More Words Of Advice For New Traders

11/16/11 01:23:59 PM

by Donald W. Pendergast, Jr.

Here's some more advice and tips for those seeking to take their trading to a more profitable level.

Security: N/A
Position: N/A

Without getting overly technical, preachy, or grandiose, here are a few more things to consider once you've actually started to get a handle on your trading temperament, strengths, weaknesses, and financial goals:

1. Build your trade positions slowly, over time. If you plan to ultimately trade a $50,000 cash account, start off small, with, say, $5,000 or $7,500, and gradually increase your dollar allocations at set intervals -- maybe increase it by $1,000 or even $2,000 per month rather than going all in and suffering an unexpectedly large drawdown right at the start. It can happen, probably when you least expect it.

2. Add new positions a few at a time, rather than all at once. This applies no matter the total dollar value involved; the idea is to put on perhaps one or maybe two stock positions on per day, rather than four, six, or even eight at the same time. My testing shows that for some systems, holding a maximum of four to six stocks in a portfolio and then only adding two on at a time will significantly increase long-term profitability even as it helps lessen drawdowns compared to the all-in approach.

3. Start off trading stocks using cash, not margin, rather than buying into all the advertising hype about making a living day trading futures. In other words, learn to walk before you start to run; you may be better able to survive numerous bad stock trades if you use proper position sizing in an adequately funded equities account as compared to trading futures on 5% to 10% margin. Since most new traders are trading with poorly funded accounts anyway, they'll still be more likely to survive a drawdown in a decent stock system than they will be if they're trading futures with scarce money.

4. Avoid daytrading if possible -- it's a terrific grind on the emotions and, frankly, it can be boring, especially if you rely on an "eyes glued to the screen" discretionary method. Either use an automated system or have it autotraded for you by your broker if you must daytrade the financial markets. You'll probably enjoy life a whole lot more and spend more quality time on your other career, business, and family activities.

5. Find a reasonably good method of trading and learn to work it for all its worth rather than constantly jumping from system to system, to this newsletter, that advisory service, or whatever. Work on strengthening your own trading psychology at least as much as you work on building and maintaining your systems. You might try a software product called Trading Mind offered by Subconscious Training Corp. if you believe that mental training is the key to consistently profitable trading (which it is, by the way).

6. Finally, always keep your computer, cellphone, and Internet connections in tiptop shape, always having a backup contingency plan for those days when Murphy's Law takes a potshot at you. Make sure your broker offers not only order-entry access via the software on your computer, but also by telephone and Internet (using a web-based platform). Make sure you can locate a reliable hotspot in case your wireless modem goes down for a few days and always try to think one step ahead of the market, no matter what you trade. An ounce of prevention is often worth a pound of cure, after all.

Think about these things and see how you may be able to apply them to your own trading regimen. You'll probably think of other tips and tricks that will assist you as you grow in your trading skills. In the meantime, these should be more than enough to get you going in the right direction.

Donald W. Pendergast, Jr.

Donald W. Pendergast is a financial markets consultant who offers specialized services to stock brokers and high net worth individuals who seek a better bottom line for their portfolios.

Title:	Writer, market consultant
Company:	Linear Trading Systems LLC
	Jacksonville, FL 32217
Phone # for sales:	904-239-9564
E-mail address:	lineartradingsys@gmail.com
Traders' Resource Links
Linear Trading Systems LLC has not added any product or service information to TRADERS' RESOURCE.

Click here for more information about our publications!

Comments

Date:�11/17/11Rank:�5Comment:�

PRINT THIS ARTICLE

Request Information From Our Sponsors

DEPARTMENTS: Advertising | Editorial | Circulation | Contact Us | BY PHONE: (206) 938-0570

Comments or Questions?	Article Usefulness
	5 (most useful) 4 3 2 1 (least useful)

BIOGRAPHICAL

More Words Of Advice For New Traders

Comments

SUBSCRIBE TO OUR FREE EMAIL NEWSLETTER!

SUBSCRIBE TO OUR FREE
EMAIL NEWSLETTER!