SA Top 40 vs STXNDQ vs SYG500SA Top 40 now negative YTD. Nasdaq100 and S&P500 outperforming by a significant margin but US markets under pressure lately.
SA40 trade ideas
Update: JSE Top 40 IndexUpdate: JSE Top 40 Index.
Yesterday morning the JSE Top 40 Index was down by 11% from my call at the beginning of the year when I presented a note called: "6 Factors Which Suggests An Attractive Reward-To-Risk For Sellers" (24 January, Published on 25 January on this platform) .
The original idea is attached to this post.
We saw the market peak three days late on 27-January. Well done to all who took the opportunity to reduce their risk.
For more research insights, including trade ideas, get in touch today.
How to be a Trading WARRIOR!To trade well you need to think like a warrior.
You need to harness your inner strength and go through the battles of trading.
There are spectators, there are participants, and then there are warriors.
These warriors stand apart.
And you need to blend your skills and traits to equip you with everything you need to WIN.
In this article, we’ll delve into the core qualities that can transform you into a genuine trading warrior.
Mastering the Sword of Time
Trading, like a warrior’s battle, is not won in haste.
You need the three Ps as I often write – patience, persistence, and passion.
Markets are fluid entities that are always shifting and changing.
So, you need to take the time to learn how to adapt or die trying.
The Shield of Dedication
Your shield is dedication.
You need to commit to the journey, embrace the learning curve, take the losses and drawdowns in your stride.
You need to continuously seek to improve with every trade, every trend analysis, and every market lineup that comes your way.
Embrace it with dedication.
Discipline: The Unyielding Armour
Discipline is what will make you win.
You need to follow your trading plan and stick to your risk management strategy.
You need to make decisions based on logic, not emotions.
Discipline keeps you grounded, even in the face of market chaos.
The Quest for Self-Understanding
This is a self-journey too.
It’s a lonely but essential quest you need to undergo.
I always say you need to understand your trading personality and risk profile.
Know and identify your strengths, weaknesses, and biases.
This will help you to develop a stronger understanding of who you are as a trading warrior.
Resilience: The Warrior’s Tenacity
Resilience is about bouncing back from losses and setbacks.
They are going to come.
Some are going to be short.
Some are going to be extending.
Rome was not built in a day.
Strategic Thinking: The Battle Plan
Trading warriors are not impulsive.
They develop a strategic plan and evaluate all possible outcomes.
We make sure we calculate risks before we think of getting into a trade.
So have your strategic game-plan with you all times.
Adaptability: The Shape-Shifter’s Gift
The financial market is volatile and unpredictable.
It’s forever changing. New markets, new volume, new algorithms, new economic cycles, and new breakthroughs.
A trading warrior is adaptable and can adjust their strategies to align with the changing markets.
Continuous Learning: Sharpen the Sword
A warrior never stops to hone their skills.
You need to continue to learn, stay ahead of the market trends. And always refine your strategy when need be.
Keep that sword sharp and ready for anything.
Emotional Intelligence: Harness the Stallion
Successful trading requires emotional control.
Learn to adapt to your emotions and feelings.
Become the market and think like them, so you don’t get clouded by your irrational and illogical judgement.
Confidence: The Warrior’s Roar
Confidence is NOT about being right. That’s ego.
Confidence is embracing your losses to come.
Confidence is when you trust your abilities, strategies and decisions.
Confidence is being comfortable with your trading, no matter what.
Independence: The Lone Wolf’s Path
Trading warriors are self-reliant.
They make their own decisions.
They might follow a leader, but they take responsibility with their own trading and risk profile.
You need to learn to take responsibility for them, and don’t blame others for their losses.
Focus: The Eagle’s Gaze
Trading warriors have tunnel vision.
They are looking straight at their goals and responsibilities.
The only thing you can do is to concentrate on your tasks, block out distractions, and don’t allow fear, greed or ego to shift your focus.
Perseverance: The Mountain’s Steadfastness
A trading warrior keeps going.
No matter what obstacles or setbacks approach.
They understand that perseverance is the key to long-term success in trading.
Balance: The Zen Master’s Touch
You don’t want to be glued to your trading screen.
This alone will defeat you.
You need to learn to balance trading, business, work and life.
Don’t put so much energy in things you cannot control.
Balance your life and your lifestyle.
Integrity: The Knight’s Virtue
In every trade, a warrior upholds honesty and fairness.
They stay true to their principles, even when nobody’s watching.
Integrity is what gives you the confidence, respect and laser focus you need to achieve.
Courage: The Lion’s Heart
This is not a faint-hearted game.
You need a lot of courage and calculated risks to trade.
Face losses and stand up against market pressure.
Developing these qualities will not guarantee instant success.
But with time, patience, and perseverance, you’ll find yourself becoming a true trading warrior!
Let’s sum up the trading warrior traits…
Mastering the Sword of Time
The Shield of Dedication
Discipline: The Unyielding Armour
The Quest for Self-Understanding
Resilience: The Warrior’s Tenacity
Strategic Thinking: The Battle Plan
Adaptability: The Shape-Shifter’s Gift
Continuous Learning: Sharpen the Sword
Emotional Intelligence: Harness the Stallion
Confidence: The Warrior’s Roar
Independence: The Lone Wolf’s Path
Focus: The Eagle’s Gaze
Perseverance: The Mountain’s Steadfastness
Balance: The Zen Master’s Touch
Integrity: The Knight’s Virtue
Courage: The Lion’s Heart
The BEST trade to TAKE!Do you know what the BEST trade is?
The best trade is not a winner.
The best trade is not a lucky streak.
The best trade is not what you think…
If you’ve followed your rules, strategy, criteria, risk management and taken the trade.
That is the BEST you can do.
Whether it wins or not, you have taken the BEST trade.
Let’s dig in…
Follow Your Rules
Every successful trader has a set of rules that act as the bedrock of their strategy.
These rules are based on highly researched analyses on back and forward testing.
In the medium to long term, you’ll reap the rewards.
Therefore, your BEST trade is following your rules.
Wait for the criteria
To find the BEST trade, you must establish specific criteria that a trade must meet before you pull the trigger.
Maybe you’re waiting for syzygy between price action, candlesticks, volume, indicators, chart patterns or a combination of them.
Once the criteria has been met, then you’re ready to take the BEST trade….
Keep to your risk management
Protecting and preserving your capital is paramount in trading.
The BEST trade is when you have assessed the risks and put your safeguards for your trades.
What are you willing to risk per trade?
What is your margin requirements in the trade?
Is it affordable?
Will you have enough capital to play it through
Will you have enough capital to take on many other BEST trades?
Can you emotionally handle the risk per trade?
Once you’ve got the right answers, you’re ready to take the BEST trade.
Own your mindset – The Ultimate Act of Courage
You know the trade might be a winner or loser.
And it’s not about the outcome.
IThe BEST trade is about having the courage to execute when all your criteria are met.
It’s about trusting your process and embracing the uncertainty that comes with every trade.
J.T.T.B.T – Just Take The BEST trade
Once you’ve done the planning, analyses, risk assessment, then you’re ready to Just Take The BEST Trade!
You’ve done your job.
If it wins great – it’s once step closer to portfolio growth.
If it loses – it’s the cost of the trading business.
Remember this…
The BEST trade is not a destination but a journey filled with learning, discipline, and resilience.
It’s not solely about profit or loss.
It’s about the process of becoming a better trader and evolving as a trader yourself.
Let’s sum up with the steps to you taking the BEST Trade.
Follow Your Rules
Wait for the criteria
Keep to your risk management
Own your mindset – The Ultimate Act of Courage
J.T.T.B.T – Just Take The BEST trade
Why We NEED to Lose To Be SuccessfulThere is a paradox to succeed when trading.
And that is, we need to lose to win.
We need to make sure though that our potential losses are ALWAYS less than our gains.
I want to go through some of the reasons why losses are not only inevitable but also essential in the journey of successful trading.
Reason #1. Losses are Inevitable
Financial markets are largely unpredictable due to a plethora of influencing factors such as:
Demand & supply
Geo, economical and political events
Algorithm volume trading by institutions
New influx of traders into the market.
Unpredictable micro and macro events
The unpredictable nature implies that losses are part and parcel of trading.
Not even the most seasoned traders can boast of a 100% win rate. Most successful traders end up with a 48% to 70% win rate.
So, if you’re looking for a high win rate – you need a reality check to stay grounded and humble.
Only then, you may have a chance at winning in this difficult game.
Reason #2. Losing Months Will Happen
Even when you work and follow proven and profitable strategies, you will face a time of losing streaks.
This can occur over weeks, even stretching into months.
You might lose a small chunk of your portfolio, but then you’ll need to the time to recoup and bring your portfolio back to ATH (All time highs).
Reason #3. Unfavourable market conditions
Markets are intrinsically volatile.
Not only that but, small markets tend to follow the bigger leaders.
And when the price fluctuations are erratic by nature, it carries the stocks, indices and other markets with it.
E.g. We could see the S&P 500 move in a sideways consolidation period for three months in a row.
And now matter how good the prospects are within a smaller market, they tend to follow the main indices.
So, we have to just wait for the better times and for the more conducive market conditions.
This moves on to a bigger element:
Reason #4: Economic Cycles
Broad economic cycles include:
Accumulation
Mark-up phase
Distribution
Mark down phase
Then there are periods of a boom, recession and a crash.
These will also impact market trends and lead to losses.
It’s important to learn to hedge positions (long and short) and know when to be neutral (no holdings).
You’ll need to learn how to adapt and integrate losses into your trading. That way, you’ll be more prepared and less emotional for when they come.
Let’s sum up the reasons:
Reason #1. Losses are Inevitable
Reason #2. Losing Months Will Happen
Reason #3. Unfavourable market conditions
Reason #4: Economic Cycles
JSE ALSI follows Friday's action and makes a breakout and fakeouJSE ALSI 40 - Update
We've seen the ALSI 40 form a restriction range between 70,122 and 67601.
It broke above the downtrend on Friday, just to come back down and form a fakeout following Americas downside on Friday night.
As most Premium know. Monday is a choppy day with no definitive chosen trend and so we'll let it choose a direction first before making any decisions.
It's these times where it's good to be hedged with longs and shorts during this timulteous time. I'll let you know...
Sector Ratings Relative To JSE Top 40 IndexI published this on Friday afternoon, so there shouldn't be much change.
Friday 15-Sep-2023, 15h46 JSE Sectors vs the broader market (using the JSE Top 40 Index as a proxy). This data can provide insight into relative sector positioning.
For more research insights, including trade ideas, get in touch today.
Enhance your Trading Expertise into the Future – 5 Tech breakthrIn today’s rapidly evolving financial landscape.
You really need to stay ahead or get left behind.
It’s our passion to help you deepen your knowledge of the market trends and technologies that are shaping the future.
And you know what, there are some very important trends and sectors you’ll need to adapt to your trading.
Let’s explore some of the new paradigms that are transforming the trading ecosystem.
New ETFs
Exchange Traded Funds (ETFs) have surged in popularity lately.
This is because of their flexibility, accessibility, and potential for diversification.
You’re going to hear a lot more from companies like BlackRock’s iShares and Vanguard leading the way.
Recently, thematic ETFs have been gaining traction.
These ETFs focus on niche areas like environmental, social, and governance (ESG), technology, and health.
For example, the ARK Innovation ETF (ARKK), managed by ARK Invest.
This targets companies that are expected to benefit from disruptive innovation across different sectors.
New AI Tech
Artificial intelligence (AI) is revolutionizing financial trading by providing traders with automated, high-speed decisions based on complex algorithms.
You need to adapt AI into your life, before it goes past your head.
AI-powered trading software’s is another thing I am looking at and trying to adapt into MATI.
With it you’ll be able to analyze large volumes of data at lightning speed.
This will allow you to make more informed decisions, run your trading journal, analyse data and even pinpoint which markets work best with your strategy.
We are still in the infant stage of deep and machine learning with trading, so learn and grow with it.
Electric Vehicles
The electric vehicle (EV) industry is really taking over.
I’m sure you’re seeing more Teslas on the road than ever before.
I’m sure you’re seeing electric vehicle stations to charge cars.
Even by the ports and harbours, you’ll see electric charging stations.
With companies such as Tesla and NIO leading the charge.
As the demand for clean energy solutions grows,
It’s not just about the car manufacturers.
But also the companies that provide these charging stations like (ChargePoint, Blink Charging) and battery technology (Panasonic, LG Chem).
Space Tourism
Space tourism is no longer a figment of science fiction. Companies like SpaceX, Blue Origin, and Virgin Galactic are making commercial space travel a reality.
Just recently in June 2023, Virgin Galactic had their first space tourism trial experience.
Before you know it, maybe we too will be looking at our beautiful blueberry of a planet from space.
Metaverse
The Metaverse is where you can combine a fully immersed world with VR ora shared digital experience with virtually augmented physical reality.
Companies like Facebook (now Meta Platforms), Apple and Roblox are investing heavily in this space.
This is just a scratch of what is coming out, and what I’ll be applying to trading.
Here are another 20 breakthrough technologies to watch out for.
Quantum Computing
CRISPR and Gene Editing
Autonomous Vehicles
Advanced Robotics
Machine Learning (ML)
Nanotechnology
Li-Fi (Light Fidelity)
Synthetic Biology
Hyperloop Technology
Smart Cities
Hydrogen Energy
Lab-Grown Meat
3D Bioprinting
Drone Delivery
Personal A
Remember, knowledge is not just power – in the world of trading, it’s profit.
IMPORTANT - 14 Risk and Money Management RulesOver the past 20+ years, I've only mentioned a few money management rules.
But then I thought about it, and realised there are so many more I use when I trade.
So with this TradingView platform, I’m going to share my 14 most essential risk management rules I’ve ever come across.
RULE #1: The 2% Rule – Limit Your Risk
You might have seen this risk rule from me before, but there are new TradingView members everyday.
Here’s how it works…
Never risk more than 2% of your total trading capital on a single trade.
No matter how good the trade looks, this rule will help you safeguard your portfolio from the impact of a single trade's outcome.
The reason is, you will enter a losing streak.
You will most likely take from five to seven losing trading in a row.
But with the 2% rule, you’ll only be down 10% to 14% of your portfolio compared to if you risked 5% to 10% per trade.
RULE #2: The Probability Rule – Assess Trades
When you buy or sell trades, there are three types that can line up according to your trading strategy.
I like to categorise these trades as.
High, medium, or low probability.
For high, medium, and low probability trades, risk 2%, 1.5%, and 1% of your portfolio respectively.
If my trading criteria matches all the right elements to buy or sell – this is considered a high probability trade.
That’s where I will risk 2% of my portfolio per trade.
If my trading criteria has one or two elements that are showing conflicting signals – this will be considered a medium probability trade.
In this case, I’ll only risk 1.5% of my portfolio.
Other cases, there’ll be a time where the system will line up but the market environment is in a choppy and volatile range.
This is where the trade will be a low probability trade. And so, I’ll only risk 1% of my portfolio per trade.
Identify the probabilities and you’ll be able to adjust your risk accordingly.
RULE #3: 20% Drawdown Rule – Pause After Losses
There could be a time, where your portfolio is in the slums.
This is where you could be down 14% to 20% of your portfolio.
What then?
Well you need to protect your capital.
I have a simple rule where, once my portfolio is down 20% of my portfolio – I will pause my trading.
During a drawdown, I’ll then switch to paper trading until conditions improve.
If the market resumes in favourable territory and I feel more confident that the system will work better – I’ll then resume trading with 1% risk.
RULE #4: Never Risk Unaffordable Money
This one is a given, and one I often preach.
With trading you should NEVER risk any money you can’t afford.
If you’re using your only savings from retirement or you have any money that you’ll be emotionally attached to - Avoid trading all together.
This is not only dangerous for your financial situation but it will also lead to a rollercoaster of emotions trading during both winning and losing streaks.
RULE #5: The Time Stop-Loss Rule – Time-Based Limits
If a trade doesn't meet its profit target (or hits the stop loss) within a specific timeframe, close it.
I have a 7 week (35 business days) rule.
It doesn’t matter when, what level or if the trade is in the money or out the money.
You want to close the trade, after a certain period of time has elapsed, for three reasons.
1. You’re a short-term trader and don’t want to turn it into a long term investment
2. There are costs you are paying daily which is leading you to incurring a higher loss or less profits.
3. You don’t want to feel married to any specific trade.
Either you’ll bank a lower loss than you planned. Or you will bank a lower profit than planned.
This prevents capital from being tied up in stagnant trades.
RULE #6: The Trailing 1:1 Rule – Protect Profits
This rule, will help you secure your profits when a trade is moving in your favour.
Here’s how it works.
Once a trade hits a 1:1 risk-reward ratio (and has moved in my favour).
It gives the opportunity to move the stop loss up to just above break even.
This way you’ll will bank a minimum gain, should the trade turn against you.
Also, it will increase your win rate and emotionally you’ll feel it’s much easier to hold a trade with nothing to lose.
RULE #7: Half Off Rule – Secure Gains
Sometimes, you don’t want to move your stop loss.
Instead you want to lock in profits, while the market is moving in your favour.
So the rule is simple.
When the trade reaches the risk to reward of 1:1, this might be the best time to close half your position.
This will lock in some profits while leaving room for further gains.
RULE #8: The 5% Margin Rule – Control Leverage
This rule is more applicable to those who have a MUCH larger account of R25,000 and up.
Remember, with trading you’re buying and selling on margin.
If the gearing is 10 times this means if I hold 1% of my account, I am risking 10% of my portfolio if the trade heads to zero.
So, the trick is to never risk more than 5% of your account on a single trade.
This approach reduces exposure to risk and aids risk tracking in volatile markets.
RULE #9: The Intraday Stop Rule – Daily Loss Limit
Not all traders like to hold overnight.
You get intraday traders who buy and sell trades within the day.
If you are one of them, then this rule is for you.
Make sure you set a daily loss limit or a maximum number of losses.
For example, if you’re down 3 to 4 trades in the day – that might be your que to stop trading for the day. There are a few reasons for this including:
• The market environment is not conducive to continue.
• You need to protect your capital.
• Your emotions might run out of control having taken too many losses in a day.
• This could result in impulsive and revenge trading to try make up for your losers.
RULE #10: Forex NEWS Rule – Avoid High-Impact News Events
I mentioned this in the last Trading Tips Q&A, but I’ll say it again.
If you’re a Forex trader and you want to avoid volatile times when certain news events come out.
You can stay out or avoid trading during high-impact news events.
These events include CPI, NFP, PPI, and FOMC releases.
Such events can increase trading risks and lead to unpredictable market movements. (Especially in the Forex market!).
RULE #11: The Risk-Reward Rule – Favor Positive Ratios
Whenever I take a trade, I always want my gains to be bigger than my losses.
To do this I set my risk-reward ratio of at least 1:2.
This means, I am only willing to risk one in order to bank two times more.
Do this enough times and you’ll almost guarantee your potential gains will outweigh your potential losses in the medium term.
And having a risk to reward of at least 1:2 means you’ll factor in the costs, brokerage and other fees with your trade.
RULE #12: The 20% Golden Rule – Diversify and Limit Exposure
You always need to have capital within your portfolio.
Not only to trade, but to protect the current trades that you’re holding at any one time.
So this rule is golden.
Here’s how it works. I never expose more than 20% of my total investment portfolio to trading.
This means, I’ll always be holding at least 80% of my portfolio.
Remember, with margin (leverage) trading, it magnifies gains and losses.
Having only 20% of your total investment portfolio will help you to always have more money in your portfolio to account for more trades, losses, costs and for you to diversify and manage your risk better.
RULE #13: The Hedgehog Rule – Balance Long and Short Positions
I love this rule.
In trading you can buy (go long) when the market moves up.
Or you can sell (go short) when the market moves down.
But sometimes, you might feel you’re over exposed to the long side even though the market is moving up.
So instead you can hedge your positions by balancing longs and shorts.
If the market turns down, then at least you’ll have some shorts in the mix to make up for the losses with your longs that are going against you.
I always try to avoid overcommitting to a single direction.
This way I am able to protect my portfolio from sudden market reversals.
RULE #14: Multi-Account Rule – Separate Markets
I find markets all move differently and yield results at different rates.
So what I like to do is open different trading account for different markets (e.g., Forex and stocks).
I like to track and trade Forex for one account and stocks for another.
You’ll find if you trade too many different markets in one account, it will most likely skew the portfolio and your track record.
This is because of the way they all move sporadically from each other.
So, diversify your portfolios across different asset classes and markets to manage your risk.
Final words.
I trust this 14 Risk management Rules Lesson will help guide you to your trading goals.
If there’s one thing you should do is print, or save this guide and keep them close for reference.
These rules will undoubtedly prove valuable in your trading endeavors.
Why you might STRUGGLE Trading - 9 REASONSTrading is the most simple and hardest career you can have.
There are simple tasks to take but difficult to mentally handle.
Success requires discipline, strategy, and often, a good amount of experience.
However, there are many reasons why people may struggle to achieve profitability in their trading endeavours.
Here are some common pitfalls that might be the reasons why you are struggling as a trader. can
Lack of a Defined System
A trading system involves a set of rules that dictate entry, exit, and money management criteria for your trades.
If you’re trading without a proven and winning system, you’re basically gambling.
You really need to find what works for you both mentally and financially.
Either you can experiment with different trading strategies.
Or you can adopt proven systems that you believe with what will work for you.
It’s crucial to find a strategy that suits your risk tolerance, investment goals, and lifestyle.
Inability to Handle Losses
Everyone experiences losses in trading.
You’ll take losing trades on a daily, weekly and monthly basis…
If you cannot handle losses, you may find yourself holding onto losing positions for too long.
You might feel you’re stuck in a rut.
You might feel like a loser yourself.
So, this needs to stop.
Start treating trading as a business.
Accept that losses as the costs of trading.
Don’t dwell on losses. Accept them, embrace them and learn from them.
Get Rich Quick Mentality
Many people get the excitement that trading Is something that will bring bread in the short term.
This cannot be farther from the truth.
You need to get out of this “get rich quick” mentality.
Establish medium to long term goals and work at it.
Make sure, your expectations are realistic and be patient.
Set achievable goals and concentrate on slow, steady progress rather than risky, high-return trades.
Lack of Experience
Like any other skill, trading requires experience to master.
If you’re new to trading, you may lack the knowledge needed to navigate the market effectively.
To gain experience, start small and learn as you go.
Maybe even start off with a demo and paper account.
This way you’ll be able to practice without risking real money.
Read books, take courses, watch from experienced traders. Learn from their mistakes, so you can avoid paying high school fees.
You ignore the Big Market Trends
Before you trade, do yourself a favour.
Get to know the market environment.
If the price is heading up, look for longs (buys).
If the price is heading down, look for shorts (sells).
Trends can give important insights into potential future market movements.
You’ll feel more in-tune with the markets when you know their overall directions.
Letting Emotions Rule
Fear, greed and ego are the enemies of profitable trading.
If you feel any of the three dangerous traits, you’ll make decisions based on emotions.
This will give you a gambling mentality of thrill, despair and denial.
Cut out the emotions and stick to a more mechanical approach.
Be like the market not like a human.
Fail to Diversify
You need to know how to mitigate risks.
One market probably won’t make the cut.
If it moves sideways for months on end, you’ll miss out on powerful opportunities elsewhere.
So, diversify with different stocks, indices, commodities, Forex and cryptos.
Also, don’t be over exposed too long with buys or too short with sells.
Find the balance, because markets can change direction very quickly.
Not Keeping a Trading Journal
You need to get yourself a log book.
A trading journal will help you to keep track of your strategies, successes, and failures.
It will also guide you with the gameplan you need with a better chance of succeeding.
Know what you can gain, lose and how long you can go through potential drawdowns (downturns).
The past data might not indicate future results, but it can give you a likelihood of what is to come for your trading, markets and your portfolio.
Lack of Discipline and integration
Discipline is sticking it out.
Doing what you need to follow your trading plan.
No matter how good or bad the market is, when the trade lines up you need to JUST TAKE THE TRADE.
And no matter how your feeling on the day, you need to do what it takes to succeed.
Integration is similar but it’s actually adapting it whole heartedly into your life.
This is where you don’t’ think twice.
This is where you wake up and trade like brushing your teeth.
If you suck at trading, you need to pinpoint why. Work on it, improve and evolve.
Let’s sum the reasons why you might SUCK at trading up one more time….
Lack of a Defined System
Inability to Handle Losses
Get Rich Quick Mentality
Lack of Experience
You ignore the Big Market Trends
Letting Emotions Rule
Fail to Diversify
Not Keeping a Trading Journal
Lack of Discipline and integration
UPDATE: JSE ALSI 40 - A break in price is imminentHere is the update with the ALSI 40...
It seems to be in a tighter range with the resistance (short term downside)
and the support from the Symmetrical Triangle since Dec 2022.
We will be watching these levels carefully and will look to hedge positions as we are heavily short at the moment.
At first glance, it shows that the price action is indeed more bearish right now with the resistance line in tact. And as there has been a bounce already, we might see a bit of consolidation before the next big move.
We'll be watching the Americas as well, to help give some type of leading direction...
Happy Monday and trade well.
SA40 daily chart support holdsSA top40 index held support off the 67500 level last week Friday and is looking to move higher
this week with positive divergence forming on the RSI(2)
good risk reward ratio are favored for the upside so long has 67500 holds this week
The Raging Bull on a Falling Roller coaster - JSE in the nutshelAbout sums up the JSE right now...
📉📈 The JSE ALSI 40: Where Sideways Meets Rollercoaster! 🎢🐂🐻
Hey there, fellow traders and market enthusiasts! 📊💰
Have you been following the JSE ALSI 40's wild dance since December 2022?
It's like watching a cat chasing its tail, but with more financial suspense! 😅🐱
Picture this: The ALSI 40 chart looks like a DJ's soundwave, with highs and lows that leave us all scratching our heads. 🤨📈📉
It's as if the market decided to throw a never-ending party, but with a catch – every time it cranks up the music and heads for the stars, it suddenly crashes back down like it remembered it had a curfew! 🎶💥
And guess what? Just when you think the party's over and everyone's heading for the exits, the market pulls a 180 and starts the bull run again! 🐂🚀
But here's the kicker – when you finally give in to FOMO (Fear Of Missing Out) and join the party, that's when the bearish bear shows up, and it's not in the mood for hugs! 🐻📉
So, what's a trader to do in this wild ride? 🤔
Here's the deal:
💰 Money Management is Key:
It's time to be the disciplined partygoer. Risk management should be your DJ, controlling your moves on the dance floor. Allocate a smaller portion of your portfolio to each trade to weather those unexpected downturns.
🚫 Ego? Leave It at the Door:
Ego is that party crasher no one likes.
Don't let your ego dictate your trades. Remember, even the best traders face losses. Stay humble, stick to your strategy, and cut your losses when it's time to bail.
📆 Patience is a Virtue:
Keep your dancing shoes on, because sooner or later, the market will decide on a direction.
It might seem like a chaotic dance floor now, but trends emerge eventually, and when they do, you want to be there when the music starts playing.
So, fellow traders, while the JSE ALSI 40 keeps doing its sideways cha-cha, let's stay nimble, manage our risks, and be ready to groove with the raging bull when it charges or stay steady with the bear when it takes its turn. 🕺💃
It's all part of the game, and in the world of trading, the only constant is change!
Let's keep our eyes on the charts, our hearts in check, and our portfolios ready for whatever direction the market decides to sway next. 📊💼
Why Trading is like Strategic Gambling
It’s a big debate that runs the financial market.
Is trading gambling?
Well I’m going to try put it to bed in just a few sentences.
There are two types of gambling.
Gambling by chance and total randomness like slot machines, lotteries, Bingo, Wheel of Fortune and flipping coins.
And strategic gambling which allows you elements of control of coming out with a probabilistic chance of winning.
I believe trading is a form of strategic gambling.
Let’s talk about the similarities between certain strategic gambling games and see how we can learn from them with trading.
Game #1: Trading and Poker: Skill, Strategy, and a Bit of Luck
In poker, each player gets a unique hand of cards.
To win, players must devise a strategy based on their understanding of the game, their observation of their opponents, and their willingness to take risks.
Players can choose to play, bet or fold.
The same principles apply to trading.
Traders have their ‘hand’ in the form of markets to choose to trade.
To yield profit, they must understand market trends, observe competitors’ behaviours, and manage risks.
In poker, one needs to know when to fold and when to bet aggressively.
In trading we have stop losses to get us out of the trade.
We have take profits to bank our wins.
We have volume choices of how much to buy or sell.
And we have the choice to stay out completely.
Poker also teaches the importance of emotional control and patience, which are crucial in trading, where emotional decisions can lead to significant losses.
Game #2: Trading and Roulette: Understanding Probabilities
Roulette is largely a game of chance where players bet on numbers, colours, or sets of numbers.
You choose whether you want to bet on red, black, even, odd, specific numbers and so on…
Although the outcomes are random, players can use probability to guide their decisions.
In trading, while certain market movements can’t be predicted with absolute certainty, we rely heavily on technical, fundamental, statistical analysis and probabilities to make trading decisions.
Trading, much like roulette, is where you need to diversify your positions and bets.
But instead of placing chips on certain numbers, we place deposits (margins) in the hopes of a probable outcome.
Game #3: Trading and Blackjack: Playing Against the Market (House)
Blackjack involves strategic decisions, where players decide to ‘hit’ or ‘stand’ based on their current hand and the dealer’s visible card.
The main goal is to try and get the cards we’re dealt to hit 21, be close to 21 or be closer to 21 than our opponent’s hand.
Bet too high past 21 and you burn.
In trading, technical analysis serves a similar purpose by predicting future market movements based on past data.
Bet too high with trading and you stand to lose a lot more.
And if you can’t count with Black Jack, then you have a much bigger disadvantage to the game.
If you don’t have strong and stringent money management principles, then good luck trying to maintain, preserve and protect your portfolio.
Game #4: Trading and Horse Racing: Know your horse!
Horse racing involves choosing the right horse based on its:
Form
Characteristics
Conditions of the race
Weather on the day
and other factors.
This is like trading. You need to understand each market you trade.
It has its own personality, form, movements, and style.
You also need to know which market is conducive for your trading portfolio.
And you need to choose the right stock or asset to trade based on its performance history, current market conditions, and other factors.
In horse racing, experienced bettors also diversify their bets across multiple races and horses to spread risk.
With trading we diversify our portfolios over different accounts, markets, sectors, instruments and types.
Game #5: Trading and Sports Betting: Predictive Analysis and Risk
Sports betting also works similar to trading.
You need to know how to analyse a team’s or player’s form, weather conditions, home and away records, and more to predict an outcome.
Whether it’s football, rugby or cricket – you need to know your team players, strategy and likelihood of who is to win what game.
Traders also conduct similar analyses, studying companies’ financial health, market trends, and technical indicators to predict market movements.
And as always, there are both risks that need to be calculated and managed for high probability successful outcomes.
So next time when someone tells you trading is just gambling. You tell them, they are right but it’s strategic gambling rather than gambling by chance.
Top 12 Trading Myths Busted! TRADING MYTHBUSTERSIt’s time we cut through the BS and noise and shed some light on the TRUE and REAL world of financial trading.
I can’t believe the misconceptions and false ideas of trading are still making appearances.
It’s time to educate yourself before you eradicate your account.
So let’s debunk some common and dangerous trading myths.
Myth 1: It’s a Get-Rich-Quick Scheme
Trading has long been shrouded in the myth of transforming anyone into an overnight millionaire.
But it’s an illusion. It’s what drives newbies and amateurs into the trading world.
And then a few months later, when they realise what it actually takes to grow an account.
They move to the next “best” thing.
Trading is a forever life-style that requires ongoing discipline and patience through strategic planning, knowledge and presteen execution.
And not to mention, it also involves periods of losses.
There are no shortcuts to wealth in trading, it’s a journey, not a sprint!
Myth 2: It’s Just High-Stakes Gambling
Trading is a form of gambling.
But strategic gambling.
It’s not like pulling the slots machine and having a chance of being right or wrong.
Or flipping a coin.
No, trading has an element of risk and reward control.
And it is based on nothing more than probabilities and comprehensive understanding of market trends, money management and analytical skills.
Unlike gambling, which is based largely on luck.
You have an element of control with the outcome. That’s through trading journals, back and forward testing and making stringent decisions.
Myth 3: More Risk, More Reward
Yes! If you risk more you’ll gain more.
But when you risk more, you can also LOSE way more.
With trading derivatives and leverage, you’re exposed to more than what you put in.
Sometimes 10 times, sometimes 50 and other times 500.
So, this alone should tell you how dangerous trading is.
When your portfolio goes to 0 – due to high risk – That’s it.
And many traders full port their accounts. And majority become the 98% losing stat of trading.
Stick to low risk, low return.
Keep consistent and the return will start adding up and you’ll reap the rewards in time.
Myth 4: Only the Rich Can Trade
The myth that trading is a club exclusive to the wealthy is just that, a myth.
Decades a go, you would have needed thousands to start trading and investing.
But no longer is that the case.
Some brokerages don’t even have a minimum with trading. You can start off with a demo or practice account.
As long as the competition and innovation picks up, trading will be cheaper, faster and more accessible.
Myth 5: Trading is Only About Buy low – sell high
Although this seems like a logical strategy.
It’s not the only way to profit.
Trading techniques like short selling allow traders to profit from falling markets.
Not only can you buy low and sell high.
You can also sell high and buy low.
Myth 6: More Trades Equal More Profit
Trading isn’t a game of ping pong.
You don’t just play as many times as you can in a day, to profit.
First, Overtrading can lead to rushed decisions, increased transaction costs, and significant stress. Patience often plays a crucial role in a trader’s success.
And second, it all depends on the market environments.
If the market is not trending, you can go long or short and still lose every bet.
Rember you still have to let the market move up or down a bit to make up for the trading costs!
And so you’re already at a disadvantage when you take a trade.
Sometimes the best move is to sit on your hands.
Neutral is also a position and a powerful position during certain periods.
Myth 7: Successful Trading Means Winning Every Trade
Even the most successful traders get knocked down by losses.
It’s the nature of the trading game.
What matters is the net outcome over a period of time.
Your job is to make sure the losses are small and the gains are bigger.
That way, even with a 50% win rate you’ll win and the profits will outweigh the losses in the long run.
Myth 8: Complicated Strategies Yield Better Results
You’ve heard of analysis paralysis right?
When you literally plant so many indicators on your chart it looks like a Jackson Pollocks Christmas Tree painting.
Complication does not equate to success.
You’ll learn that:
Too many indicators will conflict with each other.
You’ll struggle to back test a system.
You’ll struggle to find high probability trades.
You’re making it more complex than it needs to be.
And most important… You need to learn to KISS (Keep It Simple Stupid).
Often, the best trading strategies are the simplest.
What’s essential is understanding your strategy thoroughly and executing it consistently.
Myth 9: You Need to Monitor the Market 24/7
Thanks to stop-loss orders and other automated tools, you do not need to be glued to your screens all day.
The most important attention you’ll need to apply is trading layout, setup and execution.
Once you’re done and the trading levels are in place.
Go live, do something else.
Don’t be a nerd.
Enjoy life.
Trading requires attention, indeed, but a healthy balance is crucial to maintain clear-headed decisions.
Myth 10: Markets Are Always Rational
Markets, unfortunately, aren’t always rational.
Just like you learn in school. There is ideal and real ways of the world.
Sometimes, the market is one clusterfreak of confusion.
Correlations don’t work according to the book.
Trends don’t match up the micro and macro analyses of companies.
Good news doesn’t mean strong uptrends.
Markets are run by many, many, many other factors.
They can be swayed by demand, supply, algorithms, Smart Money, greed, panic, emotion, rumor, and corruption and manipulation.
This will lead to price distortions.
There is a famous quote attributed to Great Depression-era economist John Maynard Keynes –
“Markets can remain irrational longer than you can remain solvent”.
Myth 11: Brokers Want You to Lose Money
Yes there are a ton of brokers who make money when you lose.
But reputable, credible and top regulated brokers – do NOT want you to lose.
They make their money from brokerages, spread and from trading volumes.
They want you to succeed and grow. Because if you blow your account, they lose a client.
Hence, when brokers approach me I always tell them the importance of education, guidance and helping them SUCCEED.
Myth 12: Once a Successful Trader, Always a Successful Trader
Market conditions, strategies, and personal circumstances change.
If you want to be a successful trader and remain one it requires constant learning, adaptation, and diligent risk management.
This includes me!
Despite how long I’ve been in the markets, I treat each day independently. I follow my system, risk management rules. I look for future opportunities and prospects to improve my trading, platform, journals and even testing.
This is forever an alive game that requires action. We are always learning, growing, improving and adapting.
Like they say, past success doesn’t guarantee future profits.
Let’s sum up the 12 common Trading Myths:
Myth 1: It’s a Get-Rich-Quick Scheme
Myth 2: It’s Just High-Stakes Gambling
Myth 3: More Risk, More Reward
Myth 4: Only the Rich Can Trade
Myth 5: Trading is Only About Buy low – sell high
Myth 6: More Trades Equal More Profit
Myth 7: Successful Trading Means Winning Every Trade
Myth 8: Complicated Strategies Yield Better Results
Myth 9: You Need to Monitor the Market 24/7
Myth 10: Markets Are Always Rational
Myth 11: Brokers Want You to Lose Money
Myth 12: Once a Successful Trader, Always a Successful Trader
If this was helpful let me know in the comments!
How to Begin Trading in 6 Steps
If you have already taken the leap and started trading – You may skip this article and enjoy your day 😊
Beginner traders, I’m writing this for you!
Financial trading has never been more accessible, cheaper and innovative than ever before.
What you have available today, I once had to pay up to $10,000 a year. And some charting platforms cost up to $25,000 a year!
Absolutely insane.
And now today, it’s ready for you for practically FREE especially on TradingView!.
However, if you’re ready to to embark on this journey successfully, there are some essential components that you must have.
You’ll need 6 things to start your trading the right way.
1. Trading Platform
A trading platform is your gateway to the financial markets.
It’s an online software that allows you to execute trades, monitor markets, analyze price charts, and do much more.
The best platforms are user-friendly, offer a wide range of tools, and support multiple asset classes such as stocks, forex, insdices, commodities, and cryptocurrencies. They should also offer either spread betting, CFDs (which is what I like), futures and or lots.
Make sure the platform you choose is regulated by relevant financial authorities and offers strong security measures to safeguard your funds and data.
2. Charting Platform
A charting platform is a tool used to visualize market data.
You should be able to choose various formats such as line, bar, and candlestick charts.
They also provide a range of technical analysis indicators, such as moving averages, RSI, MACD, and Fibonacci retracements, which can help you analyze market trends and make informed trading decisions.
When you choose a charting platform, consider its ease of use, customizability, the range of available indicators, and compatibility with your trading platform.
3. Fund Your Account
Before you can start trading, you need to fund your trading account.
Now here’s the funny thing.
Most people put in like $1,000 or like $10,000 – Something ridiculously small.
And they just keep it at that. Look, you can have a sizeable account in your portfolio. And you can trade as if you have $1,000. You don’t need to trade everything.
But you do need to take that leap and deposit money into your account.
Also, understand the platform’s margin requirements to avoid potential margin calls (When they tell you – you have to cough up more money).
You need to be 100% ready and have your capital management prepared to a T.
4. Trading Strategy
This is your roadmap.
This is your ‘holy-grail’
This is your game plan.
This is your future plan in the financial markets.
You get the point.
A strategy will outline:
• How to know when a trade lines up.
• When to enter trades according to criteria
• When to exit a trade according to criteria.
• When to adjust your trade if need be (Lock in profits, cut losses, maximise gains).
• Which markets to trade
• How much to risk on each trade.
Your strategy can be based on technical analysis, fundamental analysis, or a combination of both.
I have used a 20 year old strategy that incorporates chart patterns, money management rules, two indicators and Smart Money Concepts.
More importantly, your strategy should align with your financial goals, risk tolerance, and trading schedule.
5. Trading Journal
A trading journal is a record of all your trades.
It includes entry and exit points, the reasons for taking the trade, the strategy used, and the outcome.
I also have other elements like Mistakes, Emotions, Drawdowns, Risk to reward and so many more.
Basically, it’s a valuable tool to reflect on your performance.
This will allow you to review your trades, learn from your mistakes, and improve your strategy over time.
6. Rules and Criteria
To ensure discipline and risk management in trading, it’s essential to set rules and criteria. These guidelines will help you remain consistent and prevent emotional decision-making. Here are some examples:
• Halt after a 15% drawdown on your account:
This rule can prevent further losses during a bad trading period.
It’s a form of risk management, forcing you to stop and reassess your strategy when things are not going as planned.
• Never risk more than 2% per trade:
This rule ensures that even multiple losing trades in a row won’t wipe out your account.
• Only trade with the trend:
When market is up – only look for longs.
When market is down – only look for shorts.
When market is sideways – Be cautiously
• Every trade needs a stop-loss and take-profit level
This automates risk management, ensuring you exit trades at predetermined levels.
• Limit the number of trades per day or period
This prevents overtrading. Always think quality versus quantity. And if you have a couple of trades, make sure you know what the WORST case scenario is for your portfolio if you hit a losing streak.
Sometimes it’s best to hedge positions (Longs and Shorts). and keeps you focused on quality rather than quantity.
• No trading during high-impact news events
Markets can be particularly volatile during these times, which can increase risk.
This is just a fraction of your journey.
Enjoy your trading journey.
It’s exciting.
It’s also long, be patient. This won’t take a month, a year or even three years.
But after 3 years, you’ll get a taste of the potential of trading fortunes.
But it’s all up to you!
This needs preparation, discipline, and constant learning.
You have the starting steps…
Now get to it.
Will we avoid the DEATH CROSS?I know we have already taken some pain on the Top40 and it appears a relief rally is underway but recent price action shows that the 50 day moving average has now crossed the 200 day moving average (known as a death cross). While this does not necessarily play out 100% of the time, it does serve as a warning that the market is not ok. I would caution against buying this market at current levels because the potential for a sharp pull-back is high.
4 Dangerous News Events - for TradersWhen you’re a mechanical trader.
And when you think you got trading in a bag.
You still need to be logical and rational when trading the markets.
There are exceptions.
And you need to consider these exceptions which could have a profound effect on the financial markets.
It’s these unforeseen circumstances, that you need to take the stand.
You might need to risk less.
You might need to not take the trade.
You might need to halt trading for a few days.
All because of these potential 4 events.
Let’s get into them so you can stay out of them.
Black Swans (Unprecedented events)
Black Swans are highly unpredictable events that go beyond what is usually expected of a situation.
One definition I like is this.
A Black Swan is where an event can cause the market to move 10 standard deviations away from the norm.
When this happens they could potentially have severe and wide-reaching consequences.
You’ll see the market will jump erratically and even cause a halt in trading activity completely.
So when you spot a Black Swan. Just take it easy from trading the markets that can be affected.
Here are 10 Black Swan Events that I can think of that had an impact on the markets.
2008 Global Financial Crisis
Triggered by the collapse of the US housing market, it led to a worldwide banking crisis and severe global economic downturn.
COVID-19 Pandemic
An unprecedented global health crisis that had significant repercussions on global economies and markets in 2020.
Dotcom Bubble Burst (2000)
The dramatic rise (due to greed and optimism) and fall (due to fear and panic) of internet companies in the late 1990s led to a severe market correction.
Brexit (2016)
Britain’s unexpected decision to leave the EU had immediate impacts on global markets.
Japanese Asset Price Bubble Burst (1992)
This led to a lost decade of economic stagnation in Japan.
(Have you seen the Nikkei! And can you imagine holding stocks from 1992?)
Swiss Franc Unpegging (2015)
The Swiss National Bank’s sudden decision to remove the cap on the Franc’s value against the Euro led to extreme currency volatility.
(Forex trading was a nightmare seeing some prices drop hundreds of pips).
September 11 Attacks (2001)
The terrorist attacks had immediate and long-term effects on global economies and markets.
(I was too young to worry so I missed this one.)
Fukushima Nuclear Disaster (2011)
Triggered by a massive earthquake and tsunami, it had significant impacts on global energy markets.
(I remember holding oil stocks while driving. And I came home to R120,000 loss).
Flash Crash (2010)
The US stock market crash, triggered by a high-frequency trading algorithm, sent a financial shockwave around the world.
(Fat fingers caused by unknown factors).
Oil Price Negative (2020)
For the first time in history, the price of US oil turned negative due to low demand during the COVID-19 pandemic.
Moving on...
Non-Farm Payrolls (Major spikes during news release)
The Non-Farm Payroll (NFP) report is the big one.
It is released on the first Friday of each month and is a key economic indicator for the United States.
It shows us the total number of paid US workers, excluding farm employees, government employees, private household employees, and employees of non-profit organizations.
When the numbers are higher than expected, there are more jobs and the stock markets go up.
When the numbers are lower than expected, there are less jobs, more pessimism which causes stock markets to plummet.
Significant deviations from forecasts in the NFP data can lead to major spikes in market volatility.
If the data shows job growth, it indicates a strong economy, which can boost the US dollar and negatively impact bonds due to the potential for increased interest rates.
Conversely, lower-than-expected job growth can indicate a weakening economy, potentially weakening the US dollar and boosting bond prices.
Possible Warnings (Micro and Macro Announcements)
Keeping an ear to the ground for both micro and macro announcements can provide a trader with essential foresight.
On a micro level, company-specific news such as:
Earnings reports
New product launches
Executive changes
M&A activities
Rights Offers and share distributions
These can result in large price movements.
On the macro level, broader economic announcements like:
Changes in monetary policy
inflation rates
QE (Quantitative Easing)
Credit tightening
GDP growth
Consumer sentiment
FOMC, Central banks meetings and economic talks
and geopolitical events
You’ll see these will have a ripple effect on wider market movements.
Huge Gaps (Spikes in Volatility in Prices)
Price gaps occur when there’s a significant difference between the closing price of one trading period and the opening price of the next.
Basically, a void between two price candles.
This generally happens when one market moves up during the day. And then a bigger and leading market crashes. This results in the first market opening a lot lower down than the previous close.
This can be due to an impactful event that happened in the time between the two periods.
Keep an eye out on these four events.
It’ll help you better navigate the market landscape, react to volatility, and potentially make better trading decisions.
Remember, the financial markets are affected by a myriad of factors, and a keen understanding of these key events can be a critical part of your trading strategy.
16 Golden Risk Management Rules for TradersTo build your portfolio.
You need to learn to manage your risk.
And over the last 16+ years, I’ve given you maybe five ideas on how to do it.
Well, today I have 16 of the most essential Risk Management rules I could come up with in just one seating.
They might not all apply to you.
But most of them I believe will definitely resonate with you, your portfolio and with your risk profile.
So, I have taken the time, energy and effort to jot down the 16 most powerful Risk management rules, you can apply to your trading.
Starting today…
Here they are…
RULE #1:
The 2% Rule
Never risk more than 2% of your total trading capital on a single trade.
This rule will help you to limit the impact of any single trade on your portfolio.
RULE #2:
The Probability Rule – Classify trades as high, medium, or low probability
This depends on your trading strategy.
If you know how to spot a:
High probability trade (HPT) (good chance of winning).
Medium probability trade (MPT) (lower chance of winning).
Low probability trade (LPT) (very low chance of winning).
I have a very simple rule.
With a HPT, risk 2% of your portfolio.
With a MPT, risk 1.5% of your portfolio.
With a LPT, risk 1% of your portfolio
Only risk according to the state of the probabilities of the trade – right?
RULE #3:
20% Drawdown Rule – Halt trading at a 20% loss to avoid deeper slumps
If that inevitable Drawdown kicks in.
And your portfolio drops 5%, 10% and then down to 20%.
Halt trading. Don’t stop!
Instead, move over to paper trade your account until the conditions turn up and the system works again.
And when you do start, only start risking 1% at a time until you are confident again with your strategy and with your frame of mind.
This rule alone, you’ll save you from blowing your account.
RULE #4:
NEVER risk money you can’t afford to lose
If you feel emotionally tied to your money.
Or you need the money for daily living expenses or retirement savings.
Don’t trade with it.
You will feel like a wreck. Instead of enjoying the trading journey and process.
Trading will be an emotional rollercoaster during both winning and losing streaks.
RULE #5:
The Time Stop-Loss Rule – Apply a time-based stop-loss rule to limit losses
If a trade doesn’t reach its profit target within a specific timeframe – Close the trade.
I have a 7 week time stop loss before I consider closing trades.
Either you’ll bank a lower loss than you planned. Or you will bank a lower profit than planned.
This prevents capital from being tied up in stagnant trades.
NOTE: There are times where I might NOT implement a time stop loss. For example, when I short (sell) a trade which earns interest income each day.
RULE #6:
The Trailing 1:1 Rule – Use a 1:1 trailing stop-loss to protect profits
Once a trade hits a 1:1 risk-reward ratio.
I might trail my stop loss up to just above break even.
This way I will bank a minimum gain, should the trade turn against me.
My win rate will go up, for the portfolio.
And emotionally it’s easier to hold a trade where you’ve secured a minimum profit.
RULE #7:
Half off Rule – Take half your profits early to secure gains
If the trade is moving nicely in my favour.
And it reaches a R:R of 1 to 1. Sometimes I’ll close half my position.
I’ll then trail my stop loss to above breakeven.
This way I’ll bank a decent profit.
And I would have left room for the market to continue rallying to my initial take profit.
This rule alone is God-sent.
RULE #8:
The 1% Margin Rule – Limit margin use to 1% of your account to control risk
For those who are worried about HIGH leveraged instruments.
This one is for you.
The rule is, if you’re trading on margin (leverage).
Never risk more than 1% of your trading account on a single trade.
This way:
You’ll have majority of your portfolio to trade with.
You’ll have less money exposed to risk in any one trade.
You’ll be able to track your risk better, for if the market gaps.
RULE #9:
The Intraday Stop Rule – Set an intraday rule to know when to stop trading for the day
If you take on an intraday trade i.e. Smart Money Concepts trading a Forex Pair or index.
Set a daily loss limit or a maximum number of losses.
If you reach this amount, stop trading for the day to prevent your portfolio from spiralling into more losses.
Come back the next day, to slay.
RULE #10:
Forex NEWS Rule – Stay off the market during high-impact news events
This happens during high-volatile events.
And this applies with mainly Forex!
If there are any high impact news events such as major economic announcements.
It can significantly increase trading risks.
When these days come, I don’t take any Forex trades.
Here’s are the main High-Impact-News events:
CPI (Consumer Price Index) news report days
CPI measures the changes in prices of a basket of goods and services over time as a measure of inflation.
NFP (Non Farm Payrolls)
A monthly report released (on the 1st Friday of the month) by the US
Department of Labor. It shows the number of jobs added or lost in the non farm sector. This is a measure of the health of the US economy.
PPI (Producer Price Index)
A measure of the average change over time in the prices that domestic producers
receive for their goods and services. This is another measure of inflation and economic growth.
First with CPI and then with PPI.
FOMC (Federal Open Market Committee)
When the FOMC the US Federal Reserve meets to set monetary policy, (decision on interest rates and the money supply).
RULE #11:
The Risk-Reward Rule – Aim for a risk-reward ratio of at least 1:1.5
If you do NOT see a trade with a Risk to Reward of at least 1:1.5.
It is NOT a good idea to trade.
Anything less than 1:1.5, and your risk will be similar to what you are looking to gain.
And remember, you still need to cover costs, brokerages and daily interest charges.
It’s not worth buying and selling trades with a R:R of 1:1.5.
I prefer to trade with risk to rewards of 1:2 instead.
That way, even with a 40% win rate, I’ll be profitable.
RULE #12:
The 20% Golden Rule – Never expose your portfolio to more than 20%
Trading is a risky biscuit.
So, even though you have money in your account.
Doesn’t mean you should have all of your money in different markets.
I like to limit my capital to a maximum of 20% of my total investment portfolio.
Remember, you are gearing up when you trade.
While leverage can magnify gains, it can also magnify losses.
It’s crucial to know how to use leverage effectively.
Also, it’s our job to and avoid taking on more debt than we can handle.
Because when you trade on margin (leverage), you’re exposing yourself to MORE than what you deposit.
So protect most of the capital at a time in your portfolio.
RULE #13:
The Hedgehog Rule – Don’t be too long or too short – Hedge your positions
I like to say hedge your positions.
Don’t HOG on too many longs. Or too many shorts.
When a main index is showing strong signs of moving in a certain direction (up or down).
You may feel the absolute need to buy as many stocks as possible, to ride the trend.
However, you need to remember the market can change the trend direction just as fast.
And your winning positions can instantly turn to losers.
So, when you are holding a high number of longs, make sure you trade a couple of shorts.
When you are holding a large number of shorts, make sure you trade a few longs.
This way you can hedge your positions in case the market does make a turnaround.
Effective hedging strategies can protect your portfolio from market volatility.
RULE #14:
Multi-Account Rule – Use different accounts for different markets
Every market acts differently.
Forex works differently to stocks.
So, I like to have two different accounts for each.
I like to track and trade Forex for one account and stocks for another.
Having too many eggs in one basket, will skew the portfolio and your track record – due to the sporadic and different movements with each set of markets.
So, diversify your portfolios across different asset classes and markets to manage risk.
RULE #15:
Check Up Rule – Regularly monitor your portfolio’s performance
The markets are always changing including:
Algorithm
New volume being injected in the markets
Dynamics of demand and supply
This causes a shift in different market environments and echoes into the financial world.
Therefore, you need to regularly review your portfolio.
This will help you to realign it with your goals, statistics, drawdown & reward management as well as your risk tolerance and goals.
RULE #16:
Correlation Rule – Understand and monitor the correlation between assets
Markets are generally positively correlated.
This means, they tend to move in the same direction.
If you see a large bank company going up in price and you go long, the chances are good that other banking companies are also going up in price (within the main stock market).
When you understand correlation between stocks, forex, indices, commodities etc…
You can find more high probability trades which will better diversify your portfolio, reduce your risk and you’ll be exposed to other market opportunities in similar markets.
Told you it will be worth it!
Save this, print it out and keep it by you.
These are the most important money management rules I believe are necessary to know as a trader. Below is the summary of them again, with the subheading.
If you found this helpful, please send let me know in the comments.
16 Most NB* Money Management Rules
RULE #1: The 2% Rule – Never risk more than 2% of your trading capital
RULE #2: The Probability Rule – Classify trades as high, medium, or low probability
RULE #3: 20% Drawdown Rule – Halt trading at a 20% loss to avoid deeper slumps
RULE #4: NEVER risk money you can’t afford
RULE #5: The Time Stop-Loss Rule – Apply a time-based stop-loss rule to limit losses
RULE #6: The Trailing 1:1 Rule – Use a 1:1 trailing stop-loss to protect profits
RULE #7: Half off Rule – Take half your profits early to secure gains
RULE #8: The 1% Margin Rule – Limit margin use to 1% of your account to control risk
RULE #9: The Intraday Stop Rule – Set an intraday rule to know when to stop trading for the day
RULE #10: Forex NEWS Rule – Stay off the market during high-impact news events
RULE #11: The Risk-Reward Rule – Aim for a risk-reward ratio of at least 1:1.5
RULE #12: The 20% Golden Rule – Never expose your portfolio to more than 20%
RULE #13: The Hedgehog Rule – Don’t be too long or too short -Hedge your positions
RULE #14: Multi-account Rule – Use different accounts for different markets
RULE #15: Check Up Rule – Regularly monitor your portfolio’s performance
RULE #16: Correlation Rule – Understand and monitor the correlation between assets
What are Fakeouts, Shakeouts and Whipsaws?Let's get straight into the three cronies of trading disaster when taking and holding a position.
Fake-out: (When the price makes a false breakout of a chart pattern)
A fake-out occurs when the price of a market appears to break out of a certain chart pattern.
This could be a trendline, support, or resistance level.
But then quickly reverses and retreats back within the pattern.
Shake-out: (Where the market is highly volatile and the price moves to levels that hits their stop losses and gets traders out of their trades)
A shake-out is a scenario where the market becomes highly volatile and the price moves rapidly to levels that trigger the stop-loss orders of many traders.
Stop-loss orders are pre-set risk levels at which traders automatically exit their positions to limit their losses.
A shake-out is designed to "shake out" weak or inexperienced traders from the market.
When stop-loss orders are triggered, it can create a temporary spike in the opposite direction of the prevailing trend.
Once these traders are "shaken out," the market might resume its original trend.
You’ll see this most commonly with low liquid, high volatile markets like Penny Stocks or Penny Cryptos.
Whipsaw: (This is where the market will change its most prominent direction within the day).
Whipsaw refers to a situation where the market quickly changes its direction within a relatively short period, often during a single trading day.
This can cause confusion and losses for traders who are caught off-guard.
Whipsaws can occur due to various factors, such as sudden news releases, economic data surprises, or changes in sentiment.
They are characterized by sharp price movements that can make it difficult to make accurate trading decisions.
Whipsaws are especially common during periods of high market uncertainty or when there's a lack of a clear trend.
Let’s create a quick summary of the three:
Fake-out:
(When the price makes a false breakout of a chart pattern)
Shake-out:
(where the market is highly volatile and the price moves to levels that hits their stop losses and gets traders out of their trades)
Whipsaw:
(This is where the market will change its most prominent direction within the day).
JSE ALSI 40 showing leading signs of downside to 60839M Formation has formed on the JSE ALSI 40.
While the SP500, Dow Jones and Nasdaq have been going up this year, it strangely looks like the JSE ALSI 40 has broken it's correlation.
Not only has America NOT been leading the JSE, it seems like the problems (economically and politically and socially) are showing signs for the country.
Now, either we get another fakeout and the market moves back up and goes "Tricked you again" as it's done this entire year.
Or this is the break down and start of major downside to come for the rest of the month.
Other indicators are showing downside momentum.
21>7
Price<200
RSI<50
Target will be 60,839.
What do you think? Will we get a bounce up or a crash from here?
The Power of the 3 Seconds Rule in TradingIn the fast-paced world of financial trading, time is often the difference between success and failure.
One effective strategy that I’ve found incredibly beneficial is the 3 Seconds Rule.
This rule, adaptable to virtually any life scenario and business.
It’s simple…
Before you make a crucial decision, you count to three.
1, 2, 3
This will help you streamline the process to execute.
It’ll also stop you from hesitating, over analyses or overthinking.
Let’s delve into how this can be applied.
Trade Lines Up: Preparation is Key
The first stage in this strategy involves setting up your trade.
This includes preparing your charts, drawing the lines, placing indicators, and identifying potential entry points.
This will help you to map out your trade plan in advance/
Also you’ll be able to respond quickly.
The 3 Seconds Rule here encourages swift action.
Once your analysis is complete and everything lines up, count to three, and finalize your setup.
This helps to avoid second-guessing your analysis, which can lead to paralysis by analysis.
Place Your Trading Levels: Define Your Parameters
Next open your trading platform and count to three. 1, 2, 3.
Then put in your trading levels.
These levels include the entry point, stop loss, take profit point, volume of trade, and whether it’s a long or short position.
This ensures that your predefined strategy is implemented promptly.
This is critical in a market environment where prices can change rapidly.
Just Take the Trade: Execution is Crucial
The final stage involves actually executing the trade.
You’ve done your analysis, prepared your charts, identified your levels, and now it’s time to make the trade.
Again, you apply the 3 Seconds Rule.
1, 2, 3
And then click the button to execute.
Like I said before, this will eliminate the fear or hesitation that can often occur at the moment of execution.
By forcing yourself to take action within three seconds, you are not allowing time for doubt or fear to prevent you from following your carefully crafted trading plan.
The Benefits of the 3 Seconds Rule
In the world of financial trading, the 3 Seconds Rule offers numerous benefits:
Eliminates hesitation:
When you commit to taking action within three seconds, you will avoid becoming trapped in a cycle of overthinking that can lead to missed opportunities.
Encourages decisive action:
The 3 Seconds Rule compels you to make a decision quickly.
Reduces stress:
By making a plan and sticking to it within a set timeframe, you can minimize the anxiety and stress of waiting too long.
So you got the power of the 3 Seconds Rule?
1, 2, 3, – GO!
6 Quantifiable Trading Goals to KnowThere is one thing that will separate the winners from the losers.
Knowing your numerical trading goals.
When you have a back-tested and solid strategy, everything else becomes easier.
You have the past and the potential future in your vision.
And all you need to do is follow the rules and then keep them in check.
To do this, you need to have written down your goals, drawn from your trading statistics and back-tested journals.
This will give you the spine of your trading strategy and ultimately guide you on the path to sustainable profitability.
There are many numbers to take in but I’m going to kickstart you with probably six of the most critical trading goals.
This will help you set your own milestones for success.
Number of Trades to Take in a Year (e.g., 120)
You need to have some type of idea of the number of trades, you’ll execute in a year.
This number can be derived from your trading strategy, time frame choice, risk tolerance, and market analysis.
For instance, if you’re a swing trader focusing on weekly chart patterns and SMC, you might aim for 120 trades in a year.
This equates to 10 trades per month.
Maybe you want to take 60 trades with stocks, indices and commodities.
Maybe you want to take another 60 trades between Forex and crypto.
Make sure you have a rough number according to your stats, so you can keep on track.
Number of Winners
Winners and losers come with the game.
So you need to identify the number of winning trades you intend to achieve in a year.
Let’s say you’re aiming for a win rate of 62.5%.
With the earlier goal of 120 trades in a year, you’re targeting approximately 75 winning trades (120 * 0.625).
Number of Losers
Losing trades are an inherent part of trading.
You need to have an acceptable number of losing trades in mind.
This will help you to manage risk effectively and maintain emotional equilibrium.
In our example, if you’re aiming for 120 trades a year, you should look at taking around 45 losing trades.
If 62.5% is your win rate then 37.5% is your losing rate (100% – 62.5%).
Win Rate
Your win rate represents the percentage of trades that yield profits.
With a target win rate of 62.5%, this means you aim to close over half of your trades with a profit.
Sure, you’re not going to bank 62.5% every week, month and year.
You might have a 70% win rate one year.
You might have a 55% win rate the next year.
Remember, consistency is key here.
But with consistency, you’ll find it’ll balance to around 62.5% win rate per year.
Percentage Return
Trading is relative.
Doesn’t matter if you have a $10,000 (R200,000) or a $300,000 (R6,000,000) account.
You need to think in percentages and not dollars.
For example, if your starting capital is $10,000 and your goal is a 32% annual return, you’re targeting a profit of $3,200 (R64,000) by year-end (0.32 * $10,000).
Expected Drawdown %
Then we need to prepare for the drops.
Drawdown refers to the reduction in your trading capital after a series of losing trades. When your portfolio goes from an all time high and takes a dip, that’s a drawdown.
An expected drawdown of 20% means that you should be prepared for a decrease of up to $2,000 (R40,000) in your starting capital of $10,000 (R200,000) during the course of the year.
It might come in May. It might last ‘till August.
This will enable you to track your performance, manage risk effectively, and maintain focus on what truly matters.
Remember consistency leads to long-term profitability.
