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How to Time Manage your Trading – 6 WaysWhen it comes to the world of trading, time isn’t just money – it’s everything. A minute delay, can miss a profit opportunity. A minute delay, can make you question the trade. A minute delay, can affect your emotions. This is something I am constantly working on (even 20 years later). I truly want to wake up earlier, spot trades quicker (as they come) and have a better time management system. I might not be an expert in time management yet, but I will share some crucial tips I have learnt over the years. This will help you to not miss the trade. #1: Why you need to be punctual Being punctual isn’t just a good trait – it’s a survival skill. The markets move so quickly. They move with or without you. And they present opportunities on the daily. You need to be on time and when you see an opportunity that is about to present itself. Write it down. Stick note it. Set a reminder or something. But for Flying Spaghetti monster sake, don’t miss it! #2: Easy to miss a profit – when you don’t time analyses Every trader has stories about the “one that got away”. So what can we do to avoid this? You need to have your watchlists spread out according to what you trade. With TradingView, I have all my watchlists in different categories. Stocks, Forex, Commodities, Indices, International stocks. Etc… Then you’ll need to go over each watchlist every day. Write down the potential trades lining up. Then revisit the markets the next day. You need to be more punctual and disciplined to monitor, analyse and prepare for execution. Those golden opportunities missed due to hesitation or distractions. By maintaining punctuality in monitoring and execution, you can minimize these missed chances and keep your trading performance on the upbeat. #3: Set Reminders: The Power of Alerts Luckily, we have the technology to harness. You can set reminders for price levels to hit, on your own trading and charting platforms. Use these alerts to remind you when to act, or at least prepare for execution. #4: Sticky Note It Old school? Maybe. Effective? Absolutely! It doesn’t hurt to pick up a pen and a sticky note once in a while. Keep these visual reminders, to prioritise what you may be trading today. You’ll be surprised how useful this little pieces of paper are. #5: Develop a Routine Trading is a lifestyle. So you need to establish your routine with it. If you’re an early Hadeda you need to do a full pre-market review and write down the trades lining up for the day. If you prefer to look at the markets in the afternoon, choose a time where you will not be distracted by work, social media, kids or the Rugby! If you are an after the markets kind of trader, then do your research, analyses and even set your trading levels for the next day. I like to plot and draw all the levels and setups in the charts, and then write down which ones are almost ripe for the picking. #6: Prioritize Your Trades Not all trades are ready to action. Some might take a few days or months. What you can do is, flag them or colour them. GREEN – Act soon. ORANGE – Check over the next few days YELLOW – Trade could line up in the next few weeks RED – Potential setup but not likely in a few weeks. This approach will help you allocate your time better. So let’s sum up the time-management methods you can apply. #1: Why you need to be punctual #2: Easy to miss a profit – when you don’t time analyses #3: Set Reminders: The Power of Alerts #4: Sticky Note It #5: Develop a Routine #6: Prioritize Your Trades
JSE:J200Education
by Timonrosso
JSE ALSI 40 chosen a direction? - DOWN! Bearish Symmetrical Triangle has been in the making since 17 November 2022... However, the last few months, the JSE has just not been able to break above it's most recent declination resistance. Instead, it's for the first time, broken below the formation - showing the bears are really starting to win. How long will it last we don't know. But it looks like the JSE ALSI 40 has chosen a direction and it's down. Other indicators confirm. 200>21>7 - Bearish RSI<50 - Bounce on resistance Target 59,428
TVC:SA40Short
by Timonrosso
Update: JSE Top 40 IndexUpdate: JSE Top 40 Index. Yesterday morning the JSE Top 40 Index was down by 11% from my call at the beginning of the year when I presented a note called: "6 Factors Which Suggests An Attractive Reward-To-Risk For Sellers" (24 January, Published on 25 January on this platform) . The original idea is attached to this post. We saw the market peak three days late on 27-January. Well done to all who took the opportunity to reduce their risk. For more research insights, including trade ideas, get in touch today.
JSE:J200
by techpers
How to be a Trading WARRIOR!To trade well you need to think like a warrior. You need to harness your inner strength and go through the battles of trading. There are spectators, there are participants, and then there are warriors. These warriors stand apart. And you need to blend your skills and traits to equip you with everything you need to WIN. In this article, we’ll delve into the core qualities that can transform you into a genuine trading warrior. Mastering the Sword of Time Trading, like a warrior’s battle, is not won in haste. You need the three Ps as I often write – patience, persistence, and passion. Markets are fluid entities that are always shifting and changing. So, you need to take the time to learn how to adapt or die trying. The Shield of Dedication Your shield is dedication. You need to commit to the journey, embrace the learning curve, take the losses and drawdowns in your stride. You need to continuously seek to improve with every trade, every trend analysis, and every market lineup that comes your way. Embrace it with dedication. Discipline: The Unyielding Armour Discipline is what will make you win. You need to follow your trading plan and stick to your risk management strategy. You need to make decisions based on logic, not emotions. Discipline keeps you grounded, even in the face of market chaos. The Quest for Self-Understanding This is a self-journey too. It’s a lonely but essential quest you need to undergo. I always say you need to understand your trading personality and risk profile. Know and identify your strengths, weaknesses, and biases. This will help you to develop a stronger understanding of who you are as a trading warrior. Resilience: The Warrior’s Tenacity Resilience is about bouncing back from losses and setbacks. They are going to come. Some are going to be short. Some are going to be extending. Rome was not built in a day. Strategic Thinking: The Battle Plan Trading warriors are not impulsive. They develop a strategic plan and evaluate all possible outcomes. We make sure we calculate risks before we think of getting into a trade. So have your strategic game-plan with you all times. Adaptability: The Shape-Shifter’s Gift The financial market is volatile and unpredictable. It’s forever changing. New markets, new volume, new algorithms, new economic cycles, and new breakthroughs. A trading warrior is adaptable and can adjust their strategies to align with the changing markets. Continuous Learning: Sharpen the Sword A warrior never stops to hone their skills. You need to continue to learn, stay ahead of the market trends. And always refine your strategy when need be. Keep that sword sharp and ready for anything. Emotional Intelligence: Harness the Stallion Successful trading requires emotional control. Learn to adapt to your emotions and feelings. Become the market and think like them, so you don’t get clouded by your irrational and illogical judgement. Confidence: The Warrior’s Roar Confidence is NOT about being right. That’s ego. Confidence is embracing your losses to come. Confidence is when you trust your abilities, strategies and decisions. Confidence is being comfortable with your trading, no matter what. Independence: The Lone Wolf’s Path Trading warriors are self-reliant. They make their own decisions. They might follow a leader, but they take responsibility with their own trading and risk profile. You need to learn to take responsibility for them, and don’t blame others for their losses. Focus: The Eagle’s Gaze Trading warriors have tunnel vision. They are looking straight at their goals and responsibilities. The only thing you can do is to concentrate on your tasks, block out distractions, and don’t allow fear, greed or ego to shift your focus. Perseverance: The Mountain’s Steadfastness A trading warrior keeps going. No matter what obstacles or setbacks approach. They understand that perseverance is the key to long-term success in trading. Balance: The Zen Master’s Touch You don’t want to be glued to your trading screen. This alone will defeat you. You need to learn to balance trading, business, work and life. Don’t put so much energy in things you cannot control. Balance your life and your lifestyle. Integrity: The Knight’s Virtue In every trade, a warrior upholds honesty and fairness. They stay true to their principles, even when nobody’s watching. Integrity is what gives you the confidence, respect and laser focus you need to achieve. Courage: The Lion’s Heart This is not a faint-hearted game. You need a lot of courage and calculated risks to trade. Face losses and stand up against market pressure. Developing these qualities will not guarantee instant success. But with time, patience, and perseverance, you’ll find yourself becoming a true trading warrior! Let’s sum up the trading warrior traits… Mastering the Sword of Time The Shield of Dedication Discipline: The Unyielding Armour The Quest for Self-Understanding Resilience: The Warrior’s Tenacity Strategic Thinking: The Battle Plan Adaptability: The Shape-Shifter’s Gift Continuous Learning: Sharpen the Sword Emotional Intelligence: Harness the Stallion Confidence: The Warrior’s Roar Independence: The Lone Wolf’s Path Focus: The Eagle’s Gaze Perseverance: The Mountain’s Steadfastness Balance: The Zen Master’s Touch Integrity: The Knight’s Virtue Courage: The Lion’s Heart
TVC:SA40Education
by Timonrosso
The BEST trade to TAKE!Do you know what the BEST trade is? The best trade is not a winner. The best trade is not a lucky streak. The best trade is not what you think… If you’ve followed your rules, strategy, criteria, risk management and taken the trade. That is the BEST you can do. Whether it wins or not, you have taken the BEST trade. Let’s dig in… Follow Your Rules Every successful trader has a set of rules that act as the bedrock of their strategy. These rules are based on highly researched analyses on back and forward testing. In the medium to long term, you’ll reap the rewards. Therefore, your BEST trade is following your rules. Wait for the criteria To find the BEST trade, you must establish specific criteria that a trade must meet before you pull the trigger. Maybe you’re waiting for syzygy between price action, candlesticks, volume, indicators, chart patterns or a combination of them. Once the criteria has been met, then you’re ready to take the BEST trade…. Keep to your risk management Protecting and preserving your capital is paramount in trading. The BEST trade is when you have assessed the risks and put your safeguards for your trades. What are you willing to risk per trade? What is your margin requirements in the trade? Is it affordable? Will you have enough capital to play it through Will you have enough capital to take on many other BEST trades? Can you emotionally handle the risk per trade? Once you’ve got the right answers, you’re ready to take the BEST trade. Own your mindset – The Ultimate Act of Courage You know the trade might be a winner or loser. And it’s not about the outcome. IThe BEST trade is about having the courage to execute when all your criteria are met. It’s about trusting your process and embracing the uncertainty that comes with every trade. J.T.T.B.T – Just Take The BEST trade Once you’ve done the planning, analyses, risk assessment, then you’re ready to Just Take The BEST Trade! You’ve done your job. If it wins great – it’s once step closer to portfolio growth. If it loses – it’s the cost of the trading business. Remember this… The BEST trade is not a destination but a journey filled with learning, discipline, and resilience. It’s not solely about profit or loss. It’s about the process of becoming a better trader and evolving as a trader yourself. Let’s sum up with the steps to you taking the BEST Trade. Follow Your Rules Wait for the criteria Keep to your risk management Own your mindset – The Ultimate Act of Courage J.T.T.B.T – Just Take The BEST trade
TVC:SA40Education
by Timonrosso
Why We NEED to Lose To Be SuccessfulThere is a paradox to succeed when trading. And that is, we need to lose to win. We need to make sure though that our potential losses are ALWAYS less than our gains. I want to go through some of the reasons why losses are not only inevitable but also essential in the journey of successful trading. Reason #1. Losses are Inevitable Financial markets are largely unpredictable due to a plethora of influencing factors such as: Demand & supply Geo, economical and political events Algorithm volume trading by institutions New influx of traders into the market. Unpredictable micro and macro events The unpredictable nature implies that losses are part and parcel of trading. Not even the most seasoned traders can boast of a 100% win rate. Most successful traders end up with a 48% to 70% win rate. So, if you’re looking for a high win rate – you need a reality check to stay grounded and humble. Only then, you may have a chance at winning in this difficult game. Reason #2. Losing Months Will Happen Even when you work and follow proven and profitable strategies, you will face a time of losing streaks. This can occur over weeks, even stretching into months. You might lose a small chunk of your portfolio, but then you’ll need to the time to recoup and bring your portfolio back to ATH (All time highs). Reason #3. Unfavourable market conditions Markets are intrinsically volatile. Not only that but, small markets tend to follow the bigger leaders. And when the price fluctuations are erratic by nature, it carries the stocks, indices and other markets with it. E.g. We could see the S&P 500 move in a sideways consolidation period for three months in a row. And now matter how good the prospects are within a smaller market, they tend to follow the main indices. So, we have to just wait for the better times and for the more conducive market conditions. This moves on to a bigger element: Reason #4: Economic Cycles Broad economic cycles include: Accumulation Mark-up phase Distribution Mark down phase Then there are periods of a boom, recession and a crash. These will also impact market trends and lead to losses. It’s important to learn to hedge positions (long and short) and know when to be neutral (no holdings). You’ll need to learn how to adapt and integrate losses into your trading. That way, you’ll be more prepared and less emotional for when they come. Let’s sum up the reasons: Reason #1. Losses are Inevitable Reason #2. Losing Months Will Happen Reason #3. Unfavourable market conditions Reason #4: Economic Cycles
TVC:SA40Education
by Timonrosso
JSE ALSI follows Friday's action and makes a breakout and fakeouJSE ALSI 40 - Update We've seen the ALSI 40 form a restriction range between 70,122 and 67601. It broke above the downtrend on Friday, just to come back down and form a fakeout following Americas downside on Friday night. As most Premium know. Monday is a choppy day with no definitive chosen trend and so we'll let it choose a direction first before making any decisions. It's these times where it's good to be hedged with longs and shorts during this timulteous time. I'll let you know...
TVC:SA40
by Timonrosso
Enhance your Trading Expertise into the Future – 5 Tech breakthrIn today’s rapidly evolving financial landscape. You really need to stay ahead or get left behind. It’s our passion to help you deepen your knowledge of the market trends and technologies that are shaping the future. And you know what, there are some very important trends and sectors you’ll need to adapt to your trading. Let’s explore some of the new paradigms that are transforming the trading ecosystem. New ETFs Exchange Traded Funds (ETFs) have surged in popularity lately. This is because of their flexibility, accessibility, and potential for diversification. You’re going to hear a lot more from companies like BlackRock’s iShares and Vanguard leading the way. Recently, thematic ETFs have been gaining traction. These ETFs focus on niche areas like environmental, social, and governance (ESG), technology, and health. For example, the ARK Innovation ETF (ARKK), managed by ARK Invest. This targets companies that are expected to benefit from disruptive innovation across different sectors. New AI Tech Artificial intelligence (AI) is revolutionizing financial trading by providing traders with automated, high-speed decisions based on complex algorithms. You need to adapt AI into your life, before it goes past your head. AI-powered trading software’s is another thing I am looking at and trying to adapt into MATI. With it you’ll be able to analyze large volumes of data at lightning speed. This will allow you to make more informed decisions, run your trading journal, analyse data and even pinpoint which markets work best with your strategy. We are still in the infant stage of deep and machine learning with trading, so learn and grow with it. Electric Vehicles The electric vehicle (EV) industry is really taking over. I’m sure you’re seeing more Teslas on the road than ever before. I’m sure you’re seeing electric vehicle stations to charge cars. Even by the ports and harbours, you’ll see electric charging stations. With companies such as Tesla and NIO leading the charge. As the demand for clean energy solutions grows, It’s not just about the car manufacturers. But also the companies that provide these charging stations like (ChargePoint, Blink Charging) and battery technology (Panasonic, LG Chem). Space Tourism Space tourism is no longer a figment of science fiction. Companies like SpaceX, Blue Origin, and Virgin Galactic are making commercial space travel a reality. Just recently in June 2023, Virgin Galactic had their first space tourism trial experience. Before you know it, maybe we too will be looking at our beautiful blueberry of a planet from space. Metaverse The Metaverse is where you can combine a fully immersed world with VR ora shared digital experience with virtually augmented physical reality. Companies like Facebook (now Meta Platforms), Apple and Roblox are investing heavily in this space. This is just a scratch of what is coming out, and what I’ll be applying to trading. Here are another 20 breakthrough technologies to watch out for. Quantum Computing CRISPR and Gene Editing Autonomous Vehicles Advanced Robotics Machine Learning (ML) Nanotechnology Li-Fi (Light Fidelity) Synthetic Biology Hyperloop Technology Smart Cities Hydrogen Energy Lab-Grown Meat 3D Bioprinting Drone Delivery Personal A Remember, knowledge is not just power – in the world of trading, it’s profit.
TVC:SA40Education
by Timonrosso
IMPORTANT - 14 Risk and Money Management RulesOver the past 20+ years, I've only mentioned a few money management rules. But then I thought about it, and realised there are so many more I use when I trade. So with this TradingView platform, I’m going to share my 14 most essential risk management rules I’ve ever come across. RULE #1: The 2% Rule – Limit Your Risk You might have seen this risk rule from me before, but there are new TradingView members everyday. Here’s how it works… Never risk more than 2% of your total trading capital on a single trade. No matter how good the trade looks, this rule will help you safeguard your portfolio from the impact of a single trade's outcome. The reason is, you will enter a losing streak. You will most likely take from five to seven losing trading in a row. But with the 2% rule, you’ll only be down 10% to 14% of your portfolio compared to if you risked 5% to 10% per trade. RULE #2: The Probability Rule – Assess Trades When you buy or sell trades, there are three types that can line up according to your trading strategy. I like to categorise these trades as. High, medium, or low probability. For high, medium, and low probability trades, risk 2%, 1.5%, and 1% of your portfolio respectively. If my trading criteria matches all the right elements to buy or sell – this is considered a high probability trade. That’s where I will risk 2% of my portfolio per trade. If my trading criteria has one or two elements that are showing conflicting signals – this will be considered a medium probability trade. In this case, I’ll only risk 1.5% of my portfolio. Other cases, there’ll be a time where the system will line up but the market environment is in a choppy and volatile range. This is where the trade will be a low probability trade. And so, I’ll only risk 1% of my portfolio per trade. Identify the probabilities and you’ll be able to adjust your risk accordingly. RULE #3: 20% Drawdown Rule – Pause After Losses There could be a time, where your portfolio is in the slums. This is where you could be down 14% to 20% of your portfolio. What then? Well you need to protect your capital. I have a simple rule where, once my portfolio is down 20% of my portfolio – I will pause my trading. During a drawdown, I’ll then switch to paper trading until conditions improve. If the market resumes in favourable territory and I feel more confident that the system will work better – I’ll then resume trading with 1% risk. RULE #4: Never Risk Unaffordable Money This one is a given, and one I often preach. With trading you should NEVER risk any money you can’t afford. If you’re using your only savings from retirement or you have any money that you’ll be emotionally attached to - Avoid trading all together. This is not only dangerous for your financial situation but it will also lead to a rollercoaster of emotions trading during both winning and losing streaks. RULE #5: The Time Stop-Loss Rule – Time-Based Limits If a trade doesn't meet its profit target (or hits the stop loss) within a specific timeframe, close it. I have a 7 week (35 business days) rule. It doesn’t matter when, what level or if the trade is in the money or out the money. You want to close the trade, after a certain period of time has elapsed, for three reasons. 1. You’re a short-term trader and don’t want to turn it into a long term investment 2. There are costs you are paying daily which is leading you to incurring a higher loss or less profits. 3. You don’t want to feel married to any specific trade. Either you’ll bank a lower loss than you planned. Or you will bank a lower profit than planned. This prevents capital from being tied up in stagnant trades. RULE #6: The Trailing 1:1 Rule – Protect Profits This rule, will help you secure your profits when a trade is moving in your favour. Here’s how it works. Once a trade hits a 1:1 risk-reward ratio (and has moved in my favour). It gives the opportunity to move the stop loss up to just above break even. This way you’ll will bank a minimum gain, should the trade turn against you. Also, it will increase your win rate and emotionally you’ll feel it’s much easier to hold a trade with nothing to lose. RULE #7: Half Off Rule – Secure Gains Sometimes, you don’t want to move your stop loss. Instead you want to lock in profits, while the market is moving in your favour. So the rule is simple. When the trade reaches the risk to reward of 1:1, this might be the best time to close half your position. This will lock in some profits while leaving room for further gains. RULE #8: The 5% Margin Rule – Control Leverage This rule is more applicable to those who have a MUCH larger account of R25,000 and up. Remember, with trading you’re buying and selling on margin. If the gearing is 10 times this means if I hold 1% of my account, I am risking 10% of my portfolio if the trade heads to zero. So, the trick is to never risk more than 5% of your account on a single trade. This approach reduces exposure to risk and aids risk tracking in volatile markets. RULE #9: The Intraday Stop Rule – Daily Loss Limit Not all traders like to hold overnight. You get intraday traders who buy and sell trades within the day. If you are one of them, then this rule is for you. Make sure you set a daily loss limit or a maximum number of losses. For example, if you’re down 3 to 4 trades in the day – that might be your que to stop trading for the day. There are a few reasons for this including: • The market environment is not conducive to continue. • You need to protect your capital. • Your emotions might run out of control having taken too many losses in a day. • This could result in impulsive and revenge trading to try make up for your losers. RULE #10: Forex NEWS Rule – Avoid High-Impact News Events I mentioned this in the last Trading Tips Q&A, but I’ll say it again. If you’re a Forex trader and you want to avoid volatile times when certain news events come out. You can stay out or avoid trading during high-impact news events. These events include CPI, NFP, PPI, and FOMC releases. Such events can increase trading risks and lead to unpredictable market movements. (Especially in the Forex market!). RULE #11: The Risk-Reward Rule – Favor Positive Ratios Whenever I take a trade, I always want my gains to be bigger than my losses. To do this I set my risk-reward ratio of at least 1:2. This means, I am only willing to risk one in order to bank two times more. Do this enough times and you’ll almost guarantee your potential gains will outweigh your potential losses in the medium term. And having a risk to reward of at least 1:2 means you’ll factor in the costs, brokerage and other fees with your trade. RULE #12: The 20% Golden Rule – Diversify and Limit Exposure You always need to have capital within your portfolio. Not only to trade, but to protect the current trades that you’re holding at any one time. So this rule is golden. Here’s how it works. I never expose more than 20% of my total investment portfolio to trading. This means, I’ll always be holding at least 80% of my portfolio. Remember, with margin (leverage) trading, it magnifies gains and losses. Having only 20% of your total investment portfolio will help you to always have more money in your portfolio to account for more trades, losses, costs and for you to diversify and manage your risk better. RULE #13: The Hedgehog Rule – Balance Long and Short Positions I love this rule. In trading you can buy (go long) when the market moves up. Or you can sell (go short) when the market moves down. But sometimes, you might feel you’re over exposed to the long side even though the market is moving up. So instead you can hedge your positions by balancing longs and shorts. If the market turns down, then at least you’ll have some shorts in the mix to make up for the losses with your longs that are going against you. I always try to avoid overcommitting to a single direction. This way I am able to protect my portfolio from sudden market reversals. RULE #14: Multi-Account Rule – Separate Markets I find markets all move differently and yield results at different rates. So what I like to do is open different trading account for different markets (e.g., Forex and stocks). I like to track and trade Forex for one account and stocks for another. You’ll find if you trade too many different markets in one account, it will most likely skew the portfolio and your track record. This is because of the way they all move sporadically from each other. So, diversify your portfolios across different asset classes and markets to manage your risk. Final words. I trust this 14 Risk management Rules Lesson will help guide you to your trading goals. If there’s one thing you should do is print, or save this guide and keep them close for reference. These rules will undoubtedly prove valuable in your trading endeavors.
TVC:SA40Education
by Timonrosso
Why you might STRUGGLE Trading - 9 REASONSTrading is the most simple and hardest career you can have. There are simple tasks to take but difficult to mentally handle. Success requires discipline, strategy, and often, a good amount of experience. However, there are many reasons why people may struggle to achieve profitability in their trading endeavours. Here are some common pitfalls that might be the reasons why you are struggling as a trader. can Lack of a Defined System A trading system involves a set of rules that dictate entry, exit, and money management criteria for your trades. If you’re trading without a proven and winning system, you’re basically gambling. You really need to find what works for you both mentally and financially. Either you can experiment with different trading strategies. Or you can adopt proven systems that you believe with what will work for you. It’s crucial to find a strategy that suits your risk tolerance, investment goals, and lifestyle. Inability to Handle Losses Everyone experiences losses in trading. You’ll take losing trades on a daily, weekly and monthly basis… If you cannot handle losses, you may find yourself holding onto losing positions for too long. You might feel you’re stuck in a rut. You might feel like a loser yourself. So, this needs to stop. Start treating trading as a business. Accept that losses as the costs of trading. Don’t dwell on losses. Accept them, embrace them and learn from them. Get Rich Quick Mentality Many people get the excitement that trading Is something that will bring bread in the short term. This cannot be farther from the truth. You need to get out of this “get rich quick” mentality. Establish medium to long term goals and work at it. Make sure, your expectations are realistic and be patient. Set achievable goals and concentrate on slow, steady progress rather than risky, high-return trades. Lack of Experience Like any other skill, trading requires experience to master. If you’re new to trading, you may lack the knowledge needed to navigate the market effectively. To gain experience, start small and learn as you go. Maybe even start off with a demo and paper account. This way you’ll be able to practice without risking real money. Read books, take courses, watch from experienced traders. Learn from their mistakes, so you can avoid paying high school fees. You ignore the Big Market Trends Before you trade, do yourself a favour. Get to know the market environment. If the price is heading up, look for longs (buys). If the price is heading down, look for shorts (sells). Trends can give important insights into potential future market movements. You’ll feel more in-tune with the markets when you know their overall directions. Letting Emotions Rule Fear, greed and ego are the enemies of profitable trading. If you feel any of the three dangerous traits, you’ll make decisions based on emotions. This will give you a gambling mentality of thrill, despair and denial. Cut out the emotions and stick to a more mechanical approach. Be like the market not like a human. Fail to Diversify You need to know how to mitigate risks. One market probably won’t make the cut. If it moves sideways for months on end, you’ll miss out on powerful opportunities elsewhere. So, diversify with different stocks, indices, commodities, Forex and cryptos. Also, don’t be over exposed too long with buys or too short with sells. Find the balance, because markets can change direction very quickly. Not Keeping a Trading Journal You need to get yourself a log book. A trading journal will help you to keep track of your strategies, successes, and failures. It will also guide you with the gameplan you need with a better chance of succeeding. Know what you can gain, lose and how long you can go through potential drawdowns (downturns). The past data might not indicate future results, but it can give you a likelihood of what is to come for your trading, markets and your portfolio. Lack of Discipline and integration Discipline is sticking it out. Doing what you need to follow your trading plan. No matter how good or bad the market is, when the trade lines up you need to JUST TAKE THE TRADE. And no matter how your feeling on the day, you need to do what it takes to succeed. Integration is similar but it’s actually adapting it whole heartedly into your life. This is where you don’t’ think twice. This is where you wake up and trade like brushing your teeth. If you suck at trading, you need to pinpoint why. Work on it, improve and evolve. Let’s sum the reasons why you might SUCK at trading up one more time…. Lack of a Defined System Inability to Handle Losses Get Rich Quick Mentality Lack of Experience You ignore the Big Market Trends Letting Emotions Rule Fail to Diversify Not Keeping a Trading Journal Lack of Discipline and integration
TVC:SA40Education
by Timonrosso
UPDATE: JSE ALSI 40 - A break in price is imminentHere is the update with the ALSI 40... It seems to be in a tighter range with the resistance (short term downside) and the support from the Symmetrical Triangle since Dec 2022. We will be watching these levels carefully and will look to hedge positions as we are heavily short at the moment. At first glance, it shows that the price action is indeed more bearish right now with the resistance line in tact. And as there has been a bounce already, we might see a bit of consolidation before the next big move. We'll be watching the Americas as well, to help give some type of leading direction... Happy Monday and trade well.
TVC:SA40
by Timonrosso
The Raging Bull on a Falling Roller coaster - JSE in the nutshelAbout sums up the JSE right now... 📉📈 The JSE ALSI 40: Where Sideways Meets Rollercoaster! 🎢🐂🐻 Hey there, fellow traders and market enthusiasts! 📊💰 Have you been following the JSE ALSI 40's wild dance since December 2022? It's like watching a cat chasing its tail, but with more financial suspense! 😅🐱 Picture this: The ALSI 40 chart looks like a DJ's soundwave, with highs and lows that leave us all scratching our heads. 🤨📈📉 It's as if the market decided to throw a never-ending party, but with a catch – every time it cranks up the music and heads for the stars, it suddenly crashes back down like it remembered it had a curfew! 🎶💥 And guess what? Just when you think the party's over and everyone's heading for the exits, the market pulls a 180 and starts the bull run again! 🐂🚀 But here's the kicker – when you finally give in to FOMO (Fear Of Missing Out) and join the party, that's when the bearish bear shows up, and it's not in the mood for hugs! 🐻📉 So, what's a trader to do in this wild ride? 🤔 Here's the deal: 💰 Money Management is Key: It's time to be the disciplined partygoer. Risk management should be your DJ, controlling your moves on the dance floor. Allocate a smaller portion of your portfolio to each trade to weather those unexpected downturns. 🚫 Ego? Leave It at the Door: Ego is that party crasher no one likes. Don't let your ego dictate your trades. Remember, even the best traders face losses. Stay humble, stick to your strategy, and cut your losses when it's time to bail. 📆 Patience is a Virtue: Keep your dancing shoes on, because sooner or later, the market will decide on a direction. It might seem like a chaotic dance floor now, but trends emerge eventually, and when they do, you want to be there when the music starts playing. So, fellow traders, while the JSE ALSI 40 keeps doing its sideways cha-cha, let's stay nimble, manage our risks, and be ready to groove with the raging bull when it charges or stay steady with the bear when it takes its turn. 🕺💃 It's all part of the game, and in the world of trading, the only constant is change! Let's keep our eyes on the charts, our hearts in check, and our portfolios ready for whatever direction the market decides to sway next. 📊💼
TVC:SA40Education
by Timonrosso
Why Trading is like Strategic Gambling It’s a big debate that runs the financial market. Is trading gambling? Well I’m going to try put it to bed in just a few sentences. There are two types of gambling. Gambling by chance and total randomness like slot machines, lotteries, Bingo, Wheel of Fortune and flipping coins. And strategic gambling which allows you elements of control of coming out with a probabilistic chance of winning. I believe trading is a form of strategic gambling. Let’s talk about the similarities between certain strategic gambling games and see how we can learn from them with trading. Game #1: Trading and Poker: Skill, Strategy, and a Bit of Luck In poker, each player gets a unique hand of cards. To win, players must devise a strategy based on their understanding of the game, their observation of their opponents, and their willingness to take risks. Players can choose to play, bet or fold. The same principles apply to trading. Traders have their ‘hand’ in the form of markets to choose to trade. To yield profit, they must understand market trends, observe competitors’ behaviours, and manage risks. In poker, one needs to know when to fold and when to bet aggressively. In trading we have stop losses to get us out of the trade. We have take profits to bank our wins. We have volume choices of how much to buy or sell. And we have the choice to stay out completely. Poker also teaches the importance of emotional control and patience, which are crucial in trading, where emotional decisions can lead to significant losses. Game #2: Trading and Roulette: Understanding Probabilities Roulette is largely a game of chance where players bet on numbers, colours, or sets of numbers. You choose whether you want to bet on red, black, even, odd, specific numbers and so on… Although the outcomes are random, players can use probability to guide their decisions. In trading, while certain market movements can’t be predicted with absolute certainty, we rely heavily on technical, fundamental, statistical analysis and probabilities to make trading decisions. Trading, much like roulette, is where you need to diversify your positions and bets. But instead of placing chips on certain numbers, we place deposits (margins) in the hopes of a probable outcome. Game #3: Trading and Blackjack: Playing Against the Market (House) Blackjack involves strategic decisions, where players decide to ‘hit’ or ‘stand’ based on their current hand and the dealer’s visible card. The main goal is to try and get the cards we’re dealt to hit 21, be close to 21 or be closer to 21 than our opponent’s hand. Bet too high past 21 and you burn. In trading, technical analysis serves a similar purpose by predicting future market movements based on past data. Bet too high with trading and you stand to lose a lot more. And if you can’t count with Black Jack, then you have a much bigger disadvantage to the game. If you don’t have strong and stringent money management principles, then good luck trying to maintain, preserve and protect your portfolio. Game #4: Trading and Horse Racing: Know your horse! Horse racing involves choosing the right horse based on its: Form Characteristics Conditions of the race Weather on the day and other factors. This is like trading. You need to understand each market you trade. It has its own personality, form, movements, and style. You also need to know which market is conducive for your trading portfolio. And you need to choose the right stock or asset to trade based on its performance history, current market conditions, and other factors. In horse racing, experienced bettors also diversify their bets across multiple races and horses to spread risk. With trading we diversify our portfolios over different accounts, markets, sectors, instruments and types. Game #5: Trading and Sports Betting: Predictive Analysis and Risk Sports betting also works similar to trading. You need to know how to analyse a team’s or player’s form, weather conditions, home and away records, and more to predict an outcome. Whether it’s football, rugby or cricket – you need to know your team players, strategy and likelihood of who is to win what game. Traders also conduct similar analyses, studying companies’ financial health, market trends, and technical indicators to predict market movements. And as always, there are both risks that need to be calculated and managed for high probability successful outcomes. So next time when someone tells you trading is just gambling. You tell them, they are right but it’s strategic gambling rather than gambling by chance.
TVC:SA40Education
by Timonrosso
1
Top 12 Trading Myths Busted! TRADING MYTHBUSTERSIt’s time we cut through the BS and noise and shed some light on the TRUE and REAL world of financial trading. I can’t believe the misconceptions and false ideas of trading are still making appearances. It’s time to educate yourself before you eradicate your account. So let’s debunk some common and dangerous trading myths. Myth 1: It’s a Get-Rich-Quick Scheme Trading has long been shrouded in the myth of transforming anyone into an overnight millionaire. But it’s an illusion. It’s what drives newbies and amateurs into the trading world. And then a few months later, when they realise what it actually takes to grow an account. They move to the next “best” thing. Trading is a forever life-style that requires ongoing discipline and patience through strategic planning, knowledge and presteen execution. And not to mention, it also involves periods of losses. There are no shortcuts to wealth in trading, it’s a journey, not a sprint! Myth 2: It’s Just High-Stakes Gambling Trading is a form of gambling. But strategic gambling. It’s not like pulling the slots machine and having a chance of being right or wrong. Or flipping a coin. No, trading has an element of risk and reward control. And it is based on nothing more than probabilities and comprehensive understanding of market trends, money management and analytical skills. Unlike gambling, which is based largely on luck. You have an element of control with the outcome. That’s through trading journals, back and forward testing and making stringent decisions. Myth 3: More Risk, More Reward Yes! If you risk more you’ll gain more. But when you risk more, you can also LOSE way more. With trading derivatives and leverage, you’re exposed to more than what you put in. Sometimes 10 times, sometimes 50 and other times 500. So, this alone should tell you how dangerous trading is. When your portfolio goes to 0 – due to high risk – That’s it. And many traders full port their accounts. And majority become the 98% losing stat of trading. Stick to low risk, low return. Keep consistent and the return will start adding up and you’ll reap the rewards in time. Myth 4: Only the Rich Can Trade The myth that trading is a club exclusive to the wealthy is just that, a myth. Decades a go, you would have needed thousands to start trading and investing. But no longer is that the case. Some brokerages don’t even have a minimum with trading. You can start off with a demo or practice account. As long as the competition and innovation picks up, trading will be cheaper, faster and more accessible. Myth 5: Trading is Only About Buy low – sell high Although this seems like a logical strategy. It’s not the only way to profit. Trading techniques like short selling allow traders to profit from falling markets. Not only can you buy low and sell high. You can also sell high and buy low. Myth 6: More Trades Equal More Profit Trading isn’t a game of ping pong. You don’t just play as many times as you can in a day, to profit. First, Overtrading can lead to rushed decisions, increased transaction costs, and significant stress. Patience often plays a crucial role in a trader’s success. And second, it all depends on the market environments. If the market is not trending, you can go long or short and still lose every bet. Rember you still have to let the market move up or down a bit to make up for the trading costs! And so you’re already at a disadvantage when you take a trade. Sometimes the best move is to sit on your hands. Neutral is also a position and a powerful position during certain periods. Myth 7: Successful Trading Means Winning Every Trade Even the most successful traders get knocked down by losses. It’s the nature of the trading game. What matters is the net outcome over a period of time. Your job is to make sure the losses are small and the gains are bigger. That way, even with a 50% win rate you’ll win and the profits will outweigh the losses in the long run. Myth 8: Complicated Strategies Yield Better Results You’ve heard of analysis paralysis right? When you literally plant so many indicators on your chart it looks like a Jackson Pollocks Christmas Tree painting. Complication does not equate to success. You’ll learn that: Too many indicators will conflict with each other. You’ll struggle to back test a system. You’ll struggle to find high probability trades. You’re making it more complex than it needs to be. And most important… You need to learn to KISS (Keep It Simple Stupid). Often, the best trading strategies are the simplest. What’s essential is understanding your strategy thoroughly and executing it consistently. Myth 9: You Need to Monitor the Market 24/7 Thanks to stop-loss orders and other automated tools, you do not need to be glued to your screens all day. The most important attention you’ll need to apply is trading layout, setup and execution. Once you’re done and the trading levels are in place. Go live, do something else. Don’t be a nerd. Enjoy life. Trading requires attention, indeed, but a healthy balance is crucial to maintain clear-headed decisions. Myth 10: Markets Are Always Rational Markets, unfortunately, aren’t always rational. Just like you learn in school. There is ideal and real ways of the world. Sometimes, the market is one clusterfreak of confusion. Correlations don’t work according to the book. Trends don’t match up the micro and macro analyses of companies. Good news doesn’t mean strong uptrends. Markets are run by many, many, many other factors. They can be swayed by demand, supply, algorithms, Smart Money, greed, panic, emotion, rumor, and corruption and manipulation. This will lead to price distortions. There is a famous quote attributed to Great Depression-era economist John Maynard Keynes – “Markets can remain irrational longer than you can remain solvent”. Myth 11: Brokers Want You to Lose Money Yes there are a ton of brokers who make money when you lose. But reputable, credible and top regulated brokers – do NOT want you to lose. They make their money from brokerages, spread and from trading volumes. They want you to succeed and grow. Because if you blow your account, they lose a client. Hence, when brokers approach me I always tell them the importance of education, guidance and helping them SUCCEED. Myth 12: Once a Successful Trader, Always a Successful Trader Market conditions, strategies, and personal circumstances change. If you want to be a successful trader and remain one it requires constant learning, adaptation, and diligent risk management. This includes me! Despite how long I’ve been in the markets, I treat each day independently. I follow my system, risk management rules. I look for future opportunities and prospects to improve my trading, platform, journals and even testing. This is forever an alive game that requires action. We are always learning, growing, improving and adapting. Like they say, past success doesn’t guarantee future profits. Let’s sum up the 12 common Trading Myths: Myth 1: It’s a Get-Rich-Quick Scheme Myth 2: It’s Just High-Stakes Gambling Myth 3: More Risk, More Reward Myth 4: Only the Rich Can Trade Myth 5: Trading is Only About Buy low – sell high Myth 6: More Trades Equal More Profit Myth 7: Successful Trading Means Winning Every Trade Myth 8: Complicated Strategies Yield Better Results Myth 9: You Need to Monitor the Market 24/7 Myth 10: Markets Are Always Rational Myth 11: Brokers Want You to Lose Money Myth 12: Once a Successful Trader, Always a Successful Trader If this was helpful let me know in the comments!
TVC:SA40Education
by Timonrosso
1
How to Begin Trading in 6 Steps If you have already taken the leap and started trading – You may skip this article and enjoy your day 😊 Beginner traders, I’m writing this for you! Financial trading has never been more accessible, cheaper and innovative than ever before. What you have available today, I once had to pay up to $10,000 a year. And some charting platforms cost up to $25,000 a year! Absolutely insane. And now today, it’s ready for you for practically FREE especially on TradingView!. However, if you’re ready to to embark on this journey successfully, there are some essential components that you must have. You’ll need 6 things to start your trading the right way. 1. Trading Platform A trading platform is your gateway to the financial markets. It’s an online software that allows you to execute trades, monitor markets, analyze price charts, and do much more. The best platforms are user-friendly, offer a wide range of tools, and support multiple asset classes such as stocks, forex, insdices, commodities, and cryptocurrencies. They should also offer either spread betting, CFDs (which is what I like), futures and or lots. Make sure the platform you choose is regulated by relevant financial authorities and offers strong security measures to safeguard your funds and data. 2. Charting Platform A charting platform is a tool used to visualize market data. You should be able to choose various formats such as line, bar, and candlestick charts. They also provide a range of technical analysis indicators, such as moving averages, RSI, MACD, and Fibonacci retracements, which can help you analyze market trends and make informed trading decisions. When you choose a charting platform, consider its ease of use, customizability, the range of available indicators, and compatibility with your trading platform. 3. Fund Your Account Before you can start trading, you need to fund your trading account. Now here’s the funny thing. Most people put in like $1,000 or like $10,000 – Something ridiculously small. And they just keep it at that. Look, you can have a sizeable account in your portfolio. And you can trade as if you have $1,000. You don’t need to trade everything. But you do need to take that leap and deposit money into your account. Also, understand the platform’s margin requirements to avoid potential margin calls (When they tell you – you have to cough up more money). You need to be 100% ready and have your capital management prepared to a T. 4. Trading Strategy This is your roadmap. This is your ‘holy-grail’ This is your game plan. This is your future plan in the financial markets. You get the point. A strategy will outline: • How to know when a trade lines up. • When to enter trades according to criteria • When to exit a trade according to criteria. • When to adjust your trade if need be (Lock in profits, cut losses, maximise gains). • Which markets to trade • How much to risk on each trade. Your strategy can be based on technical analysis, fundamental analysis, or a combination of both. I have used a 20 year old strategy that incorporates chart patterns, money management rules, two indicators and Smart Money Concepts. More importantly, your strategy should align with your financial goals, risk tolerance, and trading schedule. 5. Trading Journal A trading journal is a record of all your trades. It includes entry and exit points, the reasons for taking the trade, the strategy used, and the outcome. I also have other elements like Mistakes, Emotions, Drawdowns, Risk to reward and so many more. Basically, it’s a valuable tool to reflect on your performance. This will allow you to review your trades, learn from your mistakes, and improve your strategy over time. 6. Rules and Criteria To ensure discipline and risk management in trading, it’s essential to set rules and criteria. These guidelines will help you remain consistent and prevent emotional decision-making. Here are some examples: • Halt after a 15% drawdown on your account: This rule can prevent further losses during a bad trading period. It’s a form of risk management, forcing you to stop and reassess your strategy when things are not going as planned. • Never risk more than 2% per trade: This rule ensures that even multiple losing trades in a row won’t wipe out your account. • Only trade with the trend: When market is up – only look for longs. When market is down – only look for shorts. When market is sideways – Be cautiously • Every trade needs a stop-loss and take-profit level This automates risk management, ensuring you exit trades at predetermined levels. • Limit the number of trades per day or period This prevents overtrading. Always think quality versus quantity. And if you have a couple of trades, make sure you know what the WORST case scenario is for your portfolio if you hit a losing streak. Sometimes it’s best to hedge positions (Longs and Shorts). and keeps you focused on quality rather than quantity. • No trading during high-impact news events Markets can be particularly volatile during these times, which can increase risk. This is just a fraction of your journey. Enjoy your trading journey. It’s exciting. It’s also long, be patient. This won’t take a month, a year or even three years. But after 3 years, you’ll get a taste of the potential of trading fortunes. But it’s all up to you! This needs preparation, discipline, and constant learning. You have the starting steps… Now get to it.
TVC:SA40Education
by Timonrosso
4 Dangerous News Events - for TradersWhen you’re a mechanical trader. And when you think you got trading in a bag. You still need to be logical and rational when trading the markets. There are exceptions. And you need to consider these exceptions which could have a profound effect on the financial markets. It’s these unforeseen circumstances, that you need to take the stand. You might need to risk less. You might need to not take the trade. You might need to halt trading for a few days. All because of these potential 4 events. Let’s get into them so you can stay out of them. Black Swans (Unprecedented events) Black Swans are highly unpredictable events that go beyond what is usually expected of a situation. One definition I like is this. A Black Swan is where an event can cause the market to move 10 standard deviations away from the norm. When this happens they could potentially have severe and wide-reaching consequences. You’ll see the market will jump erratically and even cause a halt in trading activity completely. So when you spot a Black Swan. Just take it easy from trading the markets that can be affected. Here are 10 Black Swan Events that I can think of that had an impact on the markets. 2008 Global Financial Crisis Triggered by the collapse of the US housing market, it led to a worldwide banking crisis and severe global economic downturn. COVID-19 Pandemic An unprecedented global health crisis that had significant repercussions on global economies and markets in 2020. Dotcom Bubble Burst (2000) The dramatic rise (due to greed and optimism) and fall (due to fear and panic) of internet companies in the late 1990s led to a severe market correction. Brexit (2016) Britain’s unexpected decision to leave the EU had immediate impacts on global markets. Japanese Asset Price Bubble Burst (1992) This led to a lost decade of economic stagnation in Japan. (Have you seen the Nikkei! And can you imagine holding stocks from 1992?) Swiss Franc Unpegging (2015) The Swiss National Bank’s sudden decision to remove the cap on the Franc’s value against the Euro led to extreme currency volatility. (Forex trading was a nightmare seeing some prices drop hundreds of pips). September 11 Attacks (2001) The terrorist attacks had immediate and long-term effects on global economies and markets. (I was too young to worry so I missed this one.) Fukushima Nuclear Disaster (2011) Triggered by a massive earthquake and tsunami, it had significant impacts on global energy markets. (I remember holding oil stocks while driving. And I came home to R120,000 loss). Flash Crash (2010) The US stock market crash, triggered by a high-frequency trading algorithm, sent a financial shockwave around the world. (Fat fingers caused by unknown factors). Oil Price Negative (2020) For the first time in history, the price of US oil turned negative due to low demand during the COVID-19 pandemic. Moving on... Non-Farm Payrolls (Major spikes during news release) The Non-Farm Payroll (NFP) report is the big one. It is released on the first Friday of each month and is a key economic indicator for the United States. It shows us the total number of paid US workers, excluding farm employees, government employees, private household employees, and employees of non-profit organizations. When the numbers are higher than expected, there are more jobs and the stock markets go up. When the numbers are lower than expected, there are less jobs, more pessimism which causes stock markets to plummet. Significant deviations from forecasts in the NFP data can lead to major spikes in market volatility. If the data shows job growth, it indicates a strong economy, which can boost the US dollar and negatively impact bonds due to the potential for increased interest rates. Conversely, lower-than-expected job growth can indicate a weakening economy, potentially weakening the US dollar and boosting bond prices. Possible Warnings (Micro and Macro Announcements) Keeping an ear to the ground for both micro and macro announcements can provide a trader with essential foresight. On a micro level, company-specific news such as: Earnings reports New product launches Executive changes M&A activities Rights Offers and share distributions These can result in large price movements. On the macro level, broader economic announcements like: Changes in monetary policy inflation rates QE (Quantitative Easing) Credit tightening GDP growth Consumer sentiment FOMC, Central banks meetings and economic talks and geopolitical events You’ll see these will have a ripple effect on wider market movements. Huge Gaps (Spikes in Volatility in Prices) Price gaps occur when there’s a significant difference between the closing price of one trading period and the opening price of the next. Basically, a void between two price candles. This generally happens when one market moves up during the day. And then a bigger and leading market crashes. This results in the first market opening a lot lower down than the previous close. This can be due to an impactful event that happened in the time between the two periods. Keep an eye out on these four events. It’ll help you better navigate the market landscape, react to volatility, and potentially make better trading decisions. Remember, the financial markets are affected by a myriad of factors, and a keen understanding of these key events can be a critical part of your trading strategy.
TVC:SA40Education
by Timonrosso
16 Golden Risk Management Rules for TradersTo build your portfolio. You need to learn to manage your risk. And over the last 16+ years, I’ve given you maybe five ideas on how to do it. Well, today I have 16 of the most essential Risk Management rules I could come up with in just one seating. They might not all apply to you. But most of them I believe will definitely resonate with you, your portfolio and with your risk profile. So, I have taken the time, energy and effort to jot down the 16 most powerful Risk management rules, you can apply to your trading. Starting today… Here they are… RULE #1: The 2% Rule Never risk more than 2% of your total trading capital on a single trade. This rule will help you to limit the impact of any single trade on your portfolio. RULE #2: The Probability Rule – Classify trades as high, medium, or low probability This depends on your trading strategy. If you know how to spot a: High probability trade (HPT) (good chance of winning). Medium probability trade (MPT) (lower chance of winning). Low probability trade (LPT) (very low chance of winning). I have a very simple rule. With a HPT, risk 2% of your portfolio. With a MPT, risk 1.5% of your portfolio. With a LPT, risk 1% of your portfolio Only risk according to the state of the probabilities of the trade – right? RULE #3: 20% Drawdown Rule – Halt trading at a 20% loss to avoid deeper slumps If that inevitable Drawdown kicks in. And your portfolio drops 5%, 10% and then down to 20%. Halt trading. Don’t stop! Instead, move over to paper trade your account until the conditions turn up and the system works again. And when you do start, only start risking 1% at a time until you are confident again with your strategy and with your frame of mind. This rule alone, you’ll save you from blowing your account. RULE #4: NEVER risk money you can’t afford to lose If you feel emotionally tied to your money. Or you need the money for daily living expenses or retirement savings. Don’t trade with it. You will feel like a wreck. Instead of enjoying the trading journey and process. Trading will be an emotional rollercoaster during both winning and losing streaks. RULE #5: The Time Stop-Loss Rule – Apply a time-based stop-loss rule to limit losses If a trade doesn’t reach its profit target within a specific timeframe – Close the trade. I have a 7 week time stop loss before I consider closing trades. Either you’ll bank a lower loss than you planned. Or you will bank a lower profit than planned. This prevents capital from being tied up in stagnant trades. NOTE: There are times where I might NOT implement a time stop loss. For example, when I short (sell) a trade which earns interest income each day. RULE #6: The Trailing 1:1 Rule – Use a 1:1 trailing stop-loss to protect profits Once a trade hits a 1:1 risk-reward ratio. I might trail my stop loss up to just above break even. This way I will bank a minimum gain, should the trade turn against me. My win rate will go up, for the portfolio. And emotionally it’s easier to hold a trade where you’ve secured a minimum profit. RULE #7: Half off Rule – Take half your profits early to secure gains If the trade is moving nicely in my favour. And it reaches a R:R of 1 to 1. Sometimes I’ll close half my position. I’ll then trail my stop loss to above breakeven. This way I’ll bank a decent profit. And I would have left room for the market to continue rallying to my initial take profit. This rule alone is God-sent. RULE #8: The 1% Margin Rule – Limit margin use to 1% of your account to control risk For those who are worried about HIGH leveraged instruments. This one is for you. The rule is, if you’re trading on margin (leverage). Never risk more than 1% of your trading account on a single trade. This way: You’ll have majority of your portfolio to trade with. You’ll have less money exposed to risk in any one trade. You’ll be able to track your risk better, for if the market gaps. RULE #9: The Intraday Stop Rule – Set an intraday rule to know when to stop trading for the day If you take on an intraday trade i.e. Smart Money Concepts trading a Forex Pair or index. Set a daily loss limit or a maximum number of losses. If you reach this amount, stop trading for the day to prevent your portfolio from spiralling into more losses. Come back the next day, to slay. RULE #10: Forex NEWS Rule – Stay off the market during high-impact news events This happens during high-volatile events. And this applies with mainly Forex! If there are any high impact news events such as major economic announcements. It can significantly increase trading risks. When these days come, I don’t take any Forex trades. Here’s are the main High-Impact-News events: CPI (Consumer Price Index) news report days CPI measures the changes in prices of a basket of goods and services over time as a measure of inflation. NFP (Non Farm Payrolls) A monthly report released (on the 1st Friday of the month) by the US Department of Labor. It shows the number of jobs added or lost in the non farm sector. This is a measure of the health of the US economy. PPI (Producer Price Index) A measure of the average change over time in the prices that domestic producers receive for their goods and services. This is another measure of inflation and economic growth. First with CPI and then with PPI. FOMC (Federal Open Market Committee) When the FOMC the US Federal Reserve meets to set monetary policy, (decision on interest rates and the money supply). RULE #11: The Risk-Reward Rule – Aim for a risk-reward ratio of at least 1:1.5 If you do NOT see a trade with a Risk to Reward of at least 1:1.5. It is NOT a good idea to trade. Anything less than 1:1.5, and your risk will be similar to what you are looking to gain. And remember, you still need to cover costs, brokerages and daily interest charges. It’s not worth buying and selling trades with a R:R of 1:1.5. I prefer to trade with risk to rewards of 1:2 instead. That way, even with a 40% win rate, I’ll be profitable. RULE #12: The 20% Golden Rule – Never expose your portfolio to more than 20% Trading is a risky biscuit. So, even though you have money in your account. Doesn’t mean you should have all of your money in different markets. I like to limit my capital to a maximum of 20% of my total investment portfolio. Remember, you are gearing up when you trade. While leverage can magnify gains, it can also magnify losses. It’s crucial to know how to use leverage effectively. Also, it’s our job to and avoid taking on more debt than we can handle. Because when you trade on margin (leverage), you’re exposing yourself to MORE than what you deposit. So protect most of the capital at a time in your portfolio. RULE #13: The Hedgehog Rule – Don’t be too long or too short – Hedge your positions I like to say hedge your positions. Don’t HOG on too many longs. Or too many shorts. When a main index is showing strong signs of moving in a certain direction (up or down). You may feel the absolute need to buy as many stocks as possible, to ride the trend. However, you need to remember the market can change the trend direction just as fast. And your winning positions can instantly turn to losers. So, when you are holding a high number of longs, make sure you trade a couple of shorts. When you are holding a large number of shorts, make sure you trade a few longs. This way you can hedge your positions in case the market does make a turnaround. Effective hedging strategies can protect your portfolio from market volatility. RULE #14: Multi-Account Rule – Use different accounts for different markets Every market acts differently. Forex works differently to stocks. So, I like to have two different accounts for each. I like to track and trade Forex for one account and stocks for another. Having too many eggs in one basket, will skew the portfolio and your track record – due to the sporadic and different movements with each set of markets. So, diversify your portfolios across different asset classes and markets to manage risk. RULE #15: Check Up Rule – Regularly monitor your portfolio’s performance The markets are always changing including: Algorithm New volume being injected in the markets Dynamics of demand and supply This causes a shift in different market environments and echoes into the financial world. Therefore, you need to regularly review your portfolio. This will help you to realign it with your goals, statistics, drawdown & reward management as well as your risk tolerance and goals. RULE #16: Correlation Rule – Understand and monitor the correlation between assets Markets are generally positively correlated. This means, they tend to move in the same direction. If you see a large bank company going up in price and you go long, the chances are good that other banking companies are also going up in price (within the main stock market). When you understand correlation between stocks, forex, indices, commodities etc… You can find more high probability trades which will better diversify your portfolio, reduce your risk and you’ll be exposed to other market opportunities in similar markets. Told you it will be worth it! Save this, print it out and keep it by you. These are the most important money management rules I believe are necessary to know as a trader. Below is the summary of them again, with the subheading. If you found this helpful, please send let me know in the comments. 16 Most NB* Money Management Rules RULE #1: The 2% Rule – Never risk more than 2% of your trading capital RULE #2: The Probability Rule – Classify trades as high, medium, or low probability RULE #3: 20% Drawdown Rule – Halt trading at a 20% loss to avoid deeper slumps RULE #4: NEVER risk money you can’t afford RULE #5: The Time Stop-Loss Rule – Apply a time-based stop-loss rule to limit losses RULE #6: The Trailing 1:1 Rule – Use a 1:1 trailing stop-loss to protect profits RULE #7: Half off Rule – Take half your profits early to secure gains RULE #8: The 1% Margin Rule – Limit margin use to 1% of your account to control risk RULE #9: The Intraday Stop Rule – Set an intraday rule to know when to stop trading for the day RULE #10: Forex NEWS Rule – Stay off the market during high-impact news events RULE #11: The Risk-Reward Rule – Aim for a risk-reward ratio of at least 1:1.5 RULE #12: The 20% Golden Rule – Never expose your portfolio to more than 20% RULE #13: The Hedgehog Rule – Don’t be too long or too short -Hedge your positions RULE #14: Multi-account Rule – Use different accounts for different markets RULE #15: Check Up Rule – Regularly monitor your portfolio’s performance RULE #16: Correlation Rule – Understand and monitor the correlation between assets
JSE:J200Education
by Timonrosso