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Published on April 14, 2008

Winning in the stock market is not an easy task even for experienced traders. You've studied the market and chosen good stocks, but you're still far from winning. What went wrong?

Good traders not only need to apply science to help them read the market outlook, but also discipline to control their own emotions to prevent them from making decisions due to panic or greed.

Here and in the box below are suggestions about trading strategies from two experts who describe what beginners should think about before entering the equity market.

 "If you don't have a written plan or a set of rules, just stop trading" was the advice given to stock traders by Ray Barros, a veteran fund manager, author and educator who conducts investment seminars around the world.

Barros visited Thailand early this year and told his audience that the secret for trading stock is to "be patient" and "do planning".

Most beginners tend to act like day traders, afraid when stocks fall and wanting to sell rather than buy at that point.

When stocks start to rise, they worry whether they're making a mistake in buying them.

"Don't trade by letting the little voices in your head make the decision", Barros said.

The difference between the beginner and the professional is the beginner wants to take profits as fast as possible and hopes to avoid losses. But most of them fail, he said.

What Barros suggested was to "plan with an edge" for stock trading.

"If you plan to do something, you do it despite the stock plunge", he said.

 Beginners need to think of how to develop a winning psychology of their own emotions first, then do effective money management by balancing risks. Then, it comes to planning.

Before entry, Barros said, you need to study the market and see what trends the market will favour and look for all possibilities.

To make the entry low risk, you need to identify the trends. Barros calls the right prices and right stocks to buy as "zones".

"Don't do anything until it comes to the zones," he said.

Once you enter the market, you also need to tell when an entry scenario is wrong, he suggested.

"Know when to enter and when to exit, then you will know how much profit there will be. Entry and exit must come together, so do the trends and time frames," he said.

Do risk management by following the rule: "Don't take the risk if the profit is not worth it."

Another suggestion is: "Don't take positions too big."

With Bt100 of investment budget, one should never invest Bt90, he said.

Common beginners believe they won't suffer losses but they do, while professionals can take losses but maximise profit by investing somewhere else.

A position that is too large will leave you with nothing to invest further.

Jiwamol Kanoksilp

The Nation