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Friday, March 15, 2013

No Short Cuts

The comment below is not to shame anyone but to express my feelings:
I received an email from a vectorvest user that made me very sad. The person subsribed to vectorvest about a month ago, started trading real money with it, and promptly lost a sum of money via cutting loss within contra period.
For anyone who wants to stand any chance of not losing money in the long run, the following is non-negotiable. With software tool or no software tool, anyone who is successful in the long run is doing the following, or something similar:
  1. Follow timing signals. Most important rule.
  2. Write down your trading plan. Fail to plan, plan to fail.
  3. Define and follow money management rules....example : risk only 1% of your trading equity for each trade. Better to be rich slowly than poor fast.
  4. Review past trades. do not make same mistakes again
  5. Backtest, or/and forwardtest for a time period. Determine your probability of each trade, maximum drawdown, expected or average profit per trade, maximum loss, minimum loss
  6. Adapt trading plan to changing market conditions when necessary
  7. If buying, search for strong stocks. Least important rule.
There is no short cuts.

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