Over the last couple of weeks I’ve been progressing through Timothy Sykes instructional DVDs; more specifically, “The New Rules of Pennystocking” which covers his 2010 Las Vegas conference.
Simultaneously, a friend provided me with a book entitled “The Complete Turtle Trader“, to which I didn’t pay much attention until I realized one of the most captivating speakers of the DVD set (so far, as I haven’t yet finished watching it) had written it: Michael W. Covel. While his main trading field is worlds apart from pennystocking, his presentation was inviting and interesting in terms of trading strategies. This convinced me to take a second look at that book that had been sitting for a about a week on my tabletop, unaware of the wealth of trading information it could provide.
Before I get to that, I’d like however to go over some of the realizations, that I’ve come across during the last two weeks while following The Trading Challenge, that have been accentuated by reading the aforementioned book: the main and foremost realization being that, while the program is very content rich (DVDs, online videos, webinars, etc), and the strategy offered has been proven to work time and time again by Timothy Sykes, I’ve been getting the feeling that some things are missing.
More specifically, and I think the most essential part for beginner traders, is the lack of supervision, or should I say reference, in terms of entry prices, position sizes, proper introduction to risk management; multiple times have I seen in the chat mention of some of the other challenge subscribers blowing a fair chunk of their account. This has probably been an important factor in my hesitation to trade and my fear of the market as of late.
After reading “The Complete Turtle Trader”, I’ve managed to find a new support point for my trading confidence and it has pushed me to try and develop a proper trading strategy that involves both discipline and psychological self management during the trading process. I’m not really trying to change the strategy offered by Timothy Sykes, but I think that I’ve found a good way (at least for me) to complement them and establish a clear set of rules for risk, entry and exit, which I feel is completely missing from the program (maybe hidden in the remaining DVDs that I haven’t yet watched?).
What does this mean?
Well, the first and foremost aspect, which may seem obvious to many, is to learn how completely detach from the “money” aspect of trading and just deal with numbers instead of cash used to buy things. Cash has an emotional effect which adversely affects any decisions in terms of trading. The solution being to demonetize cash and render it a simple number in a game of exchanges with the simple goal of increasing your numbers. I don’t think there is enough, if at all, emphasis on this aspect of trading.
While I won’t go over my current (in-development) strategy in this post, as I am still working on its details, it is worth mentioning that chapters 4 and 5 of the “The Complete Turtle Trader” were a great reference to establish how much to play, when to enter, when to exit and how to detach emotionally. It is also worth noting that the book applies mainly to long term markets and most of the concepts conveyed are not really applicable in a fast moving realm such as penny stocks, but it did serve as a good basis to establish my set of rules and tolerances.
Second, is the need to establish these rules and stick to them rigorously (like a computer would) – this is well emphasized by the Challenge program, most people do not have the discipline, and end up racking losses.
This aspect of the program instruction is however downplayed by the lack of specificity as to what the rules actually are: buy breakouts on catalysts, short sell pumps & dumps, learn the chart patterns. Each trader has his/her own technique and there isn’t really a specific set of rules as to when to enter or exit, how much to invest, what risk to take. Unfortunately, and quite tragically, this is completely left to the discretion of the subscriber without further guidance – the general guideline being to indicate people to “judge what your loss tolerance is” or “don’t bet more than you’re willing to lose”.
The successful traders in the program have achieved their goals by developing their own techniques and habits rather than following the program itself, which seems to have served mainly as a basis to establish their own way – I intend to do just that. That being said, there have been very few successful graduates of the program; I can think of only 3, out of at least a hundred participants currently enrolled. Michael Goode, Tim Grittani and Timothy Sykes (all the millionaire pennystocking traders I can think of by name) all trade differently, with their own set specific set of rules, loss tolerances and habits and very often they don’t even follow the same stocks – hardly a repeatable process for newcomers.
My point being that this realization has pushed me to look for a proper way to develop my own repeatable technique for position entry, exit and risk management rules and still follow the core guidelines offered by the program.
I will share more details as I progress through my newly developed process and we’ll see if it manages to become a successful strategy, or if I’m just running off the reservation and heading to my untimely demise.