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Date Posted: Tuesday, December 14, 05:57:17pm
Author: Columnist Marcus PadleyThe perfect stock market strategy Wednesday 15/12/2010
Subject:

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Personal Finance > Columnists > Marcus Padley > Archive > The perfect stock market strategy

Columnist Marcus Padley
The perfect stock market strategy
by Marcus Padley
posted on Dec 13 11:14am
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Marcus PadleyRacing sailing boats is very much like investing. In hindsight there is a "Perfect Race" you could have sailed. However success is not in achieving perfection, but in making the least mistakes.There is a sailing adage: "Most races are not won; they are lost."

Racing sailing boats is very much like investing. In hindsight there is a "Perfect Race" you could have sailed. A perfect position on the start line, a perfect side to the course, a perfect sail setting. Hindsight delivers the perfect race strategy, like a share price chart, and success is not in achieving perfection, no-one can, but in making the least mistakes.

So how do you do just that? Here's your priority check list:

Avoid mistakes

As any sailor will tell you, all this involves is preparation. That means developing a routine before you actually hit the water that will put you in the best possible position to achieve victory. It means having all the necessary equipment, understanding your race instructions, knowing the course conditions.

All things that can be achieved before you set out on the water or do your first trade. They are pre-requisites for success. Having a breakage on your boat, not knowing which way around the mark, leaving your stopwatch behind are all avoidable mistakes. No excuses. Preparation, preparation, preparation. In investment it means getting educated and having a plan.

These days there is no end of education and trading knowledge readily available to the average man. But find yourself on the start line without knowing why you've ended up there, what you're trying to achieve and how to do it and the outcome is inevitable. Unfortunately in an environment of superb on line technology, fast product promotion and big promise financial product marketing, finding yourself on the starting line with your pants down is the norm these days.

Starting-out

The start is a massive part of a race, more so in sailing than perhaps any other sport. It is a hectic and dangerous time, with a lot of boats in close proximity and all too often the race ends there.

For the stock market beginner the most obvious trap at the start is the marketing, buying into wild promises. That you can live the lifestyle you always dreamed of. That the 'system' will do it all for you. That the average trader works four hours a week and earns $100,000 a year. You can't, it won't and he doesn't. It's a minefield. Put it this way, if your first trade is on-line, in a derivative, using leverage, and your money is in someone else's bank account, you've cocked it up.

Stay in touch

Success in racing is being able to at least stick with the pack for the first few marks. You don't need to achieve any more than that. If you can survive that far without a major mistake you will almost certainly come home at the end. It's the same in the markets. Survival without stupidity first. Glory later.

Expect mistakes

No race is ever sailed perfectly. But 'the great helmsmen are those that recognise the imminence of a major mistake and prevent it' or minimise it. That means, being vigilant and disciplined and building experience. In investment that means avoiding denial. Taking losses most obviously. Having a strategy and applying it unemotionally. It's not hard in investment. The template is in every book on trading.

Learn from your mistakes

Some sailors race races, pack up, go home and come out the next time and hope to do better. They probably won't. Not unless they analyse past races and spend at least some time working out how to do it better. Investment is work, not optimism. "Luck" has no part in success and anyone consistently sailing the wrong side of the course trying to snag the odd race will certainly finish their career at the back.

Consistency is key

You may win a race but you'll never win a title until you can repeat it, over and over. Glory is fleeting. Common sense is eternal. Success means doing the right thing consistently, not once, but all the time. Apply basic skills in the short term and do it over the long term.

Failing all that, find a skipper who knows what he's doing and let him sail your boat.
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4 Comments Report Abuse
1. commandokon_9 - Dec 14 11:13am
"find a skipper who knows what he's doing and let him sail your boat" - just like they did in 2008!! I say do it yourself and go in without trusting anyone. "A fool and his money are lucky enough to get together in the first place." Gordon Gecko2. janharrison56 - Dec 14 12:02pm
Being a trading novice, I found a skipper with great credentials who managed to lose $75K of my hard earned money over 2 years. When they are investing with other peoples money, they don't give a flying fig if they lose it, they are only interested in the brokerage. I manage my own stocks now and I am making money!3. janharrison56 - Dec 14 12:03pm
Being a trading novice, I found a skipper with great credentials who managed to lose $75K of my hard earned money over 2 years. When they are investing with other peoples money, they don't give a flying fig if they lose it, they are only interested in the brokerage. I manage my own stocks now and I am making money!4. houseofjoseph2000 - Dec 15 06:53am
Researching your own stocks is a lot safer than giving your money to some other party that will have no interest in you hard earned asset and could not give a shixx if you loose it or not.. Research your own stock thoroughly..Previous Page | 1 of 1 Pages | Next PageLeave your comments
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