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The third point of discovery is your trading style. Any successful trading style is developed through a process of preparation, research, calculated risk taking, and discipline. |
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The emergence of electronic trading is very exciting, but be very careful that you do not get caught up in the event and mismanage this process. Don't just jump into trading. Carefully choose your style, then learn how to trade that style effectively. |
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Why do you even need a particular trading style? |
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1. To learn and use proven tactics. Why try something unproven? Why try to invent something new? For consistent profitability, you can learn proven, reliable tactics for high-probability trading. This is the basis for everything else you do as a trader. |
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2. To increase your confidence. Confidence comes from knowing that you have a proven system. Knowing your probabilities in any trade greatly increases your confidence. |
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3. To increase your discipline. With confidence, discipline comes easy. Why would you not be disciplined to a plan that you have confidence will be successful? |
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4. To reduce your emotions. With confidence and discipline, you gain emotional detachment. |
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There are four main strategies for trading equities: |
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1. The long-term investor |
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One should be right for you. |
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This style looks for undervalued stocks to hold for long periods of time, usually one year or longer. These fundamentals of the particular security are the most important factors in entry and exit decisions: |
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Securities ratios, PE, book value per share |
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Profitability, EPS, margins, ROE |
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Leverage, debt to equity, debt to assets |
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