Portfolio management process; Ideas On Becoming A Better Trader
Portfolio management process; Ideas On Becoming A Better Trader

Portfolio management process; Ideas On Becoming A Better Trader

 

Portfolio management process; without a good plan you are bound to lose

These suggestions are meant to serve as guidelines for those looking to improve their trading skills. As your skills improve, you should be able to modify/replace some of these suggestions with ones that suit your trading needs.

News (this is useless because as soon as the news hits the stands, it is no longer news but turns into gossip). The only way to get real news would be to get insider information and that is illegal. There is nothing new about the news because millions of individuals have access to this info, and they all get it at the same time. However, if you learn to see the story behind the story, then the news could be useful.

The biggest benefit one can obtain from commercial sources, in general, is what one should abstain from doing. In general, you are better off doing the opposite of what mass media is suggesting.  Another good piece of information one can obtain from these outlets is to see if the sentiment is moving to the Euphoric or Fear zones. Euphoria relates to market tops and Fear/panic to market bottoms.

Fundamental Analysis

fundamental analysisWhen used alone, we find that fundamentals are not as useful as technical analysis and mass psychology. However, when combined with these two tools, fundamentals might help improve your trading experience.  Fundamentals alone do not provide the investor with much of an edge. In essence, fundamental data is always presented in the same format, and so the conclusions are almost always the same across a wide spectrum of users.  If everyone draws the same conclusion, it’s as good as having no new info. History clearly indicates that the masses never win.  Over the ages, some very smart and wise man have come to the same conclusion.

Paraphrasing the wise Philosopher Spinoza born in 1634; “those that try to show others the light are usually sorely in need of this light” or as Johann Wolfgang von Goethe born in 1740 who had the following to say. “I find more and more that it is well to be on the side of the minority since it is always intelligent”.  Or William Stanley Jevons born in 1853 “ As a general rule, it is foolish to do just what other people are doing because there are almost sure to be too many people doing the same thing.”

Technical analysis

 

This is the only area that can provide one with some edge if implemented properly. As more and more individuals start to embrace it, the moves are becoming more extreme. New users get fooled when a stock overshoot’s its mark on the upside and or downside.  The settings need to be adjusted or tweaked, as standard settings will usually offer you no edge.  Adjusting the settings will help provide you with an edge over those who utilise the standard settings. The main area of recalibration is the mind. One now has to understand that markets will overshoot their targets both to the upside and downside due to increased volatility.  Accept this and do not fight it; we have coined a saying to deal with this phenomenon. Adapt or die; there is no in-between when it comes to trading. Also, understand why most mechanical systems fail by reading this article 

Effective portfolio management can make the difference between winning and losing.

Mass Psychology

mass psychology

This is probably one of the most powerful tools one can employ regarding the market, but it also one of the most misunderstood and least utilised tools.  If you understand how to utilise this tool, you will have an enormous edge over most market participants.  It is the only tool that pushes the mind to focus on inductive thinking as opposed to deductive thinking. Deductive thinking is where you are given a particular bunch of facts, and you use these facts to come up with a possible outcome. However, what if the facts presented to you are faulty or worse yet fake, then no matter how thorough your analysis, the result will be flawed.

Inductive Thinking is both overlooked and under-appreciated

Inductive thinking involves using the higher part of the mind.  Here you search for the facts and then use these facts that you obtained from your observations to draw a conclusion and determine a possible outcome.  Inductive thinking is 100 times superior to deductive thinking. Very few can understand this process, let alone use it effectively.

The reason for this failure is that most market participants are trained to believe that they have to work very hard and spend an endless amount of time to improve their skills.  Nothing could be further from the truth. The general concept can be summarised as follows; you should be very nervous when everyone is happy and vice versa.  Once you understand this, you can then work on fine-tuning your understanding of this very powerful and invaluable tool.  We can be of great assistance in this arena because mass psychology plays an integral part in our analysis.

What we focus on at the Tactical Investor

stock market timing

Our focus is on the behavioural patterns of the average person (mass mindset). It’s the mass mindset that interests us for therein lies one of the most powerful secrets to becoming a truly successful investor. We would like to take the time to remind everyone that before one could walk or run one had to learn to crawl; before one could crawl one had to want to crawl. Thus if you seek to change, you must first want this and then understand that change is not something that comes about without some effort. The effort is necessary because one has to deprogram one’s mind from old concepts that one was falsely led to believe.

Mainstream media focuses on Brainwashing instead of educating

Your mind has been trained for decades to accept what mainstream, the popular press and so-called experts deemed to be true. Here at TI, we view no one as an expert (this includes us); we are not in awe of any being on this planet nor shall we be in awe for anyone who claims to know it all. We do, however, respect the giants from the past, and few from the present who go out of their way to state that they don’t know much, but are open and willing to learn as much as possible. Idiots are forever clamouring for attention while the wise desperately seek to avoid it for they know their efforts are best directed towards seeking more knowledge rather than wasting time basking in the light of false glory.

Other Articles of Interest

Avoid These Common Stock Investment mistakes

Technical Analysis

Why Mechanical and Technical Analysis Systems Fail

The Limitations of Trend Lines

Contrarian Investment Guidelines

Inductive Versus Deductive reasoning

Portfolio Management Suggestions