What are the secrets to success in the markets?
try to summarise the key steps to success in the financial markets, we
will find that they are not really secret. They are openly available.
The problem is that there are some finance industry professionals who
would prefer us to not talk about them. Some of the professionals have
vested interests to protect.
Here is a summary list of some key points that will go a
long way towards helping to be successful:
- Beware the
"sage advice" - There are many clichés and axioms to do
with investing. Things like: "time
in the market, or timing?", "a rising tide lifts all boats",
Street sneezes other markets catch a cold", "dollar cost averaging...",
"the trend is
your friend". Some of the sharemarket gems are worthy,
while some are actually furphies. See Robert's list of Share Market GEMs.
Also see more information about the finance
industry cynic's view of the world.
- Long term? -
NOT! - Accept that many investments are best NOT kept for
the long term. Even blue chip shares
can plunge in value, and result in opportunity costs.
- Plan and
- If you decide to invest in shares, then make sure to have some form
of investing/trading plan and strategy in place. Read more about plans
- Be careful not to overdo this. If you spread your investments, then
the portfolio performance will be closer and closer to the performance
of the index, in which case you might just as well invest in an
index-tracking fund, and ride the roller coaster of bull
and bear markets.
- Identifying and riding a rising
trend. Remember that once a price trend is underway, it is
statistically likely to continue.
and money management - Make sure to have some effective risk
in place. This will be described in your Investing/Trading Strategy and
will encompass some rules to limit each position size, and the portion
of your total investment capital that is at risk. Also pay some attention to stock liquidity, to make sure that if you want to sell quickly, there ought to be some buyers ready to take your stock. Effective risk
management will help to sleep at night. Also see more on risk management in the Share
Market Ready check list.
- Exit strategy
and Stop loss
- Make sure to have an effective Exit
Strategy and Stop Loss approach. This will be
covered in the risk
management portion of your strategy.
- Don't forget that the opinions and emotions of the market
participants are captured in the price charts, and it can really pay to
understand the stories in the price charts. This is essential in order
maximise the effectiveness of entry and exit timing. See
- The 4 Windows
approach - If the broad field of technical analysis is a
little daunting, then utilise the 4 Windows approach to get started.
- Balance the
- Have you ever noticed that some people spend more time on fundamental
analysis than other people? And some spend large amounts of time on
other aspects of investing? But why do they do that? See the Balance
the time discussion to understand more.
- Emotions and
psychology of investing
- Understand the issues at play with emotions, and the psychology of
investing; and the different cognitive biases that can affect
performance, eg: Confirmation bias, Herd instinct, Over-confidence
effect, andFamiliarity Bias (there are many more). See more details
about the Emotions
These steps will not guarantee success, but they are essential
ingredients to help on the pathway to success in the markets. Don't
forget to see Brainy's Share Market Ready check list.
See more information above right....
This topic has been discussed in a public presentation. See the presentation slides....
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The information presented herein
opinions of the web page content owner, and
are not recommendations or
endorsements of any product, method, strategy, etc.
For financial advice, a professional and licensed financial advisor
should be engaged.
Copyright 2013-2015, R.B.Brain -
Consulting (ABN: 52 791 744 975).
Last revised: 20 June, 2015.