- There are 2 types of investment: trading and investing
Investing
- I don't have much but very limited savings, so I have very little capital for investment(the money that I can lose without any effect on my life). And if I use more capital, it will invade my savings money and hugely increase the risk of my life. So the investment may not be suitable for me this time(you much have so much wealth that the money you spend investing to make a huge profit seems little to you).
- However, there is another investing method that has less risk, called DCA. Because it will spread out the purchase, so the time of the market doesn't have much effect on the total average price. This method is much safer for low capital like me. Also, because of less risk, I can put more capital into it.
- But, because I have limited capital(I am unemployed at this time), I will do my DCA within the limited time, just until the big economic event occurs. If it is not going as I planned, I will sell all of them with less risk.
- Another method is to wait and buy at a good price, then hold until the planned big economic event comes out. But this method has more risk if your purchased price is not good enough. So I don't recommend this.
- However, there is another investing method that has less risk, called DCA. Because it will spread out the purchase, so the time of the market doesn't have much effect on the total average price. This method is much safer for low capital like me. Also, because of less risk, I can put more capital into it.
- conclusion: for transfer or investing with large capital, only use the DCA technique within a limited time.
Trading
- Another method is trading. It requires more work and needs to follow the news to keep up with the market breath.
- The information you have is the most important thing in trading. The more you read, gain, or research the news, information, and fundamental details, the better you can trade.
- I used to keep staring at charts and hoping there would be a signal for trade in technical analysis, but it didn't work. I found that the more I stare at a chart, the more loss will occur.
- The more I read and gain information about the things I trade, the more opportunities I get in trade without looking at the chart at all(I've very little time at charts and just look at them only when I want to enter a trade.)
- There are a lot of markets: Forex, Stock, Crypto. You may not need to trade all markets, just trade the market that you have a good source of information.
- Forex: Reuters, Bloomberg, Central Bank announcement & policy
- Crypto: coinmarketcap(has separated news for each crypto),theblock.co, coindesk, cointelegraph, white paper
- Stock: News about the company from reliable sources(eg. Reuters, Bloomberg)
- Again! Know your edge. You don't need to trade the market that you're not good at, because you will lose your profit at them.
- The information you have is the most important thing in trading. The more you read, gain, or research the news, information, and fundamental details, the better you can trade.
- conclusion: speculate only when there are clues with proper risk limits. Spend time on reading and gaining information, do not spend time on charts (it is a waste of time).
- ***** Technical analysis *****
- The concept of technical analysis is its trend-following nature and supply-demand analysis with market actions, you should look at the trend with a bird-eyed view and wide time horizon.
- For example, if the trend is downtrend and there are a lot of strong bearish candlesticks, even though the price moved in range and has already broken the old down trendline, it is still a good chance to sell because the trend is down(trend following), and many strong bearish candlesticks meant that supply is much more than demand(supply and demand analysis).
- The concept of technical analysis is its trend-following nature and supply-demand analysis with market actions, you should look at the trend with a bird-eyed view and wide time horizon.
- Time on a clock also matters
- I would love to enter the trade in asia day time and just wait for the price to run in US day time
- The trade-entering technique: market order / stop market order / limit order
- I don't have any technique for entering, I just enter at the market price. But the step before, I have to calculate the loss and if only I can bear that amount of loss that may occur, I will trade. The loss that I can accept will never be more than 1% of my money.
- stop market order is also my favorite one because it provides flexibility in entering a trade when price action goes as planned(breakout)
- However, there may be some times that the price triggers the order but comes back to trigger stop loss(false breakout), so don't think trading breakout will allow using a larger risk, always use proper risk.
- stop market order is also my favorite one because it provides flexibility in entering a trade when price action goes as planned(breakout)
- I don't have any technique for entering, I just enter at the market price. But the step before, I have to calculate the loss and if only I can bear that amount of loss that may occur, I will trade. The loss that I can accept will never be more than 1% of my money.
- The best trading strategy
- Shouldn't trade much frequently and letting the market run the profit with the trend is the best strategy. Always use proper risk in each trade, and gradually(not hurriedly) increase position size when the earlier trade was right. When you trade it means that you've put your money at risk of uncertainty in the market, the more frequently you trade, the more risk you are exposed to.
- There are just 2 steps: Charting and planning the trade in the large time frame(month, week, day, 4h, 1h) then waiting to enter the trade in a 1-5min time frame
- Risk management
- Because of so much volatility, should I adjust the stop loss?
- Because the commission fee(have to be paid instantly at the opening of the position) related to the profit ratio in a 1-minute timeframe is so high, it is more sensible to leave the position open as long as possible(to close in the larger timeframe). Thus, if I've placed the order, I won't adjust the stop loss in the later but, instead, keep it either indefinitely or until the stop loss is triggered.
- the commission fee is just like buying a ticket to play a roller coaster, what is the matter that you don't take a ride or even cancel it before it finishes?
- Because the commission fee(have to be paid instantly at the opening of the position) related to the profit ratio in a 1-minute timeframe is so high, it is more sensible to leave the position open as long as possible(to close in the larger timeframe). Thus, if I've placed the order, I won't adjust the stop loss in the later but, instead, keep it either indefinitely or until the stop loss is triggered.
- How large a position size I should use which will affect the fee you cost?
- depend on how much stop loss is required i.e. if the stop loss is little, you can use a larger position.
- the fee is calculated by position size x 0.001, i.e. position size open is 1000$ the commission fee is 1$.
- normally, the fee per trade shouldn't cost more than half of the risk limit per trade(eg. if the risk limit/trade is 0.5%, the fee shouldn't be more than 0.25%), because if you use more than that the stop loss will be very tight or you are risking more than the limit.
- Separate between the trading platform and chart monitoring platform makes my trading much better in conforming to my plan without unintentional trading .
- when you use the same trading platform to watch the chart, you will usually be aroused by bias from the number of profitability, loss, the fluctuation of price, or even the narrow time horizon that the trading platform provides. All of them will cause you to unintentionally open or exit the position hurriedly hurdled which will ruin the risk management
- Instead, if you separate the trading platform from the chart monitoring platform, when you look at the chart you will look for a plan, not money, which will make you trade with much more systematically, well-planned, and less risk.
- Because of so much volatility, should I adjust the stop loss?
- Dow theory application technique: Run trend and Reversal identification
- note that all of these dow theory principle must be used with trendline. Trendline break is the first criteria, then dow theory applied.
- Runtrend
- I use the dow theory to hold the position for a long time as long as it is still conformed to the dow theory which are higher high, higher low in an uptrend and lower low, lower high in a downtrend.
- Reversal
- when dow theory is not followed it may be a sign of a changing of trend(reversal). For example, if the prior trend is a downtrend which produces LL, LH of price in the chart, then it doesn't go further but breaks the trend line and produces HH and HL which is a character of uptrend in dow theory, it will be a sign of trend reversal.
For Forex
- Read Reuters as much as you can, analyze, and find the inevitable condition that will make more profit and less risk than any bet with tiring uncertain prediction.
- don't bet on the news(because it is usually priced in), but read and analyze the information and trade if there is the character of continuing or long-lasting consequence.
For crypto
- Holding crypto is just like holding share equities of the business you love.
- Reading as much as you can in what you are trading is the best strategy for survival!!
- Because crypto is usually slow-moving, you must know the factors that will influence in long-term such as Fed money policies(interest rate), the upgrade of the system, etc.
- The most proper strategy is investing with DCA, because there is not much frequency of important news that affects the price.
- It can be short-term traded when you have good reliable news but it is not often.
- But the factors in the short term also have an influence specifically for the particular crypto such as news, trends in the present time, etc.
- For the technique in short-term trading, usually in a bear market, search for coins that didn't change in 24 hours(+/- not more than 1%) because those can outperform the bear market, and then search for news of them individually in coinmarketcap.com and trade them. However, for those coins that are bullish(+ > 1% when the markets are bearish), this method may not always work because they may have already been priced in and run out of demand.
For stock
- use a week time frame
- trade only, no investing because the upside is less than crypto, trade with leverage will provide more profit.
- Also, there are a lot of reliable news resources that are good for trading
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