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How to be successful in trading:
o Have a solid business plan
 Trading system (rules and goals)
 How am I going to make money in the stock market consistently?
 How can I lose the least amount of money while learning?
o Have the capitals to be able to be satisfied with the results you have
 If you don’t have enough capital then you might take bigger risks
o Have good management
 Follow and stick to the rules and guidelines of the business plan
Two types of charts:
o Bar charts
 Opening price: Price of the first trade of the day
 High: Highest price point the stock traded at that day
 Low: Lowest price point the stock traded at that day
 Closing price: Price of the last trade of the day
o Candle charts
 Difference between black and white candles
 White: Closing is higher than opening
 Black; Opening is higher than closing
Three types of trend:
o Uptrend: When the price of a stock is trending higher over the
studied period of time in the chart.
o Downtrend: When the price of a stock is trending lower over the
studied period of time in the chart
o No trend: When a stock is moving sideways of the studied period of time in the chart.
Support VS Resistance:
o Support: It’s a level where the price of a stock tends to find support as it falls. The price
of the stock should usually go up from there but if the breached this level then it
might go lower.
o Resistance: It’s a level where the price tends to find resistance as it rises. The price of
the stock should usually go down from there but if the stock breached the resistance
then it might reach a new resistance.
Trend lines:
o In an up-trending stock, the trend line is another support line to consider
o In a down trending stock, the trend line is another resistance line to consider
o When to buy and sell accordingly to the trend line?
 BUY: If an up-trending stock hits it’s trend line
 SELL: If a down trending stock hits it’s trend line
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Different types of moving average:
o The 50 day/200 day MA
 If a stock is in an overall uptrend and has pulled back in price to one of these
two MA, investors and fund managers will look at it as a golden opportunity to
buy the stock.
 If a stock is in an overall downtrend and has traded up un price to one of
these two MA, investors and fund managers will look at it as an opportunity to
get out of the stock.
o The 10 day/20 day MA
 These are the same and will be used the same as the other MA are used, except
they are more important in short term trades while the 50 day/200 day MA
are more for long-term trades.
The Bollinger-Bands:
o It consists of 3 bands, the middle one is the MA for the specified period, while the upper
and lower bands (envelope) are standard deviation above or below the MA. BollingerBands use standard deviations to plot self-adjusting around a MA. Standard deviation is a
sign of volatility. This will allow the bands to increase during volatile markets and
decrease during calmer periods. They can also be used as secondary support and
resistance levels.
Money management system:
o Every trade must have a plan
o The reward must be 3 times greater than the risk
o You must not take a position in one stock that is greater than 25% of equity
o Never risk more than 1,5% of equity on a single trade
o Sweep profits out of the account
How to plan trades:
o Calculate risk/reward ratio
 Divide the total net profit by the total money that you are risking
o Calculate how many stocks you can buy considering the diversity and loss rules
o Write down the guidelines
 Entry price and the price target
 The maximum I am ready to lose
 The time frame I am willing to be in the trade
 The size of the position