This post is part of Women’s Money Week 2012. For more posts about stocktrading see Saving and Investing Roundup
Women have gotten respect for doing great in budgeting and saving, but how about making money grow? With increasing expenses and dire global financial situation, you must be thinking “It’s time to step up!”. So how would you like to know more about trading stocks – by shopping for shoes!
1. We should know what we are after . “Oh I really need strappy sandals for a wedding”. Same as in Trading, start by having an Objective. Say you want to “consistently achieve 3% of capital per month (total of 36% per year!) . If you don’t know what you want, where you want to go, YOU CAN’T GET IT RIGHT!
2. We buy what is a good fit. Usually, you wouldn’t buy a shoe of a smaller size. Like so in Trading, if a trade does not feel right for you but you went ahead being influenced by someone else, this tends to be a loser. So trade only what fits you, your timeframe, trade only the stock/industry you know.
3. We buy a lot! Formal shoes, running shoes, many styles of sandals, boots, according to color, material etc. You have to have a range of shoe options. Point is you have got to budget for all the shoes you need according to your lifestyle. You shouldn’t spend too much on one shoe. So this important lesson in trading is that you have to keep how much you risk at an amount that does not blow out your budget and be able to fund next opportunities.
4. We buy and wear shoes according to the conditions. In winter we would usually wear closed shoes so we don’t get cold, in the summer, sandals are popular, to keep cool. So in Trading, you have to have an idea of what the market is doing. Are people optimistic and buying things in the hope of rising prices (Bull Market), or are people scared and dumping their assets before the prices go down more (Bear Market)? Or are people not sure where things are going and there is a tug of war between the people who are optimistic against those who are not (Sideways market). You need to determine Market condition before deciding on action or strategy, or choose not to trade when market is too choppy.
5. We buy it when we look and feel good. Easy when deciding for shoes but was a surprise for me it also applies to trading. No matter how much the trade looks positive from your analysis, but when you don’t feel good about it (or afraid) that it won’t turn out right, worrying could make you cut short a profitable run, this is the worst you can do in profit-taking! So before opening a trade, you need to feel good about it. If not, don’t trade it.
(Thank you to Via Uno Shoes!)