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Strategies for Success

by Teresa Lo

Dear Santa:

I am writing to let you know that you can skip my house again this year and forward any presents to a needy family. While there were one or two years early in my twenty-year career where I certainly appreciated the good cheer you brought, it has been a long time since you had to make a stop at our house, and I hope to continue the tradition again in 2004 by following the tried and true strategies for success:

  1. Know that “living rich” does not require a lot of money. It’s really true that all the good moments in life are free. The company of a good friend, the laughter of a child, and enjoying one’s vitality come to mind as examples.
  2. Know that “getting rich” can’t be done in an instant, or with no money. The first step, as economists say, is to delay consumption. The rest of us simply know this as “savings”. Taking risk-adjusted forays into the stock market is but one way to grow the nest egg over time. Just ask Warren Buffet about the effect of compounding small successes over a lifetime. I am always realistic.
  3. Know that there is a market sentiment cycle, the one that Justin Mamis wrote about so eloquently in his book . I will remember at all times that there is a tradeoff between price and information risk. When price is low, we don’t know much. When I know everything, I can expect to pay dearly for it in the form of high prices, when things “look good from far, but are far from good”. I will not fall in love with a trade or an investment.
  4. Know that I cannot squeeze blood out of a stone. I can only make what the market allows me to, given a measureable trading range. Doing any more than that means that I have to take on much more risk than can be justified by the potential reward.
  5. Know that I will make thousands of decisions over the course of an investment or trading lifetime. No individual trade matters in the long-run because each transaction is the means to an end, and the goal is to simply make money on a risk-adjusted basis. I will not allow a single trade to destroy my account, just because I refuse to admit defeat or my ego insists on being right, no matter what the cost. I will not vaporize my precious savings, because it has taken a lifetime to accumulate it.
  6. Know that I am no more psychic than the next market participant, and therefore, I will never be able to buy the exact low or sell the exact high. I am Forrest Gump.
  7. Know that “strategy before tactics” is my motto, and that I will always have a scenario mapped out based on deductive analysis before I enter into any transaction. This allows me to have a number of tactics organized so that if events do not unfold as anticipated, I will have a Plan B, Plan C, Plan D and Plan E, all ready for execution to deal with whatever happens. I will expect the worst, hope for the best, and not be a (dead) deer caught in the headlights.
  8. Know that if I adhere to all the rules, I will be the odd man out, and look funny to my peers, my friends and neighbours when it comes to investing and trading. I will resist being a lemming. I can run along side the pack as they charge, but when the lead animal disappears from the horizon, I will assume that it has fallen off a cliff.

Thanks for taking time out to read my letter, Santa. As you prepare to get on that big old sleigh of yours, rest easy, because there are a number of us out there who are doing our best to lighten your load.

Have a good holiday season, and have a Happy New Year!

Sincerely,

Teresa

03.12.07 16:39 #