Steps to successful trading- MIRRIAM MacWilliams

by JF Sat 01 Sep 2012, 02:11

Tuesday December 14, 2010

MIRRIAM MacWilliams (pic) is a self-made millionaire. She made over US$2mil in less than two years in the stock market with a starting capital of US$10,000.

Mirriam trades for a living. Being the former National Director of Education of the 14,000-member United States Investing Club, she shares her views on what makes a successful trader.

One: Have realistic expectations

Huge percentage gains have high risk. 1,000%+ windfalls every now and again is not the path to success - such trades are risky. Look to trade in a consistent way to yield frequent, consistent profits. Instead, a 10% move on the stock in the US is a realistic, achievable result, and can possibly yield you a 100% return on your investment capital through the use of options.

Two: Have a trading plan

Use a clear system of strategies and trading rules that is structured, consistent and proven. Stack up the probabilities in your favour by having a plan and using it every time you place a trade. Have a watch list of stocks of about 20 to 25 that you work regularly with - review the position of each stock in the basket every trading day.

Also, avoid trying to “cherry pick” the top and the bottom of a stock’s movements - that can be uncertain. Instead, look for the more identifiable 10% “middle” moves of a stock that can help produce a 100% profit on options.

Three: Ignore hot tips

Know what the company does, understand the numbers, and make an informed decision. Don’t go into a stock just because it seems like everybody else is and you feel you don’t want to be left behind - that’s “following the followers”, who are often wrong.

Four: Have trades in several industries in different stocks

Having your entire investment capital in the market in just a few stocks in the same industry can be a recipe for disaster - one trade or the industry going the wrong way can wipe you out.

Five: Understand the risks associated with options trading

Approximately 70% of options trades lose money.

That’s because many options traders do not use a proven, low-risk system to deliver them solid profits consistently.

Learn how to eliminate risky trades first before settling on the potentially good ones.

Don’t just put some money in the market when it opens and hope some of it comes back.

Six: Use a “Stop Loss”

A small percentage of your trades will go against you, even when you follow all the rules. Nobody will ever be 100% accurate. A “Stop Loss” is a live, working order that will trigger automatically if the trade goes against you, leaving you with the majority of the initial capital you placed in the trade.

It’s one of the methods for managing risk, like a safety net - if the trade goes against you, be out of it as soon as possible with a minimum loss. Prepare for a potential loss before you go into a trade. If you focus only on potential profits, your results will be weak. You need to assess your potential losses first, and your account will grow.

Seven: Automate your profits with a “Sell Stop”

Success in trading is not based on your ability to watch the stock market for several hours each trading day. Calculate and set a “Sell Stop” at your target price so that your position is automatically sold for you at your anticipated profit level without you having to be in front of a computer. This means you only need to monitor the market for 20 to 30 minutes a day, adjust your stops if necessary, then switch off your computer.

The best strategy is a hands-off one so you are not concerned with moment-to-moment fluctuations that can stir your emotions and end up making unwise decisions.

Be self-disciplined so you can continue to follow the rules, no matter what.