Garnett Znidaric, in Your Trading Edge, offers issues (in quotes) to be aware of before entering the trading game. We have included comments and links too:
- Know your goals and objectives: "After much soul searching you need to have come up with reasons for doing what you are doing. The reasons need to include family, financial aspirations, and your philosophy and purpose in life."
- Know yourself: Read.
- Set and use rules: Do you have rules you use everyday in the markets? If not, why not?
- Test and measure everything: "If you are going to put money on the line, you need to know what the probability is of it doing what you expect."
- Build a library: Read.
- Plan bigger than an entry system: "Too many people get overly concerned about buying low. It is more important to sell at a higher price than you bought." Read.
- Losses are great teachers: Many have said that losses are the tuition fee to ultimate success. The idea is to win in the long run, not be right in the long run.
- Technical analysis is not magic: If you know this "secret" than you are already one step ahead of the majority. Read.
- Eye and hand versus computer: Testing trading systems for your own confidence is critical, but you must do more than sit back and rely only on your PC or the latest software fad. The underlying premise of why a strategy works must resonate in you, not just your PC.
- Plans are personal: Not everyone wants the same thing in life. Some people want 15% a year. Some want 50% a year. These are choices and there are tradeoffs.
- System evaluation: You have to always measure and make adjustments. If volatility changes, for example, what is your plan? You must know before you ever start.
- Keeping good records: "Trading sheets that detail trades and a day book that helps you understand what you were thinking when you entered are the minimum records you need to keep."
These are core issues all Trend Followers live every day.
Garnett Znidaric is ACT State President of Australian Technical Analysts Association.
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