According to Tradeciety, 93% of the stock investors will NOT survive after five years in the game.
Here’s my brief list of 9 reasons why they can’t last that long:
When I began investing in 2008, I had no idea I was doing. All I know at that time was I was losing money.
Let me share how I initiated my trades in the past.
First, I begged my ‘expert’ friends for their market outlooks and stock recommendations. I’d then buy them immediately.
So what happened next was normal at that time. My losses would be as much as 40-70% per stock trade. Then, I would drown myself in sorrow. I’d blame everyone except myself.
Now, I’ll laugh for having such a fixed mindset back then.
You see. Having a proven method or system is crucial toward successful investments. In fact, it is important to have a trading plan.
Once you’ve written down your trading plan’s rules, you have something to start. You'll be refining it along the way as you make mistakes while implementing it.
Simplified not simple
Your rules for your trading system need to allow for clear and decisive action.
It means that your actual rules for buying and selling should be quite clear and easy to use. But this is not to say your plan itself should be simple. Rather, you should take your insights from the market and simplify them into a plan of action.
When you write down your rules everything changes
I know that is a big statement, but when you try it, you will see it’s not far from the truth.
Do not wait and watch for the market to follow your requirements. It'll never happen. Instead, look at your rules, and they will tell you what to do.
Doing it will change the dynamic of mistakes. Mistakes are now not about whether you win or lose on a trade. Rather, they are about whether you follow the rules of your plan. It establishes discipline in your trading, which is critical to your success.
Your plan is not working
What to do if you are not getting the results you want?
It's a simple matter of making changes to your rules, to improve the results. Think of it as a science experiment in a controlled environment. You change a rule at a time. Over time, they will all add up to give you that one that fits your trading personality.
What rules to write down
Here are some of the rules you can use for your system to get you started. Remember to make changes based on your taste.
1. Entry and exit rules
2. Setup conditions such as fundamentals, market trends and moving averages.
3. Position sizing rules, i.e., how much you will trade, and how this helps to quantify your risks.
Failure to plan is planning to fail.
To remain active in the stock investment, you need a system that keeps improving over time.
No system is perfect the first time. Hence, start one now and keep improving it.
Here's a tip if you are unsure how to setup a trading plan. See how the world-class traders do it. Refer to their investment style.
One more thing
If you like what you read so far, remember to share this post on Facebook.
Also, tell me in the comment section:
How long did it take you to come up with a plan?