TRADING PSYCHOLOGY (2)

It is often mentioned that we have to master our TRADING PSYCHOLOGY before we can become successful stock operators; meaning, we have to pay more attention to managing our emotion and patience in order to manage the greed and fear of stock trading.

Further to the last article about this book:-

REMINISCENCES OF A STOCK OPERATOR by Edwin LeFevre
to Jesse Lauriston Livermore

The author LeFevre wrote the book in person of a trader called Larry Livingston, as a nom de guerre for Jesse Livermore who was one of the greatest stock speculators ever. From 14 years old until the day Livermore died, he made a living, became multi rich, bankrupt and rich again through nothing but trading in the stock market as well as commodities. Of course the rules of trading had changed tremendously but the human nature is still the same.

For those finding difficulty to read the book in its entirety, the highlights in the excerpts from the book are as follow:

**********************************************************************************************************

About emotion in trading

The number one in my reading list:

REMINISCENCES OF A STOCK OPERATOR to Jesse Lauriston Livermore; by Edwin LeFevre

Quite many articles been written base on this book about the legend in trading (speculation) of Jesse Livermore, who lived in the early 19 century. However, many members find difficulties and finding time to read this book about this celebrated trader (probably the best of all times).  

Here are some extracts from some of those articles written about this book. At the end of this article is another author who formulated some rules base on this book.

Hong Kong up trending stocks

THIS ARTICLE OUT-DATED (for education only)

Hong Kong stocks have been performing tremendously well for the past few months and some of them outperformed the market very much.
Look at this list:-

Company Code	Company Name	sector
1211	BYD Co (比亞迪股份)	auto
175	Geely Automobile Holdings Ltd. (吉利汽車)	auto
2128	China Liansu Group Holding Ltd (中國聯塑)	construction
3323	China National Building Material Co (中國建材)	construction
3336	Ju Teng International Holdings Ltd. (巨騰國際)	I.T
189	Dongyue Group Ltd. (東岳集團)	manufacturing
2689	Nine Dragons Paper (Holdings) Ltd. (玖龍紙業)	manufacturing
1230	Yashili International Holdings Ltd (雅士利國際)	manufacturing
347	Angang Steel Co. Ltd. (鞍鋼股份)	metal
323	Maanshan Iron & Steel Co. Ltd. (馬鞍山鋼鐵股份)	metal
196	Honghua group ltd. (宏華集團)	oil & gas
3383	Agile Property Holdings Ltd. (雅居樂地產)	property
1109	China Resources Land Ltd. (華潤置地)	property
2007	Country Garden Holdings Co., Ltd. (碧桂園)	property
3900	Greentown China Holdings Ltd. (綠城中國)	property
2777	Guangzhou R&F Properties (富力地產)	property
173	K. Wah International Holdings Ltd. (嘉華國際)	property
808	Prosperity REIT (泓富產業信託)	property
604	Shenzhen Investment Ltd. (深圳控股)	property
1918	Sunac China Holdings Limited (融創中國)	property
435	Sunlight Real Estate Investment Trust (陽光房地產基金)	property
1186	China Railway Construction Corp (中國鐵建)	railway
750	China Singyes Solar Technologies Holdings Ltd (興業太陽能)	solar
2369	China Wireless Technologies Ltd. (中國無線)	telco

These are all strong leaders in their sectors.
(click "read more" to see the charts)

Emotions – the rascal spoiler to your trades

There are already many books and articles written on similar topics such as:-

•  Secrets to profitable trading
•  Sure fire trading methods
•  Make money strategies to trading
•  etc…

Hello! There is no single system that can be 100% perfect because we are dealing in human emotions in trading – forex, options, stocks, equities, commodities and so on.

Optionable ETF & stock option

TRADING STOCK OPTION - SINGLE DIRECTION METHOD

Picking
Some members been asking, "how to choose and pick stocks to buy their options?"
First, we need to check the chart and qualify a few basic criteria:-
1. Which direction is the trend? That will determine whether we buy Call option or buy Put option.
2. Is there adequate average daily trading volume? That will relate to good Open Interest for the strike we like to trade (say maybe about 2 million shares a day over a 2 to 3 months average).
3. What is the entry signal? Here, we can use some basic indicators and time our entry. There are quite a few good systems and methods that a beginner like us can adopt.

• use a 11 day moving average together with RSI of 11 day. For uptrend, a break above the 11 DMA line with a lower RSI heading towards the centre line is a good way.
• if the trend is clear (i.e both the stock and the sector is in the same direction) use a breakout above last 2 previous high as a signal to enter.
• candlestick reversal pattern is another method - like a hammer and morning star pattern for reversal to uptrend together with a direction indicator (like GMMA)

So whatever system adopted, stick to the same method for consistency otherwise one can get confused.

Option criteria

1. The expiration - which is the best? There is no straight answer as the stock movement is unsure so we choose at least over 60 days. That is base on the style we trade the options as we follow the trend and trade single direction.

2. Which strike to choose?

gold related shares

A watchlist of gold related shares and ETF (all optionable with good volumes)

GOLD RELATED SHARES & ETF
Ticker	company
AEM	Agnico-Eagle Mines Ltd
EGO	Eldorado Gold Cp
GFI	Gold Field Ltd
GG	Goldcorp B
GSS	Golden Star Res Ltd
HMY	Harmony Gold Mining Co
IAG	IAMGOLD Corp
KGC	Kinross Gold Corp
BVN	Minas Buenaventura
NGD	New Gold
NEM	Newmont Mining Cp
AUY	Yamana Gold Inc
	ETF
IAU	iShares Gold
GLD	SPDR Gold
GDX	Market Vectors Trust Market Vectors Gold Miners

For more categories, go to this site:

http://www.freestockcharts.com/

In the menu on the right side, click industry and you will get a list of all the related stocks under each category.

You may sort by volume and make your own watchlist of good volume traded shares like above.