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                  O S I S  BBS  (416) 266-7005                      
                   
                  On-Line Skills, Information, & Strategies         
                                                                    
             A knowledge-base BBS fostering PERSONAL SUCCESS        
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             FILE NAME:      TFAL                                   
                                                                    
             SUBJECT:        Brainstorming "Trading For A living"   
                                                                    
                                                                    
             DATE REVISED:   October 1, 1994                        
                                                                    
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                   TRADING FOR A LIVING
                   --------------------

Many novice investors dream of one day being able to trade full
time and make a living out of it. Wouldn't it be nice, not having
to report for work each day, no more taking orders from the boss,
or try and survive the office politics. Instead, we stay home and
indulge in our favourite hobby - investing in the market - and are
proficient enough to generate sufficient income to allow us
continue doing so. 

Ahh.. computer trading, stock charts, financial reports, talking
with corporate public relations personnel, eagerly scanning the
financial news each morning, discussions with our DIY Investment
Club buddies, working hard, but working when we want, whether it's
3 in the afternoon, or 3 in the morning, adrenalin running watching
trading positions when the markets go volatile, the rush of closing
positions with profits.... that's the independent life that some of
us dream for. Who needs working for others. Work for yourself, in
the comfort of your home, and having the luxury of working at your
own pace.

OSIS DIY Investment Club members are currently undertaking a
research on a practical trading methodlogy/discipline that can be
used towards achieving the goal of TFAL - trading for a living. As
a first step, we have developed the TFAL skeleton framework as
shown below.  We are now inviting private investors all over North
America to help us flesh out the details. Critique the framework,
share us your thoughts and ideas, and help make this project a
success! 

If you are in receipt of this file, you're one of the seasoned
investors who are willing to help in the brainstorming process. You
are willing to share with us techniques and methods of your
personal trading system. And we thank you for your generosity of
time and spirit. In appreciation of your help, we will send you a
copy of product when it's finished. 


Trading, not Investing
----------------------
We would like to clarify that we're talking here about TRADING, and
not INVESTING. The trading cycle is weeks, and not years. 

Brief instructions
------------------
Kindly write your comments on this file itself and then return it
to us. In order not to have duplicate file names, please rename
this file as TFALINI where INI are your initials. For example, in
my case, the filename is TFALDT where DT are my initials. 

When you have finished, please attach the file to a message and e-
mail it to 

               Denis Tay
               Internet address:  denis.tay@canrem.com   

or, upload it to:

                OSIS BBS at 416-266-7005

or, if you have to use snail mail, send a diskette (or hard copy) 
to:

                Denis Tay
                7 Sari Crescent
                Scarborough, Ontario
                M1E4W3, Canada.
           

and, remember to:

                Leave us your e-mail internet address or local
                BBS number, or mailing address for us to deliver  
                the final product to you.
                

       -----------------------------------------------
    
       LETS BUILD A METHODOLOGY TO TRADE FOR A LIVING!

       ------------------------------------------------

At this time, we are focusing on trading stocks and options.
However, if you are trading futures, or other things (throwing in
other things here 'cause there might be other things that we are
presently not aware of, but would like to know), tell us about them
as well. In a brainstorming process, there is no pre-judgment on
suitability of information. Any type and manner of help and
information from you are important to us!


       -----------------------------
    
 1.     CAPITAL AND EARNINGS TARGET

       -----------------------------

Here's our thinking: Size of capital:$10,000. 4 trades. $2,500 per
trade. Want to leverage, therefore, either go on margin, or buy
options. Minimum size is 500 shares. Target is $1 move per 2 week.
That is, the maximum, based on 100% winners, is 4x$500x26 = $52,000
per year. This means:

     .    4 plays going on at one time (more plays, more
          diversification, therefore less risk)

     .    Each play has $2,500 capital, leverage as much as
          possible.

     .    Minimum size lot is 500 shares, or 5 option contracts.

     .    Target is the stock in play moves up by $1.25 in 2 weeks
          time, giving a clear profit of $1.

Questions to you:

*    Is $10,000 capital, divided into 4 trading blocks practical?

*    Is the annual earnings target practical? Obviously, it is
     impossible to score 100% to achieve $52,000. However, if our
     trading success factor is 70%, this is $36,400 annual income,
     not bad for a $10,000 capital outlay.

*    Is $5,000 per trade (margin at 50%) practical? This is
     equivalent to 500 of $10 stock.

*    If trading options, the leverage is already there, therefore
     the capital per trade is $2,500, equivalent to 5 contracts of
     $10 option, or 10 contracts of $5 option. Does this make
     sense?

*    The profit target of each trade is $500 (clear, after paying
     commission, discount, of course). Four trades are going on at
     any one time. Each trade has a investment horizon of 2 weeks.
     The assumption here is that the trader only take trading
     positions on stock that is expected to go up, or down (short
     the position, or buy put) within the 2 weeks after taking the
     trading position. Is this practical in real life?



       ----------------
    
 2.     TRADING TOOLS

       ----------------

We see at this early stage, three essential trading tools: stock
chart trading software, brokerage firm with computer trading
facility, and discount brokerage.

Stock Charting Software
-----------------------
The software has to be specially geared for short term trading. The
technical indicators must be sensitive enough to show changes in
phases and momentum. The graphics have to be easily understood, at
one glace, to tell whether the cycle and momentum are reversing.

Presently, club members use AIQ, MetaStock, and Magic Bourse.

Questions to you:

*    If you're familiar with anyone of the software above, how do
     you rate it as a trading tool?

*    What technical indicators, or a combination of indicators, do
     you use, and how do you find them?

*    If you're not using any of the above, what software are you
     currently using, and how would you rate it for trading
     purposes?


Computer Trading & Discount Brokerage Firm
------------------------------------------
OSIS DIY Investing Club is located in Toronto, Ontario, Canada.
Since this file may travel all over the globe via e-mail, we need
to say where we are located. Presently, we use the Toronto Dominion
Line Green Line Investors Services. We can trade and do market
inquiries with a computer through this discount brokerage firm. And
this is essential, since it is convenient to call in via computer
and review the market and trading positions throughout the day.

Questions to you:

*    Is it good enough to call in via computer for quotes, or
     should a trader get one of those gadgets that do live market
     quotes throughout the day?

*    If you're living in Toronto, are you using a discount broker,
     which, and how do you rate its services.

*    Are you aware of any other services offering computer trading
     and online quotes?



Trading Discipline:
-------------------

Questions to you:

How does one develop a WINNING trading discipline? 

How do you rate the following success factors: knowledge,
experience, temperament on risk taking, ability to decide and act
quickly, dedication and commitment to studying, enhancing, and
following a trading discipline, and, not least, luck.

Here is our concept of a winning discipline methodology. How to you
see it? Are there further points you would like to add?

     .    IDENTIFY CANDIDATES: Identify the best 4 stock
          candidates. A candidate must have the following
          attributes: volatility ( a flat trading stock is not a
          good stock to make a living on), darling stocks (for
          example, Methanex, Cominco Fertilizer, and Potash right
          now, and Newbridge, Magna, Cott, a year ago.)

          How do we go about identifying stock candidates?

          What other features should a stock candidate possess?

     .    MONITOR CHART: Study the charts of the candidates. Look
          for duration cycle in particular, and the hi/low in the
          duration cycle. To reach the profit target, we need a
          duration cycle averaging 4 weeks (2 up, 2 down), and with
          a fluctuation of at least $2 (for margin of error) in
          each cycle. Study of the stock chart daily is essential -
          downloading data every day, and checking the technical
          analysis indicators, asking the question: is it at the
          top/bottom of the cycle (top sell-short, bottom - buy
          long).

     .    TAKE A TRADING POSITION: When it is viewed to be at
          bottom of the trading cycle, take a position in the
          stock. If the stock is optionable, buy 5 contracts. If
          not, buy 500 shares.

          Is 500 an optimum lot to trade for this purpose?

          Say, if we have only 2 positions at play now, and feel
          very confident of a third find, would we put 2 lots into
          this third position?

     .    PUT STOP LOSS: Some may want to do this, some may not.
          I'm inclined to put a 15% stop loss. It means that if I
          call a stock direction wrongly, and it goes in the
          opposite direction to what I had anticipated when going
          into the trade, then I would take a maximum of 15% loss.
          Stop loss is essential for a disciplined way of damage
          control. The idea is to limit losses, while letting
          profits continue.

     .    MONITOR, MONITOR, MONITOR: If we're doing this for a
          living, we'd have to check our trading positions at least
          three times a day for any sudden surprises. These days,
          with computer trading, a stock can be very volatile and
          have sudden large moves within a day. If this happens to
          your trade, you'd have a decision to make or whether to
          hold, or sell.

     .    CLOSE: Deciding when to close a position is just as
          important as deciding when to open a position. This is
          where experience comes in. Generally, if a stock is in
          the right direction and momentum is strong, then continue
          to leave the position open even though the profit target
          of $1 has been reached. OTHO, if the direction is
          listless, and there is a small window of opportunity to
          sell for a profit, then you would want to do this, even
          though the profit is less than $1. The overall discipline
          and profit target should be maintained, however, common
          sense approach and decision-making must prevail to tailor
          to the unique circumstances of each trade.

     .    APPRAISAL: Each trade must be a learning experience. A
          trading journal has been proven to be most helpful to
          record your thought and decision making processes. After
          each trade, analyse and reflect on how you made
          decisions, and ask yourself: What did I do well? What can
          I do better the next time? A journal will provide
          feedback to you. Feedback is necessary for effecting
          SELF-CHANGE, constantly refining and improving your
          trading system.

     .    ATTITUDE: As in any other endeavour, a winning attitude
          is of utmost important. A winning attitude is one of high
          self-confidence, believing and "knowing" in your
          capability to suceed, visualizing the outcome you desire
          (yes, see a picture of the stock zooming and going beyond
          your wildest expectations), and staying relaxed in a
          mindful  and alert way even though at times the price
          gyrations may be stressful. The easiest way of
          maintaining a winning attitude is to WATCH YOUR INTERNAL
          TALK TO YOURSELF, and choose to say things that are
          naturing, optimistic, and respectful of your self esteem.

Well, thats the framework we got to so far. It's going to  be
exciting to see the final outcome of this brainstorm process.

Thanks for helping,

Denis Tay

                                

     ͻ
                  O S I S  BBS  (416) 266-7005                      
                   
                  On-Line Skills, Information, & Strategies         
                                                                    
       To contact the Sysop, please leave a message on OSIS, or     
       Internet e-mail denis.tay@canrem.com   or write to           
                                                                    
                  Denis Tay                                         
                  7 Sari Crescent,                                  
                  Scarborough, Ontario, M1E4W3, Canada.             
                                                                    
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