One Stock Trading Fund
3 things you need for this to work:
- Bull market- you cannot beat the market. No new stocks will show up near market tops or in bear markets.
- A highly accurate method. Anything less than an almost sure thing (90%) will not work.
- Compounding returns: There is no point in taking profits out after one trade and doing it again. You need to compound of three trades.
High accuracy is a must.
The other factor no-one ever talks about in trading stocks is time. Time it takes to hit your % gain makes a huge difference.
Given the choice of these returns:
Obviously everyone goes for 500% gains. BUT if that return took four years and you got that by blind luck is it the best one to take?
What if the 50% return could be made in three months but was 95% accurate? So in that four year time frame you could make sixteen successive trades hopefully all come of. Maybe one or two losing trades. Now compound those returns to see you the % return.
Time is the missing element most people never look into. Accuracy being the most important. Even if you had a system that made 5% but was 100% accurate you’d trade it all day long. SADLY, THERE IS NO 100% WINNING SYSTEM. But you should aim for “almost sure things” only.
Be very careful of highly accurate but negative % return systems. Where they say the system is 90%+ accurate but you only make 5% on winners and can lose 30%+ on losing trades. They do not work either. A lot of new traders fall for this scam.
So it’s a bit of juggling act between:
Win/loss % ratio
You need the best fit with these three criteria.
The other two main factors are:
- Overall market. Best system in the world cannot beat the market. Any system that goes long only works in bull markets. Pointing out the obvious but you’d be surprised.
- Then there is the discipline/faith to stick to that system. That cannot be taught. That is why people that buy other people’s systems/method do not succeed. Because they never put the “system” in place, carried out the tests, tested during good/bad market conditions. Eliminated the parts that did not work and/or tweaked other parts to improve performance over many years…they lack belief in that system. They might try it out…but as soon as a draw-down hits they bail. Going onto the next touted system. Seen it time and time again. Then they blame the seller for their lack of discipline. That does not work.
Having said all that trading one stock at a time carries big risks. Markets can crash. Occasionally companies get caught out fro fraud (cooking the books) and the stock collapse without warning. This is very rare in US stocks. Especially the high priced, highly liquid stocks. Only seen it happen twice. I could imagine third world stock markets this is rampant. Just as it is in the Pink sheets, OTC markets, and penny stocks. (AIM -LONDON is about the worse exchange in the world to ever invest…avoid like the plague).Remember, most companies list on the stock market to simply cash out or gain financing.
Forget about thinking you are “investing in a company.” It’s a giant pyramid scheme. Where there are billions of $$’s of Mutual fund, institutional money having to put their huge money somewhere. The key is to find this….Take out the sure % part of the move, repeat, move on. Not go and research companies books. Beyond the very basics it has no bearing.
As for advanced technical analysis, moving averages, waves, angles, retracements, cycles: DO NOT WASTE YOUR TIME. Sadly, as I wish I could get my wasted time back, I studied for a diploma in T.A. in the 90’s. I was stupid. Naive. The only thing it taught me was it is complete waste of time. Maybe not so bad then?
Past 20 trades 18 have come off. If that ever drops below 16 I will cease.