investing

He Learned to Trade for Profit – and Can Teach You, Too

Raymond Rondeau says technical analysis, plus emotional discipline, are the keys to investing success.

Raymond Rondeau, 55, of Exeter, R.I., is a trader, president of the New England American Association of Individual Investors chapter, and creator of AAII’s new course, “Investing Strategies and Technical Analysis.”

When did you start trading? I began with a simulated account at TradeStation [a brokerage and technical analysis platform for trading], so I could learn without any actual monetary risk. After I became more proficient and confident, I gradually switched to trading with real money and then over shorter periods of time.

What’s your strategy? I use a variety of strategies, techniques and investment vehicles. I primarily use price activity, charts and technical analysis to help choose prices to enter and exit my trades strategically. I hold investments for a range of time periods.

I always go where I feel the best opportunities are. For shorter-term trades, I look for peculiar reactions to investment-related news, as well as certain price patterns and chart formations. My computers constantly scan more than 1,500 stocks and other kinds of investment vehicles in real time. When they identify an opportunity meeting my criteria, they alert me and provide some basic trade parameters. Then I examine the potential trade. If the risk-reward ratio makes sense, I enter the execution orders.

Can anyone do this? Day trading is probably the least appropriate form of trading for most people. It’s like playing speed chess, with limited time to determine your next move, and that’s stressful. In my opinion, “swing” trading, which anticipates holding times of two days to a few weeks, is a much better alternative for most people. I know many successful investors who enjoy spending an hour or so on the weekend, over a cup of coffee, looking over a filtered list of stocks that meet their criteria, such as those from AAII’s Stock Investor Pro stock screening and research software, and reviewing them for strong technical setups. Then they set their positions, real or simulated, monitor them throughout the week and track their results.

How do you keep emotions out of it? Having a well-developed plan and the emotional discipline to follow through are two keys for successful trading. My first consideration is always risk. When placing a trade, I always first decide at what point I should get out. And to overcome any human bias, I set my trading platform to alert me at certain loss thresholds. If they are hit, I close all my positions.

Sometimes I back-test a strategy for efficacy over long time periods on numerous issues. With this tactic, I can generate statistics on hundreds of trade-related measurements to fine-tune my future trades. I also religiously review my past trades to help identify and avoid any negative, emotionally based tendencies.

What’s the best way for people to start using these strategies? You can open an account with an online brokerage such as TradeStation for $1,000 or less. Once you access its platform, you’ll have all the charts and related tools you would likely ever need to learn and trade effectively. By trading with a simulated account, you won’t have to trade with real money until you’re ready. It’s a great way to get started, gain some experience and see if trading is right for you.

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