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Education

Learn how to invest in the securities market. Whether you are a beginner or an expert, you can find useful information, tips and ideas on investing in this section.

Develop Your Own Trading Plan

The Golden Rules

Develop Your Own Trading Plan

Trading is about probabilities, not certainties. A Trading Plan establishes a series of steps that ensure a higher probability of success.

The Plan will set certain guidelines for:

  • What stocks to buy
  • When to buy
  • When to sell

The Structure of Your Trading Plan

A Strong Market:

Before deciding what to buy, first establish if the market is in a positive phase. If the KL Composite Market has been negative over recent weeks (or longer), it is not a good time to enter the market. If the majority of stocks are going down or sideways, the probability of you buying a share that is going to rise in the immediate future is slim.

A Strong Sector:

Having waited until the market is in a growth phase, determine if there are any sectors showing strong growth in the past few weeks. These are the sectors that have stocks performing well and are increasing in price.

Examine stocks in these strong sectors and determine those that are on an uptrend, meaning the price of the stock has been steadily going up for at least 3 months.

These stocks will qualify as having potential for ongoing growth as they are generating positive market sentiment. If they have adequate liquidity on top of that, you could add any of these to your portfolio knowing that you could exit quickly at any point in time.

Exit Strategy:

Having selected shares to include in your portfolio you must then have an Exit Strategy in the event that these shares show signs of reversing. Simply set an Early Exit price to ensure that the stocks you buy never generate losses.

This is a simple description of a Trading Plan. It holds the basics for selecting stocks that have a good probability of increasing in price and risk management to protect your capital. These three ingredients are the key to success in stock trading.