Basic tenets of swing trading - Linda Bradford – Street smarts.

·         Stay in one time frame! Yes, it is important to be aware of the big picture, but it should not affect where you get into or out of a trade or how you manage it. Don't turn short-term scalps into "big picture" trades.

·         When in doubt, get out! If the market goes dull and quiet after you enter a trade and makes no progress in the direction of your entry, do not wait until your stop is hit. Just get out! Seek a more active market or better trading opportunity. All of the strategies of swing trading techniques should reward you immediately. If they don't, it is likely your trade will turn into a losing one.

·         Don't trade in quiet, dull markets. Dow, Livermore, Rhea, Taylor, Gann-all the greats say this over and over. There must be activity and liquidity in order to trade profitably.

·         Don't carry losing positions overnight. Exit and try entering at a more favorable level the next day.

·         If the market offers you a windfall profit on a trade, lock it in! (Windfall means a much bigger profit than anticipated.) Take profits on half or all of the position. Trail an extremely tight stop on any balance!

·         Finally, remember that both in short-term trading and mechanical systems, the distribution of winners is skewed. Most of a month's profits might come from only two or three big trades. Much of the time the individual profits may seem small, but more importantly the losses should be small, too.

It is vitally important to lock in the best trades. Be defensive and don't give back profits when swing trading!

Some basic rules for successful trading

Money	:	Never trade with money you cannot afford to lose
Trend	:	Always ride the trend and never try to decide a trend
Selection	:	Always select the stocks, for there are always bullish  stocks in a bearish market and bearish stocks in a  bullish market.
Timing:	:	Never initiate your trade at the opening bell, wait for a  market to make initial high and lows
Quantity		Always while trading keep the amount same in each trade  and not the quantity, ex: if have traded 50000/- in one,  trade 50000/- in another rather than trading 100 shares in  each trade. i.e. keep  the trading amount same in each  trade rather  than the trading quantity.
Learning	:	Blaming market is trying to hide your mistakes from yourselves ,making fool of one’s self, thereby losing an opportunity to learn,  markets are never wrong, the blame lies with trader.
Introspection	:	Always introspect at the end of every trading day, next day will  work wonders.
Risk/ reward ratio	:	Never ever enter a trade where the risk to reward ratio is  less than 1:4
No of Trades	:	Always trade in 2 to 3 stocks at any given point of time,  how lucrative the market be, be master of some than being jack of all, keep buffering profits,  you’ll find stock markets a wonderful place to be in...
Stop loss	:	Stop loss is essence for trading, never trade without a stop loss,  though adequate liverage should be taken while placing  stop losses in a volatile market.
Averaging	:	Averaging has no place in day trading, either u get out of the trade  with the  stop loss getting triggered or get the target
Success	:	Always use trailing stop loss, when the trade initiated,  starts bearing results, to get maximum profit.
Greed:	:	Always be ready to take the profits home, if the initial trades  have worked for you,  be ready to go home , do not trade for the broker
Confience:	:	If the markets are not making you confident do not trade,  just for the sake of trading ,  wait for clear signals
Rumors	:	Never trade on news or rumors, always follow the levels,  remember, news does not make levels,  it just triggers levels.
Levels	:	Never get panicked or exited by the happenings on the screen,  stick to the levels and stop loss, else you’ll always end up loser
Psycology	:	Never follow the mass [the people sitting besides u],  for 95% of them do not understand market
Decision	:	Be ready to book loss if the ship starts to sink, do no pray ,  just jump.
Patience:	:	Patience is the name of the game, always exercise patience  and restrain during the course of trading, for if a couple of trades  have worked against u, take a gap and try to get the trend.
Speculation:	:	Check on the speculative tendency, every rise or fall has a logic  behind it, just do not be speculative, without logic.
Failures	:	Always treat failures [losses] if any, as an learning opportunity,  for every failure opens the doors of success, failures should be  used as a source of motivation rather than depression.

The 23 Winning Investment Habits of the World’s Masters Investors – Warren Buffet and George Soros!

Winning Habit Number 1:
• Believes his priority is always preservation of capital.
Winning Habit Number 2:
• Risk Averse.
Winning Habit Number 3:
• Has developed his own investment philosophy (personality,ability, knowledge, tastes and objectives).
Winning Habit Number 4:
• Has developed and tested his own personal system for selecting buying and selling shares.
Winning Habit Number 5:
• Believes diversification is for the birds.
Winning Habit Number 6:
• Hates to pay taxes and other transaction costs and arranges his affairs to legally minimize tax.
Winning Habit Number 7:
• He only invests in what he understands.
Winning Habit Number 8:
• Refuses to make investments that do not meet his criteria.Can effortlessly say “NO” to everything else.

Winning Habit Number 9:
• Is continually searching for new investment opportunities that meet his criteria and actively engages in his own research. Likely to listen only to other investors or analysts who he has profound reasons to respect.
Winning Habit Number 10:
• When he can’t find an investment that meets his criteria, he has the patience to wait indefinitely until he finds one that does.
Winning Habit Number 11:
• Acts instantly when he has made a decision.
Winning Habit Number 12:
• Hold a winning investment until a pre-determined reason to exit arrives.
Winning Habit Number 13:
• Follows his own system RELIGIOUSLY.
Winning Habit Number 14:
• Aware of his own fallibility. Corrects mistakes the moment they become evident. As a result suffers more than small losses.
Winning Habit Number 15:
• Always treats mistakes as LEARNING EXPERIENCE.
Winning Habit Number 16:
• As his experience increases, so do his returns. He now seems to spend less time to make more money. Has “paid his dues”.

Winning Habit Number 17:
• Almost never talks to anyone about what he’s doing. Not interested or concerned with what others think about his investment decisions.
Winning Habit Number 18:
• Has successfully delegated most if not all of his responsibilities to others.
Winning Habit Number 19:
• Lives far below his means.
Winning Habit Number 20:
• Does what he does for stimulation and self-fulfillment and not for money.
Winning Habit Number 21:
• Is emotionally involved with the process of investing and can walk away from any individual investment.
Winning Habit Number 22:
• Lives and breathes investing 24 hours a day.
Winning Habit Number 23:
• Puts his money where his mouth is.

Learn Intelligent Ignorance

Education teaches us what we can do and also teaches us what we cannot do.

I'm looking for a lot of men with an infinite capacity for not knowing what cannot be done. --Henry Ford

Henry Ford gave this world the V8 engine. He did not have much formal education. In fact, he did not go to school beyond the age of 14. He was intelligent enough to know there had to be a V8 engine but he was ignorant and didn't know how to build it. So he asked all his highly qualified, educated people to build one. But they told him what could be done and what couldn't. According to them, a V8 was an impossibility. But Henry Ford insisted on having his V8. A few months later he asked his people if they had the V8 and they replied, "We know what can be done and we also know what cannot be done and V8 is an impossibility." This went on for many months and still Henry Ford said, "I want my V8." And shortly thereafter the same people produced his V8 engine.

How come? They let their imagination run beyond academic limitation. Education teaches us what can be done and sometimes also teaches us false limitations.

HERD MENTALITY:

Stampeding up the high mountain when markets are rising and down into the cold deep sea when markets are falling!

This "herd" mentality can be extremely dangerous to your pocketbook.

Why?

Because investors often get into the market too late and get out too early!

You should never let emotions cloud your trading judgment. But you can turn the crowd's fear and greed to your advantage! To exploit market psychology, you must act in a contrarian fashion, taking the contrary course when the crowd falls prey to its emotions.

Extreme optimism can coincide with market tops. People think the sky's the limit and send stock prices flying. Savvier investors sell into this frenzy and run to cash. The market tanks soon afterward!

Extreme pessimism can be bullish. Toward the end of a big decline, the last bulls throw in the towel and sell with a vengeance. Cooler heads smell a fire sale. They dive into the market and buy equities with both hands to launch the next rally!

Studies by economists and psychologists have found that investors are most influenced by recent events --market news, political events, earnings, and so on-- and ignore long-term investment and economic fundamentals.

Furthermore, if a movement starts in one direction, it tends to pick up more and more investors with time and momentum.

The impact of this lemming-like behavior has been made worse in recent years because financial, economic, and other news affecting investor psychology travel faster than ever before.

Capital can also flow now between nations with surprising ease, so that international markets respond more quickly to sudden changes with a domino effect in the direction of investor buying and selling.

How do you stay calm during market drops and restrained during market updrafts?
Here are a few guidelines:

1. Have a plan.
2. Know why you're investing and what you want to accomplish.
3. Pick a strategy and investments that best help you reach your goals.
4. Minimize risks.
5. Don't fall prey to the temptations of greed or fear.
6. Know your investment personality.
7. Pick investment strategies and risks you feel comfortable with.
8. Stick to your investment approach. If you follow a certain type of investing strategy or a particular investment newsletter, stick with it unless there are sound reasons to change. Different strategies often can end up with similar results over the course of a market cycle. It's the switching back and forth between strategies that can cause problems because jittery investors often abandon a strategy that's temporarily out of favor--just before it makes a strong recovery.
9. Sort out the good from the bad. Learn to recognize the difference between a poor investment and a solid investment that is having an off period.
10. Diversify.
11. Invest regularly according to your long-term plan and
12. Don't read the daily stock pages. It's the daily following of the inevitable ups and downs of the market that send the average investors reaching for the phone! Instead, check every two to three months.

EDUCATION DOES NOT MEAN GOOD JUDGEMENT

There is a story about a man who sold hot dogs by the roadside. He was illiterate, so he never read newspapers . He was hard of hearing, so he never listened to the radio. His eyes were weak, so he never watched television. But enthusiastically, he sold lots of hot dogs. His sales and profit went up. He ordered more meat and got himself a bigger and a better stove. As his business was growing, the son, who had recently graduated from college, joined his father.

Then something strange happened. The son asked, "Dad, aren't you aware of the great recession that is coming our way?" The father replied, "No, but tell me about it." The son said, "The international situation is terrible. The domestic is even worse. We should be prepared for the coming bad time." The man thought that since his son had been to college, read the papers, and listened to the radio, he ought to know and his advice should not be taken lightly. So the next day, the father cut down his order for the meat and buns, took down the sign and was no longer enthusiastic. Very soon, fewer and fewer people bothered to stop at his hot dog stand. And his sales started coming down rapidly. The father said to his son, "Son, you were right. We are in the middle of a recession. I am glad you warned me ahead of time."

These excerpts form the book YOU CAN WIN -SHIV KHERA.

The Year that was !!!

"Many of the biggest and most far reaching investments we make in our lives are investments that have little or nothing to do with money"