Being a successful investor is not as difficult as most people may think. Making a successful investment is highly dependent on know how the market works and understanding it. Think of it as throwing a boomerang. In order for you to throw the boomerang and make it turn back towards you, you need to know which direction the wind is blowing. Just like in investing, you need to know which direction the market is headed. This way, when the market direction changes; you can change with it.
The key thing to note is that the market is led and influenced by people. Thus, in order to understand the market, you need to understand human nature. And that is what we call the psychology of great investing. Since 1920s, investors today still operate from the same set of emotions that investors of the past did. They all invest with hope, fear and greed. It is extremely difficult for human nature to change. And as long as it remains unchanged, market will behave like the way they did and keep repeating itself.
Here are some keys for you if you want to enhance your psychology and become a better and greater investor.
1. Investing On Paper
To hone your market knowledge, practise by putting investments decisions on paper first. During this period, get to know your personal investment style which is linked to your personality and lifestyle. This is one of the processes to building a strong mental state of investing.
2. Money Management
Money management is by far the most important factor of trading success. I cannot emphasize the importance of it. The principles behind of an investment plan are to manage your losses and gains and to preserve your capital so that you can stay in the game. Trading is a survival game. Do not ignore money management or you will regret.
3. Keep a Trading Diary
Whether it is on paper or digitally, just keep one. Record all your daily, weekly and monthly trades, opening and closing balances. You will be surprised how much you can learn if you put an honest effort into a personal trading journal.
4. Review and find your personal investing style
Each successful investor has a unique style of investing. There are many great investors in the world including Warren Buffet, George Soros, Jim Rogers and many more. But they do not invest in the same style because there is no fixed style.
5. Constantly acquiring Market Information
Savvy investors need to be current on market sentiment because analysts, chain of events continue to influence the institutions and move markets. Enhance your own research by acquiring market knowledge.
6. Knowing the Market
Finally, when it comes to investing, the market never changes because human psychology does not change. Hope, fear and greed will always be the main driving force of the markets. However, the fact that the market never changes is the key to investing success if only you are willing to do your homework. By studying the past and learning to interpret the market, you will be able to recognize possible and predictable trends. This ability will be critical to capitalizing on opportunities and protecting your gains.
While changes in market trends take place over time, a focus on its daily actions can help you understand the overall picture better. I encourage every one of you to start investing early. The fact is that whether you want to retire at 35, 55 or 65 years old, you need money. To live relatively comfortable, you have to be realistic of how much you will need. And you need to start investing your money early so that they will start working for you earlier and keep growing until your retirement.
For every year you delay in investing, you need to save more of your earnings or income for retirement. That means lesser space for your wallet or pocket to breath. Start investing today and if you are really serious about investing, you have to give it your best shot!