Plan a Trade and Trade a Plan

3) Plan a Trade and Trade a Plan:
Without doubt, no trader will last long if he doesn't plan every trade.
But there is absolutely no point in making a plan for a trade if you are not
disciplined enough to follow it.

A plan should cater for every eventuality. As Richard Dennis (Turtles fa
said, "Don't worry about where the prices are going. Worry about what
you are going to do when they get there."

Think about what is being said here. Once you put your money down on
trade you can not control the prices. So stop worrying about what could
happen and concentrate on you trigger points and what you will do when
these points are violated. By doing this your trading stops being emotional
and now becomes very systematic and stress free.

Look at this example:
1) you like the look of stock XYZ Corp. currently trading at $40 and you
place a buy 100, stop in at $42. This is just the beginning. You must then
ask and answer the following questions:

* IF filled on this trade where will where will I place my initial stop
loss. i.e "How much of my capital am I willing to lose?"

* IF filled on this trade how will I take profits? By how much will I
trail my stop? What exit strategies will I use?

* IF filled, will i add more shares as the trade goes my way?

* If filled and the share does not show a profit after X weeks, will
I get out, or will I let my trailing stop exit me from the trade.

* IF stopped out of this trade will i be willing to try and get back in,
or completely scratch the trade and look else-where?

2) So having made a complete plan, prior to entering the trade you place
the order to buy 100 XYZ corp at: $42.

3) You are filled at $42 1/4, automatically you place a stop order in at
$39. No guessing it's done automatically.

4) The trade goes your way and a second buy order is placed in at $50.

5) You buy 100 more at $50 and the stop is now moved up to $45.

6) The trade goes your way and you keep raising your stop at a safe
distance behind.

7) Your sell stop is hit at $130 and you exit the trade with a massive
profit.

Do you see now that by having a plan everything becomes automatic.
You know where to get in, place stops, add and exit. In short you are
now trading professionally and not from emotion.

Not once did you have to ask for opinion. Not once were you afraid
of letting a profit get away, or of a loss becoming too big.
Simply put, if you make a plan and have the discipline to follow it
trading becomes very simple and stress free.

In my many years of trading one point I try to get across to other
would be traders is the market will always do its utmost to throw
you off track. Once in a share it's a little like riding a wild horse.
The prices will thrash around violently shaking off all scared and
emotional traders. It will only be the ones who have the discipline
to follow a set plan that will benefit from the full move.

If you ever find your-self having to ask some-one for an opinion
on a stock you hold then it can only be because you either have not
made a plan, or you are second guessing the plan, in which case you may
as well not bother making one in the first place.

Planning a trade should be no different from planning a journey.
You must plan for all kinds of events. Especially the unforeseen ones.
Most of the time a trade will go your way and the plan will barely
have to be looked at but what if the share gaps down? flys up? goes
sideways for six weeks, the market crashes, the company announces a
complete surprise announcement which makes the share gain $30 in
one day? If you aren't prepared for these surprises then when
one does happen you are going to find yourself wandering what to do.
And once your are trading from the "hip" and not from a plan then
expect your results to worsen.

Having a plan totally removes all opinion and emotion from a
trade and anything which does this can only be good news.
Time and time again at seminars and meetings I hear the same
questions:

" I bought ABC stock at $25 a few months ago, do you think I
should still keep it?"

When I hear such questions I (discreetly) shake my head. How
can any-one trade such a way? Where is his plan? When he got into
the trade where was he get out point? Basically what the hell is
this guy doing trading? Does he really expect to out-perform the
market when he has to ask a third party about his stock holdings?

If this guy had a plan and more importantly the discipline to
follow he would never ask such a question.

This is probably the single biggest reason people love to
follow opinion. People just love to be told to do something
rather than thinking of it for them-selves. Reading a recent
Internet magazine I was astounded by the number of followers
some of the tip sheets have. The top ones have from 15,000
to 80,000. Are any of these followers really making them-selves
better traders? I have no doubt a small percentage are but the
majority aren't. Why? Because by following some-one else they
abondon the principles laid down in this book. There is no
system. Responsibility has no been shfted to the guru (so there's
the excuse for the losses in place) Worse of all they do not
have a solid plan.

When you start following your own plans you will find your-
self not wanting to listen to out-side opinion. If you hold ADF
stock and bought at $60 and your initial stop loss is at $56 then
why would you care if the local guru is saying, "Sell ADF it's
over-valued and will fall to $20." For one, he is just as likely
to be wrong as right and secondly if your stop is at $56 then let
this kick you out of the trade. At least that way when you ask
your-self "did I follow my rules today?" the answer will be YES.

I can guarantee before Warren Buffet, or George Soros buys
$50,000,000 worth of stocks they know exactly what they will do
if prices swing one way or another. Could you imagine Warren Buffet
thinking, " gee, I bought $20,000,000 worth of DFG stock and it's
down by 15%. what shall I do?" No way! And why should it be any
different for your trading? The point is it doesn't matter whether
you are trading with a $5,000 account or a $50,000,000 the
principles are the same. You must eliminate all emotion and follow
YOUR plan.

To be a winner in the markets you can never trade from emotion.
and the only way to eliminate emotion is to have the iron
discipline to follow your own plan. It's said most traders never
plan a trade never mind have the discipline to follow one.
If you want to become one of the few market winners you must

"Plan every trade and trade every plan"

(Excerpt from 7 Habits of Highly Successful Traders)

Have a System that Fits You

As promised, below is the list of good growth stocks:

asiapharm

beauty china

china milk

china sky

cosco

ferrochina

frasers centrpoint trust

gallant venture

guocoland

ho bee

jiutian

keppel corp

labroy marine

longcheer

midas

pacific shipping trust

raffles education

raffles medical

rotary

sarin technology

singapore land

st engineering

sino environment

sp chemicals

sunpower

tech oil & gas

united envirotech

uic

wilmar

yanlord

The above stocks are highlighted according to several factors, most of which are earnings per share and revenue growth. Enjoy.

2) Have a System that Fits You:

Every successful trader, investor, money manager, etc.. has a system that fits them. Some are long term, some mechanical, some intuitive, day traders, scalpers, arbitrage, value, momentum. The system its self is not the important factor. What is? Is that the system fits their unique personality.

The system does not matter. I've heard of value investors (WarrenBuffet) who make untold millions from the stock market. I've heard of day traders taking home over $2 million per annum in profits. I've heard of a dancer making $2,5 million from Momentum trading. What do they have in common? As you can see it's not the system but they operate a style of trading that they are both happy with and excel at. They wouldn't dream of trading any other way. No-one told them to trade this way it just happened this way. Too many traders try to copy the latest hot fad in trading.

Right now that would be day trading. But that style of trading will not suite every-one. To be a successful day trader you have to love the short term up and downs of the market during the day. Being in contact with quotes for hours at a time. Yes, there are a number of traders making very good incomes from day trading, but theres many more who lose their shirts within a couple of months and don't even find out whether day trading is suited to their temperament. For some traders buying a stock and holding on to it for a year as it doubles in price would be torture. Although long term investing can offer fantastic rewards with very little work unless you have the patience and discipline to ride your profits all the way to the top then you'll never succeed with this method.

It's a little like choosing a career. I remember reading a book sometime ago about the world's best managers. And one characteristic the author emphasized with all these top achievers was their LOVE for their chosen careers. Most of them said they couldn't believe they were getting paid to do something they loved so much. It's no different in trading. You will only be a top trader if you trade a system which you simply love to trade. You wouldn't swap that way of trading for anything. And the profits you make, well that's just icing on the cake. How do you find a system you are happy with? You have to work backwards. First work out your objectives!

Ask these questions:

* What annual rate of return do I want?

* Do I want to trade full time, part time, hardly any time?

* Can I handle the stress of day trading and short term trading?

* Do I have the patience for long term trading?

* What kind of personality am I? Do I need lots of action, Do I need to make decisions all the time?

* What trading books have i read and which top traders do I most admire and why? Could you easily copy their style of trading?

What-ever you do don't read about a hot shot day trader and then try to emulate him if day trading is not for you. Strive to find a way of trading you will be comfortable with and aim to become the world's best at this style of trading. For me I like the thought of buying a share at $30 and selling it 9 months later for $130. Sure it doesn't happen all the time. But it only takes one or two of these moves per year to make it a fantastic return.

I am very patient. Not only whilst in a trade but I see absolutely nothing wrong with sitting on the side-lines for months. If the conditions aren't right for me than I will not trade. I love the idea of spending just a few minutes per day checking the charts and the rest of the time is mine to study and write, etc.. For me the big money is in the big moves, not the individual fluctuations. This style of trading will not suite every-one, but the point is after many years of trial and error I have found a system that fits me and I aim to become THE world's best trader with this system.

You must do the same. If you are trading a system that does not fit your personality you can never gain the confidence nor the results to truly make the big profits. If you are a new trader or an unsuccessful one then I suggest you start by asking your-self "What kind of trading suites my personality?" Spend lots of time getting this correct as this is you foundation. Build a strong foundation and your trading system will be strong and stand the test of time. Build a weak foundation and your trading system will crumble along with your money. This is where the majority of traders go wrong. They have no idea which style of trading suites them. They keep buying into the latest software, or listening to the new guru, hoping this will change their trading results.

Most never get to know what successful trading is all about as the average trader lasts SIX months. I believe any trader who can last over TWO years in the market will probably go on to become one of those rare breeds: A Stock Market Winner. Why? Because after two years they start to develop a set of rules that fits them. They start trading a way they are comfortable with. Unfortunately, in their haste to make a ton of money, most traders will never get two years experience before they lose their money and/ortheir interest.

Say it today.

" I will find a system that fits me and I will become THE world's best trader at this ONE style of trading"

Go and get to work. There's a lot of soul searching to be done.

(Excerpt from The 7 Habits of Highly Successful Trader)

Happy Lunar New Year!

Dear brothers & sisters,

Hereby wishing all of us a very Prosperous, Joyous and Healthy Lunar Pig Year 2007! Cheers!

P.S. : Enjoy the Lion Dance routine sponsored by CoD :)

7 Habits of Highly Successful Traders

Aqua-Terra ~ Retesting limits, breakout lvl .565 , supp .475





GMG ~ Rubber power, breakout .12 with big volume






GEMS Tv ~ Superbull, res 1.47/1.54 , supp 1.30/1.19 (vested)





1) Take Complete Responsibility:

For the successful trader knows every action he takes, every decision he makes he , and only he, is responsible for that action. You will never meet a successful trader who is looking to blame someone else, or something else for the consequences of his results. It just will not happen. You see, when you accept 100%, no questions asked responsibility for all your actions you close the door to "excuses" behind you. When something goes wrong instead of looking for someone else to shoulder the blame, you will accept responsibility, note it down and vow never to repeat it again.

Simply, you are willing to accept you are going to make mistakes, but more importantly, you are going to learn and never repeat those mistakes. A vital component of any winning trader. Could you imagine Warren Buffet losing a few million $$$'s on as hare trade and then blaming the general conditions of the market. Or blaming his broker for giving him dud advice? no way! Just not going to happen. I will guarantee when top traders takes a loss the first thing they will ask them-selves is "Did I follow my rules?"

If the answer is yes, then they will look at their rules. Is there something that could be changed in their rules to avoid this loss again? Many times the answer will be a re-sounding no. On the other hand, if after asking the question "did I follow my rules?", If the answer is NO. Then some deep self explanation will be called for.

Why did I fail to follow my rules? How can I stop my-self from doing that gain? Am I likely to do that gain, etc... But do you notice the wording of the questions? How can I, Will I, Why did I. IIIIIII Here the trader knows he takes total responsibility for every trade and is seeking re-assurance that he will not break the rules again.

There's an old saying in trading:" If you have to ask you shouldn't be trading" Think about it. If you have a system that you have tested and proven over the long run that it does outperform the market and it is a system that fits you, why will you EVER have to ask for an opinion? What extra will a third party opinion provide?Apart from confusing you and clouding your opinion?

If you are a long term trend follower then why ask a day trader? If you are a value investor then asking a momentum trader will be a total waste of time. What I am saying is, no two people have the same opinion. Why would you believe some-one else over your trading rules?

It's a fact of life, and even more so in trading, most people want to be told what to do rather than acting on their own. Yet this is a major reason most people fail in the markets. Either accept total responsibility for your trading action or do not trade at all. If your number one rule is"to follow your rules " why will you need to ask a guru what they think of your position? If you EVER find your-self wanting to ask a third party about your position do this:

* Close the position out.

* Review your plan and rules.

* Work out why you lack the responsibility to follow that plan

* When you are convinced you don't need a third party opinion start trading again.

How can a trader learn to accept total responsibility? Have a set of rules and realize THE most important point in trading is following those rules. Once you have a set of firmly established rules you will find your-self not having to follow out-side opinion. In fact I go to great lengths not to listen to outside opinion.

Simply because, I know by following my rules I will be on the right side of the market 95% of the time and I will never miss a big move.Those kind of figures are much better than any out-side source can give you.

So from today, learn to take total responsibility for all your trading decisions. Strive to develop and then religiously follow a set of trading rules, knowing it is the importance of following those rules that ultimately determines whether you will win or lose in the long run.

If you ever find your-self thinking, "they did this" or, "the market caused that loss." Change it to: "Did I follow my rules?" If the answer is yes pat your-self on the back as you are on your way to becoming a market winner (one of the minority). If the answer is NO find out why and strive never to repeat this error again.

Accept total and utter responsibility for every trade you take from today and you'll be amazed at how easy trading really is.

(Excerpt from 7 Habits of Highly Successful Traders)

The Science of Chaos: Handling of New Information

The Science of Chaos has proven that material traditionally neglected by classical science as being random behavior and/or unimportant measurement errors may be the most important causative factors in our search for understanding. It pointedly addresses areas that cannot be navigated by classical concepts. It specifically concentrates on what scientists formerly labeled as Chaos. Chaos is one of those unfortunate misnomers that describes more of what IT IS NOT than what IT IS. Chaos is not random behavior. It is a much higher form of order. Instead of thinking of your usual connotation of the word Chaos, substitute instead the more accurate description: NEW INFORMATION. From now on, every time you hear the word Chaos, translate it in your mind to new information.

The universally most common and most prejudiced way to handle new information is to fit it into old categories. We have done this so often that we consider it either the natural thing to do or, more commonly, the ONLY way to handle it. Upon receiving new information, our usual first approach is: "What is it like? It reminds me of ...." According to psychologists, anytime you feel either overwhelmed or bored it is because you are attempting to fit new information into old categories. (Aha! What are you doing with this information at this moment?) Think about that when you are in the market and feeling either bored or overwhelmed. Our first impulse when handling new incoming information is to organize it in some way. You are in the process of organizing this material that you are reading. Once anything, material or otherwise, is organized, it takes on a life of its own. When it takes on this life, its primary purpose and goal is survival. As this chapter is being written, there is a national outcry to do away with the IRS. What do you think the chances are? Before that happens, there will be blood in the street. For any organization, from the most complex to the very simplest, the first goal is to survive. The four largest money gatherers and distributors in the world are:

1. War.
2. Medicine.
3. Insurance.
4. Religion.

These four institutions control more money than the most powerful country in the world. Why do they enjoy this position? Because they have to do with the survival of our most personal organization--ourselves. The purpose of war is to break things and kill people. The purpose of medicine is to repair those who aren't dead, so that they can fight again. The purpose of insurance is to take care of those left by the dead. The purpose of religion is to take care of those who do die. These institutions have the most money because they all have to do with our personal ultimate survival. The real reason that most traders lose consistently is that they are fitting new information into old, inappropriate categories. If our usual way of handling new information is to fit it into old categories, what is the alternate choice? Let the new information organize itself. When that happens, we have a trance-ending experience of a higher form of order. The question then is: How is this done in trading the markets?

The simplest organization I can think of is a hydrogen atom. It contains one proton made up of three quarks and one electron. It just doesn't get much simpler than that. Trillions of these gaseous atoms are floating around in the air in the room where you are sitting. Their first instinct, just like yours and mine, is to keep their current logic organization intact. They seek to remain hydrogen atoms. In this room, there are also trillions of oxygen atoms. They are much larger and more complex, and they, too, seek to keep their current organization intact. As both of these gases circulate and bounce around the room, they occasionally will come into each other's gravitational field (Figure 2-1). This provides new information for both of them(the gravitational pull of the other). And even though they are infinitesimally small and are inorganic, they make what could only be called an intelligent choice--whether to keep their old organization as independent atoms or to permit the new incoming information to change their organizational structure. They keep their current structure 99.99999 percent of the time. About 0.00001 percent of the time, they let this new information (the gravitational pull of the other atom) reorganize their approach to the world. When that happens, these atoms TRANCE-END their old limitations and become something entirely new, with all new characteristics and a totally different organization. They have become H20-- water. Water has virtually no characteristics that are shared by the two former gases. They were compressible, light as air, invisible to humans and so on. Water is not compressible, is heavier than air, is visible, and exists in different states (solid, liquid, gas). The point here is that there are only two ways of dealing with new information:

1. Massage (distort) it so that it will fit into an old organization.

2. Permit the new incoming information to organize itself into a new, different, and unpredictable organization.

Therein lies the difference between a successful approach to trading and the more common losing approach. Traders who let the new incoming information organize their trading will be in sync with the market and thereby will be winners. Attempting to fit new incoming information (Chaos) into old categories distorts both the information and the trading. The surprise that the Science of Chaos found was that there is an underlying structure to what seems, on the surface, to be random behavior or information.

(Excerpt from New Trading Dimension: How to Profit from Chaos)