Brainy's Share Market Toolbox Brainy's
Share Market Toolbox
(public information)


Are you Share Market Ready?

This is just one of the tools in Brainy's Share Market Toolbox.

You are here: Share Market Toolbox > Share Market > Share Market Ready
Related links: Financial instruments; Share Market GEMs; Market Indexes; Robert's Philosophy;
 Paper Trading; Stop Loss; Support and ResistanceTrend-spotting;
 Blue chips can disappoint; Sensible Investing; Contrarian Investing Redefined;
 Fundamental Analysis; Technical Analysis; Funda-Technical Analysis
Brainy's Share Market ToolboxBefore you start investing in the share market or share trading, it is wise to adequately prepare.
It is very useful to know "enough" about the markets - but how much is "enough"?
And what is really involved? Perhaps you have started investing/trading but without success?
Here is Robert's checklist to help you determine your level of readiness.
It might look like a long list; but if you can tick off every item, it will help you to be prepared.
Which financial instrument to trade or invest?
The discussion and information on this page is focused on share market trading and investing.
For simplicity, there are other financial instruments which are not mentioned here.
See more information about alternative instruments (eg. bonds, hybrids, forex, options, etc.)

Print this web page, and use it as a checklist - tick the completed items, and circle the outstanding ones.
(Print it using the print option "shrink to fit".)
WARNING: Investing in the share market does
expose you to the risk of financial ruin.
If you proceed, please do so carefully.
This is not advice of any sort. Always seek
professional guidance before taking action.

Investing or trading in the share market
is not for everyone.
And it is foolish to rush in under-prepared.
There is a serious risk of loss of capital.
NOTE: This check list will not guarantee your success, 
but it will help prepare you for the road ahead.

Summary Check list

(A) Preparation - Important things to
think about (see details below)

  1. Why do this? Is this for your?
  2. Your suitability
  3. Psychology and emotions
  4. Risk tolerance
  5. Funds and funding (where will the money come from?)
  6. Fundamental analysis or Technical Analysis?
  7. Funda-Technical Analysis
  8. Share price trends - The trend is your friend
  9. How much news?
  10. Trading Styles, Plans and Strategies
    • Trading Styles
    • Trading Plans
    • Trading Strategy
  11. Nimble Short Term Investing
  12. Allocate time and time slots (ie. time management)
  13. Understand the market and the instrument
  14. Your stock universe
  15. Understand your opponent and the counter-party
  16. Understand the market rules

(B) Get ready (see details below)

  1. Paperwork
  2. Trading practise
    1. Back testing
    2. Paper trading
  3. Education
  4. How to trade?
  5. Broker and Trading Account
  6. Charting software
  7. Computer hardware
  8. Review

(C) Risk and money management (see details below)

  1. Risk and money management
  2. Position sizing and position size calculator
  3. Exit strategies
  4. Stop Loss
  5. Portfolio management
  6. Risk management
  7. More information...

(D) Trading - "pulling the trigger" (see details below)

  1. Trade planning
  2. Logon, select and trade
  3. Keep good records
  4. Be aware of and manage the emotions

(E) Trade Management - Monitor progress (see details below)

  1. Monitor positions
  2. Periodic review of positions
  3. Scale down a position
  4. Periodic strategy review

(F) Investing / Trading Strategies (see details below)

  1. Strategy considerations
  2. Sample strategies

See all the details below...

* Notes
and More Info

Many of the topics listed at left are expanded in Brainy's series of eBook (PDF) Articles on Share Trading / Investing (see the list in the left hand column).

Toolbox Members - have access to the contents of the Share Market Toolbox. Some materials are free; but much is reserved for subscribing Members. More details...

Robert Brain provides support to new and experienced traders and investors, including charting software.

Why "Brainy"?

"I need to differentiate myself and my products and services from others in the market place. So I am using one of the nicknames I had in High School."

Who is Robert Brain?

Brainy's eBook Articles are fantastic value for money (free access included with Toolbox Membership):

  • The amount of information delivered each month is just enough to easily digest without suffering information overload.
  • Better than buying another text book that you might struggle to find time to read. 
  • File the information for easy future reference.
  • If you have a special topic that you would like covered, just email a request to Robert and maybe it can be included.
Robert also runs seminars:
Brainy's Share Market Toolbox
The toolbox is an arsenal of weapons to help you tackle the share market.
See a list of contents on
the Toolbox Gateway page.

The Share Market - more information about the market and investing and trading.

And whatever you do,
beware the sharks in the ocean!

Beware the sharks in the ocean!

(A) Preparation - Important things to think about

  1. Why do this? Is this for you? - Think seriously about why you might want to do this. Possible reasons include: taking control, for enjoyment, to increase income, to build wealth, etc. Or perhaps just as a hobby for pocket money.
    How seriously will you treat it? The Australian Taxation Office has strong views about the degree of seriousness.
    See Brainy's eBook Article ST-2000, "Preparation" for an introduction to this topic (it's free), and
    Article ST-2100, "Why get into Share Trading?" for some more details
    [Toolbox members* can see the full version of ST-2100 here.]

  2. Your suitability
    Find out if you are suited to share market investing/trading - whether short term trading or long-term investing. Some people have problems with the worry of committing money to the share market. But there are simple ways to overcome this, such as keeping the amount of money "at risk" relatively small (proper money management - see below). It is possible to sleep at night.
  3. Mark Whistler's "Trade with Passion and Purpose".
  4. Psychology and emotions
    Understand the emotions and psychology involved with this activity to help you stay in control of your emotions whilst trading. The experts say that a sound psychological approach is about 80% of the challenge in achieving success. There are strategies that can be implemented to help calm the nerves, stay in control, sleep at night, and protect investment capital. Read more about the underlying emotions and psychology of the markets on this Toolbox web page on Emotions and psychology.
    Also see the "Risk and money management" notes below.
    A good book on this subject is Mark Whistler's "Trade with Passion and Purpose" (picture at right).
    Also see Brainy's eBook Article ST-2120, "Psychology and emotions.
    [Toolbox members* see the full version of ST-2120 here.]

  5. Risk tolerance Financial Risk Tolerance table
    It is very useful to understand your risk tolerance.
    Robert has included a self-assessment Financial Risk Tolerance table (FiRT) in eBook Article ST-2180, "Your risk profile and tolerance".
    [Toolbox members* see the full version of ST-2180 here.]

  6. Funds and funding
    It is important to understand where the investing/trading funds will come from, and
    if there is any limit on the funds, and the costs associated with any borrowings.

  7. Fundamental or Technical Analysis? 

    Don't forget:
    Price charts summarise the underlying
    opinions and emotions of the market participants.
    Every chart tells a story.
    It pays to understand the stories in the price charts.
    (technical analysis helps us read the charts)
    Understand the difference between fundamental analysis and technical analysis, and understand your own preferred position. That is, do you want to follow just one of these approaches 100%? Or maybe a bit of both? If you want to follow technical analysis, consider Brainy's Technical Analysis Intro seminar, or consider joining the ATAA (Australian Technical Analysts Association)

  8. Funda-Technical AnalysisFunda-Technical Analysis 
    The Funda-Technical Analysis approach is a special blend of both the fundamental and technical analysis approaches. It utilises just three key fundamental analysis criteria to develop a watchlist of quality stocks, and then technical analysis to time the investment entry and exit for optimum benefit and profits. Read more about Funda-Technical Analysis, and
    see Article ST-2300, "Funda-Technical Analysis" 
    [Toolbox members* see the full version of ST-2300 here.]

  9. Brainy's "3Ways Rule"Trends - The trend is your friend 
    Understand the concept of share market price chart trends
    (ie. uptrends and down trends) using Brainy's unique "3Ways Rule" to help
    understand the key characteristics.
    Also see detailed information on trends (a Toolbox web page), and the related topic of Dow Theory (also the Article TA-2200, "Dow Theory" - and Toolbox members see the full version of TA-2200 here).
    Don't forget a couple of very important points about trends - once a price trend is confirmed (either up or down) then it is likely to continue, and a trend is in place until it is confirmed to have finished (see Dow Theory for more details).

  10. How much news?
    Think about how much news you want to see and hear, to help you with stock selection. Some people ignore most of the news, whilst others spend many hours studying the news. Some people follow the news because they enjoy it, even if it doesn't help much. Also see the Toolbox web page Balance the time on research and investing.

  11. Trading Styles, Plans and Strategies
    Understand the difference between each of these ideas. Much has been written on this topic, and many people have different understandings of what they are. After consulting with experts, Robert has clearly described how the notion of trading styles is rather different to trading plans, and also different to trading strategies.
    See the free eBook Article ST-2400, "Trading Styles, Plans, Strategies" for an overview and explanation.

  12. Trading Plan Template
    1. Trading Styles
      Understand your preferred style (intraday trader, short term trader, longer term trader, or investor). 
      See eBook Article ST-2410, "Trading Styles" for a discussion.
      [Toolbox members see the full version of ST-2410 here.]

    1. Trading Plan 
      Write out a trading plan to describe "what" you want to invest in (eg. shares, CFDs, currencies, foreign exchange) and over what time frames (short periods, long periods). 
      See eBook Article ST-2420, "Trading Plans and Template" for a discussion.
      [Toolbox members see the full version of ST-2420 here.]

    1. Trading Strategy TemplateTrading Strategy 
      Write out your intended trading strategy - ie. the stock selection criteria, the entry signals, the exit criteria. Also your money management, portfolio management and risk management strategies (including stop-loss determination method). BUT, there is an assumption here that you understand enough about stock selection criteria.
      It is possible that you might need to learn more about Technical Analysis methods. 
      See eBook Article ST-2430, "Trading Strategies and Template" for a discussion.
      [Toolbox members see the full version of ST-2430 here.]

  13. Nimble Short Term Investing
    The Nimble Short Term Investing approach was pulled together (by Robert Brain) in 2014, and pondering many investing and trading issues for quite some time. There is no suggestion that the approach is a winner, and there is no suggestion that any one should adopt it. And it is possible that some of the finance industry professionals might not like some of the details.
    See more details about the Nimble Short Term Investing approach.
  14. Allocate time and time slots

    A note on allocating time
    The time to spend can be apportioned across
    each of the following areas:
    • Research time,
    • Stock selection time,
    • Optimising the entry,
    • Managing the position,
    • Monitoring all open positions,
    • Managing the exit.

    Why do people spend
    so much time on it?

    Different people will spend different amounts of time
    on each of the above aspects. Why?
    Simple - It's because they enjoy the activity. It's almost like a favourite hobby. For them, the journey itself is enjoyable.
    See a discussion on this on the Toolbox web page Balance the time on research and investing.
    One of the biggest downfalls for many new-comers is that they don't treat this activity seriously, and they don't allocate the time that it deserves. But the amount of time is not as important as having a routine.
    The routine might be a specific couple of hours on a certain day once each week, or it might be more or less often. The important point is that we need to be able to take advantage of market opportunities as they arise, but more importantly we need to know whether our position is in profit or loss, and to exit our position if needed.
    Without a regular (perhaps weekly) routine to do this, we might be throwing our money away.

  15. Understand the market and the instrument
    You need to understand the market and instrument that you want to trade. It might be real shares on the share market, or CFDs on shares in the share market, or the currency markets (forex), or options or warrants on the share market. Or it might be the SPI (Share Price Index). It is dangerous to play any game without knowing the rules. 
    See Article ST-2500 "Understanding Share Prices" (Toolbox member full version here.)
    Perhaps study a training course or seminar (eg. Brainy's Share Market Secrets 101 seminar (aka Boot Camp). 
  16. Your "stock universe"
    To help increase the chance of success, and to stay focused, there are a number of considerations regarding your "stocks universe". If you choose to invest in Australian equities (ie. the share market), then it can be useful to narrow down the range of stocks in which you might invest. For example, you might choose to focus on any one of the following groups, or more than one of these groups (and see more information on the "Your stock universe" web page):-
    1. Top 200 stocks - The XJO index (S&P/ASX 200).
    2. Top 500 stocks - The All Ordinaries index (XAO).
    3. The stocks in the mid-cap 50 index.
    4. The stocks in the Small Ordinaries index.
    5. The stocks in a particular sector (eg. financials, health care, telecommunication stocks, etc.).
    6. Stock liquidity (see more details here).
    7. And there are many other groupings to think about.
  17. Understand your opponent and the counter-party
    It is very useful to understand as much as you can about the other players in the market - who are they? how big is their pocket? and what rules do they play by? You might be surprised at how easy it is for a novice to come unstuck very quickly because some of the players bend the rules and don't play fair. Don't forget that there is always a counter-party on the other side of your trade, and it can be useful to understand who that might be.
  18. Understand the market rules
    It is very useful to understand the rules for playing the game in your chosen market. And after understanding the rules, then realise that sometimes, some of these rules are bent by some of the players. And sometimes they get caught and punished, and sometimes they don't. Just because there are road rules that we are meant to obey on the roads (like speed limits, and obeying traffic lights and turn signals), doesn't mean that everyone abides by all the rules all of the time.

(B) Get ready

  1. Paperwork
    It is very important to have the appropriate paperwork ready to record useful information about your investing / trading activity. This might be a simple spread sheet to record the details of each buy and sell transaction, with some way to track your overall results - win/loss ratio, average win size, average loss size, total profit (or loss), etc,. etc. It is important to give some thought to how you might do this. See more information below about Trading Journals and a Trading Diary.
  2. Trading practise 
    It is important to practise before starting to trade for real. This will help to test out the emotions, as well as the strategy and the recording paperwork. The practise might be back testing (see items below), or a share market game like the twice yearly ASX share market game. Also see Article ST-3100, "Trading Practise" [Toolbox members see the full article here].

    1. Back testing 
      To gain confidence with your documented trading strategy, it is very wise to test it out on past history. You could use the TradeSim software to do this (with BullCharts).
    2. Paper trading and back-testingPaper trading 
      Now that you have some confidence with your trading strategy, test it for real by "paper trading". That is, go through the motions of identifying stocks to trade, and hypothetically place your trade by recording your hypothetical trade details on paper (or in the computer), then at some future time, exit the trade and record the details. Monitor your success over a period of time (weeks or months) to gain more confidence that your strategy actually works. See more details about Paper Trading.

  3. Education 
    Identify any missing knowledge or skill, and seek to address this. Join an organisation of like-minded people to network with others and to share ideas and learn from their experiences
    (eg. the Australian Technical Analysts Association - ATAA).

  4. How to trade? 
    Determine whether you want to use a full-service broker to give you guidance and advice, or an online broker with no advice, or somewhere in between.

  5. Broker and Trading Account 
    Find an appropriate broker and/or service provider, and sign up for a trading account.
  6. BullCharts (Aussie) charting software.
  7. Charting software
    To effectively select quality stocks, and properly time the entry, you really need good quality charting software. This author prefers the Australian BullCharts charting software (and as an authorised re-reseller can offer a good deal). Many people find that a second computer monitor can be useful.

  8. Computer hardware
    Provided we have a reliable internet connection, we don't really need anything special to manage our own trades, unless we are serious enough to want to trade intraday utilising current data. This might include a "trading platform" with specialised software (eg. WebIRESS which is offered by a number of brokers), running on a computer with enough grunt to perform adequately.

  9. Review your "ShareMarketReady" checklist (this web page) to see if you are ready.

(C) Risk and money management

  1. Risk and money management 
    Make sure you implement sound money and risk management strategies.
    If investing / trading in stocks, consider preparing a watchlist of only quality companies in order to increase the chances of success - avoid high-debt companies and those with a history of poor performance. Also see the "Managing Risk" presentation), and the Toolbox web page Risk management, and the following eBook (PDF) Articles:
  1. Position Sizing and Position Size Calculator
    In order to maximise the effectiveness of your trading, it is important to optimise the size of each trading position. That is, to maximise your profits on winning trades, you should take out the largest possible position that your strategy and risk management will allow (perhaps up to a degree). Otherwise, your profits will be smaller than they could be. And with proper money and risk management, the losses should be no larger.
    Some simplistic research has shown that a position size needs to be at least about $1500 to $2000 in size, otherwise a modest amount of brokerage will take too large a bite out of the capital.
    See the Toolbox web page on Optimising position size.
    See eBook Article ST-4400, "Position Sizing" for details about position sizing.
    [Toolbox members see the full version of ST-4400 here.]

  2. Stop Loss detailsExit strategies
    It is very important to have a plan regarding the possible exit conditions from a position. That is, what condition might trigger the action to sell part or all of a position? It could be any of the following, for example:- little price movement over a specific time period (known as a Time-based Stop); a weakening uptrend; a failure of an uptrend; two moving averages cross; a chart indicator shows weakening (eg. RSI, MACD, ADX, etc.); or a Stop Loss is triggered. See  the free eBook Article TA-6030, "Exit strategies - Introduction", and the Toolbox web page. Also, more details in the October 2013 monthly eNews email.
  3. Stop Loss 
    If we want to limit our losses, and avoid the sometimes catastrophic falls in share prices, then it is vitally important to have a Stop Loss position determined for every position, and to action our stop loss as appropriate.
    It is customary to have an Initial Stop Loss to protect the position until it moves into profit, and then a Trailing Stop Loss that will be moved progressively higher to protect the accumulating profit as the share price moves higher.
    See some initial information on the Toolbox Stop Loss web page.
    See Robert's eBook Article ST-4500, "Stop Loss" for more details about that all important concept - the humble Stop Loss.
    [Toolbox members see the full version of ST-4500 here.]

  4. Portfolio management 
    Make sure to have a good way to record your trades and your portfolio positions.
  5. Risk management
    Be sure to think through those things that could go wrong with the investing or trading activities - ie. have a "Plan B" ready. Things like a broken computer (power goes off, or internet goes down). It will be useful to have an alternate method for placing trades. This might be a laptop computer (with battery fully charged) and a separate mobile internet connection. Also a printed sheet of instructions, and broker phone number details, so that positions can be closed manually by phone without using a computer. If you do a serious risk analysis, you might ask yourself "what's the worst thing that can go wrong?". And then consider both the likelihood of each risk event, and the seriousness of the risk event if it does occur. Then work through the high impact and highly likely events and do something to mitigate the risk. Then you will be like a good Scout - Prepared.

  6. More information...
    on these topics is included in Brainy's eBook (PDF) Articles on Share Trading - see them listed in the left-hand column on this web page (eBook Articles Table of Contents).... Also see: the archived Monthly Toolbox eNews emails.

(D) Trading - "pulling the trigger"

  1. Trade planning
    Give careful consideration to any pending investment. This can include things like:
    • The amount of possible Reward versus the Risk (and the Reward to Risk Ratio).
    • Using a Trade Planning work sheet or calculator to quickly consider different position size scenarios.
    • The percentage amount of capital to be deployed, and at risk (see item above).
    See Robert's eBook Article ST-5110, "Trade Planning" for more information and tips regarding planning the trade.
    [Toolbox members see the full version of ST-5110 here.]
  2. Trading Journal and Diary Logon, select, and trade 
    Proceed with caution. 
  3. Keep good records
    It is vitally important to keep adequate records of all transactions. This might be for tax purposes, but also to enable a sound periodic review of performance to determine whether the strategy needs to be refined.
    See Robert's eBook Article ST-5210, "Trading Journal and Trading Diary" for details about Trading Journals and Diaries. [Toolbox members see the full version of ST-5210 here.]
  4. Manage the emotions 
    Be mindful of the sweaty palms and pumping heart on your first few trades.
    Not able to sleep at night in case something goes wrong? Perhaps the position size is too large. Go back to the discussion above about risk management and reduce the position size to be a smaller portion of the overall capital (but remember to keep it large enough so that the brokerage fees don't kill it). Also see the Toolbox web page Emotion and psychology of the markets.

(E) Trade Management - Monitor the positions and progress reviews

  1. Monitor positions 
    Monitor and review open positions, and close out appropriate positions (ie. implement the Exit Strategy when appropriate), on a periodic basis according to your trading strategy. This is critical, in case the position is moving against you and you ought to consider closing the position. This might be on a daily basis, or every couple of days, or perhaps weekly. It needs to be thought about, and acted upon - rigorously.

  2. Periodic review of positions 
    According to your trading strategy, review your open positions and make adjustments as appropriate.

  3. Scale down a position
    If a position has experienced significant growth, and is now a much greater value than when purchased, it might be over-weight in the portfolio. In which case it might be appropriate to sell a portion in order to bring the portfolio back towards a more balanced situation.

  4. Periodic strategy review 
    According to your trading strategy, review both open and closed positions (ie. overall progress), and make any necessary adjustments to your trading plan and strategy. 

(F) Investing / Trading Strategies

For information on investing/trading strategies including some concepts, some considerations, and some sample strategies including those listed below, with more details and lots of sample strategies in Brainy's eBook (PDF) Articles on Share Trading / Investing (in the left-hand column, numbered ST-6xxx).
  1. Strategy considerations:
    1. Volume and stock liquidity
    2. Finding liquid stocks
    3. GICS Codes, indexes and sectors
  2. Sample Strategies
    1. Break outs
    2. Correlation
    3. Robert Weekly Watchlist
    4. Robert's JB+AH Strategy
    5. Stan Weinstein
    6. Alan Hull
    7. Daryl Guppy
    8. Nicolas Darvas "How I made $2 million on the Stock Market".

WARNING: Investing in the share market does
expose you to the risk of financial ruin.
If you proceed, please do so carefully.

Beware the sharks in the ocean.

Whatever you read on this topic, and wherever you read it,
there are some people somewhere who might try to tell you that it is rubbish.
Everyone is entitled to their opinion.
What they really mean to say is either "it is not for me", or
"I do not believe that to be true" (because they have not yet been convinced).
The bottom line is: "There is not one right answer, and different people have different opinions."

The information presented herein represents the opinions of the web page content owner, and
are not recommendations or endorsements of any product, method, strategy, etc.
For financial advice, a professional and licensed financial advisor should be engaged.

Home | DISCLAIMER | Contact us
Copyright 2008-2019, R.B.Brain - Consulting (ABN: 52 791 744 975).
Last revised: 21 December 2019