(For beginners) Investing/Speculation -Developing Trading Plans
Investing/Speculating for Beginners
First, let me talk about my views on the difference between investing and speculating, as well as some trading plans and ideas I have compiled from reading books. I hope that after reading this article, you can save some time on reading other books XD.
The purpose of investing should be to achieve "stable asset growth", and good investments should accumulate assets in almost risk-free situations, bringing stable returns of 10% or less per year. "As the recent bond investment return rate is considerable, wealthy people are all doing it."
The purpose of speculation is to seek higher returns in the short term based on specific events, market conditions, and analysis. However, it also requires bearing corresponding risks, with returns and risks ranging from 10% to any percentage. (The so-called almost risk-free depends on the individual, and having insider information is also risk-free. The above definition is my own. I believe that over 90% of my trades are speculation, not investment.)
Since I have said that investing is almost risk-free, the main topic of discussion will be speculation. I will consider some details before, during, and after trading.
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"Before Speculative Trading"
Some details I will consider:
1.Risk assessment of the trade. In extreme cases, how much money will be lost? Good fund management ensures that you will never fail.
2. Assessment of expected returns and the maximum percentage of potential losses. Make cost-effective trades and trade when there is a good chance of winning.
3. Analysis of the entry price. If there is no good position, abandon the trade and look for the next opportunity.
4. Planning for the start of trading, the basis for the target price and stop-loss price, whether to move the stop-profit and stop-loss in specific circumstances, and whether to exit directly if the original trading basis is lost.
5. The impact on life. Will the psychological pressure after the trade affect life and work? Is there time to cope with unexpected situations during trading?
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"Start Trading"
Prepare well before trading and execute according to the original plan.
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"After Trading"
1. Reflect on where the trade went wrong, whether the plan was not followed, and whether the pre-trade assessment was misjudged.
2. Do not be overly pleased or upset because of the result of a single trade. With a 50% chance of success even when tossing a coin with closed eyes, what needs to be done is to accumulate a trading strategy with a long-term positive expected value. With the logic of making big profits and small losses, one can have the Holy Grail of trading. If you can't win, review your strategy and conduct backtesting.
3. Speculation requires accumulating long-term trading records to determine whether the trading strategy is successful. At least 1,000 trades are needed to have some reference value, and short-term success or failure does not necessarily represent right or wrong.
4. When making money, take it out and feel its weight to avoid getting lost in the world of money and decreasing the quality of risk management.
First, let me talk about my views on the difference between investing and speculating, as well as some trading plans and ideas I have compiled from reading books. I hope that after reading this article, you can save some time on reading other books XD.
The purpose of investing should be to achieve "stable asset growth", and good investments should accumulate assets in almost risk-free situations, bringing stable returns of 10% or less per year. "As the recent bond investment return rate is considerable, wealthy people are all doing it."
The purpose of speculation is to seek higher returns in the short term based on specific events, market conditions, and analysis. However, it also requires bearing corresponding risks, with returns and risks ranging from 10% to any percentage. (The so-called almost risk-free depends on the individual, and having insider information is also risk-free. The above definition is my own. I believe that over 90% of my trades are speculation, not investment.)
Since I have said that investing is almost risk-free, the main topic of discussion will be speculation. I will consider some details before, during, and after trading.
-----------------------------------------------------------------
"Before Speculative Trading"
Some details I will consider:
1.Risk assessment of the trade. In extreme cases, how much money will be lost? Good fund management ensures that you will never fail.
2. Assessment of expected returns and the maximum percentage of potential losses. Make cost-effective trades and trade when there is a good chance of winning.
3. Analysis of the entry price. If there is no good position, abandon the trade and look for the next opportunity.
4. Planning for the start of trading, the basis for the target price and stop-loss price, whether to move the stop-profit and stop-loss in specific circumstances, and whether to exit directly if the original trading basis is lost.
5. The impact on life. Will the psychological pressure after the trade affect life and work? Is there time to cope with unexpected situations during trading?
-----------------------------------------------------------------
"Start Trading"
Prepare well before trading and execute according to the original plan.
-----------------------------------------------------------------
"After Trading"
1. Reflect on where the trade went wrong, whether the plan was not followed, and whether the pre-trade assessment was misjudged.
2. Do not be overly pleased or upset because of the result of a single trade. With a 50% chance of success even when tossing a coin with closed eyes, what needs to be done is to accumulate a trading strategy with a long-term positive expected value. With the logic of making big profits and small losses, one can have the Holy Grail of trading. If you can't win, review your strategy and conduct backtesting.
3. Speculation requires accumulating long-term trading records to determine whether the trading strategy is successful. At least 1,000 trades are needed to have some reference value, and short-term success or failure does not necessarily represent right or wrong.
4. When making money, take it out and feel its weight to avoid getting lost in the world of money and decreasing the quality of risk management.