8 Lessons You Should Learn From the World Trading Gurus

by Harry Miller Content Writer

Not all trading Gurus agree with each other much but one thing they show consensus on is that you can only make money if you have a steadfast strategy. That strategy must be built around certain rules or in other words lessons from the trading the gurus. Using their knowledge, you can learn how to turn pennies into millions and even billions using your current CFD broker. Let’s have a look at 8 lessons from the world trading gurus on investment and trading:

#1. Adjust to your environment

One of the important lessons to hold on to as a trader is to adjust to your trading environment. The market will get volatile. Prepare yourself for whatever it will throw at you. When the time is good, don’t overtrade. When it’s not, have patience.

#2. Never overtrade

The key is to always remain patient. When you are not, you will end up making bad decisions. In fact, overtrading is one of the main reasons why traders fail. This habit, if continued, can turn out to be quite expensive.

To overcome it, apply the 80/20 rule. According to this rule, 80% of your results come from 20% of your actions. So, you need to work on your actions. The best way to start is by creating rules and guidelines around your trading strategy.

#3. Show tolerance

Dennis Gartman, the author of the Gartman Letter, says that you must be patient with the winning trades (profits) and impatient with losing trades (losses).

This actually addresses a mistake most young investors make. First things first, never sell at the first sign of profit. Let the trade run. Secondly, do not let a loss get away that easily. Investors are usually ok with losing a little bit of the money but react only when the loss is huge.

Gartman says that you don’t necessarily have to be right majority of the time. What’s important is to come out of the losing trade as soon as you can. If you make enough money on the winning trades, it will outpace the losing trades.

#4. Check the company’s quality

Warren Buffett says it is better to buy a wonderful company at a fair price than buying a fair company at a wonderful price.

Buffett is among the richest men in the world. The world markets move on his words. He has two key pieces of advice for investors. When you are evaluating a company, you must look at its quality. Take some time to understand its balance sheets. Make sure you have confidence in its management. Once you have confidence in the quality of the company, evaluate its price. If the company’s quality is high, don’t buy at a bargain price. On the other hand, if the company’s quality isn’t impressive, don’t buy just because the price is low. It’s simple – if you invest in a bargain-bin company, it is only going to produce bargain-bin results.

#5. Set realistic expectations

This one is obvious but once you are in the moment, you tend to forget it. Do not enter the market with the hope to get 100% return overnight. Unrealistic expectations make you use excess leverage. The right approach is to plan towards growing your capital slowly and steadily. That is the only way you will survive.

#6. Nobody’s your friend

A private equity investor, Carl Icahn says that if you want a friend, go get a dog. Nobody’s really your friend and you will learn that the longer you stay in this business.

What Icahn means is that don’t take a tip from a friend about the next hot stock or else you might lose money. The only piece of advice is to listen and act upon your own research. This doesn’t also mean that you shouldn’t listen to any advice. Listen but don’t act upon it without verifying the information.

#7. Perform post-trade analytics

Newbies often believe that their work is done once they have closed the trade and booked a profit/loss. Absolutely not! The right way is to dissect each trade to understand how it panned out. In other words, you must perform post-trade analytics. Check the effect of the trade on the equity curve, do disruption of winning/losing streak or perform time-based analytics. Your broker can provide you these details. Extract the reports and analyze them. You will gain lots of insights from your own trading behavior.

#8. Invest for the long-run

Prince Alwaleed Bin Tala is well known in the investing world. He is from Saudi Arabia and he is the founder of the Kingdom Holding Company. During the time of recession, when others were selling their investments, Talal didn’t do what the rest of the world was doing to protect their riches. Instead, the held onto his investments for a long period of time. He didn’t let the large market events take the best of him.

That doesn’t mean you must always invest for the long-run. It’s perfectly fine to trade stocks on a short-term basis. However, a majority of your portfolio should be invested in long-term holdings. Only then will you have the real taste of profit.

Conclusion

Of course, everybody’s got to make their own mistakes and you only learn from bad experiences. Keep one thing mind, you can’t expect good results just because you are using the MT4 Turbo Package. Yes, it’s a great resource but you still need pearls of wisdom from the Gurus to become better at this game.