Investment Rule no. 4:

My Investment Rule no. 4: No discipline is the key of losing money in the market.

We always hear people say, “You can’t go broke taking profits.” However in my opinion, one may just go broke by taking small profit at a time. Most people does not have the idea to maximize their gain and because of that they tend to sell their holdings too early. When come to loses, people are not able to sell their holdings early and end up taking large losses.

Remember this point, investing and trading is not about maximizing the number of winning trades. The two examples below will be used to explain this fact.

Example 1: you win a total of $1000 in 9 trades but in the 10th trade, you lose $10000. Basically you are losing $9000, even though, you have more winning trades.

Example 2: You lose a total of $1000 in 9 trades, but in the 10th trade, you win $10000. Basically you are gaining $9000 even though you have less winning trades.

Every investor or trader should think of their own strategies and must have the discipline to follow it. The strategy must be working for long term and not short term gain. Short term market movement always like to mislead people to go against their strategies. And most of the time, this may result in people losing opportunities to make more money, or can even make people lose more money.

My Quotes/Rules of Investment