Investment Strategies - Logic Is Important

No other commodity enjoys as much universal acceptability and marketability as gold !

By Hans F. Sennholz, 2009

I have been trading stocks and currency exchange all my life. One thing I steadily became mindful of in this experience was the strategies which make the most logical sense generally are the ones which work the best. There are such a lot of investment systems I am getting offered I could doubtless spend two life times working thru them all.

And a tasty sum working out which ones do not work. What I have found though is you can short cut this process simply by looking logically at them. Quite frequently when you strongly go thru the logic of an investment technique you will find holes in it. And huge holes too, holes that may make you lose your cash. Its quite probable that these methods, in their wholeness work reasonably well. But the difficulty is that if you are trading a technique that has holes in it, at some stage you'll come up against a genuine life situation where the technique has no answer. Then you will be on your own and you will need to make a call outside of the system.

This may be an educated guess, to an intuitive judgment call, to a flip of a coin. Personally I believe that making calls like this, choices which are outside of the logic of an investment or trading system, is betting. It isn't a good situation. Sure you can earn cash with this bet, but you might lose it too. Its no different than 21. A tough and complete trading plan should take these bets away from you. There should be no estimates. You need to just plan the trade and then trade the plan. The other problem with this is that regardless of what occurs to your returns from this point, you may never know if it occurred as the method worked or due to the guess you made. This can also create issues as it must impact your confidence in the technique. If your confidence is impacted, this could further lead you to divert from the technique in different conditions, exacerbating the issue. So if you have got a new method which looks promising, apply your reason to it first.

Attempt to understand all of the trading eventualities you will face and make sure the method stands up to every one of them and deals with them. This easy piece of recommendation could save you thousands. And after you are ecstatic with the logical research you have applied, remember to dummy trade for some time too. In dummy trading you may likely find a number of eventualities you never thought of.

This gives you the likelihood of ensuring the technique deals suitably with them too, without hazarding any cash. Good luck. 

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