I have recently begun to rediscover the importance of getting back to the basics when it comes to investing and trading in whatever market you happen to be in. There is so much information, data, systems and strategies floating around out there that it can cause an information paralysis and overload.
There is nothing wrong with finding the next best trading strategy or buying a new system that has tons of promise. But in the midst of acquiring new and innovative methods, you shouldn’t forget the fundamentals that are crucial to long term success in the financial markets.
Every new and innovative trading or investment strategy is directly built upon the fundamental working of the market. The basics work and they are simple. So why not use them? People assume that systems that work can only be complicated in nature. That is not true. Many successful traders and investors use a very simple method to trade and invest.
Example from the Oracle of Omaha
Take Warren Buffett for example. He uses the simple concepts of value investing to make billions of dollars every year. He has taken a simple and straightforward concept and has become an expert in it. Buffett doesn’t use complicated software and tools to make his decisions. In fact, most of what he does is read annual reports, mostly in paper form.
There are other traders that use simple strategies like buying a stock only when a large insitutional investor or hedge fund buys a particular stock. It’s a simple strategy. Buy with the big guys because they are going to drive up the price. If you can learn how to do this very simple thing, you will become successful in trading.
Scaling a Successful Model
Once you have figured out a simple strategy or method that you like and works for you, spend the rest of your time and energy scaling it. If you find a strategy that works, you have found a goldmine. Don’t go out searching for another goldmine while the one you have in your hand is yet to be mined. That’s what so many people do. They look for the next big thing and don’t take advantage of the big thing they currently have.
By scale it I mean take the method that works for you and makes you money and multiply it. It’s a very simple concept. So here are a couple of investment tips for you. Keep it simple and keep it scalable. Keeping your trading method simple will help you scale it easier. The more complicated a system is, the more difficult it will be to scale it to large proportions that will make you money.
