Your Investment Success Now!

I have been asked a few times recently what are the key things to do (or not do) when starting out as an investor. Well, one thing led to another and … here are my Ten Commandments for Trading. I hope you find them useful and I look forward to your feedback.

By the way, I use the term “trading” to include “investing”. So these could just as easily have been called my Ten Commandments of Investing.

1. Thou shalt have a clear goal

If you do not know why you are trading then stop! The clearer this goal is, the more likely you are to achieve it.

2. Thou shalt have a documented trading plan

Before you enter any trade, you should have a documented trading plan that covers things such as: the criteria for entering a trade, the criteria for exiting, when to trade, how much to trade, how often you will review the trading plan, etc. This applies to all types of trading – shares, options, property, business, …

3. Thou shalt always follow thy trading plan

Measure your success based upon whether you followed your plan or not – not on whether you happened to have a few lucky trades this week. Adjust your trading plan as necessary to improve its expected success based upon measurements of its past success.

4. Thou shalt never enter into any trade without knowing when thou shalt exit

It is considerably harder to decide when to exit after time has passed, especially if a trade has moved against you. Always set your rules before entering a trade and follow them while in the trade. If you find you need to change your rules, then change your trading plan.

5. Thou shalt manage thy money

Knowing how much to trade with will make the difference between success and failure. Calculate the right amount based upon your statistics of how your trading plan has performed in the past. If you have not traded the plan before, paper trade with historical data to develop these stats.

6. Thou shalt not be greedy

Do not deviate from your trading plan for any reason. Do not take trades outside your plan and do not “stretch” your trades to try for higher returns. You may get away with it sometimes but you will pay for it later.

7. Thou shalt take action

Paper trading is great. But you can’t spend your paper profits on groceries. Keep taking more actions, monitor the results and adjust your future actions.

8. Thou shalt be responsible for thine own trades

I do not care who suggested a trade or a trading strategy – your broker, your best friend, an “expert”, … If you choose to trade it, it is YOUR trade. YOU are responsible for choosing whether to trade it or not and you are responsible for the results too.

9. Thou shalt let thy profits run and cut thy losses short

Do not let your losses run and cut your profits short!

10. Thou shalt not attempt to “beat the market”

The market does not care whether you win or lose. It is unemotional. Do not waste your energy or deviate from your tested trading plan by trying to beat it. You won’t!

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Let me know what you think.

Ian

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