Where are you going?

We mentioned  preparation in “Entering the Water”… where are you going anyway?

I touched on Objectives couple of times before. Like when we buy shoes – We should know what we are after   “Oh I really need new shoes  for a wedding”.

It helps so that you don’t get distracted  (like when another non-formal shoe  “Is On Sale” — be strong girl, be strong) and NOT spend your resources on “other” things that don’t fulfill the Objective.   Say your Objective can be  “consistently achieve 3% of capital per month (total of 36% per year!) .

BUT  since we are first taking baby steps to Trading,   know that  – you won’t get to this right away.     One of the first Objectives I recommend  is to LEARN.  Then there should be a sense of “graduation” as you gain knowledge and skills.  Just so you know, professional traders (who manage other people’s money) are viewed to do a good job when generating upwards of 20% consistently for their clients.

I personally see three levels to this :

1. Profitability – your ability to add to your capital

2. Consistency – your ability to add to your capital regularly

3. Alchemy – your ability to profit excessive returns with low-risk at the right conditions

(I mean you know, this is Goddless-like powers!)

Profitability – I remember reading the book “Trade Your Way to Financial Freedom” by Dr. Van Tharp and thought that the concepts in there, not discussed in other books elsewhere are very powerful. I was convinced to trade using ONLY his concepts.  I put together a System from the “ingredients” presented in the book.   I remember I had about 6 months trading and after that, lo and behold, I made 18% of my capital – even with a lot of human errors too.  (I mean I did not follow the concept or how I should be using the System).   It’s probably not a marvel, but 18%  beats  bank interest rate anywhere!

Consistency -remember about the Retirement we were talking about in Oceans of Opportunities article?  If at 25, you put your money, say 10,000 at the bank that pays 6% interest it will be 102,857 after 40 years  (doesn’t seem much does it?) .  Now let’s take my example of being profitable by  18% , the same 10,000  after 40 years will amount to a staggering 7,503,783 — sounds like we have serious money now doesn’t it? (See Table below) .   Imagine that if you consistently make 18% from your trading and investments,  that will really make the difference in your life.

Alchemy –  In the olden times, Alchemy was practiced to  turn cheap metals into Gold.  I just want it here to represent making excessive returns from low-risk.  To do that, one has got to have the knowledge and experience to know when the situation could be ripe for such opportunities.    George Soros  made $1 Billion making a massive bet against the British pound sterling when he correctly anticipated that the Bank of England would have to devalue their currency.   (Just researching about him again, I just found that he actually wrote the book  “Alchemy of Finance” – there we are!).   In my case, I have found these opportunities do exist when back testing.   Now I  just need more knowledge and experience to actually see it before it happens hehehe

Let’s do it!

So now, let’s focus on our Number 1 Objective: To Learn to have consistent skills in Investing / Trading. I’m excited! Are you?  If it helps I am going to confess that early on I struggled in learning to trade too.  I mean no one wrote an easy-to- read blog for me to follow!  🙂    I had to lose some brain cells trying to understand finance books and when you get to read a lot of them they are conflicting or confuse the heck out of you!

Anyway, I just know I have to do it so I just kept going.  I remember my friend, a very nice lady who is newly retired with her husband who was a builder.  At the depths of the financial crisis (2years ago), she told me one day that  she got a report from her financial planner that their “retirement account” (Superannuation) is down by $80,000.  She was shaking.    Now I don’t know about you but $80,000 is a big amount to me! I think actually it’s kind of funny that we let our financial lives be run by these “professionals” — we assume that since we don’t know much about finance that they do. I say assume nothing!

So it’s worth spending time on Learning to trade and invest, if only to know how to choose financial professionals to whom you would be entrusting your money.  Don’t be among people who lost money like Steven Spielberg who entrusted millions of funds to Bernard Maddoff – who was even a figurehead in the NASDAQ electronic exchange — he went on to run a scheme scamming people of billions of dollars in life savings. There was a suspicion that his returns is not mathematically possible — but was not proven before he admitted to the fraud when his clients began redeeming money during the Global Financial Crisis.

If the “professionals” are not doing a good job… you’d know what to do. Find another one, or do it yourself! Let’s get ready to Learn…

(For comments : pls email charmel@highheeledtraders.com) or
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