Yak's 10 Rules - They're BACK!!!!

  1. Yak
    13,672 Posts.
    Thanx to those people who emailed me and faxed me the stuff I needed after my crash

    I owe ya's

    After much messin' about scanning OCR'ing etc here's those rules - sort of timely given the present state of the market

    Whats funny - if ya look at the stockexamples i give - on some we're STILL waiting and its well over a year!!!

    Message Yak's 10 Rules o1 Trading (read 37 times;
    2 replies
    Conference ASX
    Posted Fri 17-Aug-01 13:55
    Member Yak
    Email Address bobbyw~
    Member Since 22 Ju1y 99
    No. Connections 2271
    No. Posts 1680

    Set out below are the 10 rules I've posted over the past couple of weeks on H/C.

    A "guru" I aint

    What they do represent however, are the crystallised strategies and philosophy's that make up the core of both how I see myself as trader now and haw I feel I've grown over quite a number of years.

    I've made a fair bit and lost a fair bit. But what I've always sought and strived far was consistency and reliability. Maybe, due to my profession, there’s always been an attempt to understand the powerful human forces at work within and without that can and will impact on the logic and control t am trying to bring to my own involvement in the market.

    Most are a bit of a "tongue-in-cheek" spin on a kennel of an idea.

    All, however, do stem from a perception on the market that seems best put along the lines of that '"we more I know - the less I understand"!

    Someone once described the market as a "challenging game of strategy and discipline". It is an incredibly large, complex, intricate and dynamic system. I see it as an iceberg with only the tip in your awareness at any one time. You look away and its a different iceberg!

    To survive and THAT is the key - to "stay in the game" - you need to exercise strict discipline, clear judgment, do your homework, and set firm goals and limits. Sometimes the most important work you can do is exercising patience, confidence, and discipline.

    As someone in the French Revolution said, "keep your head while everyone around you is losing theirs". You need to stay calm, keeping your mind clear and focused

    Whilst there are certainly similarities between the market and a horse race meeting, whet you musn't do is blindly bet that the stock price will go up or down. You must remain on top of the news (accepting you know very little) and make your trading decisions based on the facts and logic at hand REALISING they are imperfect.

    You need to evaluate the risks, the projected upside as well as the downside.

    Intrinsically linked to our trading behaviour is our self-image, self-esteem; self-confidence and the sense of where we fit into this big complex system.

    Winning or losing - or in other words making "good" and "bad" trades can have a dynamic impact on how you see yourself.

    Positive outcomes carry the risks you wilt lose caution and succumb to greed, The result? You've squandered everything you worked so hard for in a heartbeat! And, you're OUTTA the game!

    The flip side, of course, is that negative outcomes can often lead you to the belief that "you are a loser" and you can exit never to be heard of again!

    I have always believed mere is far more to to learned from failures, misses and mistakes than most people would believe. Learn to use a loss as a learning experience, just as all pros do in any field and make the effort to figure out WHY you lost. In this way, you maximize your chance of becoming a better investor.

    Believe in yourself. If your next trading decision ends up being wrong, that may mean you haven't yet done sufficient research.

    Anyway - I hope they help!

    Rule #1: Nothing ever, ever, ever happens when you think; believe or hope it will.

    Corollary; Any plans, investments or punts made upon these ill-founded time frames will fail.

    Simple rule really, Recent proofs are as follows:
    CAG - the "imminent" release of contract details
    CBT - to release definitive figures on profitablity
    EBT - the "imminent" redistribution - for what a year?!?
    MXA - release at end of June details of a million dollar profit surge
    XEN - anything!
    VPI - its drill results on Eagle
    HDR - its wireline Logs
    KCG - its China deals
    TRE - its bio-security deals
    AY0 - its gas deals and pipeline

    Honestly - I could go on and on.

    Rule #2: No matter how much you think or believe you know about what's happening behind the price, accept you know almost nothing.

    Corollary #1: Anything you do know is KNOWN by everyone and can and probably will be used against you!

    Corollary 02: The more you think you know, the greater the risk you pose to yourself!

    Rule#3. The single largest battle you will face is the challenge of common sense, logic and discipline to overcome the often more powerful and, at times, irresistible forces of greed, hope, fear and panic

    #4: If you make 3 BAD trades in a row - take a break from the market.

    Corollary: Breaking Rule 04 - whilst not necessarily fatal in itself - can and often does - lead to despair and a corresponding and often fatal failure to follow Rule #3.

    Rule#5:When making a BUY trade as a result of the research you've done (but hey thats another rule!!), ALWAYS look to get the entry price you have selected.

    However, when exiting a bad trade and hence a SELL, ALWAYS use an "at market" order.

    NOTE: Vitally important if using an on-line broker WITHOUT STP!!!

    Experience: Learned this one as I attempted to, on many occasions, keep chasing the price lower and lower on a sell trade.

    Rule #6: "Learn" to take a profit! This is the antidote to greed!

    In practice: When in a trade and with you as an inexperienced trader, sell half of a holding that is in profit at a REDUCED target.

    WHY??? Its about training yourself, folks. TAKE PROFITS!!!

    Get used to taking partial profits and this will let you have the trust and confidence to allow the other portion achieve its goal.

    Also, as I learned a long time ago, dont try something new or different in the heat of a battle. As with any skill, learn it, practice it and master it in controlled or rather benign situations so when you really need it -
    when the proverbial is hitting the fan - its there to be used effectively!

    The other positive out of this is that its likely to put you m a 'no lose' situation which will bolster your confildence, ease the fear, raise your self-esteem and self-belief.

    Remember I'm a shrink so listen up!

    Rule#7: Truely ACCEPT that no matter how GOOD an opportunity looks and no matter how positive you are that this "a THE deal NOT to be missed under ANY circumstances'", if you trade by YOUR rules - something JUST AS GOOD will pop up almost immediately.

    Discussion: This may be the hardest of the lot to accept, integrate and operationalise. It eventually will occur or you'll end up as someone "who used to trade."'

    Another way of looking at it is that there is ALWAYS, ALWAYS another train about to leave the station!!!

    Perhaps more advice than a rule.

    Rule#8: Beware the trap of watching, recording and analysing the movement and sweep of the second hand of a clock!

    Meaning: If you're not careful you can develop a habit (?compulsion/addiction?) to sitting at your screen and watching, at first then recording and trying to analyse, each moment-by-moment event on your screens!!

    Even when nothing's happening.

    1 liken it to, at the end of the day, when nothing HAS happened and no real trading decisions have been made, to one who meticulously records the movement of the clock's second hand.

    Pointless, useless and about as big a waste a time as I can imagine.

    Rule#9: Scale back your profit-per-trade expectations from fantasy to reality.

    Explanation; Ensure you have a rational, achievable and realistic expectation of what sort of profit you expect.

    Corollary, If it sounds too good to be true it probably is,

    Imagine someone walking up to you in the street and whispering " Oy! Ya wanna make a million bucks?" Whatever scepticism that raises in you should be applied to the market!

    To enter a trade or to limit your entry to those "get rich quick" plays or those which you've been assured will yield a 100% return in a couple of days" is incredibly risky.

    Far more likely to be untrue and lead to huge loss of capital.

    If you see yourself as a trader and you can see the capacity to turn a small profit in a short time; MULTIPLY this by many trades and you have a far greater chance of surviving and actually making money.

    For sure - no where near as exciting!!

    So, maybe set aside a small percentage of your capital with which to take those sort of risks. Just make sure they dont form the basis and the foundation of your capital or trading philosphy.

    #10: Find a couple of TIA indicators and become adept at their usage.

    Discussion: Without really getting into the tiresome debate of the relative merits of TIA vs Fundamentals, find a couple of TIA indicators and become really familiar with the theory behind them how to use them along their relative stregnths and weaknesses.

    For example, in my case I like moving Averages (MIA). I like to use either a 10 Day MA or a 40 Day MA. (You can play with the parameters till ya feel comfortable). The 10 and 40 give me a spread of the movements with some varying degree of dampening for the inevitable oscillations. Plot the 40 day MA and 10 day MA.

    For me, as long as the 10 day average is above the 40 day, I feel comfortable stay in the stock. When the 10 day =saes below the 40 day, I sell and move on

    For me my experiences have shown this strategy keeps me in a stock trending upward slowly and steadily.

    This is where I have made my best returns,

    Other uses - when a stock crosses down through its 10-Day MA with a large volume, I see this as a likely down pattern

    I tend to use the 40 day MA as a moving support line for stocks in an up trend. For me, its a strong buy signal if the stock price bounces back sifter reaching the support line.

    My other favourite is RSI. Probably like these two 'cause they're easier to undertand than most others - more intuitive - and dont soured like quackery (ie candlesticks - not that they are - they just sound like it is "Sudden Cloudy Day

    I could go on and on but ya get my drift

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