Probabilities and money management are the keys to stock trading success

    Merry Christmas from Stockradar.   

That time is upon us when we turn the page on another successful year for Stockradar members.

Do you too want to trade shares successfully?

If you are going to do it you need to do it properly or you will find your capital can quickly disappear. The main game for Stockradar, who has 14 years of successful recorded performance, is working with probabilities and money management.

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To win big you need to learn how to lose

Charlie Aitken (Aim Funds):the difference between my life as a stockbroker and my new life as a fund manager is that now I limit my losses to 10%. As a stockbroker I (we) are not great at issuing sells.
Now when a stock is at a loss I cut it and move on. We work our capital hard and that means cutting the non-performers and move on to new opportunities.’

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It is good to know what we don’t know

Let’s not pretend.

We don’t know, do we?

In fact two of the fundamental truths of trading tell us that:

  1. Anything can happen and
  2. You don’t need to know what is going to happen next to make money.

Seems strange but there it is – the truth. It is good to know what we don’t know.

This puts paid to the many analytical hours spent exasperatingly trying to forecast and predict share prices, and yes even technical analysts are more than guilty of that. Fundamental analysts may construct various models, projections and price targets about what the future offers but this is to little avail in guiding us to what share prices will really do. Thus it seems the contrarian was bred!

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Why Stockradar portfolios

I am a quant.

In other words, data, numbers, and verifiable results drive my investment decisions.

Why am I willing to stand by this strategy.

Firstly, based on my personal research and results from14 years of performance, it can produce returns that historically outperform those of common benchmark portfolios and in fact more importantly to my members those returns can be ‘absolute’ regardless of market direction.

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Trading Tactics

Our portfolio service is designed to attract patient capital that doesn’t get troubled by broader market conditions.

Recently I discussed the benefits of weekly data (see Stockradar blog – The primary motivation for using the weekly time frame is for perspective), which suits the majority of my SMSF members as it is employed to avoid the damaging distraction of intra week noise and in turn it allows a little more time for ourselves. It is one of the many controls we use to help us focus us on the big picture. The discussion centred on getting a real perspective on the market action and not to be distracted by inconsequential daily noise. Today I will to discuss the trading tactics that can be adapted to various market conditions.

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The primary motivation for using the weekly time frame is for perspective and to help you catch the big trends.

Ride ‘em cowboy

One of key premises we work with at Stockradar is the weekly time frame. It helps you filter out the daily ‘noise’ and allows you to ride those big trends with confidence. Our natural inclination when profits are growing fast is to ‘take the money and run’, or use a shorter-term chart to try and get the ‘answer’ you want. Restraint and discipline is needed when investing and for good reason. When money is riding on your decision it is important to stay on for the ride for as long as we can to get the best result. Making ‘decisions on the run’ or disregarding trading plan boundaries that you know work is dangerous and can cause emotional conflict and mixed trading results. Of course the decision is always yours and Stockradar is only here to offer you guidance based on my experience. However try and push those ‘natural’ anxious thoughts from your mind and let the markets do the work for you.

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Complacency is our enemy

There is no doubt the ETF wave of popularity is creating a self-perpetuating dangerous and ‘unknown’ quantity with repercussions yet to be fully understood or played out. In my blog over recent months I refer to the many issues surrounding this ETF phenomenon taking hold of investors.

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