Have you wondered why most traders have problems making consistent profits? As renowned trader, George Soros puts it, “it’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong.” Risk management and discipline is definitely key in a trader’s world.
DAR Wong certainly knows this. A trader with more than 25 years of experience, he has just published a book giving valuable advice on trading on the stock market. In an exclusive interview (video at the end of the article), he highlighted some interesting ideas about how to monetise trading profits in only eight days.
How You Can Focus Your Trades
DAR Wong: The most important part in my book was dedicated to coach traders from the front and back end. I discussed on areas about market indicators, company fundamentals and tracking stock rotations over a huge list of more than a thousand stocks. These areas can help the average investor to maximise potential returns and understand risk management.
Risk Management – A Key Ingredient
DAR Wong: Basically if you look at stock trading in general, all traders should have a very crisp idea of time and price perimeters. I was very cautious in writing this book, particularly about how to use technical momentum to identify an attractive price entry.
It must be governed by risk management so that the trader can decide on an exit point. The exit point is based on either time or price perimeters. The time perimeter approach means that the trader will exit from the market after a certain period of time, regardless of price appreciation or depreciation.
On the other hand, a price perimeter approach involves the trader selling the stock once the price appreciates or depreciates to a certain amount.
There is No Secret!
DAR Wong: Many people have always asked about “trade secrets” and such, but I don’t think that there are any secrets. However, the first and most important rule when you go into the market is to control your risk management. If a trader is unable to do that, it will be very common to make money only to lose it all the day after.
A trader can exercise control over risk management by considering the Risk:Reward ratio. When a trader can grasp that concept well, profits would be consistent and losses will be minimised over the long-term.
Clear and Present Trading Opportunities!
DAR Wong: In Singapore right now, I feel that one should really look at the blue chip companies. However, I understand that many retail investors like to look at penny stocks that are very volatile.
One must note that these stocks are not good for long-term trading strategies. Nevertheless, if one intends to trade with these stocks, a strong understanding about the volume and volatility to identify the risk involved.
There are equal opportunities in both types of stocks of course, be it blue chips or penny stocks. But ultimately I think a trader should have a very clear objective of their trading strategies. Furthermore, besides stocks, there are other opportunities that many people seldom look into.
One such example is investing in ETFs (Exchange-Traded Funds) under Lyxor or Blackrock or even commodities. These are definitely some areas that traders can look into other than the usual stocks.
Click here now to download your free preview of DAR Wong’s book. Discount code inside!