myinvestingnotes.blogspot.my (Bullbear Buffett Stock Investing Notes)

Keep INVESTING Simple and Safe (KISS) ****Investment Philosophy, Strategy and various Valuation Methods**** The same forces that bring risk into investing in the stock market also make possible the large gains many investors enjoy. It’s true that the fluctuations in the market make for losses as well as gains but if you have a proven strategy and stick with it over the long term you will be a winner!****Warren Buffett: Rule No. 1 - Never lose money. Rule No. 2 - Never forget Rule No. 1.

Showing posts with label trading plan. Show all posts

Friday, 13 April 2012

*Make BIG Money Trading -WATCH NOW!

- Ultimate Trading Cycles - by Greg Secker

Martin J. Pring's Trading Rules - Webinar

Rule 1: When in Doubt Stay Out
Rule 2: Never Invest or Trade Based on Hope
Rule 3: Act on Your Own Judgment or Else Absolutely and Entirely on the Judgment of Others
Rule 4: Buy Low (into weakness), Sell High (into strength)
Rule 5: Don't Overtrade

Rule 6: After a Successful and Profitable Trading Campaign, Take a Trading Vacation
Rule 7: Take a Periodic Mental Inventory to Check How You Are Doing
Rule 8: Constantly Analyze Your Mistakes
Rule 9: Don't Jump the Gun
Rule 10: Don';t Try to Call Every Market Turn

Rule 11: Never Enter into a Position Without First Establishing a Reward to Risk
Rule 12: Cut Losses Short, Let Profits Run
Rule 13: Place Numerous Bets on Low Risk Ideas
Rule 14: Look Down (at the risk potential) not Up (before your reward potential)
Rule 15: Never Trade or Invest More Than you Can Reasonably Afford

Rule 16: Don't Fight the Trend
Rule 17: Whenever Possible Trade Liquid Markets
Rule 18: Never Meet a Margin Call
Rule 19: If You are Going to Place Stop, Put it in a Logical, Not Convenient Place

Thursday, 12 April 2012

Trading Psychology

Friday, 9 March 2012

Currency Trading for DUMMIES (Getting Started Edition)

Currency Trading for DUMMIES

GETTING STARTED EDITION

by Mark Galant and Brian Dolan

https://secure.efxnow.com/forex2/eng/ct-dummies.pdf

Thursday, 24 November 2011

The Importance of the Risk to Reward Ratio

Written by Thomas Long

Trader A has a win percentage of 75% on all trades while trader B has a win percentage of closer to 40% on all trades. Which trader is more profitable? Of course we can't answer that as we don't know how much each trader makes when they are right compared to how much they lose when they are wrong. So the win percentage is not the most important factor in trading. I'm sure that we would all like to win most of our trades, but if our goal is to be profitable, then there is more to the equation. It is called the risk:reward ratio and is one of the most important aspects of money management and a key to becoming a consistently profitable trader. Let's take a look at some examples:

If you risk 100 pips and look for 300 pips in profit, your risk:reward ratio is 1:3 or one pip of risk for every three pips in potential profit.
If you risk 100 pips and look for 200 pips in profit, your risk:reward ratio is 1:2 or one pip of risk for every two pips in potential profit.
If you risk 100 pips and look for 100 pips in profit, your risk:reward ratio is 1:1 or one pip of risk for every one pip in potential profit.
If you risk 100 pips and look for 50 pips in profit, your risk:reward ratio is 2:1 or two pips of risk for every one pip in potential profit.
If you risk 100 pips and look for 25 pips in profit, your risk:reward ratio is 4:1 or four pips of risk for every one pip in potential profit.

So forex trader A would not be profitable using a 4:1 risk:reward ratio while maintaining a win percentage of 75%. On the other hand, trader B using a 1:2 risk:reward ratio while maintaining a win percentage of 40% is a profitable trader. I would recommend that new traders use a 1:2 risk:reward ratio in their trading. If you open a trade with a risk of 25 pips, then try to get twice that or 50 pips in profit. I would also recommend moving your protective stop up to breakeven when the market moves halfway to your target.

An example of this would be if you bought at 1.2500 and placed your protective stop at 1.2475, your risk is 25 pips. Using a 1:2 risk:reward ratio means placing your limit order to take profits at 1.2550 for a potential gain of 50 pips. When the market moves up halfway to your target which would be the 1.2525 level, you move your protective stop from 1.2475 up to your entry level of 1.2500. At this point, you can only win or break even on the trade. Then you can spend your time looking for the next trading opportunity instead of following the current trade.

Thomas Long, FX PowerCourse Instructor
FXCM

“Top 10 questions a Trading Plan must answer“.

A Trading Plan has only one purpose which is to guide the Trader to achieve his goals in Trading and in Life. It must pre-define a course of action to all situations a Trader will encounter. It must contain a system that can be easily followed, otherwise it is likely the trader will eventually not follow it.

Developing your trading plan is an essential process for a trader on his or her road to success, it can be a process which evolves over time as you expand your knowledge and learn about yourself.

Below are all the posts in this series:

What are your Life Goals & Trading Goals?
What is your Trade Entry Method?
What are your Trade Exit Methods?
What type of orders will you use to enter & exit?
What are your Money Management Techniques ?
How will you manage your Position Risk versus Reward?
What is your Process for Open Trade Review & finding New Trades Picks?
What is your Trading Success Profile?
How will you Review your Trading System to measure & improve?
What is your Trading Daily Routine-(Part1 & Part 2)?

http://globaltrendtraders.com/trading-plan/top-10-questions-a-trading-plan-must-answer/

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My 18 points guide to Successfully compounding your money in Stocks

Be a good stock picker.
Think as a business owner.
Always look at value rather than the price. Do the homework.
Buy and hold is alright for selected stocks.
Compounding is your friend, get this to work its magic.
Mr. Market is there to be taken advantage of. Do not be the sucker instead. BFS;STS.
Always buy a lot when the price is low.
Never buy when the stock is overpriced.
It is alright to buy when the selected stock is at a fair price.
Phasing in or dollar cost averaging is safe for such stocks during a downtrend, unless the price is still obviously too high.
Do not time the market for such or any stocks.
By keeping to the above strategy, the returns will be delivered through the growth of the company's business.
So, when do you sell the stock? Almost never, as long as the fundamentals remain sound and the future prospects intact.
The downside risk is protected through only buying when the price is low or fairly priced.
Tactical dynamic asset allocation or rebalancing based on valuation can be employed but this sounds easier than is practical, except in extreme market situations.
Sell urgently when the company business fundamental has deteriorated irreversibly.
You may also wish to sell should the growth of the company has obviously slowed and you can reinvest into another company with greater growth potential of similar quality. However, unlike point 16, you can do so leisurely.
In conclusion, a critical key to successful investing is in your stock picking ability.

http://myinvestingnotes.blogspot.com/2012/07/my-18-points-guide-to-successfully.html

11 Lessons From Peter Lynch

Peter Lynch taught me:

1. Behind every stock is a company. Find out what it’s doing.
2. Never invest in any idea you can’t illustrate with a crayon.
3. Over the short term, there may be no correlation between the success of a company’s operations and the success of its stock. Over the long term, there’s a 100% correlation.
4. Buying stocks without studying the companies is the same as playing poker – and never looking at your cards.
5. Time is on your side when you own shares of superior companies.
6. Owning stock is like having children. Don’t get involved with more than you can handle.
7. When the insiders are buying, it’s a good sign.
8. Unless you’re a short seller, it never pays to be pessimistic.
9. A stock market decline is as predictable as a January blizzard in Colorado. If you’re prepared, it can’t hurt you.
10. Everyone has the brainpower to make money in stocks. Not everyone has the stomach.
11. Nobody can predict interest rates, the future direction of the economy, or the stock market. Dismiss all such forecasts and concentrate on what’s actually happening to the companies in which you’ve invested.

Lynch’s advice had a profound effect on my stock market approach. He taught me that investment success isn’t the result of developing the right macro-economic view or deciding when to jump in or out of the market. Success is about researching companies to identify those that are likely to report positive surprises.

Capital Expenditure

A great company with a Durable Competitive Advantage will have a ratio of Capital Expenditures to Net Income of less than 25%. Less is better.

Capital Expenditures are expenses on:
- fixed assets such as equipment, property, or industrial buildings
- fixing problems with an asset
- preparing an asset to be used in business
- restoring property
- starting new businesses

A good company will have a ratio of Capital Expenditures to Net Income of less than 50%.

A great company with a Durable Competitive Advantage will have a ratio of less than 25%.

Less is better.

Benjamin Graham's 113 Wise Words

The true investor scarcely ever is forced to sell his shares, and at all times he is free to disregard the current price quotation. He need pay attention to it and act upon it only to the extent that it suits his book, and no more. Thus the investor who permits himself to be stampeded or unduly worried by unjustified market declines in his holdings is perversely transforming his basic advantage into a basic disadvantage. That man would be better off if his stocks had no market quotation at all, for he would then be spared the mental anguish caused him by other persons' mistakes of judgement."

Philip Fisher's Wise Words

"The refusal to sell at a loss, while completely natural and normal, is probably one of the most dangerous in which we can indulge ourselves in the entire investment process.

More money has probably been lost by investors holding a stock they really did not want until they could 'at least come out even' than from any other single reason. If to these actual losses are added the profits that might have been made through the proper reinvestment of these funds if such reinvestment had been made when the mistake was first realized, the cost of self-indulgence becomes truly tremendous."

(Common Stocks and Uncommon Profits)

The Ultimate Hold-versus-Sell Test

Here is the overriding primary test, followed by observations on why it is so critically important:

Knowing all that you now know and expect about the company and its stock (not what you originally believed or hoped at time of purchase), and assuming that you had available capital, and assuming that it would not cause a portfolio imbalance to do so, would you buy this stock today, at today's price?

No equivocation. Yes or no?

Answers such as maybe or probably are not acceptable since they are ways of dodging the issue. No investor probably buys a stock; they either place an order or do not.

Here is the implication of your answer to that critical test: if you did not answer with a clear affirmative, you should sell; only if you said a strong yes, are you justified to hold.

Some thoughts on Analysing Stocks (KISS)

Ideally a stock you plan to purchase should have all of the following charateristics:

• A rising trend of earnings dividends and book value per share.
• A balance sheet with less debt than other companies in its particular industry.
• A P/E ratio no higher than average.
• A dividend yield that suits your particular needs.
• A below-average dividend pay-out ratio.
• A history of earnings and dividends not pockmarked by erratic ups and downs.
• Companies whose ROE is 15 or better.
• A ratio of price to cash flow (P/CF) that is not too high when compared to other stocks in the same industry.

Margin of Safety Concept: Stocks should be bought like groceries, not like perfume

The high CAGR in the early years of the investing period, due to buying at a discount, tended to decline and approach that of the intrinsic EPS GR of the companies over a longer investment time-frame.

Chapter 20 - “Margin of Safety” as the Central Concept of Investment

A single quote by Graham on page 516 struck me:

Observation over many years has taught us that the chief losses to investors come from the purchase of low-quality securities at times of favorable business conditions.

Basically, Graham is saying that most stock investors lose money because they invest in companies that seem good at a particular point in time, but are lacking the fundamentals of a long-lasting stable company.

This seems obvious on the surface, but it’s actually a great argument for thinking more carefully about your individual stock investments. If most of your losses come from buying companies that seem healthy but really aren’t, isn’t that a profound argument for carefully studying any company you might invest in?

myinvestingnotes.blogspot.my (Bullbear Buffett Stock Investing Notes)

Friday, 13 April 2012

*Make BIG Money Trading -WATCH NOW!

Martin J. Pring's Trading Rules - Webinar

Thursday, 12 April 2012

Trading Psychology

Friday, 9 March 2012

Currency Trading for DUMMIES (Getting Started Edition)

Thursday, 24 November 2011

The Importance of the Risk to Reward Ratio

The Importance of the Risk to Reward Ratio

“Top 10 questions a Trading Plan must answer“.

All equity security investments present a risk of loss of capital

The Ultimate Hold-versus-Sell Test

Some thoughts on Analysing Stocks (KISS)

Benjamin Graham

Sell the losers, let the winners run.

Investment Style

Warren Buffett

Political and Economic News

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