Hello guys
This is a series called “The Traders Journey” by “Tensile trader” Gatis Roze. This series will present arguments and guide you to participate in the investment and trading process to achieve your own prosperity. This series is not only about investment and trading, but also about personal finance, divided into 6 main levels: Money management, Investment, discussing the trader himself, market analysis, Investment/trading roadmap, Portfolio tracking, etc. Hopefully it will create more excitement for you and support you in your investment/trading process.
This series is compiled from the personal blog posts of author Gatis Roze, so there may be some overlapping content, but I will adjust it later, and this series will be posted every noon from Monday to Friday. I will pause the daily crypto analysis to focus on this part, please read and contemplate, we will come to the first article: The first step - Money management!
💡
The first step to becoming a consistently profitable investor is learning how to manage your money well. You have to know how to work smart and put the odds in your favor. In short, it means:
Know what you have
Know how to protect it
Know how to develop it
Write it down in a personalized investment plan.
I see many traders rush right into item #3, while ignoring items #1, #2, and #4. Yes, item#3– growing your wealth – is actually the sexiest and flashiest of the four, but if you pursue this item first, you will kill your chances of success.
First, we must build a solid foundation. At the most basic level, that means learning to read and understand the language of the markets. Every profession – medicine, engineering, accounting, law – has its own language. Investing is no different. If you don’t know the difference between a market order and a pending order, you won’t be able to trade effectively. Education is a prerequisite, and the more you rush, the more sunk costs can be costly.
I also recommend learning how different markets work. For example, Dow Jones, Standard & Poor’s, and Russell are all made up of different groups of stocks (or characteristics of the forex, crypto, derivatives, etc.) markets. Study their characteristics carefully, to avoid confusion in your analysis later!
First, let’s tackle number 1: know what you have. Before you throw money at the market, you need to understand your personal finances. You can download Quicken or some other software, so you can understand exactly what you own and where it should be invested. I update my asset portfolio every January and every year there are always surprises, or new things. You need to get your personal finances in order first. Until you do that, you can’t start investing.
Let’s tackle number two: knowing how to protect it. We can argue for years whether a foolproof defense will win you games in sports (Jose Mourinho has had great success with defensive football); but in investing, building a defense for your assets is paramount. This may come as a shock, but the reality is that there is always someone (and even the government) trying to take your hard-earned money in any way they can – legally and illegally.
Remember, you must protect your capital first, because there will always be another investment opportunity if you have capital left. If you run out of capital, there will be no opportunity to turn it into reality. Start with the basic financial goals: insurance, retirement planning, taxes, etc. Once you have the basics covered, you can expand that list as your assets grow.
Money management has always been considered the “secret sauce of the Market Wizards” (like dishes, the recipes may be the same, but the sauce is what makes them special). To manage money well, you will basically need to do the following:
Express all that you are in writing
Describe all your goals and priorities
outline your investment approach and strategy
Describe your investment tools and rules
Confirm your risk tolerance and describe the risk management techniques you use to protect your assets
update it regularly
Trying to invest without a money management strategy is like “throwing sand into the East Sea”. There are two essential things: You have to demonstrate your investment plan, and then you have to believe in it. To believe in it without wavering and trading on it, you have to build it yourself. It’s a circular process.
Another important factor is that you must understand the “law of probability”. Nothing is 100%, but you can take clearly defined steps to get closer to perfection. As an investor, probability and your personal beliefs are very important.
As George Washington once said, “If I had three hours to chop down a cherry tree, I would spend the first two hours sharpening the saw.” A well-written investment plan is like a sharp saw. As an individual investor, the sharper the saw, the more consistent your returns will be.
Good trading; good discipline!
