#10 Verily I Say Unto You Part Two

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by Mike Lally

BALL_PURYou must determine your risk-reward ratio
BALL_PURYou can use your risk management strategy to set the entry point
BALL_PURCondition your position size to your risk strategy
BALL_PURInclude the cost of doing business in your projections
BALL_PURUse a technical stop based on the chart where possible
BALL_PURYou can survive in trading if you lose more often than you win providing you cut your losses and let your winning trades run
BALL_PURSetting your stop-loss according to the prevailing volatility is highly recommended
BALL_PUREnter each trade with a stop-loss in place

BALL_PURBuy and Hold is a passive form of investing
BALL_PURCompare the performance of your system with a corresponding buy-and-hold result
BALL_PURThe random walk theory may be outdated
BALL_PURDollar cost averaging should be avoided
BALL_PURPyramiding into successful trades can be a good strategy since it is based on adding to a winning    position
BALL_PURReduce the position size and risk for each leg when pyramiding
BALL_PURMarket breadth can help the trader to gauge how buoyant the market is
BALL_PURMarket breadth can be measured by:
    Advance Decline Line
    52-week new highs and lows
    Volume up and down
BALL_PURTraders need to make money irrespective of market conditions
BALL_PURShort Selling is an underused facility for making money in a market downturn
BALL_PURThe main risks of short selling are:
The price moves up after the stock is sold
The lender demands the return of the stock
BALL_PURLeverage is a very dangerous weapon since the risk is greatly increased

BALL_PURPay no attention to the assortment of easy wealth gimmicks
BALL_PURAs traders and investors we take on board the lessons of the past
BALL_PURSuccessful traders keep things relatively simple
BALL_PURThe technology stock collapse in 2000 can happen at any time
BALL_PURTry to think long-term when investing
BALL_PURIn difficult times the fundamentals come into play
BALL_PURDo not believe it when you are told “this time it’s different!”
BALL_PURStick to your game plan when times are uncertain
BALL_PURThe results from growth stocks and value stocks vary during the economic cycle
BALL_PURIt’s not hard to make money during a bull market
BALL_PURIt’s difficult to make money during a bear market
BALL_PURSmart companies are making considerable cost reductions through e-commerce activities
BALL_PURThere are opportunities and risks every day in every market
BALL_PURReduce your exposure to equities during a downturn
BALL_PURBeware of laziness particularly during a downturn

BALL_PURTo succeed in trading you must be strong psychologically and emotionally
BALL_PURYou need to be aware of the behaviour patterns of successful traders
BALL_PURYou need to examine your self-destructive tendencies
BALL_PURTrading is a long journey full of self-discovery
BALL_PURThe crowd moves the market
BALL_PURYou need to be aware of the economic environment
BALL_PURMarkets move in cycles
BALL_PURYou must know the market cycles
BALL_PURA bear market is not over until it’s over
BALL_PURYou must know your investing timeframe
BALL_PURMost technical indicators lag the market
BALL_PURFibonacci ratios can help you to reduce risk
BALL_PURThe probability of an ordinary event following an extraordinary event is greater than the probability of successive extraordinary events
BALL_PURSuccessful trading requires control of fear, greed and pride

BALL_PURYou need to control fear, greed and pride
BALL_PURYou need to know in advance how you will respond to certain trading events
BALL_PURCognition Behavioural Therapy can help you to help yourself
BALL_PURYou may need to remodel your thinking
BALL_PURYou must clear the psychological barriers affecting your performance
BALL_PURYou need to able to judge a trade only on its merits
BALL_PURYou need to judge your trade performance after its completion
BALL_PURYou must know what is happening in the wider economy
BALL_PURDo not read too much into small samples
BALL_PURPeople are generally risk-averse when ahead and risk-seeking when behind
BALL_PURThe loss of $1 generally causes more concern than the joy of winning $1
BALL_PURInvestors are influenced by many factors including:
    The crowd
    The amount of risk
    The advice of their broker
    Greed, fear and pride
BALL_PURSupply and demand drive markets
BALL_PURYou must be psychologically ready to trade well
BALL_PURYou must realise that losses are inevitable
BALL_PURYou must keep a trading diary
BALL_PURYou must understand the risk associated with each trade
BALL_PUR“Mastering Risk” is vital

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