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Trading the stock market: how not to lose, safety precautions

This article is intended solely to provide information that may be useful to someone, and ideally helps not to lose and increase capital in the current difficult situation in the markets. One of its goals is to show that it is not easy. It was written on the basis of two years of experience trading on the exchange, during which I studied a lot and thought a lot, made many mistakes. An additional motivation for writing this article was an increase in interest in the stock exchange and an increase in the number of new accounts in recent years, which is facilitated by a decrease in deposit returns, aggressive marketing of brokerage services, and turbulence in the markets in recent months. In addition, this is a great opportunity to practice the skill of "blind" printing, which I mastered in quarantine.
Most importantly , this article should raise more questions than give answers. If you, upon meeting something incomprehensible in the article, begin to search for information on your own and try to figure it out, then you already have a trait that is characteristic of successful investors.

The market is that game in which money is taken away


To be more precise, this is such a game where professionals (and brokers) take money from beginners. The number of newcomers to the stock market has recently grown, and I think the professionals are very happy about this. There are a lot of players in the American market and the turnovers are very large, therefore there is much higher competition, it is much more difficult to “take to the feet” of other participants. It is important to understand that the best minds of mankind are playing against you, trading algorithms written by the best mathematicians that investment funds are hunting for. Read, for example, about the Renaissance Technologies hedge fund. Domestic brokers trade the American market through the St. Petersburg exchange, on which, by the way, a lot of interesting things happen when there is no trading in America (when there is less liquidity).

There is not much capital on the domestic market, not many large players (who also often know about each other’s movements) and it can be easier to make a “crowd” or “hamsters” here. Examples are papers of the third tier (IDGC, Irkut, Pharmacy 36.6 and a large number of obscure companies), where speculators can arrange growth several times and give out to everyone who wants it: pump & dump. The lower the liquidity, the greater the danger, so I urge you not to succumb to the harmful thought that investment is easy.

Yes, in every market there are periods of growth (the “bull” market), when you bought anything - and it has grown. If you look at the Dow Jones index, it is growing all the time. Well, if you look closely, it’s not always - there are periods of recovery from recessions. But overall, it is growing. Great, then you can buy Apple, Microsotf, Zoom, Tesla and get rich! After all, if it was so before, then it will continue to be so!


Nobody knows the right part of the chart, but investing only on the basis of what has been growing for a long time is a big bid for buying “on high”. For example, look at the Japanese Nikkei index and imagine how long-term investors “bought and forgot” the end of the 1980s asset bubble.

Types of investors. Good luck and skills. Skills development


Here is a picture that I liked. I think everything is clear with her. But it’s difficult to say in advance how you have good luck on the stock market, so developing skills is a win-win strategy. Besides, you never know at what point Fortune will turn away.


What skills? My approach is to gradually fill in the gaps in understanding. As soon as we met something incomprehensible - to study, understand, learning from the best. Ongoing research. I believe that the following aspects should be gradually studied (gradually - this means filling in the gaps as you study the information):

  • Trader psychology: how to relate to losses and profits, how not to make emotional decisions in the moment, etc.
  • Technical analysis: what are indicators, moving average, resistance and support levels, channels, patterns of continuation and trend changes, etc.
  • : EPS, P/E, EBITDA, Debt/EBITDA ..
  • : , , , , , , , , ..
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I believe that only TA or only FA do not work, because if an investor does not understand or does not know something, then he makes it possible to earn on his incompetence. Studying the aspects that I mentioned, you will be able to understand what is most suitable for you, what is most understandable and interesting for you, what you can make money from. This means deciding on the time frame that suits you - speculating within the day, medium-term investment (several months) or long-term (years). It depends on what you are comfortable with by the psychotype, how much time you are ready to devote to the stock exchange, for how long you are ready to “freeze” money in the position. As a result, you should have your own trading system - not in terms of uniqueness, but in terms of a set of tools, on the basis of which you decide to open or close a transaction.

Is it possible to be only a value investor using only fundamental analysis? Yes, you can. Buy dividend aristocrats, diversify and calmly relate to drawdowns in stocks, even use them for purchases. Or buy some ETFs. Let's just say retired, ISS. Of course, there are such approaches, and there are Telegram channels that illuminate this path. But this is not my way now, so I can’t say anything about it. W. Buffett’s conditional approach “not to buy a stock if you’re not ready to hold it for 10 years”. I think about this even for medium-term purchases, of course, since this approach can be rephrased as follows: “What are the prospects for business?” After all, buying a stock, if this is not a speculative strategy, you are buying a stake in the business. Only you need to understand againAre you ready to freeze money for these 10 years and you rated the business prospect so well that you didn’t buy it on “highways” (when it is said from each box that the company is beautiful and has a bright future).

Sources of information. The relationship of the financial market and the economy. MASS MEDIA. Psychology of the "crowd"


They earn on the market the asymmetry of knowledge - not only competencies, but also information. The most obvious example is insider trading, which, although considered illegal, is not so easily provable. Of the “strange” moments from what I observed myself, it was TMK, in which trading volumes often increased before big leaps on the news. Well, the scale can be much more significant - from OPEC ministers to Presidents.


It is important to understand one thing: most likely the information that you read is read by someone else, that is, it is already included in the price. Markets are trading the future. No, that’s better.

Markets are trading the future.

This does not mean that traders are predictors with magic balls, no one knows the future. You just need to look if market movements correlate (it’s better to look at all the main tools) in the selected time frame with your look at it, with your market logic. If yes - excellent, you are “in the market”, if not, then this situation should not be something unexpected and unpleasant, such a situation should always be foreseen in advance. For example, if you look at the current situation, then markets expect that the gradual lifting of quarantine will trigger economic recovery (and look at a recovery in China) and the recovery of oil and gas prices, monetary incentives from governments will not allow defaults and support banks, and the second wave of the epidemic will not be. If this turns out to be wrong, then they will collapse - the second “bottom” or even “overfill”.There is a saying: "Open a position on rumors - close on facts." That is, the market may begin to adjust even if this bid for successful removal of quarantine is confirmed! Who will buy from those who made this bet in advance? Correctly. Those who read the headlines of the media: "Markets are growing at the removal of quarantine in the United States." These are just “hai” and will be local. In general, do not read unprofessional media. No, like last time, it’s better.like last time, it’s better.like last time, it’s better.

Do not read unprofessional media.

How to distinguish them? They do what they explain, what has already happened, copying information from each other. They predict all nonsense with loud headlines from unknown "experts", which then are not confirmed from the word at all. And it's not about Komsomol truth, there is a sign among oil traders: “Listen to the Goldman Sachs forecast - and do the opposite.” In 99% of cases, when someone writes something, he has a vested interest - the market is evil and dirty most often. If you do not have enough experience to generate your trading ideas, then it is important to learn to distinguish and choose 1% of the forecasts that will allow you to make money.

And these are definitely not forecasts of brokers and analytical houses, promising, for example, high dividend yield (the favorite strategy on the Russian market is dividend yield, since we have few growth companies). I don’t read these forecasts right now, because I don’t know what is on the move now. Well, for example: “Buy the Central Telegraph or Nizhnekamskneftekhim - there’s what kind of profitability they had last year.” These are just examples of companies with high dividends that year, I have no view on their dividends this year. But he must be with the one who decides to buy the shares of these companies. It’s just that even if the dividends are high, the dividend “gap” may never close, pay your own dividends and that’s it. By the way, with regard to CT, the original idea was brilliantly predicted by one of the authors of the public Corvalol Street in VK.Never open a position on someone else's recommendation without a thorough analysis. Otherwise, they will close it for you. So, another thought in the piggy bank, increasing the chance not to lose in the market.
Do not open a position on someone else's recommendation without a thorough analysis.

It is not to lose. Your task in the first few years on the market is precisely so as not to lose money, gain experience, so that in the future, having developed your strategy and your system, start making money. And do not trade not for your money! According to statistics, after the failures of the first years, most of the investors leave the market. You will definitely make a mistake - buy “on highs”, sell “on highs”. Further success will depend on how you feel about mistakes, start trading violently to win back, or start learning violently so as not to repeat a mistake.
Mistakes and money losses are useful if they force you to learn.

One of such mistakes for me, which I am very grateful for, is to open (and, alas, build up) a short position in Tesla shares. Wicked paper, where some short players endure the “shorts" with a bang. I became a hostage of the belief in the correctness of my position that the company was overbought, that the company was unprofitable, that the technological cycle was coming to an end, that American indices were “on high”. The market almost brought me to the “margin call”, and then, having sorted into the TA, over the next month I earned several thousand dollars on the actions of the stock, practicing the acquired skills. The FA in Tesla shares did not work at all in the moment, and in general, what I learned from this lesson is that the price of a company can be divorced from reality for a long time. As a rule, a little longer than your opportunity to endure this injustice. It is important to ask the following question before opening a position:“Will there be those who buy / sell the stock after me?”
, / ?

And here I think, now this is exactly the place where advanced hedge funds use all available methods of big data analysis to determine and control the mood of the “crowd” of retail investors. A stream of “garbage” or information pressure on specialized forums, streams of false information, stuffing and stuff like that. Everything, in order to put pressure on the psyche and cause a desire to sell / buy. By the way, speculators (by the way, I call them “vultures have arrived”), who help their strategy to increase the amplitude of price fluctuations in markets, perfectly help them in this. Someone just sincerely shares their feelings - euphoria or panic, for which I thank you so much. For there are such eternal truths "sell to optimists, buy from pessimists" or "buy when blood is shed." I have not done research, of course, but maybehere, on a large sample and with diversification, a winning strategy would be to determine the general mood in specialized forums and to stand in the opposite direction. In general, the crowd does not go to Olympus, as they say, and if there are a lot of “passengers” in some paper, then it is likely that the faint of heart will be landed. As I read on one of the forums: "Only steel eggs are covered with gold leaf."


Since medium-term investment based on FA is more suitable for me, then TA is more like an auxiliary mechanism for me, which allows me to follow the movement of the main instruments that are interesting to me at the moment. It is important to look at the correlation in the movements of related instruments, it also provides additional information for reflection. I look at trend movements within the channels, at support levels, at moving averages MA50 and MA200, at trading volumes, divergence / convergence in RSI and MACD, PSAR. The main thing here is not to overload the schedule. For example, how my futures chart on the S & P500 looks like, it will be important for me how it will behave when meeting with the MA200, especially since there is a psychological level of 3000 points. At the same time, I do not take these lines very seriously, I constantly rebuild them and update them as the market moves.I change time frames to understand which MAs are currently traded as supports / resistances. Watching big time frames is useful not only for investors, but also for traders to see important global price levels - a lot is seen from a distance.



As for the simple TA figures (flags, triangles, etc.), which are described in all textbooks, everyone sees them and trading robots will draw anything. The way out of such figures, unfortunately, is difficult to predict, especially for beginners, so do not make big bets only on beautiful geometry. In addition, you need to understand, at least, in the framework of which larger movement this figure is drawn and where the fundamental looks. In this regard, the tactics of trading false breakouts / exits are more interesting, since they connect the emotions and “stop-losses” of those who jerked the wrong way.

For a long time I haven’t made deals on the market, I always look at the “glass” in an attempt to understand what is going on there and how anyone is raising money for it.

And also, if you are interested in active trading. Practice and accumulate successful transactions, experience of successful transactions on small amounts. The main thing is to understand yourself, your psychology on not small, but real amounts (unlike virtual demo accounts). Positive experience will allow you to feel more confident on the increased amounts, and negative should make you learn.

A few words about tactics. What to look after opening a position


Suppose, based on an analysis of the available information, I decided to open a position. What's next? The market does not always immediately go in your direction, even if the analytics for the further movement is correct. There is no such technique that allows you to buy “loys” and sell “hai”, it is only later, it becomes clear on the left side of the chart. My tactic is to make sure where the market will go in the medium term, what trend will form / continue. Until this moment, I constantly monitor the situation. At the same time, if the market goes against me for a short time, I am ready to average out what is usually not recommended - and therefore I also do not recommend it to you. But I am averaging only if new information, a new movement of related instruments, some fundamental data continue to strengthen my position. At the same time, I am constantly looking for confirmation that I can be wrong. Again.
When in a position, look for arguments against it.

As soon as the situation changes fundamentally for me, I am ready to reduce the risk or even close the position. Although for me it is always difficult, since I'm stubborn. Sometimes it goes sideways. As there is a saying that sometimes it is better to be happy than right, so here it is better not to lose money than to be right.

My set of information resources.


The most important thing is to filter out all the info noise that falls through all the channels, especially from people who are not connected to the market at all, but earn on subscribers.
Listen only to those who trade, who put money on their opinions and, most importantly, are often right.

Here is my list of quality resources, to the authors of which I take this opportunity to express my gratitude and respect:

  • «Investing.com». , .
  • Telegram- «profitgate.ru» .. , . Twitter- , . . , , , QE .
  • «principles.com». ., , , . LinkedIn Telegram, . «Profitgate» – , .
  • Telegram- « ». . – .
  • Telegram- «All Economics». .
  • Telegram- «Bastion». , , .
  • Telegram- «Invest Heroes: LIVE». , .
  • «InvestCommunity». .
  • YouTube- «UKspreadbetting». . , (, , , fakeout, breakout ), .
  • To look at specific papers, how people flood and sometimes catch something useful with experience and a nonsense detector, you can go to the Yahoo Finance, Investing, TradingView forums on the American market and MFD on the domestic to the market. There is definitely not for support. There to scout the general sentiment for the instrument. But many do not recommend watching at all, especially to those who are subject to pressure from someone else’s opinion, and there they are just doing it, a meat grinder between “bulls” and “bears”, sometimes funny jokes.

Now the channels are actively promoting each other, so you can easily find your own set if this does not work.

Some additional tips from experienced traders (more specifically for traders)


1. Start with a small amount of

demo account? Someone does not believe in them at all, since experience is practically not tolerated, there is no emotional component of fear of losing or under-earning. You can try it if the goal is intraday speculation. But for real money, nevertheless, start with the amount that you are ready to lose. Here, one must be disciplined so as not to run to withdraw money from the deposit to averaging the position, which is "100% about to shoot in a maximum of a week." Now the market is very nervous, and money is easy to lose. He has not yet decided on the movement. As it crashes into a “breakdown” on the difficultly predicted second wave of a pandemic, you will average it until the fall by “catching knives”.

2. Allow profit to flow and cut losses

Such advice is often given. Again, the point is to save capital as experience grows. The market makes it possible to earn money, no need to rest and sit against the movement of the market. So they say. However, it seems to me that the advice is not so simple and you need to take it in some adapted form. It can lead to unnecessary jerking, which is not always successful for beginners.

3. Plan for the deal. Lay the risk that the market will go in the wrong direction

Opening a deal, you need to decide in advance for yourself (in addition to answering the main questions why I open it at all and who will buy / sell after me), at what prices in both directions will you close it. The same “stop-loss” and “take-profit”, which sometimes carry malicious trading robots. With automatic exposure, I would advise you to be careful if this is not speculative intraday trading.

4. Responsibility

Understand the risks, take responsibility for losses and failures, do not look for the guilty, sort out the mistakes and move on. This is for everyone, finished, true, and not only for the stock market. There are exceptions when you need to be able to defend your rights when someone plays in violation of an agreement, but I can write about this later. Basic - no one owes anything to anyone and I myself am to blame for everything.

5. Risk management. Do not put too much on one transaction

The criterion is the willingness to lose this money. Do not store all eggs. Although Buffett said that it’s possible if you control this basket, it’s me that there are exceptions, but there are no universal principles, look for your style. But an assessment of possible losses is always needed. At the same time, prices can be negative, as the world learned this year.

6. Focus

It is not necessary to trade everything in a row, to compose a portfolio of 20 is unclear what the Chinese companies and ETFs for Japanese robotics do. You should be like a crouching tiger, a hidden dragon and look for a good moment for a deal, a good probability. Take your percentage per day in one transaction, conditionally. This is an experience, of course. Someone sells only oil, for example, or only one share, becoming a specialist in it and acting more efficiently, understanding the movement.

Good luck and growth of skills to all, be a blessed investor!

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