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A ‘profitable trading strategy’ is an oxymoron.
97% of day traders lose money. To make real money in the stock market, you need to leverage the power of compounding returns. As the classic Wall Street adage goes, “It’s not about timing the market; it’s about time in the market.”
What you need is an investment strategy. Not a trading strategy.
An investment strategy allows you to make decisions based on the underlying value of the company instead of momentary volatility. To best understand the difference between trading and investing, think of it in terms of time.
Trading is about making quick money by trading short-term fluctuations. Investing is about taking a vested interest in a company. If you believe in a company’s value (and understand its financial statements), then you can invest in it for the long haul. As Warren Buffet says, “Our favorite holding period is forever.”
There are a few reliable flavors of investing strategy:
- Value Investing: As far as I am concerned, this is the single most important paradigm for investing. Appreciating the simple philosophy of buying undervalued companies provides a scaffolding for your entire approach to asset allocation. If you want to learn from the landmark text of this strategy, be sure to read The Intelligent Investor by…
