A lot has been written about an investor ‘knowing the term’ of any position that they take in the market. For example, when a long term ‘buy and hold’ position is taken, the investor must be prepared to ride the ups and downs of the market but must also be prepared to accept a lower…

The main benefits of using a Trading System are to: • Remove emotion from the buy/sell/hold decision. • Remove personal ego from the buy/sell/hold equation. • Exclude outside influences and ‘noise’ from the buy/sell/hold decision. • Achieve objectivity & consistency, trust and confidence, in the buy/hold/sell decision process. • Overcome personal expectations of the market.…

It is ironic that generally the less capital novice investors have the more risk they take. They focus on higher risk trading instruments or higher risk trades seeking the large quick returns. Besides the additional volatility risk, they then magnify that risk by allocating too much capital to these high risk trades and in many…

If you are a follower of my weekly journal, you would understand that my approach for successful investment in the stock market is rules based and mechanical. The SPA3 methodology forms the basis for my trading decisions, risk management and money management but I have additional list of “Golden Rules” that I use to trade…

With systems operating around us and our lives essentially dominated by systems – systems that are designed by humans for use by humans – why is it, that we seem to struggle to be able to accept this concept and the use of systems when it comes to investing in the share market? People flounder…

Many traders and investors, who have experienced the highs and lows of trading, regularly look for a method or system in the hope that they will discover a “new” hidden truth. A great truth is that there are no “new” hidden truths in the universe of the markets, just “new truths” to individuals that for…

There is an old Chinese adage that says “that which does not destroy me will only make me stronger”. It refers to the internal battle with one’s self. As we know, trading certainly can be an internal battle but this quote could not be more relevant than when discussing a trader’s psychological mindset and their…

Basics of compounding Following on from last week’s Journal post, I felt it very important to continue our discussion on the positive effects that compounding can have on an active investment portfolio. A simple way to look at the effectiveness of compounding is to use a mental maths shortcut known as the “Rule of 72”.…

Have you heard of the economic term ‘velocity of money’? In effect, velocity of money is the rate at which money circulates, changes hands or turns over in an economy in a given period. High velocity means the same quantity of money is used for a greater number of transactions and is related to the…

This week we move back onto the subject of “Investment Risk” and specifically the different “Types of investment risk”. As mentioned below in my 6th October 2010 post, there are two main types of risk, market risk and specific risk. Market risk is the downside potential that relates to the entire market or the industry…