Many a stock trader has recommended that one should keep a trading journal to keep track of your trades and help you learn from your mistakes. I finally thought I would start doing it and there is no reason I cannot share it with you. In a recent post I made about What A 30-Year-Old Can Teach A 20-Year-Old About Money, I recommended that people educate themselves about investing and making their money work for them instead of the other way round.
I understand that there is a VERY big difference between investing and trading, but I should nevertheless practice what I preach. Through my trading journals, I hope that you can learn from my mistakes. More importantly, though, I hope that it will pique your interest in the world of investing and trading, whatever form it may take, and spur you on to be more responsible financially and work towards a future of financial freedom.
I am not a snake oil salesman. I will very much be upfront about the fact that I am not a financial guru or professional. A BA degree in English is the extent of my formal education. What I share with you is but only practical lessons I have learned in life. It is for you take that knowledge and educate yourself further. Do not take everything I say as is. What works for me might not necessarily work for you. I might have been in investing a few years now, but I have only been trading for under a month. So I might not be the best person to listen to at the moment, anyway.
So what is it exactly that I am trading? Contracts For Differences or CFDs for short. With a CFD you never actually buy or sell the actual shares in which you are trading. It is more like you are making a bet on which direction the share price will go. With CFDs you also do not have to put down the full amount. Instead you only have to put down a certain percentage known as the margin. This can make CFDs very profitable but also extremely dangerous. I will explain the reasons in tomorrow’s journal entry as I do not want to make this one too long and we still have a bit to cover.
Now onto the trading strategy I will be using. I tried this one here for about two weeks, but it gave me more red days than green days and the red days were way bigger than the green days. I then went to simple, basic, technical analysis and I am now trading according to certain candlestick patterns. I do not know all candlestick patterns off by heart so there is a select few I am using. Performance is not amazing, but the green days are now more frequent than the red days as well as bigger.
It also comes highly recommended to have a set of rules by which you trade. Here are the ones I use:
Never risk more than 1% of your capital on a trade: Stop losses are set to keep it this way. The reason you do not risk more than 1% of your capital on a trade is because if the trade goes against you, then your losses are minimal. You can have 8 bad trades out of 10, but the losses on those 8 bad trades will be capped at 1% each (if you set your stop loss right) whereas the profits on the 2 that did go your way are not capped.
Wait a day for confirmation: I have lost out on a bit of money by waiting a full day for confirmation, but it has also saved me a lot money.
Do not question the patterns: I need to take emotion out of my trading decisions. So if I see a pattern that has been confirmed, I go in no matter what. If it has not been confirmed, I DO NOT go in. No matter what.
Exit strategy: When the stop losses are hit, and only then. Stop losses are adjusted at the end of every day. They are only ever adjusted up if I am long, and only ever adjusted down if I am short. They are never adjusted against me. Stop losses are, of course, initially set at an amount that will keep my losses to 1%, as mentioned.
Since I am new, I am currently trading on a demo account using pretend money. I do hope to go in with actual money within the month. I just need to refine some things. I am not disillusioned, though, and I am not expecting success, I am just hoping for it. I have always found the stock market to be an interesting animal. I will be somewhat disappointed if I fail in this. But such is life, isn’t it? All we can do is take it one day at a time.
Now, there was a lot more I wanted to cover but I think this post is getting a bit long. I will leave things here for now but I do ask that you share your opinions and questions down below. As I said, I have been doing trading for a very short time and I will appreciate any advice or engagement with me on this topic. It will not just be for my own benefit, I hope, but also for the benefit of anyone who views this post.
Thank you and talk soon.
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Good blog post, but I respectfully disagree.
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