Many E-books for investments are titled, “How to be financially independent before 45?”, otherwise it will be leading you to believe that it can help you attain financial success magically. Frankly speaking, we all know it is not so easy but many of us out there will still buy in to a certain extent.
I believe that financial freedom is attained through strategy, discipline and hard work. More importantly, to learn how to trade, we must learn how to fail so that we can avoid it. Let me share with you a few steps to fail wisely when trading and investing.
Buying when prices fall is extremely hard
Normally, traders and investors will set a price to buy in when the price reaches that target. However, when the price eventually dip, we will usually be taken aback by the news or market conditions which actually was the cause for the lower price. This happens really often as we will always feel that the price we buy at is “not low enough”
Is there a solution to overcome our fears?
1. Owning your decisions (including bad ones)
The solution is to learn how to own your decisions, the price will never be low enough for someone out there and we will never be truly sure if the price is at its lowest during the time of purchase.
F.E.A.R is False Evidents Appearing Real
UNKNOWN
To overcome failure in trading and investments, learn to plan all the possible ways you can fail
- Error in price target setting
- Unprecedented political news
- Technical recession (2 Quarters)
2. Expect to lose (while hoping for the best)
I am not encouraging you to lose actual money but set a scenario where you have actually made paper loss before you make an order on the exchange. This will prepare you from getting caught off guard or feeling disappointed, which will do you no good in the area of trading and investments.
When I bought my first share, I recall it dropping continuously and I was making paper losses equivalent to around $60 to $100 on a daily basis. Besides regretting and lamenting about what’s to come, I was also bitter about the choice I made. Obviously, it did not help my situation at all, in fact, I was afraid to look at the market fearing more losses. Eventually, I forced myself to grow out of that fear and came to a conclusion that I was going to earn back my losses with proper strategies. I hope that through this blog, I am able to help some of us out there who are going through painful periods in their investments and we can all help one another to get out of it rationally.
Read up on strategies to manage paper losses (Click here to find out more).
3. Never lose money while trading and investing
There is something that I strongly agree with Ben Graham and that is to never lose money.
Learn to own your errors and not ditch it. When we have bought into a falling knife situation, always follow subsequent strategies to recuperate your losses. It may be through buying and selling the same counter or other share counters on your watchlist.
Closing Thoughts
It is not Failure which leads to Success, It is getting back up after failing that leads to success. We all are afraid to fall and there is no denial about that. However if falling is the way to learn, then we should learn to fall rather than never learning at all.
