When we attend investment and brokers workshops, one question that seems to spring forth is what’s our secret grail? Well, we don’t have one. By following clearly laid out strategies, we seem to be right most of the time. These are strategies have been time tested and we always seemingly pull through:
1.Plan: Benjamin Franklin once said, “If you fail to plan, you are planning to fail”. Sir Winston Churchill is credited with another, often repeated, saying: “Those who fail to learn from the past are doomed to repeat it.
Trading isn’t just clicking on your computer mouse and hoping to win. That’s gambling. This isn’t about hoping. This is about make clear cut decisions based on historical facts and figures. And to have this all lined up, you need a plan. Our best advice – don’t dream of trading until you have a clearly written out plan. You need to know what you’re buying and selling; what markets you’re going to trade, what your portfolio will consist of. Very importantly – you need to agree on how much you’re going to risk on a trade. At Xavier McAllister, it’s our first golden rule.
2. Facts and not feelings: You must trade with facts. Trading on “I feel like” or “I’ve got a hitch” will quickly make you loose all of your head earned money. This isn’t the grand national or Baba Ijebu. You need to research, and do it quickly. Just because you won today based on a feeling is a gamblers game. Facts and figures i.e. financials and technical analysis must guide your decision making processes.
3. Use technology: There are thousands of traders out there, both retail and institutional. What makes you think you’re so special? We haven’t even mentioned those that are using HTF’s. You need to use all of the available technologies out there. Have your ear to the ground. Get the best laptop, internet connection and use multiple screens. Use your mobile apps to view the markets (Although be wary of using them due to distractions). Get the technology you need and you can make fast, informed and accurate decisions.
4. Risk Averse: Our golden rule – be a 1% percenter. Don’t risk more than this. Only lose what you can afford. Going above 1% means you’ll cost your company a lot and will be out of the door before you know it. If you company has another strategy that delivers results, then stick to it and only adjust it when you’ve come away from trading and have been able to give it much thought.
5. Know when to stop: If you don’t have an entry and exit plan, then you won’t stick to rules. Stick only to the entry and exit parameters in a trading plan. Maintain discipline and focus on the plan. And if the plan isn’t giving you the results you need, then come up with another plan – but not during the trading day.