A Strong Trading Mind
- Thread starter amitrandive
- Start date
System Objectives
The challenge is to bring together afew set of consideraions in a cohesive set of realistic objectives:
If you are only prepared to tolerate a 10 per cent retracement, do not try to ride out major corrections.
If you are prepared to tolerate a 10 or 20 per cent retracement, consider trading lower-risk blue chip stocks in the hope of limiting the number of times that you are stopped out in a trend. Or are you prepared to endure more stop-outs in the hope of greater returns from faster-moving stocks?
If your transaction costs are high, you will need to limit the number of times that you are stopped out in the trend. Are you prepared to tolerate deep retracements or will you trade more reliable, slower-moving stocks?
If you intend to trade a shorter time frame, you will need to minimize your transaction costs.
How will you identify suitable trends, separating faster-moving and slower-moving stocks?
How much of the early part of the trend do you need to sacrifice in order to minimize false starts? This is especially important if you are going to trade more volatile stocks.
How will you identify and cope with shake-outs: where there are two (or even three) successive down-swings before the up-trend resumes?
How will you cope emotionally if you are repeatedly stopped out? Will you have the resolve to stick to your system?
How will you identify and cope with blow-offs, where price goes into an almost vertical spike? These tend to reverse sharply, leaving trend-following exits far behind.
If you trade breakouts, how will you cope with false breaks or fake-outs?
Source – incrediblecharts.com
The challenge is to bring together afew set of consideraions in a cohesive set of realistic objectives:
If you are only prepared to tolerate a 10 per cent retracement, do not try to ride out major corrections.
If you are prepared to tolerate a 10 or 20 per cent retracement, consider trading lower-risk blue chip stocks in the hope of limiting the number of times that you are stopped out in a trend. Or are you prepared to endure more stop-outs in the hope of greater returns from faster-moving stocks?
If your transaction costs are high, you will need to limit the number of times that you are stopped out in the trend. Are you prepared to tolerate deep retracements or will you trade more reliable, slower-moving stocks?
If you intend to trade a shorter time frame, you will need to minimize your transaction costs.
How will you identify suitable trends, separating faster-moving and slower-moving stocks?
How much of the early part of the trend do you need to sacrifice in order to minimize false starts? This is especially important if you are going to trade more volatile stocks.
How will you identify and cope with shake-outs: where there are two (or even three) successive down-swings before the up-trend resumes?
How will you cope emotionally if you are repeatedly stopped out? Will you have the resolve to stick to your system?
How will you identify and cope with blow-offs, where price goes into an almost vertical spike? These tend to reverse sharply, leaving trend-following exits far behind.
If you trade breakouts, how will you cope with false breaks or fake-outs?
Source – incrediblecharts.com
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