The Honest Guide To Stock Trading - Backtestwizard
The Honest Guide to Stock TradingMake Market-Beating Returns. Achieve Long-Term Wealth.ByLlewelyn James
Copyright InformationCopyright 2014 by Llewelyn JamesAll rights reserved. No part of this publication may be reproduced,distributed, or transmitted in any form or by any means, includingphotocopying, recording, or other electronic or mechanical methods,without the prior written permission of the publisher, except in the case ofbrief quotations permitted by copyright law.For permission requests, email the publisher, subject line “Attention:Permissions Coordinator,” at the email address below.llewelynjames@hotmail.co.uk
DisclaimerWhile the author has used their best efforts in preparing this book, theymake no representations or warranties with respect to the accuracy orcompleteness of the contents in this book and specifically disclaim anyimplied warranties or merchantability or fitness for a particular purpose.The advice and strategies contained herein may not be suitable for yoursituation. You should consult with a professional where appropriate.Neither the publisher nor author shall be liable for any loss of profit or anyother commercial damages, including but not limited to special, incidental,consequential, or other damages.Past performance is not necessarily indicative of future performance.Forex, futures, stock, and options trading is not appropriate for everyone.There is a substantial risk of loss associated with trading these markets.Losses can and will occur. No system or methodology has ever beendeveloped that can guarantee profits or ensure freedom from losses. Norwill it likely ever be. No representation or implication is being made thatusing the methodologies or systems or the information contained withinthis book will generate profits or ensure freedom from losses. The systemsoutlined in this book are for illustrative purposes only and should NOT betaken as investment advice.HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAINLIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATEDRESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THETRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDEROR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKETFACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADINGPROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEYARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NOREPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR ISLIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.
Also by Llewelyn JamesThe Honest Guide to Candlestick PatternsSpecific Trading Strategies. Back-Tested for Proven Results.
Table of ContentsIntroduction . 9Assumptions. 9What you’ll learn in this book . 9A little background information. 10Learning from my mistakes . 11Letting Winners Run . 11How I hope to help you become a better trader. . 14Why I wrote this book . 14Trading isn’t easy. But it doesn’t need to be complicated! . 15Who this book is for . 16How this book is structured . 17Why do the majority of traders fail?. 20Inadequate understanding of risk . 20Thinking that markets can be predicted . 20What you don’t know can’t hurt you . 21Not having a quantifiable system . Error! Bookmark not defined.Unrealistic expectations. Error! Bookmark not defined.Not wanting to lose. Error! Bookmark not defined.Getting to know expectancy . Error! Bookmark not defined.Understanding Stop-losses and Position Sizing . Error! Bookmark not defined.What is a stop-loss? . Error! Bookmark not defined.What is a trailing stop-loss? . Error! Bookmark not defined.Why a trailing stop-loss helps improve your risk/reward ratio . Error! Bookmark not defined.Risk/Reward Ratios . Error! Bookmark not defined.Understanding position sizing. Error! Bookmark not defined.Leverage . Error! Bookmark not defined.Be aware of slippage and gaps in price. Error! Bookmark not defined.Use leverage sparingly . Error! Bookmark not defined.Risk before reward . Error! Bookmark not defined.Approach the market without a bias . Error! Bookmark not defined.Conflicts of Interest . Error! Bookmark not defined.Avoid the crowded trades. Error! Bookmark not defined.Trend-Following . Error! Bookmark not defined.
The technical tools to use . Error! Bookmark not defined.Technical analysis is not predictive . Error! Bookmark not defined.Technical indicators . Error! Bookmark not defined.Moving Average (MA) . Error! Bookmark not defined.Donchian Channels . Error! Bookmark not defined.Volume . Error! Bookmark not defined.Stochastics oscillator . Error! Bookmark not defined.Average true range indicator (ATR) . Error! Bookmark not defined.Caveats to trailing stop-losses . Error! Bookmark not defined.It’s easier to manage a losing trade than a winning trade. . Error! Bookmark not defined.Conclusions to our technical tools. . Error! Bookmark not defined.Fundamental Criteria . Error! Bookmark not defined.Strong broader markets and strong industries . Error! Bookmark not defined.Earnings per share (EPS) growth . Error! Bookmark not defined.Revenue growth . Error! Bookmark not defined.Return on Equity (ROE) . Error! Bookmark not defined.Insider transactions. Error! Bookmark not defined.Float . Error! Bookmark not defined.Short float . Error! Bookmark not defined.Debt to equity ratio. Error! Bookmark not defined.Fair value calculation . Error! Bookmark not defined.Conclusions to our fundamental criteria . Error! Bookmark not defined.Organizing your workspace. Error! Bookmark not defined.Fundamental rules data sources . Error! Bookmark not defined.WWW.FINVIZ.COM . Error! Bookmark not defined.Determining the strength of the broader market and individual industries . Error! Bookmark notdefined.The benefit of building watch-lists. Error! Bookmark not defined.Herding. Error! Bookmark not defined.Screening criteria for Daily Breakout and Counter-Trend strategy watch-lists . Error! Bookmark notdefined.WWW.ADVFN.COM . Error! Bookmark not defined.Highlighted phrases . Error! Bookmark not defined.WWW.BARCHART.COM . Error! Bookmark not defined.
WWW.INSIDERINSIGHTS.COM . Error! Bookmark not defined.WWW.SEEKINGALPHA.COM . Error! Bookmark not defined.WWW.PROREALTIME.COM (Preparing your charts) . Error! Bookmark not defined.Creating your daily breakout and counter-trend chart template . Error! Bookmark not defined.Creating your weekly breakout chart template . Error! Bookmark not defined.Conclusions to organising your workspace . Error! Bookmark not defined.Mechanical trading strategies. Error! Bookmark not defined.Daily breakout trend strategy rules . Error! Bookmark not defined.Entry and exit rules . Error! Bookmark not defined.You can always re-enter a trending asset . Error! Bookmark not defined.Love your losses . Error! Bookmark not defined.Daily counter-trend strategy rules . Error! Bookmark not defined.Diversify your strategies . Error! Bookmark not defined.Would you want a strategy that you knew would lose? . Error! Bookmark not defined.Counter-trend rules . Error! Bookmark not defined.Entry and exit rules . Error! Bookmark not defined.Why it works . Error! Bookmark not defined.Reduce your size when your stops are tight . Error! Bookmark not defined.Examples from different asset classes . Error! Bookmark not defined.Losing counter-trend trade examples. Error! Bookmark not defined.Weekly breakout strategy rules . Error! Bookmark not defined.Broader market analysis . Error! Bookmark not defined.Fundamental analysis . Error! Bookmark not defined.Create your weekly breakout strategy screener. Error! Bookmark not defined.Trading low float stocks . Error! Bookmark not defined.Growing earnings . Error! Bookmark not defined.Earnings progress . Error! Bookmark not defined.Easy earnings comps . Error! Bookmark not defined.Does the current price leave room for appreciation? . Error! Bookmark not defined.Fair value calculation re-cap . Error! Bookmark not defined.EPS catalysts . Error! Bookmark not defined.Weekly breakout strategy technical entry and exit rules . Error! Bookmark not defined.Top tips for trading low float stocks . Error! Bookmark not defined.Weekly breakout strategy modified . Error! Bookmark not defined.
Conclusions to the weekly breakout strategy. Error! Bookmark not defined.Strategy back-test results . Error! Bookmark not defined.Knowing your strategy . Error! Bookmark not defined.Back-testing good practice. Error! Bookmark not defined.Survivorship bias . Error! Bookmark not defined.Look-ahead bias . Error! Bookmark not defined.Curve-fitting . Error! Bookmark not defined.Sample size. Error! Bookmark not defined.Look-back period. Error! Bookmark not defined.Account management used during tests . Error! Bookmark not defined.Market benchmark . Error! Bookmark not defined.Test results for daily breakout strategy . Error! Bookmark not defined.Adding the market-environment filter . Error! Bookmark not defined.Trend-following characteristics . Error! Bookmark not defined.The negatives to trend-following . Error! Bookmark not defined.Test results for daily counter-trend strategy . Error! Bookmark not defined.Analysis of results . Error! Bookmark not defined.Total return profile. Error! Bookmark not defined.Tips for sticking to the plan. Error! Bookmark not defined.Find YOUR optimal bet size . Error! Bookmark not defined.Repetition breeds consistency . Error! Bookmark not defined.High risk, high reward. Low risk, low reward . Error! Bookmark not defined.Building a better portfolio . Error! Bookmark not defined.Other risk reduction methods. Error! Bookmark not defined.How many positions should I trade at once? . Error! Bookmark not defined.Correlation analysis. Error! Bookmark not defined.Diverse ETF matrix Jan 2014 . Error! Bookmark not defined.Practical use of a correlation matrix . Error! Bookmark not defined.USA stock market sectors . Error! Bookmark not defined.Diversify your portfolio with ETFs . Error! Bookmark not defined.How much to get paid? . Error! Bookmark not defined.Conclusions . Error! Bookmark not defined.Final thoughts . Error! Bookmark not defined.Essential reading list . Error! Bookmark not defined.
Thank-You for Reading The Honest Guide to Stock Trading . Error! Bookmark not defined.Introduction“The things I want to know are in books; my best friend is the man who'll getme a book I ain't read.”- Abraham LincolnAssumptionsWe haven’t met, so I can’t be sure how much you already know about trading. However, I doassume that you have a basic understanding of trading terminology as well as the knowledgerequired to open an account, place your trades and modify your orders.In the interest of catering to everyone, I would suggest paying a visit to www.babypips.com ifany of the terms in this book are unfamiliar to you. A couple of hours spent taking their‘beginner’s guide to trading course’ will be sufficient to understand each of the topics that Iwrite about.You are also always welcome to email me regarding anything in this book. A great advantageof publishing on Kindle is that I can constantly keep the book
for them. The Honest Guide to Stock Trading will also provide: A complete case-study of rules for trading with the trend, and against the trend. How to diversify the strategies that you trade, and why it is essential to do so. How to successfully trade stocks, forex, ETFs
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