This is the continuing Narrative of our two imaginary traders, Peter and Paul. Peter is a Professional trader, Paul is not. Peter has a tested, proven, written trading plan that he follows each time he enters a trade, Paul does not Peter and Paul have Had vastly different Stock trading experiences – Peter has made another significant profit – this time in the Bear market, Paul has dropped heavily. A chance meeting with Peter’s group of friends one day at lunch launches Paul on a learning curve which will see him become a great dealer, but not without some hard lessons along the way. Today Peter shares his Trading plan and the value of having a trading strategy with Paul.
Today we will Work on your Stock Trading Strategy, Peter told Paul as they sat down to the beginning of their next weekly mentoring meeting. Peter handed Paul a Copy of Robert Miner’s book, Dynamic Trading, and said, here, read this part of the terrific trading book. Paul read to himself as Peter poured them both a cup of java. The purpose of Technical Analysis is not in order to accurately identify every industry position, all the time. While this might be the daydream of several analysts and many amateur traders, it is impossibility. Every method of Technical evaluation has it is limits and sometimes will provide contradictory information. Unless the analyst, trader or investor is willing to accept that their investigation will from time to time not supply a positive opinion of market position, he or she’s doomed to failure.
The objective of Technical evaluation is to identify those market conditions and the particular trading strategies which have a high likelihood of success. If there is a Key concept related to investing and trading, it has to be probability. All consistently profitable traders and investors understand that each and every investing and trading choice only has a probability of success, never a certainty. Losses are Inevitable and are as much a part of successful trading as gains. If a dealer has a successful trading program, they should have no more psychological reaction to a loss than to a triumph. Each will be inevitable. While it may be Difficult to maintain an entirely non-emotional connection to trading and investing, an understanding that trading is a Company of probabilities will go a long way towards creating a stable attitude to the company.