Building a Consistent Trading Strategy - Dr. David Paul
Introduction
- Speaker: Dr. David Paul
- Background: Engineering degree, MSc in Metallurgy, PhD in Mathematics
- Experience: Officer in the Royal Marines, extensive market trading
- Objective: Teach mental framework for consistently making money from markets
Seminar Structure
- Typically 3 days at banks, condensed to 40 minutes
- Slides available post-presentation through Fun Port
Key Topics
Personal Journey and Insights
- Confidence and discipline from Royal Marines experience
- Emphasis on simple, repeatable trading processes
Trading Edge
- Fundamental Analysis: Search for true value of a share
- Technical Analysis: Study of trends and turning points
- Combine both to identify undervalued shares with strong earnings growth in rising trends
Methodology
- Method: Have a systematic approach to trading
- Money Management: Manage your money wisely
- Self-Management: Maintain discipline and emotional control
Practical Example
- The MACD Indicator: Initially designed with complexity for higher sales
- Coin Toss Analogy: Coin flip game to understand probability and risk management
Key Takeaways from Coin Toss Analogy
- Positive Expectancy System: Structure to ensure long-term profit
- Risk Management: Balance between hit rate and risk-to-reward ratio
- Probability: Understanding run clusters and their impact on trading psychology
Emotional and Psychological Aspects
- Euphoria: Impact of consecutive wins; the risk of over-trading
- Optimism: Handling emotional highs and lows, particularly during streaks of losses
- Discipline: Importance of sticking to the trading plan to build good habits
Steps to Building Discipline
- Create a written, simple, mechanical trading plan
- Follow the plan for 20-30 trades to build neural pathways and discipline
Position Sizing and Risk Management
- Bet Size: Difference between entry point and stop loss should not exceed 1-2% of your total funds
- Avoid Overbetting: Don’t risk more than your calculated bet size to survive bad trade clusters
Developing a Trading Edge
- Only need one reliable pattern (e.g., head and shoulders, falling wedges)
- Combine fundamental and technical analysis for higher accuracy
- Use patterns such as ascending/falling triangles for entry points
Importance of General Market Conditions
- Trade in line with overall market direction (e.g., market above 21-day moving average)
- Avoid buying in falling markets unless shorting
Recommended Reading
- Book: “How to Make Money in Stocks” by William J. O'Neil
- Focuses on combining fundamental and technical analysis
Execution and Consistency
- Focus on perfect execution of each trade rather than the outcome
- Build habits through repeated practice and consistency
Final Thoughts and Q&A
- Audience Question: Should you run more than one trade?
- Yes, but limit exposure within one market sector.
Conclusion: Emphasize perfect execution and consistent discipline. Adapt simple but effective trading methods to achieve success.
Note: Enjoy the learning process and stick to fundamental principles for long-term success.