There is a lot of literature on how to get rich on the stock market, lots of value analysis, investment strategies, "analyst" advice and other recommendations from "grocery sellers". However, statistics show that 95% of traders end up ruining themselves.
What path should we take to form ourselves and create a strategy that allows us to earn money consistently and continuously over time in the financial markets?You have to be very clear the 3 principles of a good trader:
Investment system: stock selection, entry, exit and fixation strategy
Risk management: "Money Management", analysis of the position in each operation and risks.
Psychology: self-knowledge and the functioning of the market.
One way to improve the financial culture is to encourage debate on the search for possible investment strategies, I propose a basic investment plan to achieve income from financial markets:
System, strategy:
· Trends: identify and select markets, sectors and values in clear trends
· Input system: buys when it breaks historic highs and surpasses resistances.
· Output system: Dynamic stop loss previously set according to the volatizad of each value.
Risk management:
Analyze our initial capital
Test our system to establish the size of the position with which to enter each value.
Establish a level of portfolio risk and by operation
Measure the maximum possible loss, the number of negative consecutive operations and percentage of success
Psychology:
Self-evaluation: stress levels, assuming operating losses and letting profits run.
Knowledge of financial markets: expand training and experience.
Constancy, rigor and fulfillment: do not let yourself be carried away by intuition and respect the set system.
Without having a clear grasp of these three facets, our path to ruin will be more or less slow, but of course we have no future in the financial markets. The best thing would be that we ruined at the beginning that we have little capital to risk and dedicate ourselves to something else.
Because of the difficulty of handling and combining this, most people prefer to be advised by a specialist. And it is what everyone should do, since it requires a lot of time for study and training, and a specific follow-up to become a good trader and trader.
The problem at the time of counseling is that we have been deceived by our entities. They sold us financial advice, when really our banking manager, for very good professional and goodwill, his main objective is to sell the products that demand in his entity. If your salary depends on the results of what you sell, be assured that you will place what interests you to meet your goal, not what is truly appropriate to your profile.
And the economic crisis has uncovered these practices, with thousands of savers with millionaire losses, for being in products and values not according to their level of risk and knowledge. Scams and deceptions have come to light, and although European initiatives like the Mifid have tried to solve this, bad practices will always continue because they are systematically flawed.
To address this, EAFIs have been created: Independent Financial Advisory Firms. Born in 2008 as a result of the crisis, there are currently 100 in Spain. They are dedicated to advising the client on financial planning, without being linked to any entity, so their recommendations and analysis do not depend on any commission and are appropriate for each client. Another thing is that they agree or not in their assessments, but leave in good faith.
In the UK 90% of the financial system is organized in this way. Banking institutions offer products and services, while the advisory service is conducted by Independent Financial Advisors (IFAs).
In Spain there is a lack of culture to pay for the advisory service, and society is reluctant in this respect, but it should be the natural evolution towards which the sector would have to address if we want greater transparency and a more efficient and successful financial system.
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