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Your Successful Investment Plan
It is common knowledge that over ninety percent of investors lose their money and stop investing within their first year, and that about ten percent of investors get the other investors' money, year after year. If the odds are stacked against new investors nine to one, why do they still want to start investing? Usually the answer is they think they have a better way of choosing the right investment.
What is it that the ten percent of investors who seem to consistently take everyone else's money are doing differently than everyone else? Is it some super secret? When these wizards are interviewed, they often say: "I let my profits ride, and cut my losses quickly." Hmmmm. No kidding. Others offer more helpful advice like "It's easy: buy low and sell high". Ok, we're all ready to invest for a living now! What are these wizards really saying between the lines that separate their results from everyone else's? The answer is simple, but ninety percent of investors don't do it, and probably wouldn't do it if they knew how.
The answer is to treat investing like a business, which specifically means having a business plan. Even more specifically it means having an investing plan that applies the concept of money management before deciding how to get into a market. For most investors, the feeling of being "in the market" is more rewarding than whether they actually win or lose. For them, a real investing plan would get in the way of what they are really trying to get out of the markets, which is a specific flavor of excitement. All they have to have is a half-decent excuse to "get in" to immediately taste the sweet tension of being in an investor. It's just like going to Las Vegas and loosing thousands of dollars. "But I had a lot of fun, they will reply" If you rely on investing to make a living, preserve your capital for retirement, you will need to make profits - it's not about having fun.
Many who invest in futures successfully rely on a trading system. Just like a business plan, it outlines in detail the establishment and development of a proposed business, a trading system outlines in detail a structure for investing. There are two major components of a trading system: a method of price prediction which signals if and when to buy or sell a particular futures contract, and a risk management program which dictates the amount of money to risk on any trade, and specifies when to cut losses. Strict observance of the rules of the trading system is the hallmark of a successful futures investor.
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