“Mr. Roze: we’d like to offer you 90 minutes to speak to our group and tell us all you know about investing.” I have actually received this sort of invitation more times than you can imagine. Let me personalize it. If you are an accountant, engineer, doctor, lawyer or something similar, how do you answer this challenge? Frankly, it’s impossible. Similarly, after 25 years as a stock market trader, it’s not possible to tell you “all I know about investing” in 90 minutes. In lieu of that, what I have managed to do is identify 5 key pivotal passages in my investing journey, and when I’m presented with this kind of invitation, I share those passages and amplify upon each as the audiences seem inclined.
The first passage in my journey as a trader happened very early on. Put simply, I embraced technical analysis and charting. I learned to read stock charts, and I came to trust and believe what those charts were telling me.
The second passage was when I assembled my tool kit. The fact is that there are an infinite number of tools available in the investing universe. But once I winnowed down the options that both fit my personality and also addressed the essential elements of trend, relative strength, volume analysis and momentum, I then moved ahead by focusing on this manageable ensemble. Simplicity actually made me a more profitable trader.
The third passage in my journey was achieving an organizational model that allowed me to maximize my analysis of the markets while minimizing the time required to do so. Routines are everything, and most traders are understandably very secretive and protective of their optimized routines.
The fourth passage for me was the most difficult and continues to be an ongoing challenge. I call it the “Investor Self”. At the risk of sounding like a Thesaurus, it encompasses all the unique stresses and personal stuff that can discombobulate your trading and make it something less than effortless. It’s all about your beliefs, emotions, psychological baggage, discipline, motivation, brutal honesty, confidence, temperament, mental equilibrium, concentration and self-control, just to name a few. In other words, it’s about overcoming the ‘enemies within’.
The fifth passage dealt with the sell side. Learning to recognize what ‘wrong’ looks like – and getting my ego to step aside so I could stop being wrong – allowed me to pull the trigger and exit the trade. The cruel reality of investing is that even the best traders lose 3 to 4 out of every 10 trades. The sooner you can embrace this reality, the more money will flow to your bottom line. Look at it this way: if you were a professional baseball player, how much would the Yankees pay you if you hit 6 to 7 out of every 10 times at bat?
So, there you have it. The highlights of “everything I know about investing” offered up in a 90-minute presentation.
Trade well; trade with discipline!
-- Gatis Roze