There are formulas for just about everything, but it has been shown that the simpler the formula or method of doing a particular task the better it works. It has evolved down to KISS ? Keep It Simple Stupid.
This also applies to trading in the stock market. There are literally hundreds of formulas, both technical and fundamental that are easily available to investors. Each trader has his own method he uses. Every professional trader on the floor of the stock exchange has his own variation on some major proven formula. The more skilled he becomes with it the more he feels it is the best one.
Sometimes it takes years for a trader to settle on one method or group of methods that he uses to signal buys and sells. It took me many years to find that technical group that worked for me when I was an exchange member.
For some it evolves into long term trading and for others it can be buying and selling in a matter of minutes. The time period is not important. The method is. Even as a floor trader on the commodity exchange I had only two criteria I watched before entering into any position.
All professional traders and investors are aware of the single most important fact and that is how much I am willing to lose before I exit this new position. Every KISS formula has an exit strategy. Every professional knows in advance how much he will allow himself to lose if he is wrong. The professional does not set a limit on the winning side of a trade only on the losing side.
Ask any full time professional and he will tell you if he is right 50% of the time he considers that to be phenomenal. When I was on the floor I was only right about 40% of the time, even about 20% and wrong about 40%. BUT I made $3.00 for every dollar I lost. Small losses and big winners are the key to success. This is the key to any profitable formula ? keeping the losses small.
When I see advertisements in the financial papers for methods claiming to be right 80%, 90% of the time I cringe. It just can't be. There is no trader I ever met who was that good and I have known some exceptional traders.
The major text on technical analysis is "Technical Analysis of Stock Trends" by Edwards and Magee now in the 17th printing of the Fifth Edition that lists multitudes of methods. They all work, but many are complicated. A magazine called Futures Truth analyses 200 commodity trading systems in each issue. Fundamental Theory is equally complex.
There are software programs that allow the investors to enter as many as 30 parameters. The more complex it is the less chance it has to work. And the biggest obstacle to any program is the trader himself. He cannot hesitate when a buy or sell signal is given.
Keep your formula simple and execute the signals. You can be a winner.
Al Thomas' book, "If It Doesn't Go Up, Don't Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he's the man that Wall Street does not want you to know.
Copyright 2005
Airbnb cleaning service Arlington Heights ..Every day I hear from the "experts" on CNBC-TV and... Read More
How do you make money without picking tops and bottoms?I... Read More
In my opinion, due to the volatility of stock market... Read More
The stock market can present you with a lot of... Read More
"Buy and hold" is one of the most heralded investment... Read More
In a previously written article, we expanded the use of... Read More
We are already in it, but you can't see it.... Read More
You have a lock on your house. You have a... Read More
Maximizing a stock market investmentThere are several factors an investor... Read More
This is the continuing story of our two imaginary traders,... Read More
Do you have a financial planner? Does one of your... Read More
On Monday, November 25, 2000 Investor's Business Daily listed on... Read More
There is nothing more exciting than finding an undervalued stock... Read More
How do you invest? What do you really pay? At... Read More
THERE'S SOMETHING TO BE SAID FOR standing firm in the... Read More
You probably know the story of Sherlock Holmes and the... Read More
Disclaimer: Please note that I do not necessarily purchase, own,... Read More
Are you attracted to the idea of being in control... Read More
Let's go into the details of why non-indexed mutual funds... Read More
You read and hear a lot about hedge funds. Unfortunately,... Read More
Wall Street has been preaching for years and years to... Read More
Being wrong is OK, but let's not carry it to... Read More
Have you bought any mutual funds this year or late... Read More
Every publicly traded company is required by the SEC(Securities and... Read More
I am hearing predictions by brokers, financial planners, talk show... Read More
reliable maid service Winnetka ..It seems that every day I turn on the TV... Read More
As one of my regular readers you know I have... Read More
Every Wall Street analyst, financial planner and broker will tell... Read More
When it comes to buying a stock or mutual fund... Read More
This is a guide to the different types of mutual... Read More
Everybody is riding the Wall Street Roller coaster. Even if... Read More
Are hedge funds a suitable investment for you? Hedge funds... Read More
Why? Because I am going to shatter your conventional wisdom... Read More
One of the things people are always asking me is... Read More
How often have you come across an advertisement or e-mail... Read More
You must take the time once a month to review... Read More
A recent cartoon in my daily newspaper showed two guys... Read More
Ever turn down a street, get half way and suddenly... Read More
The stock market often closes a week in the middle... Read More
Ever done any whitewater rafting or canoeing? Long periods of... Read More
One of the main reasons many of us get into... Read More
It is wonderful to be alive in the information age.... Read More
Ever wondered what is a mutual fund? A mutual fund... Read More
Ever have one of those sample boxes of candy? Each... Read More
I have watched my cat play with a bag of... Read More
Options trading can increase the profits you make when trading... Read More
When you become interested in a stock or mutual fund... Read More
Any online investor / trader seeks an excellent off or... Read More
Four blind men were asked to give a description of... Read More
At some time in your life you have been on... Read More
Stocks & Mutual Fund |