Investing in financial markets - are you ready for the long ride?

In today's article, I am focusing on two often overlooked but critical factors for the success of any investment in the financial markets - patience and determination.

Victor Tomov | 07:39, 2019/05/20

Dear aspiring investors,

Many of you who trade with real money risking their capital know that feeling of anxiety when the price starts moving in the "wrong" direction.

It is the time when we start asking ourselves questions like:

  • Did I make the right decision to enter the market that early?
  • Should I close my position now to avoid a loss?
  • Should I put a tighter Stop Loss?
  • Should I open another position in the same direction hoping for a reversal?

The opposite is also valid. When we got it right, and our position starts accumulating profits, we face another set of challenging questions:

  • Should I collect the profit and close my trade now?
  • For how long should I wait until I close the position and get a good profit?
  • How likely is for a reversal to happen?

The answer to those problematic yet critical questions is not straight-forward and depends a lot on your experience and the strategy (investment approach) you are applying, but also on your circumstances and risk affinity. Each of those questions deserves a separate discussion. There are, however, personal qualities that you could practise and master so that you take the most out of any situation in the financial markets. Core values and principles that may guide your decisions.

Patience

Many experienced investors will tell you - "the market is here to stay, it ain't going nowhere". That's correct. It's quite similar to fishing and hunting where you patiently wait, sometimes for hours, for the big catch. It may seem that you got it wrong at the beginning, that your target is about to escape. It may even get out of your vision for a while, but it still there somewhere. You need to be patient to get there. In financial markets, this patience comes with a set of prerequisites:

  • enough account balance/equity to sustain temporary floating losses
  • good overview and understanding of the historical price movements (usually forming well-defined waves or cycles - see the illustration below)
  • proper risk management (definition of optimum exposure and trade size)

Fig. 1 Example of price cycles in a GBP/USD daily chart

Considering the above, we may also compare investing with cycling - if you are well equipped, hydrated and fueled, you may sustain the long run and reach eventually your profit target going through the tough phases hours, days or weeks ahead. Just like enduro races, you push hard mentally to achieve your goals.

Analysing the market conditions to define your entry point is another topic that I will discuss in a separate article as there are scenarios where waiting can be quite profitable.

Determination

When you first started investing in financial markets, you must have had a reason for that - getting wealthy or financially independent, growing your wealth at rates much higher than those on savings accounts, earning for your next holiday in an exotic location, saving for the education of your children and so on. All these reasons define further your investment approach and the markets you select (usually those you know best).

Once you open your first trades, it's critical always to keep your objectives in sight to remind yourself where you are going. In panic-like market conditions where volatility increases significantly, your willingness to keep going, even at the expense of some losses, is what could make the difference and help you achieve your goals. No pain, no gain is the old saying, but it is so true in every aspect of our lives. It does not matter if you trade manually or use an automated investment system; your determination is what keeps you going. Few rules of thumb boost it:

  • Never rely on investing for a living. Financial markets are highly speculative. Hence, you should allocate there only extra funds that you could afford losing.
  • Start small and slow enough. The going will get tough sooner or later, so make sure that you do not exhaust your resources right after the start and set a comfortable pace according to your risk tolerance.
  • Losses are inevitable but not unrecoverable. You could offset every loss sooner or later.

Getting mentally ready for the long ride of financial investment is as essential as having the funds needed to start your journey. Through self-awareness and reflection, you will be able to evaluate your personality and select an approach that best fits it, facilitating your patience and determination. If you do not feel ready to spend the time needed for full-time manual trading, you may consider automation to a certain degree or even delegation of funds to professional portfolio managers. However, no matter which way you choose, you need to have enough patience to navigate through market turbulence and determination to stay on track after the first bump.

Many lose sight of their objectives when they face some difficulties and give up to realise the chances of profitability missed afterwards. Financial markets are here to stay. With or without your participation - it's up to you. My company Findilao and I are here to help you make wise investment decisions.

Warning:

Disclaimer: This article presents the personal opinion of the author based on individual experience and past results. None of its content shall be considered investment advice. Past performance does not indicate future results. It is your sole responsibility to decide whether to follow any presented techniques or approaches and neither the author nor Findilao Ltd can be held liable for an outcome from your actions.

Risk Warning: Trading Foreign Exchange and Contracts for Difference (CFDs) is highly speculative and may not be suitable for all investors. The leverage created by trading on margin can work against you as well as for you. Only invest with money you can afford to lose and ensure that you fully understand the risks involved. You should be aware that your investment may go down as well as up and you may not get back the full amount invested. Seek independent advice if necessary, before buying a subscription to use our services.

Victor Tomov has more than six years of extensive hands-on experience in the financial industry gained in different management roles. Passionate about marketing ethics and confident in the success of any customer-driven organisation, Victor leads Findilao's business operations since the company's establishment in early 2018 offering diverse solutions for sustainable investment growth that help investors make wise decisions and monetise financial expertise. He has a Masters in Corporate Marketing from the University of Economics in Varna, Bulgaria. Victor's strong analytical skills proved to be instrumental in the development of his views on trading.

Victor Tomov has more than six years of extensive hands-on experience in the financial industry gained in different management roles. Passionate about marketing ethics and confident in the success of any customer-driven organisation, Victor leads Findilao's business operations since the company's establishment in early 2018 offering diverse solutions for sustainable investment growth that help investors make wise decisions and monetise financial expertise. He has a Masters in Corporate Marketing from the University of Economics in Varna, Bulgaria. Victor's strong analytical skills proved to be instrumental in the development of his views on trading.