April 17th, 2009 by Damian Papworth

One of the things I have noticed during the 20 years I have spent either actively investing in various strategies, or trialing them, is that the ones which make logical sense usually are the ones which work best in real life.

There are so many strategies I’ve tried, I have lost count. And there are at least as many which I’ve let go without trying. There are just too many. I found a quick fire way though which helps disregard the strategies which are useless, so you can trial the ones which are worth trialing. Its logic. Look at the logic of your trading strategy and see if there are holes in it. You’ll be amazed by the number of strategies with big logical holes.

Its quite possible that these strategies, in their wholeness work quite well. But the problem is that if you are trading a strategy which has holes in it, at some stage you’ll come up against a real life situation where the strategy has no answer. Then you’ll be on your own and you’ll need to make a decision outside the strategy. This can be an educated guess, to an intuitive judgment call, to a flip of a coin.

Personally I think that making decisions like this, decisions which are outside the logic of an investment or trading strategy, is gambling. Its not a good situation. Sure you may make money with this gamble, but you could lose it too. Its no different than blackjack. A robust and complete trading strategy should take these gambles away from you. There should be no guesses. You should just plan the trade and then trade the plan.

Also, the point about trialing a strategy is that you are finding out whether it will make consistent returns over the fullness of time. The point about trading a strategy is that you know it makes consistent returns over the fullness of time. If you have had a guess mid way through the strategy, you cannot be confident its the strategy or your guess which is making the money. You will need to start again.

So if you have a new strategy which looks promising, apply your logic to it first. Try to understand all the trading scenarios you may face and ensure the strategy stands up to all of them and deals with them. This simple piece of advice could save you thousands.

And once you have covered off every situation you can think of, always remember to execute a preliminary trading exercise without putting money down. Spend a few months running the strategy in spreadsheets before you trade with money. You’ll be amazed at the real life situations which come your way which you’d never have dreamed of. And you will thank your stars you resolved these issues when you had nothing on the line.

Business, business;finance, Finance, foreign exchange, FOREX Trading, investing, investment, investment strategies, Investments, money, money management, stock market trading, stocks, trading, trading strategies

November 26th, 2007 by Damian Papworth

One of my most enduring memories from high school is that in pretty much every class I attended, it didn’t matter what the subject was, there was always some smarty pants who would say to the teacher “I just don’t see how this will help me later in life”. Its funny how the teachers never really gave them a satisfactory answer.

I would really love to go back, and review the subjects I learnt back then just to see how insightful those kids were, and how much of what I learnt back then has helped me get to where I am today. I won’t though, rather I want to look into a slightly different topic. I believe that there is one subject that everyone should be taught at school as it would be invaluable in helping you make your way through life, no matter what background you come from, or where you are going. This subject is never on the curriculum though. I don’t understand why. It is Financial Literacy.

This subject, “Financial Literacy”, should teach you about the implications of making a bunch of decisions about your finances. From the simple things, to more complex things. The ultimate purpose of this subject should be to ensure that you are armed with enough financial knowledge, that you won’t make the idiotic, financially ruining decisions so many people make every day. I’d see the curriculum running something like this.

Week 1. Is that a scam? How to recognise scams and not get involved in them. All they are, are people stealing your money.

Week 2. How much can you borrow? This lesson would teach you to calculate how much money you can borrow for personal or business purposes, on a variety of mediums. This would include credit cards, personal loans, business loans and mortgages. It would mainly concentrate on cash flow issues, but also touch on the tax effectiveness of some of the different loans.

Week 3. What type of assets do you own? In this lesson, different assets would be explained. For example, an appreciating asset would be compared to a depreciating asset. Similarly a consumable would be compared to an earning asset. These assets would be compared over time, so you can see the impact purchasing different items has to your net wealth over time.

Week 4. What investment strategies are right for you? This lesson would run through different risk profiles, explaining both what can go right, and what can go wrong with these profiles. This should enable you to work out your tolerance to financial risk, and therefore make better investment decisions. From there, the class should explain some robust investment strategies for the different risk profiles, such as our Stock Market Trading Strategy and our Foreign Exchange Trading Strategy. Both these strategies try to maximise returns and minimise risk at the same time and therefore would be ideal for someone with a middle ground level of risk tolerance.

Week 5. Should you leverage your investments. This lesson would run through the advantages and risks associated with leveraging investment protfolios. Similar to what we have done on our Investment Financing Advice page. Tax would have to be covered to some extent in this lesson also as there are some definate tax advantages when borrowing to invest.

Final. The final lesson of this course would be put it all together. The steps you should take to avoid the financial problems so many people face. How to structure yourself to maximise your legal protection and yor tax position. And of course, how to use the money you have to most effectively create wealth and income, given your personal tolerance to risk.

At TheOnlyWay.com.au we have made some small inroads into bridging this gap in our education system. We have a bunch of high yield investment strategies we are successfully trading today which we encourage you to review.

We also have a free email newsletter through which we endeavor to produce high quality free information, to educate and arm you with the knowledge and information you need, to make the investment decisions which will make your life much easier in the years to come.

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