Knowing yourself is the key to consistent profits in Investing and Trading

Know yourself is the key to consistent profits. Why?

Because the key to consistent profits is sticking to a trading strategy or style that has an edge.

There are different ways to make money in the stock markets. Investing, trading, value investing, growth investing, systematic trading, swing trading, day trading, options buying, options writing.

The underlying mathematical reason for making profits is making more on winning trades and losing less on losing trade. This is the edge and the only common thing among the different styles that make money.

Edge = Making more on winning trades and losing less on losing trading.

Now for the edge to work in our favour, we need to stick with ONE style for a long period of time to allow the law of large numbers to work in our favour.

To be profitable, we need to allow the edge to work in our favour. This is only possible when we are able to stick with a strategy or style that we believe in.

When I was a beginner, I constantly used to switch styles. Switching from value investing to growth investing, from growth investing to swing trading, from swing trading to day trading, you get the point.

Though each of these styles were profitable over a larger time frame, I wasn’t profitable because I was never letting one of the styles to work in my favour. I was judging the style based on a smaller timeframe or smaller sample size.

Only when I took some time on reflecting on the below questions

• Which style suits my mindset?

• How much time do I have for trading/investing?

• What are my strengths and weaknesses?

• Which style am I comfortable with?

• Which style suits my work-life balance?

Based on this reflection, I chose a systematic way to invest in the markets.

If you are struggling with your trading or investing, I strongly suggest to take some time to knowing yourself and to find out which trading or investing style suits you.

Everyone is different.

Mindset required for day trading is quite different from the one required for swing trading/investing.

Strengths required for option writing (fast decision making ) are different from those required for value investing.

Know yourself and choose a style that suits you.

Happy trading/investing! See you in the next post!