So this one’s going to bit of a hypothetical and it’s based on a recent post on Whirlpool where a new investor was seeking advice about starting out. It’s also inspired by a recent tweet by Steve Burns asking this very question.
The two questions got me thinking, what did I wish I knew when I first started trading, what were my key turning points and what would I do differently.
So first up, what do I wish I knew before I started trading:
So what was the turning point for me.
Really it was reading a post on Whirlpool where someone had asked for recommendations for trading books and one of the recommendations was a book called Trend Following by Michael Covel. I thought that sounded interesting and went out and got a audible version of it (I can speak highly enough of Audible, it’s made it much much easier for me to smash through trading books). This book really changed my approach to the markets and trading (and enabled me to make some more painful mistakes – but that’s probably a whole other blog post).
From trend following, the biggest shift for me was really point three above around cutting losses fast. After reading the book, I cut a couple of positions I’d been holding for months hoping they’d bounce back (3 years later and I think they are still about the same level they were when I sold out, if not lower) and freed up my capital to deploy else where. There’s a lesson there too I suspect 😊.
I think one of the key take-aways for me from Trend-Following, beyond the above, whilst buy and hold does work, it can be optimised (to an extend, you’ve got to be careful to not over optimise) to work better for the investor. I think Covel sums it up nicely when he calls buy and hold, buy and hope.
So the TLDR summary of what I’d tell myself if I had a time machine:
Cheers for now,
Nick the Trader Guy