Stock Market PILIPINAS: Empowering the Filipino Investors

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Can anyone of you point me to good stock trading books? Thanks for the answers. More power to SMP, the forum of choice nowadays. Sir Ollie, you are the best.
Dr. Alexander Elder books

1) Trading for a Living: Psychology, Trading Tactics, Money Management

2) Come Into My Trading Room: A Complete Guide to Trading

digested from these books Smile

Managing Risk or Money Management

Money Management goal is to accumulate equity by reducing losses on losing trades and maximizing gains on winning trades.

“Markets kill traders in one or two ways. If your equity is your life, a market can snap it with a single shark bite, a disastrous loss that effectively takes you out of the game. It can also kill like a pack of piranhas, with a series of bites, none of which is lethal alone but which together strip an account to the bone.”

The 2% Ruleprotection from sharks, limit your loss on any trade to 2% of your equity.

Example: 100K Equity (50K cash or buying power, 50K positions current market value)
You want to trade with an Entry Price = 19.00, Stop Price = 18.00, Target Price = 22.00, How many shares you are allowed to buy?

2% of 100K = 2,000 your maximum acceptable risk per trade
Buying at 19.00 and putting a stop at 18.00 you will have 1 peso risk per share
Divide maximum acceptable risk (2,000) by 1 peso risk per share = 2,000 shares (maximum number of shares), but you have to compute also the broker charges. To be exact it will be 1,600 shares maximum:

Buying Cost is 19.00 x 1,600 + 89.68 (broker charges) = 30,489.68

Selling Cost at Stop Price is 18.00 x 1,600 + 228.96 (broker charges) = 28,571.04

Stop Cost (Buying Cost – Selling Cost)= 1,918.64 - should be less than or equal to the maximum acceptable risk per trade which is 2K (2% of your equity).

So, the computation of the shares you can buy will be depending on the Stop Price:

Stop Price=18.00 | Stop Cost=1,918.64 | Risk/Share=1.00 | Shares=1,600 | Target Gain=4,430.48 | T.Gain%=14.53% | Risk/Reward=1 : 2
Stop Price=18.50 |Stop Cost= 1,828.13 | Risk/Share=0.50 | Shares=2,600 | Target Gain=7,199.53 | T.Gain%=14.53% | Risk/Reward= 1 : 3
Stop Price=18.90 | Stop Cost=796.39 | Risk/Share=0.10 | Shares=2,600 | Target Gain=7,199.53 | T.Gain%=14.53% | Risk/Reward =1 : 9

I'm using the 2% rule with the following:
  • Blue Chips = 2%
  • 2nd liner = 1%
  • 3rd liner = 0.5%

Technical Analysis helps you decide where to place a stop, limiting your loss per share but no matter how accurate your analysis will not make you a winner and guarantee success. Money management rule is to limit your loss on any trade to a small fraction of your account. Establish the size of your trades on the basis of how much money you can afford to risk, not how much you want to make.

Others may react to the 2% rule that is too low for small accounts, the answer is simple - “When you go into bungee jumping, it doesn’t pay to extend the cord”

Overtrading – putting on trades that are too large for your account is a deadly mistake. Beginners are in hurry to make money, whereas serious traders begin by measuring risks. If you start small and concentrate on quality, you’ll become a better trader. Once you’ve learned to trade – find trades, enter, set stops and profit targets, and exit – you can start increasing your trading size to the point where your account starts generating a meaningful income.

The 6% Ruleprotection from piranhas, limit your total loss 6% of your equity per month.

A trader keeps sharks at bay with the 2% rule, but he still needs protection from the piranhas. The 6% rule will save you from being nibbled to death.

Traders on a losing streak keep trying to trade their way out of a hole. A loser thinks a successful trade is just around the corner, and that his luck is about to turn. He keeps putting on more trades and increases his size, all the while digging himself a deeper hole in the ice. This sounds familiar?
  • Whenever the value of your account dips 6% below its closing value at the end of last month, stop trading for the rest of this month.
  • Calculate your equity each day, including cash (buying power) and current market value of all open positions in your account. Stop trading as soon as your equity dips 6%.
  • Close all positions that may still be open and spend the rest of that month on the sidelines.
  • Continue to monitor the markets, keep track of your favorite stocks and indicators, and paper trade if you wish.
  • Review your trading system and strategies.

The 6% rule will save you from a series of losses and it forces you to do something most people cannot do on their own – stop losing streaks, saving the bulk of your account to trade the next month.

The 6% rule encourages you to increase your size when you’re on a winning streak. If the markets move in your favor, you will move your stops beyond the breakeven and put on more positions; you have no capital at risk and may look for new trades.

Conclusion
Using the 6% rule, along with the 2% rule, is like having your own trading manager. The trading manager watches his traders like a hawk and sets the maximum allowed monthly drawdown for each trader. When an employee sinks to that level, his trading privileges are suspended for the rest of the month.

May I know your inclination in stock trading, ie. Technical or Fundamental Analysis?
Best book I've read "technical analysis of the financial markets" by john murphy luma na. pero solve pa din.
also try "getting started in candlestick charting" by tina logan.
How to make money in stocks - william j. o'neil

Technical analysis of the financial markets - john j. murphy

The neatest little guide to stock market investing - jason kelly
The neatest little guide to stock market investing - jason kelly

Hi! I'm also a newbie Smile Pero, i'll share the books I have already read.

I was inspired to trade because of this book : How I made 2 million in the stock market by Darvas.

You may also want to check out Intelligent Investor by Graham. It was deemed by Buffett as the best book on investing. However, it's really for the conservative type. At least, you'll be sure that you wont lose anything if you follow his advice.

Right now I'm reading Technical Analysis of the Financial Markets by Murphy. Im reading it together with Technical Analysis Explained by Pring.

Though, OT.. plug ko na rin favorite business book ko by far.. Millionaire Fastlane by Demarco.. its main thesis is that you do not get rich by working 8 to 5. It also goes against many investment books that tell you that you should live below your means and invest your saving in MFs / stocks. Rather, it motivates the reader to go against the "slowlane" and be an entrepreneur.
I want to buy the actual book, "Reminiscences of a Stock Operator". Unfortunately, I couldn't find it in our local bookstores. Anyone who could point me to the right direction? I know there are ebooks out there, but I also want a hard copy. Smile
sir scion cho, have you tried fully booked sa boni? their lineup is pretty extensive, and you can request for a copy pag wala sila.