Personal Finance and Investment

I am generally recognized as a top expert in the stock market and particularly at teaching people how to develop into their neighbour’s millionaire round the corner. I didn’t start off as skilful and clued-up as I am now. When I began, I knew almost nothing. In my early twenties my experience was so poor that all I could do is to stand by watching a full-time stock broker stealing $90,000 from my 75 year old grandmother. I witnessed the nationwide stock brokerage defend the interests of that broker, while my grandma lost all she had.

The pain of this drama was so acute that it provoked me to pursue my Ph.D. in finance - not more than a 100 of students graduate in finance worldwide each year, as the subject is extremely difficult in terms of math. Frustration and anger I had at the huge rich power behind Wall Street spurred me to become a contemporary master of money. And that’s what you also need to do - wake up!!! Awaken to the belief that you can become a stock investor. Believe that you are in control of your destiny and that it’s in your power to stop delegating all the control to the Wall Street system, which couldn’t care less to provide for your financial future. Taking full responsibility for your investment, earnings and savings is the first step to your financial welfare.

Many years ago I learned from my friend, an expert in finance, that if I didn’t take complete responsibility for all my investment choices, then I would never make progress - I would merely interrupt the delicate feedback loop that gives all of us an opportunity to learn from our mistakes. Every time you accuse someone else of a financial mistake, you obliterate an opportunity to learn a lesson and benefit from the situation. The straightforward move you should make is to genuinely and firmly say to yourself: “I am the master of my life and I am in charge of everything - Wall Street is not in command of my mind”. This is the most crucial change you must make to your way of thinking.

Some of your acquaintances may think that you are big-headed. Never mind - just ignore them and laugh all the way to the bank! Don’t listen to everything people say - are these noisy little bugs in your life, who so quickly nay say your investment plans, paying off your bills or funding you to move ahead?! If not, then blow them off! They are just giving you a poor advice to make you fall into the same loser traps as they once did. In terms of investing become your own consultant and carefully build up relationships with people who indeed know how to do investing successfully. That is precisely what I have done. I began to look for people who really knew the market. With time I found them and I asked them many, many questions. That’s how my career of stock investor has begun.

Rules you use in stock trading are your money. If you adhere to certain rules you can make money. If, however, you fail to follow your own rules in stock trading, you run a risk of losing your money.

Once you work out a set of sure-fire stock trading rules it is extremely important to bear them in mind. This is one of the disciplines, which will reap you rewards. Recall those rules at least twice a day - when your day starts, as well as when it finishes.

Rule No.1: You must adhere to your rules.

Obviously, if you build up a set of rules they must be followed. It is in human nature to feel tempted to break or change rules, and it takes integrity and discipline to carry on acting in compliance with the rules once established.

Rule No.2: You will never bet in excess of 3% of your overall portfolio on any single stock trade.

There are a lot of bold traders and a lot of old traders. But you will never find any old bold traders. Securing your capital base is a fundamental rule for success in stock market trading in the long run.

Rule No.3: You will cut off your losses at 5%-15% every time you make a mistake without any question.

Quite a few traders set an even smaller tolerance for loss. The important thing here is to keep the set point (cut loss) within the range of your loss tolerance. Stay tuned about the behaviour of your stock and adhere to your stop loss point.

Rule No.4: Never set a target price.

Following this rule will allow you to reap the highest benefits from rising stocks. Just let the profits flow. Practically, you may never pick the top. Never think a stock has risen excessively high too fast. Be willing to wait and sacrifice a sizeable chunk of profits hoping for much bigger returns.

The big money is made by trading the really big swings, which you sometimes can catch.

Rule No.5: Master one approach.

Keep mastering and getting better at just one technique of trading. Do NOT skip from one method of trading to another. Aim at mastering one technique perfectly instead of becoming an average trader who uses several methods.

Rule No.6: Let volume and price be your guides.

Never believe any opinion on trends in the stock market or particular stocks you are thinking of trading or trading already. All you need to know is shown by the price and volume.

Rule No.7: Use all sensible signals that show up.

Make no excuses. If an entry signal pops up, dismiss all excuses not to take it.

Rule No.8: Never trade from intra-day variations.

During the course of any trading day there is always a fluctuation of stock prices. If you rely on these information for momentum trading, it can lead you into making the wrong decision.

Rule No.9: Take breaks!

Achieving success in stock trading is not only about trading. It also requires emotional power and physical strength. Decrease your stress every day by taking a break from the computer and engaging in other activities. A trader under stress will not make it in the long run.

Rule No.10: Endeavour to be above an average trader.

Becoming successful in the stock market does not require you to do anything extraordinary. Just try to avoid mistakes typically made by an average trader, who is inconsistent and in lack of discipline. Ask yourself this question every day: “Did I follow my set of rules today?”, and if the answer is negative, then it’s a strong signal that you have to reconvince yourself to start following your stock trading rules strictly!