Today is a special day indeed. Finally I get to share Rule # 3 today which was implemented today.
Let's review the rules again.
Rule # 1: Do not lose money.
Rule # 2: Never forget rule # 1.
Rule # 3: Always average up.
Elaborate here a bit.
Rule # 1 says when there is a safety of capital and high probability of winning, then trade. Safety of capital comes first. Even if the potential profit is higher by buying now but the direction/conclusion is still uncertain, do not bet. Why you want to try winning something that will not affect you now while putting your current comfortable position at risk?
Rule # 2 says have a cut loss. Must always have a cut loss. Cut loss when you found out your valuation is wrong. Cut loss when the trading plan is wrong. Cut loss when the situation has changed and not following your plan. Cut loss to prevent a big loss so that you can continue trading/investing/business. Never let 1 bad loss wipe you out. Have discipline. Have a trading plan and follow and execute it as planned. Do not let emotion control you. Never ask what if the stock go up again? Ask what if the stock fall again!!! Accept a small pain rather than mega pain where you cannot climb up again. To supplement, if you get a margin call, just close all your trade. It means you are trading on the wrong side and also not trading following your plan.
Rule #3 says always average up. Bet/Buy somemore when you are correct and winning. It shows that you are trading according to plan, and your plan has worked so far. So add up only when you are winning. Never average down your losses unless you are sure of your valuation and it is getting even more undervalued. For trading, if you average down, you will find yourself losing a lot more later. Your are averaging with you own money. While averaging up, you are using your profits. If the trade goes bad, you didn't lose any money. But if you average down.... That is a certain way to get wiped out and also a catastrophic loss. So if you get a supplementary buy signal, you go ahead and add up after considering Rule #1 & 2.
So after Rule #3, the rules repeat itself again, Rule 1,2,3, Rule 1,2,3 until it is time to get out/close position. If you follow the rules, you will prevent yourself from catastrophic loss. If you take care of the downside, the profit will take care of itself. Like my big brother BC always says:"Protecting your capital is the most important. Whatever market give, we just take, never ask for more."
Greed and hope.
As a Technical trader, you need to recognize that it is a boring game. Nothing special. Got buy signal, just buy. Got sell signal just sell. No what if. So you will find it funny that you are feeling greedy and hoping the stock market will not fall, please don't fall. Please go up somemore... etc... it was simply part of your trading plan. You planned for it to happen, or else you won't be buying it. So if it was plan, why get excited? You should hope to win Toto or 4D or get a free BMW. That's understandable. But funny in trading.
Today has a huge Premium. I feel uncomfortable. As I said Rule #1 is the most important. When I cut loss, the losses will be bigger. if 10 points premium, cutting losses will be at least 20 points gone. So will your previous profits. Well, just trade according to plan. Don't expect to get lucky everyday Lok.
一个不曾用自己的脚在路上踩下脚印的人，不会找到一条真正属于自己的路。
ReplyDeleteIvy good morning!
ReplyDeleteToday is a special day indeed. Finally I get to share Rule # 3 today which was implemented today.
Let's review the rules again.
Rule # 1: Do not lose money.
Rule # 2: Never forget rule # 1.
Rule # 3: Always average up.
Elaborate here a bit.
Rule # 1 says when there is a safety of capital and high probability of winning, then trade. Safety of capital comes first. Even if the potential profit is higher by buying now but the direction/conclusion is still uncertain, do not bet. Why you want to try winning something that will not affect you now while putting your current comfortable position at risk?
Rule # 2 says have a cut loss. Must always have a cut loss. Cut loss when you found out your valuation is wrong. Cut loss when the trading plan is wrong. Cut loss when the situation has changed and not following your plan.
Cut loss to prevent a big loss so that you can continue trading/investing/business. Never let 1 bad loss wipe you out. Have discipline. Have a trading plan and follow and execute it as planned. Do not let emotion control you. Never ask what if the stock go up again?
Ask what if the stock fall again!!! Accept a small pain rather than mega pain where you cannot climb up again. To supplement, if you get a margin call, just close all your trade. It means you are trading on the wrong side and also not trading following your plan.
Rule #3 says always average up. Bet/Buy somemore when you are correct and winning. It shows that you are trading according to plan, and your plan has worked so far. So add up only when you are winning. Never average down your losses unless you are sure of your valuation and it is getting even more undervalued. For trading, if you average down, you will find yourself losing a lot more later. Your are averaging with you own money. While averaging up, you are using your profits. If the trade goes bad, you didn't lose any money. But if you average down.... That is a certain way to get wiped out and also a catastrophic loss.
So if you get a supplementary buy signal, you go ahead and add up after considering Rule #1 & 2.
So after Rule #3, the rules repeat itself again, Rule 1,2,3, Rule 1,2,3 until it is time to get out/close position. If you follow the rules, you will prevent yourself from catastrophic loss.
If you take care of the downside, the profit will take care of itself.
Like my big brother BC always says:"Protecting your capital is the most important. Whatever market give, we just take, never ask for more."
Greed and hope.
As a Technical trader, you need to recognize that it is a boring game. Nothing special. Got buy signal, just buy. Got sell signal just sell. No what if. So you will find it funny that you are feeling greedy and hoping the stock market will not fall, please don't fall. Please go up somemore... etc... it was simply part of your trading plan. You planned for it to happen, or else you won't be buying it. So if it was plan, why get excited? You should hope to win Toto or 4D or get a free BMW. That's understandable. But funny in trading.
Today has a huge Premium. I feel uncomfortable. As I said Rule #1 is the most important. When I cut loss, the losses will be bigger. if 10 points premium, cutting losses will be at least 20 points gone. So will your previous profits.
Well, just trade according to plan. Don't expect to get lucky everyday Lok.
Quote:
ReplyDeletechiew5151 said...
" 随缘就好，^.^
何必去猜测市场走到哪里？
何必去猜测人生还有几何？
一切随缘、一切随缘... "
July 14, 2010 4:45 AM
A：阿弥陀佛！施主，一切随缘、一切随缘...
ReplyDeleteB：师父，你说的容易，但做的难呀!你带钩来？
A: 阿弥陀佛!善哉!善哉!施主，送你锦囊“秒”记一个
B：（打开）哈！我要晕。。。
（开玩笑）