Lesson 4 for this weekend

Today I will share a list of essential things needed in doing a good yet powerful trade. There are 3 things to be remembered in doing a trade which is well-known as 3M (Mental, Method, Money Management).

1. Mental

The main reason that I put this as the 1st is because this is the most important thing in doing a good trade. One of my mentor said that Good Trade or Profitable Trade = Machine + Money Management -Me (Emotion). It is important to keep in your mind that you must trade without any emotion being in your mind. Once emotion is exist in trading, then you'll ruin your trade. So, in doing a trade, we must just follow the system that we believe. We must also se our logic thinking in doing a trade not a feeling.

Here's an e-book about this that you can read:

http://www.ziddu.com/download/12212035/005-Psychology_of_Trading.pdf.html

2. Method

Use a method that is already proven to be good for a trend. Trade a trending stock will give additional 5% chance of winning rather than we keep up on trading at a ranging stock. This is one of the method that we must know. Remember to plan your trade & trade your plan. What is a trading plan? Almost everytime I talk about trading plan people will ask me of what it is actually. Trading Plan is a plan before you decide to buy or sell a security, which includes entry price, stop loss, resistance (a lot of people call as target). In making a plan, we must be very aware that the risk to reward ratio is as low as possible which means the risk is lower than the reward, which means risk to reward ration less than 1 is OK. The other thing to be determined is thee trading style are you a technician or fundamentalist.

Here's the reference:

http://www.ziddu.com/download/12212115/010-Trader_Tipe.pdf.html

3. Money Management

The other essential thing is the management of your money. How big is the risk you can bear determine the amount of money to be put in a stock. For instance, you stop loss is determined at 3% of you buying value, so if your account is $10,000, then if you can only bear $30, then your trade for a stock is $1,000. Make it flat for each stock.

Here's the workbook:

http://www.ziddu.com/download/12322012/MoneyManagement.xlsx.html

Have a nice weekend!!!

Btw, I'm in Jakarta, if want to contact me, just e-mail me at my mailing list at Y!Group

Happy Investing^^

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