My Powerful Trading And Investing Rules

These are the rules I live and die by

My Powerful Trading And Investing Rules
Photo by Kanchanara / Unsplash

I’ve spent years honing my money making skills in the market to the point where I can start picking out the easy meat. Now I’m trying to do it with a smile and a firm handshake.

Can you make money trading and investing, hell yes! Can you lose your shirt? Double hell yes. I've seen people make and lose fortunes in the span of a few days or hours. One moment you're up and the next it's eating beans from a can.

The reality is that no one knows if the stock market is going up or down in the short term, but what about the long term? Isn't that why we have oodles of retirement plans to choose from? The reality is that yes, in the long term, you make money. The average long term return for the S&P 500 is 7.58% - via Forbes.

Using Shiller’s data, since 1971 the S&P 500 has delivered an annualized return of 7.58%—or 10.51% with dividends reinvested.

That’s pretty damn good rate of return and it's why the majority of people put their 401k money into index funds with low costs. By the time they retire they'd on average made 7 to 8%. Hey, not bad but then again you're not anybody, you're you. A special and smart person, just like all the rest.

What about the traders and more skilled investors? Based on that average, there will be traders and investors that outperform that average and others that don’t. On one side of that average are losers and on the other side are big winners. The trick to trading and investing is to be on the side of the winners, on the right side of the average.

(c) Yahoo Finance

So how do you get to be one of the "top performers"? That’s the hard question and it requires some careful thought. Most of my wealth has been generated investing low cost mutual funds with more risk. Do I have index funds, yes but I tend to focus on building a portfolio that's more aggressive and tries to beat the market by a few percentage points per year.

That's investing, what about trading? What about those filthy rich day traders? How are they getting rich? They're engaging in the hardest way to make an easy buck, they're in the thick of things and I have no time for that. I have very little time to watch the market on a daily basis and commit to all the market news.

Hell, I can't even stomach swing trading and the only thing I can do is do read a few charts at the end of the day and look at if my brokerage account is up or down.

This is why trend trading works for me. It's a lot easier than day or swing trading and it tends to capture strong moves over a long period of time. Trend trading, also known as momentum trading, makes sense to me and that's why I do it.

It's the one method that's consistently made money for me, if and only if I follow some additional rules.

Below are my rules for becoming a successful trend trader: