I have a lot of concerns when it comes to implementing Warren Buffett’s approach to the stock market. I think the buy and hold approach is outdated and highly risky. Today’s market requires that you actively manage and trade your portfolio and not allow naivete or passive investing hamper your ability to trade the stocck market.
You have to be on top of your game, and if you are leaving your money in the hands of some big bank financial adviser, I would stay on top of him and demand that he provides you with returns that beats the S&P 500 each year, or what good is he/she?
However, there is one rule of Warren’s that I do like and it is this:
The first rule is not to lose. The second rule is not to forget the first rule. I have always been a huge believer of this trading axiom (even though he meant it for investors).
Beyond not losing money, I make sure I don’t put myself in a position where I can lose a lot of money. That means I don’t play earnings, in the case of Brexit, I went to cash, because I thought the outcome was too uncertain and to be on the wrong side of the trade would have meant doom for my portfolio.
You see, when you can avoid the big losses from being long on Friday and this Monday, and instead of being in cash and waiting for more certain market conditions, it gives you a massive leg up on this market. And that doesn’t come from picking stocks right, that comes from managing the risk right. That has to be your mindset in this market if you are wanting to succeed. Manage risk first, profit second, and this will make sure that you ultimately don’t lose money when it comes to trading in the stock market.
I have been actively teaching and trading with thousands of other traders over the years, and helping them better manage risk and put themselves in a position to consistently profit from the stock market. They become the manager of their future and not dependent on some financial adviser that spends the majority of his time out on the golf course.
I am present every day in the financial markets. I provide the risk to every trade that I make, and on a day like today, I actually made money. I didn’t lose money. That is because I cashed out my positions yesterday and went straight to cash before the market sell-off ever happened. When the opportunity arose this morning, I shorted SPY and made a quick buck off of it. I am active in how I manage my accounts. I don’t take unnecessary risk, and I preserve the capital in my portfolio at all costs to avoid draw-downs
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