3 Questions to Ask Yourself if You're Sick of Losing Money
Wednesday, March 4, 2009 | Teeka TiwariRating:
I'm drawing today from an article that I originally published last year in advance of our ETF Master Trader launch.
Today I want to share it with all of you who might be new to The Tycoon Report for two reasons:
1. Those of you on my Inner Circle list for this Friday's Sector Hunter launch ought to understand my motivation for creating Sector Hunter, and ...
2. Anybody who invests needs to get in the habit of asking themselves the questions I outline below on a regular basis.
Enjoy!
Today I want to share it with all of you who might be new to The Tycoon Report for two reasons:
1. Those of you on my Inner Circle list for this Friday's Sector Hunter launch ought to understand my motivation for creating Sector Hunter, and ...
2. Anybody who invests needs to get in the habit of asking themselves the questions I outline below on a regular basis.
Enjoy!
One of the most emotionally painful periods of my life came about by my over-staying a short position in 1998.
After that -- like a surviving plane crash victim who goes into convulsions at the mere thought of flying -- for a while I almost entirely avoided shorting stocks directly. As investors, there are some mistakes that might seem too painful to face ... but face them we must if we hope to excel.
The good news is that, since the utter personal financial annihilation that was my 1998, I have forced myself to learn from my mistakes.
The hard truth of it is that my success up to that point really had more to do with gut reaction, intuition and luck. I had no formal approach, and no coherent methodology.
I was like a brain surgeon operating by feel! "Oops, shouldn’t have cut out that piece!"
At some point I was doomed to be struck down by the financial gods due to my lack of a cohesive system. I had no method of judging my risk, I had no position size discipline; in fact, I traded with almost no rules at all.
What kept me alive for so long was that I’ve always had a knack for pattern recognition and getting a good read on crowd psychology. I had also gotten lucky on some very gutsy calls on which I had employed enormous amounts of leverage, and they had worked. But youthful exuberance and bravado will only take you so far. At some point you will pay the price for trading without a system.
Just ask the guys from Amaranth. These were some very smart boys, but they still managed to lose $6 billion in a week on unhedged Natural Gas futures! Without a trading system, we’re all just walking market time bombs.
What I have learned is that there are really only three questions that we need to answer in order to become wealthy stock market investors ...
1. What to buy?
2. When to buy?
3. How to buy/sell?
1. What to buy?
Should you be buying stocks, bonds, foreign stocks, ETFs, ADR’s, steel stocks, agricultural stocks, oil stocks? OMG, the list can seem endless! There are tens of thousands of listed stocks on the world’s exchanges. Do you have a system that tells you which sector you should be buying into and which stocks or ETFs you should be buying?
Let’s say that you have an empirical method for selecting the best sector to put your money in. What method do you have to make sure that you are in the right stock or ETF in that group? Do you have a specific method for whittling down all those thousands of company names to just one?
If you don’t, then you are just taking shots, you’re not investing.
2. When to buy?
Let’s imagine that you do have a system that has kicked out the best stock in the best sector. Now the question is, when do you buy it? Do you buy it right away? How many of us have seen a stock in a great sector that we just knew would trade higher and rushed out and bought it?
Some of the time we’ve been dead on and it’s zoomed higher right away. Most of the time, however, the stock has promptly gone down and scared us out of the position. Then to add insult to injury, it’s turned around and sky rocketed!
What’s your system for making sure this doesn’t happen to you?
Do you have one?
3. How to buy/sell?
Let’s assume that you’ve nailed the first two parts of investing. You’ve figured out a system that will tell you what to buy and when to buy it.
Do you know how much money you should put into it? Do you know exactly how much you are prepared to lose on the trade if it doesn't go your way?
Most importantly, do you know when to take a short term profit and when and how to invest for the next Microsoft? What system do you have in place to prevent you from selling too fast or too late?
What strategy do you have in place for pyramiding your profits to generate massive geometric returns?
If you can answer all of these questions, terrific, you don’t need me. In fact you don’t need anybody, because if you can answer those three questions you can successfully invest your way into multi-millionaire status very, very quickly.
I’ve spent the last ten years pondering those very same questions. I never, ever, ever want to face the paralyzing nightmare that was 1998 for me again. So when I set out to answer these questions, I did so on the back of the greatest personal defeat of my professional career.
Through failure I was forced to ask and answer these questions in order to rebuild my own wealth. The good news is that I was able to do so; the even better news is that I’m actually going to share the fruits of what I learned with a select few Tycoon Report readers.
You see, Sector Hunter was designed to execute -- literally, verbatim -- this system that took me so many years and so many mistakes to perfect.
If you're on my Inner Circle list, I want to take a quick moment here to sincerely wish you luck.
You're one of more than 25,000 people looking ahead to Friday as what might be the first day of the rest of their financial lives. I believe to my core that the opportunity facing you on Friday is the kind that only comes along once in a lifetime ... and for many people, not at all.
So keep an eye out for messages from me in your inbox -- now that we're on our "final approach" to the big day, I'll be sending out important details you'll definitely want to hear.
After that -- like a surviving plane crash victim who goes into convulsions at the mere thought of flying -- for a while I almost entirely avoided shorting stocks directly. As investors, there are some mistakes that might seem too painful to face ... but face them we must if we hope to excel.
The good news is that, since the utter personal financial annihilation that was my 1998, I have forced myself to learn from my mistakes.
The hard truth of it is that my success up to that point really had more to do with gut reaction, intuition and luck. I had no formal approach, and no coherent methodology.
I was like a brain surgeon operating by feel! "Oops, shouldn’t have cut out that piece!"
At some point I was doomed to be struck down by the financial gods due to my lack of a cohesive system. I had no method of judging my risk, I had no position size discipline; in fact, I traded with almost no rules at all.
What kept me alive for so long was that I’ve always had a knack for pattern recognition and getting a good read on crowd psychology. I had also gotten lucky on some very gutsy calls on which I had employed enormous amounts of leverage, and they had worked. But youthful exuberance and bravado will only take you so far. At some point you will pay the price for trading without a system.
Just ask the guys from Amaranth. These were some very smart boys, but they still managed to lose $6 billion in a week on unhedged Natural Gas futures! Without a trading system, we’re all just walking market time bombs.
What I have learned is that there are really only three questions that we need to answer in order to become wealthy stock market investors ...
1. What to buy?
2. When to buy?
3. How to buy/sell?
1. What to buy?
Should you be buying stocks, bonds, foreign stocks, ETFs, ADR’s, steel stocks, agricultural stocks, oil stocks? OMG, the list can seem endless! There are tens of thousands of listed stocks on the world’s exchanges. Do you have a system that tells you which sector you should be buying into and which stocks or ETFs you should be buying?
Let’s say that you have an empirical method for selecting the best sector to put your money in. What method do you have to make sure that you are in the right stock or ETF in that group? Do you have a specific method for whittling down all those thousands of company names to just one?
If you don’t, then you are just taking shots, you’re not investing.
2. When to buy?
Let’s imagine that you do have a system that has kicked out the best stock in the best sector. Now the question is, when do you buy it? Do you buy it right away? How many of us have seen a stock in a great sector that we just knew would trade higher and rushed out and bought it?
Some of the time we’ve been dead on and it’s zoomed higher right away. Most of the time, however, the stock has promptly gone down and scared us out of the position. Then to add insult to injury, it’s turned around and sky rocketed!
What’s your system for making sure this doesn’t happen to you?
Do you have one?
3. How to buy/sell?
Let’s assume that you’ve nailed the first two parts of investing. You’ve figured out a system that will tell you what to buy and when to buy it.
Do you know how much money you should put into it? Do you know exactly how much you are prepared to lose on the trade if it doesn't go your way?
Most importantly, do you know when to take a short term profit and when and how to invest for the next Microsoft? What system do you have in place to prevent you from selling too fast or too late?
What strategy do you have in place for pyramiding your profits to generate massive geometric returns?
If you can answer all of these questions, terrific, you don’t need me. In fact you don’t need anybody, because if you can answer those three questions you can successfully invest your way into multi-millionaire status very, very quickly.
I’ve spent the last ten years pondering those very same questions. I never, ever, ever want to face the paralyzing nightmare that was 1998 for me again. So when I set out to answer these questions, I did so on the back of the greatest personal defeat of my professional career.
Through failure I was forced to ask and answer these questions in order to rebuild my own wealth. The good news is that I was able to do so; the even better news is that I’m actually going to share the fruits of what I learned with a select few Tycoon Report readers.
You see, Sector Hunter was designed to execute -- literally, verbatim -- this system that took me so many years and so many mistakes to perfect.
If you're on my Inner Circle list, I want to take a quick moment here to sincerely wish you luck.
You're one of more than 25,000 people looking ahead to Friday as what might be the first day of the rest of their financial lives. I believe to my core that the opportunity facing you on Friday is the kind that only comes along once in a lifetime ... and for many people, not at all.
So keep an eye out for messages from me in your inbox -- now that we're on our "final approach" to the big day, I'll be sending out important details you'll definitely want to hear.
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Teeka Tiwari
Chief Investment Officer
ETF Master Trader
