Decoding Markets and Marwood Research
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101 Lessons For Aspiring Traders PDF
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12 There is no one formula that can guarantee investment success. All you can do is weigh up the situation and make a decision based on data and best judgement. 13 14 Stocks always fall faster and harder than they rally on the way up. Options pricing models incorporate this reality. Always have some cash available to take advantage of a significant market drop and be prepared to do more research and work harder when a correction occurs. Watching the VIX is a useful way to gauge fear in the market. Economic indicators like the yield curve and TED spread also provide clues as to how fearful investors are. Liquidity is an important driver of markets that is not given as much airtime as it should. 15 16 17 18 19 20 Warren Buffett said “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” This is an excellent way to think about investing and is helpful to avoid value traps - stocks that look cheap but are cheap for a good reason. Recently, we have seen a number of growth stocks with negative earnings become strong winners. However, these are more the exception than the rule. Historically, profitable stocks (companies with positive earnings) have outperformed stocks with negative earnings. Likewise, stocks with a price-to-sales more than 3 and certainly more than 10, have been poor investments. The same goes for p/e multiples more than 30. It’s best to avoid these stocks and wait for more favourable multiples. There’s no need for leverage in long-term investing. The increased reward has to come from somewhere and it’s always in the form of increased risk. Using leverage at the wrong time can wipe out years worth of gains. Save leverage for your trading account when you are confident you have an edge. The stock market is not a random walk but it is highly efficient and hard to beat. Instead of trying to beat the market though concentrate on your own financial goals and how you can achieve them. Who cares if you beat the market if you achieved what you set out to achieve? To understand how to make money in the stock market, try inverting the problem. Think of all the ways to lose money in the stock market and then focus on doing the opposite. For example: over trading, paying high spreads, investing in things you don’t understand. These are easy ways to lose money that you can avoid. The most important concept to learn in investing is compounding. The first $100k is the hardest but once the wheels of compounding start to work, there’ll be no stopping you. 101 LESSONS FOR ASPIRING TRADERS Start by trading small or by paper trading. If you can’t make money paper trading, you’re unlikely to make money live trading. Download 1.87 Mb. Do'stlaringiz bilan baham: |
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