HOW AND WHY DO WE SELECT EACH TRADE?
Let’s start by stating the obvious - EVERY strategy works!
Now, let’s add the proviso - Given the right circumstances.
We hear lots of people say ‘this strategy is better than that strategy’, or similar silly things that only serve to show their ignorance.
The bottom line is every strategy works in a certain environment, and every strategy achieves different things. Comparing buying shares to selling debit spreads to directional option trading (or anything else) is just stupid, and pointless. Might as well compare the taste of oranges and steak!
Again, every strategy works – it just depends what you are trying to achieve. If you want to create income from shares, you don’t short CFD’s. If you want to trade non-directionally, you don’t buy options. If you want to achieve potentially big profits from directional movements in the stock price, you don’t sell Iron Condors.
You need to match the strategy you use with what you are trying to achieve and your risk profile.
At Planet Wealth, our risk profile ranges from the super safe, to the extreme high risk! We want a balance across our portfolio, and that’s why we trade several strategies – not just one.
Trading just one strategy is OK, as long as you accept that you are more at risk because you need that particular environment- where that strategy works perfectly - to exist continually. Is that likely? Probably not.
Trading multiple strategies means we lower our total portfolio risk because we have a variety of trading styles. Once you have decided which strategy(s) you are comfortable with and which strategy(s) fit your risk profile, the question you need to ask yourself is “How do I select the actual trades”. That’s where it becomes difficult!Making a particular strategy work by effective trade ‘picking’ is the most crucial element in successful investing. Let me say that again – nothing is more important than the actual trades chosen.
Remember, every strategy works. It’s then a matter of deciding which strategy suits you, then the most important step of picking the best trades to take advantage of that particular strategy.
Over, and over, and over, and over again.
Unfortunately, the average investor doesn’t always have the skills to choose the correct trades at the best time for the given strategy. That’s where we think we can help.
At Planet Wealth, we consider ourselves Value Investors; using fundamental analysis to select companies that fit our criteria in our disciplined value methodology. If they don’t, we’re not interested in the trade.
We’ve prepared an E-Book entitled “How we select shares to buy – and why” which you can download free of charge. This E-Book will give you at least an idea of the principles we apply to every trade selection we make.
It’s a very complex process, no doubt, and it literally takes years to not only learn, but to apply in real time to the stock market.
However, this E-Book should give you a good start and a sound foundation on the methods we apply for our trades at Planet Wealth (the exact trades that you can copy as a member of the Trading Diary).
You can download it now by clicking on the link below…
FREE E-Book: Value Investing
The above ebook is in PDF format and will require that acrobat reader is installed on your computer:
