Taking the Emotion out of Trading
One problem that a lot of traders, including me have is they let their emotions interfere with their trading. The emotions I am talking about here are greed, fear, and optimism. When our stock is going up, we do not sell because we think it will keep going up, and when it’s going down, we don’t sell hoping that it would rebound soon. I want to fix this flaw at an early stage in my trading life and this is where my new trading strategy comes into play.
My goal is to split my investments into two different strategies. Half of my trading funds would go towards long term investments. I will buy stocks of companies that I expect would continue to grow with time and would give me a steady return over time. These stocks in most cases would come with a decent dividend as well. The other half of my trading funds would go towards an active trading strategy. My goal is to get a 2% return on my investments every month. This seems like a lot, but I think is very doable. I will buy stocks of reliable companies which fluctuate frequently. I am not looking for a huge return, all I want to do is buy the stock on a day the market is low, and sell it on a day the market is doing better. I get 10 free trades per month with Zecco, so that gives me 5 buys and 5 sells to get a profit of 2%. This averages to a gain of 0.4% per stock, but obviously I will get a higher return on some, and will lose money on some. I intend to use stop loss very effectively to make sure I do not lose too much money on stocks that go down after I buy them, and also to make sure that I do not lose money on a stock that is up at first.
I am very excited about this new trading strategy I have and can’t wait to put it to use, which will be once my ACAT transfer with Zecco is complete. Even if this strategy does not work, I want it to be a learning experience, as I am still in early stages of trading in my life and am looking to learn from everything that I come across.
August 21, 2008
Posted in: Lessons - Practices
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