An important part of being an investor is understanding that one must always keep learning.
As such, we’ve compiled 10 of the most important quotes in finance, the ones which have made a greater impact and helped traders worldwide to adopt ideas, improve their performance, overcome their own struggles, and keep pushing forward in their path towards success.
1. “Do not anticipate and move without market confirmation - being a little late in your trade is your insurance that you are right or wrong” - Jesse Livermore
Any market specialist will tell you that it is important to wait for your trade to be confirmed before you actually enter it.
This means that you want to have a plan ready before you make a trade.
Consequently, you must be meticulous in your research and be absolutely positive that the trade will fit your strategy.
However, that’s not the end of it.
Many traders will rush into their traders and, what Livermore is saying here is that the trade will “expose” itself to you as you let the market confirm your bias.
2. “Risk comes from not knowing what you are doing” – Warren Buffett
Risk management is very easy to overlook when it comes to trading.
And even if you are on a roll, a couple of bad trades can easily make you lose a high proportion of your gains if you fail to understand the risk each trade entails.
As such, to become consistently profitable over the long term one must know his or her potential profit and maximum loss in their trades.
Moreover, it is especially important to know how to manage risk which is why this point is the perfect follow up for the last one: because not only will you need a well thought out strategy and serious planning, but you will also need to have a proper risk management strategy in place to protect you from the unexpected.
3. “The market can remain irrational longer than you can remain solvent.” – John Maynard Keynes
The reason for the market to be irrational is quite rational: it happens because the market itself is made of people with conflicting knowledge, perceptions, opinions, and intelligence.
Once every little while, investors may find themselves trying to fight a trend only to rack up even greater losses.
Time and time again, stop losses have proven to be investors’ best friends, so remember to use them because holding a large losing position in hopes of a reversal may end up wiping your account.
Which leads us to our next point:
4. “Learn to take losses. The most important thing in making money is not letting your losses get out of hand” - Marty Schwartz
It is absolutely vital that investors understand that regardless of how good they are and regardless of how much they researched and analyzed things, no one has a 100% win rate when it comes to trading.
In fact, one might argue that losses are an integral part of trading.
As such, if you are committed about staying in the trading game for the long run, it is important to know how to be prepared to lose and avoid letting losses get out of your hands and out of your mind.
5. “I think investment psychology is by far the more important element, followed by risk control, with the least important consideration being the question of where you buy and sell.” - Tom Basso
Markets will constantly test traders and you should remember that you are the weakest link in your trading strategy.
With that last point in mind, finding the necessary discipline, the required mindset and the much-needed emotional stability is something every trader out there should try to accomplish because those things will be the very foundation upon they will build their own trading methodology.
Leaving oneself open to trading on emotion, impulsive decisions and so forth can ruin a perfectly good strategy and deteriorate one’s mind.
Wrapping up
The 5 rules of trading have been brought to you by some of the greatest investors of our time, so make sure to savor them and incorporate them into your strategy.
You will be flying in no time!
