Saturday, August 9, 2014

Investing/Trading/Speculating - Farming

Investing/Trading/Speculating activities in the financial markets is a fairly simple game. A game of identifying LOW risk entry and HIGH potential exit. This activities can be enhanced with the understanding of CYCLES. The beginning of a new cycle is the ending of the older cycle.

Navigating through the cycle is no different from driving a vehicle. How to avoid any accident! Many come to the market with the mindset of making quick and big bucks! Turning this arena into a bumper car arcade. The only difference is you pay an entrance fee to ride a bumper car. But you foot the looses in market when it goes against you.. Don't blame the market when you make losses. A lot of this is due to ATTITUDE imposing your rule on the market. Market has its own rule.

A farmer knows the cyclical season and weather before seeding the ground to ensure maximum germination besides having high germinating seeds. IF the farmer seeds during the wrong season (high risk), all the effort will be wasted and more seeds will be needed (losses). This is no different from  the markets. If you initiated entry during high risk cycle, be prepared to take losses.

Once the seeds are in the ground, we let mother nature takes over. Let the plants grow to maturity and harvest accordingly. Similarly, when we have accumulate sufficient positions with low risk entry, we should let time and trend to move in our favor. When the trend has run it's course, it is time to exit.

We have a lot of basic simple knowledge but when it comes to markets, we develop new set of rules (irrelevant in my opinion) and totally contradict what a sensible mind will do!

When you are sure of a good low risk entry, it is not necessary to cut loss if market is against you provided you have implemented good management and strategy. After all, temporary set back is part of the game 

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