Hey hey: what's up my friends, so in today's episode i want to talk about seven best practices for beginner stock traders, so number one trade with the long-term trend. So here's the thing for the u.s stock markets. It has been in a long-term uptrend over the last 30 40 years. If you look through any charts, you can see that the u.s stock market is just trending higher over time, but here's the thing right, just because it's in a long-term uptrend doesn't mean it's going up.

Every single day we come up. There are times where we face. Bear market recession et cetera, so one thing you can do is to trade in the direction of the long term trend. What you can do is overlay, or rather look at what the broad market indices is doing, for example, the s p, 500 or the russell 3000 and make sure the index is above the 100 weight moving average.

So that's one way to define the long term trade. So if the index is above the 100 weight moving average, then you can conclude the longer term trend is up and you can look for buying opportunities in the stock market. If the index is below the 100 weight moving average, then you can conclude that it's a bear market or maybe even a recession, and you want to remain in cash. So this is one tip that i have for.

You is to trade with the long-term trend and i've shared with you. How do you actually define the long-term trend using an index trend? Filter number two trade from it from an area of value, so just because a stock is trending higher doesn't mean you want to blindly hit the buy button because again for traders for discretionary discretionary traders, you want to be trading from an area of value. This could be things like support. It could be a respected.

Moving average like the 50-day moving average could be a bounce off the upward trend line. So this is an area of value where you can use it to better time your entry and get a more favorable risk to reward on your trade. Number three buy the strongest stocks out there. So when you trade, u.s stocks, there are thousands of stocks out there and you will be overwhelmed, sometimes even spoiled for choice man which stock should i should i buy abcdefg, or should i just pick one of them, so one way you can do is to rank The stocks according to their their rate of change, for example, what rate of change does is to measure how much a stock has increased in price over a given period.

So this is a tip that i learned from nick ranch, so what you can do is to rank a stock according to the rate of change over the last 50 weeks. So this measures how much a stock has increased in price over the last 50 weeks and once you rank, let's say you have 10 stocks to choose from rank all these 10 stocks. These 10 stocks right according to the rate of change over the last 50 weeks and if all 10 have similar trading setups go with those stocks that has the highest rate of change failure so in other words, you're picking the strongest stocks out there and the reason For this is because stocks that tend to outperform the market over the last six to 12 months tend to continue. You know outperforming the market in the near future, so this is why you want to focus on strong stocks.

Not the wake stocks, and one way to define strong stocks is to rank them according to their rate of change. Number four: don't use fixed position size. Why is that? And what do i mean by that? So, for example, let's say you have a stock that is let's say: stock is trading at a thousand dollars, and stock b is trading at let's say ten dollars. If you blindly, just you know, treat all this stock the same, you buy a hundred shares or stock a hundred shares of stock stock b, because they are the same then.

What are gon na happen is that you'll be overweighted to stock a because you'll be having like a hundred thousand dollars worth of stock, a in your portfolio where stock b, you have a much more smaller amount of money. So this is why you want to use uh proper position position sizing when you trade stocks, so very simple. What you can do is you can allocate your capital, you know equally among different stocks, for example. Let's say you have hundred thousand dollars and let's say you want to trade 10 stocks.

So what you can do is that each stock right should not be worth more than 10 000 in your portfolio. So, for example, if stock a is, let's say, trading at a thousand dollars, this means you can only buy 10 shares of stock because 10 multiplied by a thousand is 10 000. Let's say: stock b is trading at a 100, so how many shares of stock b can you buy? So what do you do you? You take the ten thousand dollars value divided by 100 and you get a value of i believe, 100 as well, so you can buy 100 shares of stock b. So this way your portfolio exposure in a way is kind of like evenly distributed among the different stocks out there, instead of you know, being heavily skewed to certain stocks, because their dollar value is much higher, does it make sense? Okay, next one number four plan, or rather number five plan for your exit.

So when you buy stocks, you have a, i suppose, a technical trading setup to enter a trade, but when you exit the trade, you also want to plan this ahead of time. Will you be exiting based on you know, a trailing stop loss? Will you be exiting based on a certain key level on the chart? Will you be exiting you know based on fundamental news, so you want to plan all this ahead of time, because if you don't plan your exit, what's going to happen, is that you know you get into a stock if the price goes up higher you're happy you Chill way, wee wee wee right and when the stock collapse all right, you start to you know panic freak out right and you usually would sell it at the kind of like the bottom, the low. So, just when the stock is about to bake a rarely help higher to continue its upward upward trending trajectory. So key thing is: you know, plan your exit ahead of time.

If you're going to go with the trailing, stop loss define what trailing stop-loss you're going to use. If you're going to capture a swing, identify ahead of time, which level right will you exit the trade okay? Next one number six right based on my research and back testing. I realized that for stocks right, especially those who trade off the daily time frame and higher, it makes sense to wait for the closing price before you exit the trade. So, for example, let's say you have a stop loss at 100.

You want to make sure the stock price has closed below 100 for the day before you exceed the trade, because what happens often is that the stock price intraday it could deep below 100 and then close above 100 for the day and then, if you were to Use just like you know, uh a stop order in the market. You will get stopped out of the trade right and you know exit your trade prematurely. So my suggestion is again: if you can write, according to your risk management procedure, wait for the price to close below your stop-loss level. First, before you exit the trade and what you'll find based on my research.

More often than not is that the price will intraday deep below your stop-loss level and then bounce up higher, and you know you would have you know, remain in the trade if you exit your trade or rather set your stop-loss based on closing price. And finally, the last tip that i have for you is don't get carried away so right now, in the stock markets, we are experiencing a huge bull market, since i would say, 2008 2009 a very long bull market and along the way. Yes, we have dips and corrections along the way, but over the last one or two years it has been relatively smooth sailing. The stock market is just grinding up higher consistently.

You know week after week, month of the month with very minor correction and it's very easy to get carried away, to think that oh man, i'm a stock picking genius, i'm good at trading, i'm good at stock trading. But no trust me you're, not it's, because the overall sentiment in the market is just hitting up higher smoothly over the last 12 months, the last 18 months. So don't get carried away. Don't think you are the next stop shop trader, because this happened to me early in my trading career when i started you know dabbling in stocks.

I remember that you know i was trading the local singapore stock markets. I was having a my i had about. Twenty thousand dollars and all my capital were used up to buy all the stocks and the stock market is still going up higher. I had no more capital left to deploy, so what i did is i i opened a margin account with my broker, so i had some more money to buy stocks and i continue buying up to my margin limit.

You see it and my broker even commented man right now: yeah the media's touch man every every stock that you buy and it's hitting up higher, and i thought you know what i'm really good at this and then what happened is that the pullback? The correction came right during the euro debt crisis and and all my open profits were wiped out, and not only that i even eat up into my initial capital. So i lost like about five figures in open profits and even though hit my own trading capital and i went into a drawdown and i had to sell all my stocks out there. So at this point i kind of realized that no, i shouldn't have get carried away. I wasn't good at stock.

Picking, i was just you know, happened to be with the flow of the uptrend. When the pullback came, when the correction came, i did not have proper risk management. I did not have proper plan for exit and i pretty much got stopped out of all my position and i lost to me at the point of time was a lot of money. So that's my last tip, for you don't get carried away, easy markets, it's not equivalent to you being a good trader.

It's just easy markets and almost everyone with closing two eyes can pretty much make money in the bull market when the market is going up consistently. Almost every week, every month, okay, so a quick recap for you number one trade. With the long-term trend you can use the 100-week moving average as a trend. Filter number two trade from an area of value could be things like support swing, low, moving average trend line.

Number three buying the strongest stocks out there. If you have too many stocks to choose from, you can buy the strongest stocks out there by ranking them. According to the rate of change over the last 50 weeks, number four don't use fixed position size because different stocks, they have different volatility and different value to it. Number five plan for your exit: number: six: if possible, wait for the price to close below your stop-loss level or trailing stop-loss before you exit the trade and, finally, number seven don't get carried away in the bull market.

So with that said, i wish you good luck. Good trading stay safe and i will talk to you soon. You.