Thursday, November 24, 2011

3 M's for Investing & Trading


Mind: The key to winning is inside the Mind. As master of your mind, you have to manage and understand your emotions very well. It is extremely important to understand not just the individual’s psychology, but also the crowd psychology of the markets. To become a good investor or trader, you must have perseverance and discipline.

Method: Plan your Trade and Trade your Plan. A good trading plan should cover your entry, exit and position sizing requirements. Use different methods for different market conditions.

Money: Overall profit/loss depends on money management. The first goal of money management is capital preservation. If you lose 10% of your capital, you have to make 11% just to break even. If you lose 40%, you need to make 67%, and if you lose 50%, guess what? You have to make 100% just to recover. So before you think about making big money, first you got to think about not risking your capital unnecessarily.