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First of all, welcome and thank you for visiting my blog... Here are a few things for you to ponder about... 1) Do you feel shy when posting your questions or comments on blogs because most people there are already experts? 2) Do you have problem finding or asking the most basic questions about the stock market? Well, you have reached the right blog... This is a blog for anyone who wants to learn more about the stock market. Particularly for beginers. However, some of you may find it too basic. However, I'm not here to teach or to lead... But as I have mentioned, this is a learning blog.... And learning is an ongoing process. So if you are patient enough and continue to stay with me, you will be able to see our progress as we share and learn more with each passing day. So if you have any questions or comments or suggestions, do feel free to post here. I will try to find the answers from other sources and experts elsewhere... And to those experts out there, please do drop by and give us comments and advices ya.. Thank you so much.. By the way, when you are free, you may visit another blog of mine that is about chinese tea culture... Do drop by and relax after a hard day of battle...

Saturday, March 31, 2007

The right edge

When talking about technical analysis, one major component is reading graphs... From various indicators, we try to determine the market trend and movement. We have indicators as volume, moving average, RSI,.......... sound complicated enough? Hehe.... Wait till you read the real difficult part...

As we look at the graph, we look at previous price and performance. To identitify the trend from previous performance is hard enough, but that is not the most difficult part. The worst part is the right edge of the graph. The more to the right, the harder it gets... To complicate the problem further, most indicators tend to give contradicting results when you needed them the most.... Sigh....

The past is solid and fixed, but the future is fluid and volatile. And we have to make decisions on the future instead of the past. So, in order to do it right, we need to be flexible and make your decisions based on probabilities.... However probabilities is not as simple as simple calculations... The probabilities to make mistakes is actually quite high... So, you can either wait for confirmation to increase the probabilities to get it right. But then again, even if you wait for confirmation to come, you can never tell if it is going to make a sudden turn in the trend...

This is the reason why before you decide to make any trade, the first thing that you need to do is to have a stop loss plan. Just in case your decision turns out to be wrong, you need to keep the loss as small as possible... So the most important mentality is "Keep the loss small and let the profit run". You need to keep the loss as small as possible in order for you to survive long enough to win... And in this way, you can increase the odds of you winning... So remember, NEVER EVER enter a trade without a stop loss plan....

3 comments:

Trader Max said...

Superb post.
Totally showed the dilemma of a TA practitioner. But the good news is, after a while, after a few hundreds of charts and the forward test, you would be able to "see" it.
However, must avoid pitfall of trying to fix the market movement.

RL said...

Max,
Thanks... hehe.. i guess experience is the most important thing here ya.. Hopefully we can be as experienced as you are.. But in the mean time... Stop loss plan is the most important thing... Never enter a trade without a stop loss plan....

Unknown said...

Their Standard reply - "You buy, sell or hold at your own risk absolutely."
Then the say "Never blame others for your own action."

I still caution everyone

BEWARE _ BE CAREFUL _ YOU MAY THINK THE INFORMATION HERE IS INFORMATIVE AND CAN MAKE YOU MONEY _ DON'T.

MANY SUCH BLOGS HAVE MADE PEOPLE POORER>
MAXFORCE - AND BURSAMASTER - THE SAME. READ THEIR CALLS IN BURSAMASTER's BLOG.

THEY CALL FOR A BUY AFTER THEY HAVE BOUGHT SO THAT YOU CAN HELP TO PUSH UP THE PRICE FOR THEM> THEY HARDLY EVER TELL YOU WHEN TO SELL UNLESS THEY WANT YOU TO SELL BACK TO THEM AT LOW PRICES > DO YOU KNOW WHY? BECAUSE WHILE YOU ARE BUYING THEY ARE SELLING> AFTER THAT WHEN PRICE COMES DOWN< THEY SAID MARKET CORRECTION-HEALTHY OR "OPERATOR" COLLECTING AND THE PUSH WILL COME SOON>

TYPICAL TRICKS.


SO BE CAREFUL BE WARY OF MAXFORCE