If you focus only on fundamentals, stop reading now.
If you focus on fundamentals and technicals, this might be helpful to consider.
If you're a trader or investor, I'm assuming you've bought shares at some point and then sold shares too. I hear it's common.
Whether you know it or not you're operating within a framework of systems across the four main parts of every trade.
(1) Identify
(2) Control
(3) Mitigate
(4) Optimise
You're systems in those areas can range from excellent to non-existent.
Think about your friend who you occasionally 'chat stocks' with...
(1) How do they identify a high quality setup as per their criteria?
(2) How do they initially control the risk of that 'trade/investment' to ensure it has asymmetric risk/reward potential?
(3) How do they mitigate risk to be risk free on the position whilst leaving upside potential?
(4) What are their selling rules/guidelines to help them optimise profits? (stocks don't go up forever)
Or does the conversation go more like this... 'I saw an interview with the CEO on YouTube and they said...'
What if your friend asked you those same questions, how would you respond?
How do you think 'Joe Bloggs' would respond to those questions?
(1) Joe, how do you identify a high quality?
I look on social media to see what people are talking about and ask my mate at work.
(2) Joe, how do you initially control the risk of that 'trade/investment' to ensure it has asymmetric risk/reward potential?
Why would I use a stop loss? I'd only buy if I thought the price was going up.
(3) Joe, how do you mitigate risk to be risk free on the position whilst leaving upside potential?
What?
(4) Joe, what are your selling rules/guidelines to help you optimise profits?
Either, (A) I'd never sell because this stock is going to make me rich, or (B) when I can't take enough and down 50, 70, 90%.
How do you think Joe Bloggs is going to get on over a period of years in the market with these systems? Remember, every one has systems, whether they are aware of them and want to improve them is another matter.
'You do not rise to the level of your goals, you fall to the level of your systems.' - James Clear, Atomic Habits
The point of…
