10 Trading and Investment Strategies to Last You a Lifetime

10 Trading and Investment Strategies to Last You a Lifetime

Investment Strategies – Trading is Great

Trading is one of the most interesting things you can do for a living. This is partly because you learn a new thing on a daily basis. As a trader, each day is always going to be different. With these differences, you learn a new thing every day. In this article, I will highlight the ten best investment strategies that will last you a lifetime.

#1 – Start Trading Early

The first of these investment strategies you will find very interesting as a trader is to start trading early in your career. The earlier you start trading, the better it will be for you. Historically, the largest traders in the world started to trade in their early 20s. Warren Buffet started trading at 20 years old. Ken Griffin started trading at hos college dormitory. Bill Ackman started trading at 26 years old. So, the earlier you start, the better it will be for you. On the other hand, if you are above 20s, you can still start trading.

#2 – Trade in What You Really Know

In trading, many traders try to be jack of all trades. They want to invest/trade in multiple asset classes. This is usually a huge mistake. Like I have mentioned before, I believe in trading a few assets. The fact is that you want to trade a few assets which you really understand. If you are a commodities trader, you simply don’t want to trade tens of commodities. You can focus on just crude oil. By doing this, you will be able to master and understand the field of crude oil. You will be an expert in crude oil which will be to your advantage.

#3 – Separate Emotions and Objectives

In trading and investments, you should carefully separate your emotions and your objectives. I have written before on the importance of having a good emotional balance in your trading. If you control your emotions carefully, chances are high that you will make it as a trader. For instance, you can have the objective of making 20% every week. If you return less than that figure, you need to understand that losing is part of the trading game. If you bring your emotions into this, chances are high that you will lose by making bad decisions.

#4 – Learn to Hedge

Hedging is an important aspect of any trading strategy. This is simply because you cannot be sure of the direction of asset classes. For instance, if you are a crude oil trader, you need to have a strategy that hedges your oil trade. For instance, it is known that Brent and WTI move in the similar direction. Therefore, in your trades, you can buy and sell WTI and Brent at the same time.

#5 – Diversify

While you should learn to be a good trader in a few assets, the power of diversification is very important. Diversifying means buying a number of stocks at the same time. You can buy assets in different industries and in different asset classes. This will help you reduce the downside in the category you have invested in.

#6 – Always be Ready to Calibrate

Not all your trades are going to work. Warren Buffet still owns IBM which has seen its stock price fall by a large percentage in the last five years. Ken Griffon lost a lot of money during the crash. The fact is that you need to realize that not all trades will make you money. What you do in these situations is the most important. You should learn to cut losses and also to be resilient on your trades.

#7 – Cash is King

No matter the holdings you have, you need to realize that cash is always going to be king. This means that you should never keep all your cash invested. A good example in this is what happened in 2015 when Switzeland removed the peg on their currency. This unexpected move in the market led to many investors making huge losses. Therefore, you should always trade with the cash you don’t need.

#8 – Always Have a Plan

The next thing you need to do is to have a plan. This plan will guide you to trade in the best way possible. The plan should tell you when to enter and when to leave a trade. By having this plan, you will be at a good position to enter or exit when its best for you. You should have this plan written down. The plan should also be backtested.

Investment Strategies – Useful Links

  • Discover more investment strategies on BankRate
  • Read more about investment strategies on Investopedia