KISS Formula
There are formulas for just about everything, but it has been shown that the simpler the formula or method of doing a particular task the better it works. It has evolved down to KISS - Keep It Simple Stupid.
This also applies to trading in the stock market. There are literally hundreds of formulas, both technical and fundamental that are easily available to investors. Each trader has his own method he uses. Every professional trader on the floor of the stock exchange has his own variation on some major proven formula. The more skilled he becomes with it the more he feels it is the best one.
Sometimes it takes years for a trader to settle on one method or group of methods that he uses to signal buys and sells. It took me many years to find that technical group that worked for me when I was an exchange member.
For some it evolves into long term trading and for others it can be buying and selling in a matter of minutes. The time period is not important. The method is. Even as a floor trader on the commodity exchange I had only two criteria I watched before entering into any position.
All professional traders and investors are aware of the single most important fact and that is how much I am willing to lose before I exit this new position. Every KISS formula has an exit strategy. Every professional knows in advance how much he will allow himself to lose if he is wrong. The professional does not set a limit on the winning side of a trade only on the losing side.
Ask any full time professional and he will tell you if he is right 50% of the time he considers that to be phenomenal. When I was on the floor I was only right about 40% of the time, even about 20% and wrong about 40%. BUT I made $3.00 for every dollar I lost. Small losses and big winners are the key to success. This is the key to any profitable formula - keeping the losses small.
When I see advertisements in the financial papers for methods claiming to be right 80%, 90% of the time I cringe. It just can't be. There is no trader I ever met who was that good and I have known some exceptional traders.
The major text on technical analysis is "Technical Analysis of Stock Trends" by Edwards and Magee now in the 17th printing of the Fifth Edition that lists multitudes of methods. They all work, but many are complicated. A magazine called Futures Truth analyses 200 commodity trading systems in each issue. Fundamental Theory is equally complex.
There are software programs that allow the investors to enter as many as 30 parameters. The more complex it is the less chance it has to work. And the biggest obstacle to any program is the trader himself. He cannot hesitate when a buy or sell signal is given.
Keep your formula simple and execute the signals. You can be a winner.
Al Thomas' book, "If It Doesn't Go Up, Don't Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he's the man that Wall Street does not want you to know.
Copyright 2005.
More Resources
Unable to open RSS Feed $XMLfilename with error HTTP ERROR: 404, exitingMore Stocks & Mutual Funds Information:
Related Articles
Online Broker Trade History Not Doing the Job
Let me start by saying that..
Investing in the Stock Market
From the book 'The Stockopoly Plan' by the author Charles M. O'MeliaThere are several factors an investor in the stock market should consider:1.
Mindset
In 1960 an engineer working for a watch company in Switzerland discovered that a small crystal would vibrate at a constant rate. He found this was so accurate that it could be used to calibrate time so he took it to company management and said it would make an entirely new kind of watch that had no springs and no gears.
No Load Mutual Funds or Exchange Traded Funds (ETFs)?
If you are fed up with early redemption charges and ever increasing mutual fund management fees on top of bad-performing fund managers, read on. There is a quiet revolution going on in the no-load mutual fund industry and you, the individual investor, may benefit from it greatly.
Why Investors Use Financial Planners
Do you have a financial planner? Does one of your friends have a financial planner? Maybe you take your advice from your broker. As I have said countless times before a broker will make you broker.
Investment Clubs
Because you don't feel too sure about which stock or mutual fund to buy you decide to become a member of an investment club. Each of the members contribute a certain amount of money each month and then meet to decide what to buy or sell.
How To Buy And Hold
One of the most believed bits of conventional wisdom from Wall Street is to Buy and Hold. Any stock or mutual fund should be put away for eternity and never sold.
Understanding a Stocks PEG Ratio
A PEG ratio cannot be used alone but is a very powerful tool when integrated with the basics (price, volume and chart reading). You must enjoy crunching numbers and have a calculator handy to estimate your own PEG ratio.
Oil Stocks CHK WLL - What Is Their Worth?
(1) CHK stock price $16.74, NAV $32.
Your Trading Objective: Why is that so Important?
You've decided to try your luck at trading stocks or commodities, but so called experts tell you that you need to determine your trading objective. What exactly does that mean and why is it so important? Well, it's really a question of your trading philosophy.
Parachute Investing
Ever jumped out of an airplane? It's OK if you have on a parachute. Pretty dumb if you don't.
Buy and Hold Investment Strategy
"Buy and hold" is one of the most heralded investment strategies promoted today. "Buy and hold" is also one of the few investment methods where you are guaranteed to lose money 2 out of every 5 years.
The 401(K): How The Insider Has Stolen Your Retirement!
Mutual funds were moderately successful in creating a presence in the stock market until the advent of the investment retirement account and in particular the 401(k). Corporate insiders persuaded the federal government to allow for the 401(k) in lieu of offering employees the traditional pension.
How to Make Big Money Safely in Stock Market
(1) Stock Market is Tough Place to Make Any Money ConsistentlyNASDAQ or SP&500 averaged about -6% per year for 5 years between 1999 and 2003. Many individual investors who made killing in the internet bubble period got wiped out during those 5 years.
Your Job
There are so many kinds of work that needs to be done and you are doing one of those jobs right now - unless you are one of those two and a half million that have been laid off during the past 3 years. The press continues to blame China and India for stealing away all these forms of employment, but they don't have it right.
Stock and Fund Dividends
When is a dividend not a dividend?The latest thing "conservative" brokers are preaching these days is to buy stocks that pay dividends. Everyone likes dividends.
Money, Insanity and Wall Street
Money: the most charged word in the planet. It means something to everyone.
The 10 Commandments
Wall Street has been preaching for years and years to investors how and where to put their money. The "experts" have put forth these ideas for so long that they seem to be carved in stone just like Moses did with God's 10 Commandments.
How Commodity Trading Differs from Stock Trading
There are major differences between trading stocks and trading futures. While stories of fortunes made or lost overnight on the futures markets are largely untrue, the futures trader, if using a sound trading system, can usually make more money on the futures market and make it much faster.
Online Trading Strategy: Collecting Cash when Stocks Go UP - It PAYS to Know More than Others
When it comes to stock market trading it PAYS to have more knowledge than the rest of the pack. Pure gold can be harvested in each profitable trade that you accomplish.