Your Top 5 Trading Questions Answered

August 3, 2013 / By Nick Radge / Beginner Traders

Recorded in 2010 the Top 5 Trading Questions are still relevant today.

Your top 5 share trading questions answered by Nick Radge of The Chartist. Nick Radge is a down-to-earth, common-sense trader with 25 years of trading experience.

So, What Were the Top 5 Trading Questions?

1. How do I identify a list of stocks to work with?

It can be done by identifying clean and sustainable trends. Money can be made by following big swings or trends that lasts six to twelve months in time. This is similar to 2009 trend which are very profitable. Trading for the high beta stocks is also a good strategy. Know that clean and sustainable trends tend to be found to the ASX 100 through 300. Generally stocks under the ASX 100 are too institutionalized. They also tend to become quite choppy and back fill and does not show very sustainable trend. Above ASX 300 tend to become too volatile and illiquid and so you have to be balanced. Those trending stocks tend to occur in small ordinaries. And it’s actually getting those newly-establish companies.

2. How does Elliott Wave Theory really work?

Following trends works but Elliott Wave does not make the profit. It just analyzes the market. It is good for analysis of bigger picture (2007 high, 2009 low) and it does work very well by setting bigger broader strategies. It is also good and reasonably successful for buying dips rather than breakouts. But you have to pick out only pieces of the theory to be applied and build your strategy for it can only be use for trading in “isolation”. It is not used all the time in every single stock you look out but rather in in conjunction with common sense volume, support/resistant, divergence, classic chart patterns and several others. The book “Dynamic Trading” by Robert Miner offers the best real world application rather than pure theory.

3. What is your preferred stop loss method?

The initial stop depends on time frame being traded. For example the Chartist’s Growth Portfolio have wider stops. ASX Systematic Power Setups or turtle strategy have tighter stops (approx. 2.5 ATR). Discretionary trading uses very tight stops and the essential to the success of The Chartist is trailing stops. This is done by following the market, trailing the stock behind the market, following the trailing, allowing the trailing to develop, and exiting when the trail turns.

4. What is an example of a good trading plan?

The ideal trading plan must suit ones personality. Determine how much time each day you have to allocate to the trading. Say if you have thirty minutes you have to find a strategy to implement it even with small amount of time. They do exist. If you do not have ample time or means or discipline to do that a service like The Chartist’s can really help. Most of all, you must have a positive expectancy employing patience and a good trading plan.

5. What is the most important personality trait that helps for trading success?

Aside from patience, perseverance, and tenacity which are all highly related to mental toughness, it is also important to know that this is not all about what is taught in seminars or books. You have to consider the two parts of trading according to Nick Radge. Quantitative which is apparent in seminars, books, which anybody can follow while many also fail in the end; and Qualitative, referred to as things that are difficult to teach, and takes time to be learned.

Nick uses an analogy like teaching your teenage child to drive a car. The quantitative side is stay to the left side of the road, give way at the giveway sign, use the blinker to turn left and etc. These are the quantitative rules. The qualitative part is that she’ll have to learn what the traffic is doing around. Learn what the driver in the next car is thinking. Furthermore, mental toughness and understanding that you have to roll through the bad times in order for the good times to come along should be understood. Because in trading there are some things that are actually difficult to teach, things that make the major difference between the winners and the losers.