Posted by: Bevan | May 26, 2008

A new approach

The past six weeks have been tough for me.  My account has been gradually eroded through ‘scared’ trading, with stops too close, a lack of conviction and method.  I virtually stopped trading and went back to first principles again, a good dose of Alexander Elder and my realisation that I needed to get back to a formal strategy rather than my ‘fast and loose’ combination of technical analysis and gut-feel based fundamental analysis.  I’ve adopted the Triple Screen approach, with my risk carefully contained, and only pursuing high risk reward trades.  So far the system has only entered me into one trade, which returned a 20% yield.  I figure that if I’m only getting into one trade every week or two, but can get returns like that, I’ll be on the road to success.  I’ve discovered that frequent trading usually leads to losses, and its the well considered, carefully stalked opportunities which usually prove the most productive.  Thats not to say that I won’t have any losses, I expect one with every trade, but I know when I put it on what I can expect my account to be at the end of the trade if it is not successful.

I’ve been watching and reading a bit of Larry Williams stuff, haven’t studied it in great depth but one lesson that is driven home is the necessity to hold on to your winners rather than trying to pick tops and bottoms.  Although I will be reducing risk relatively quickly, because I am picking trades where my stop is not too far away I can feel comfortable in ‘letting them run’!

I’ve also been reading Tharp’s Trade Your Way to Financial Freedom.  Although I’m finding it difficult to have the time to make real progress with it, I am picking up lots of good ideas, and like the way it teases out the components of a trading system and analyses their importance and contribution.  I’d highly recommend it and I think its going to contribute to my overall trading plan which I’m developing.

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Responses

  1. Good Luck Bro!
    Onwards and Upwards from here.
    Was nice to read such a positive post

    Cheers Peter


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