Thursday, 6 September 2012

A useful tip as a trader: Gauge the number of losing trades in your portfolio

Dear Friends,

I may not be extremely accurate in my picks as a trader, but I am good at knowing when to buy and sell stocks or increasing my position size. This simple strategy that I am going to share with you has benefited me throughout my years of trading.

This strategy requires you to pay attention to the number of losing trades in your portfolio. This is as easy as it gets. Duh...

A good reflection of market not working that well would be that almost every single stock in your portfolio is red in colour. For me, that is a SURE sign of not going into the stock market anymore. The market isn't the right time to enter now. I do not need the technical indicators to tell me whether it is bearish or not. The stocks that you keep will "tell" you. But some of us has a habit of buying and buying again, trying to average down by entering again. That is one sure way of throwing money away.

My habit is at any one time (for my short term trading portfolio), there shouldn't be more than 3 stocks in my portfolio. 3 is the max. At any one time there should be 2 green versus 1 red in my portfolio to know the market is still right for me to go bullish. And at any one time, I tried to maintain my profits to be more than my losses in my portfolio. If not, I would probably look for ways to cut my losing stocks.

If there happens to be 3 red, I would try to liquidate all my losing positions (no matter how much the losses is now) as I aim to preserve my capital, and wait for signs of market to get better. Yes this hurts, but I know that there is always a better 2moro....

Once the market turns better (eg. one simple way is to note a triple digit increase in Dow Jones), I would "test" the market by entering a bullish position. If this position goes in my favor (in one day or two, the stock will tell you), I would up my position lot size and with bigger amount the next time I enter! Most of the times, I would make back what I lose in the 3 stocks that I cut loss the last time round.

And I would keep track of when my stocks turn red again. The market always tells me by just looking closely at my stocks.

Of course there are a lot money managing formula or strategies out there. This method is as simple as it gets. Try it...

Radio FM958访谈 2018年11月15日:世界股市展望 - 现在是熊市吗?

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