I cannot define myself a good trader; by a trader I imply a person that attempts to buy shares at a low price and sell at high price in a short period of time, or vice versa.

It is not that I have not tried my luck. I have studied technical analysis, built trading models and stared at charts for long hours. But, the end result was mostly the same, a few wins followed by a huge loss. At least I was consistent.

I am more inclined towards fundamental, value investing. I do make money, for myself and my clients by strictly following fundamental investing principles. The fund I manage is up 9.5 per cent this year.

Still there is always that tiny part of me, call it my tendency towards addictive behaviour, which certainly does not help. Luckily by now I have even managed to convince myself that I am not very good at this thing. So I have a self-imposed limit not to add funds to my ‘trading’ (another word for money down the drain) account.

However, since I am repeatedly asked the same questions I have compiled a list of tips that any day trader should keep in mind.

- If you want to stay in this business, leave "hope" at the door and stick to your stops. This means, realising that you have got the direction of the trade wrong, hope sets in and you abandon your targets and limits.

Transfixed to the screen you pray for a change in direction – luck. Get out! The market may turn, but in all probability, you will only lose double what you have already lost.

- When you get into a day trade, start looking for signs right away that you are wrong. If you see them, then get out before your stop is hit. This means adopting a trading strategy.

For instance, ‘Buy, Double Down if A happens, Sell if B happens, Take Profits if C happens’. This means setting your targets and stop losses beforehand. Write them down and stick to them religiously.

Day trading should be boring, like factory work. If there is one guarantee in trading, it is that "thrill seekers" get their accounts ground down into small change.

- Amateur day traders turn into professional online traders when they start controlling their risk on each trade. Trading is 90 per cent risk management. Plan stop losses and exposure limits well.

- You are trading other traders, not the actual stock. You have to be aware of the psychology and emotions behind online trading. Newbies will be shocked when they see the market apparently working against them. The truth is that the market is not a living entity but each trader behind each trade is. Experienced traders will attempt to sweep you out of the market. Rules and discipline are the main antidote.

- Watch yourself if you get too excited - excitement increases risk because it clouds judgment. Expect losses as part of the process, the key is to keep losses at a minimum while letting gains roll.

Disclaimer:
This article was issued by Antoine Briffa, Investment Manager at Calamatta Cuschieri. For more information visit, www.cc.com.mt. The information, view and opinions provided in this article are being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice. Calamatta Cuschieri Investment Services Ltd has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website.

 

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