Firstly. I am not a very good writer, make plenty typos etc. My grammar is probably appalling and I was never good at English Lessons at school. But I hope I make some sense here..
I have been trading now for around 10 years with the past 8 years or so a modest success. My first two years was a disaster, with me losing around £15000. As a thirty year old that was a lot of money to lose. Far too much money. I was trading FOREX, penny shares, story stocks and pretty much going with the crowds.
But I didn't give up. I was fortunate in working offshore and having some disposable income that allowed me not to give up. But in doing so I realised that I must separate myself from the crowd and think deeply what I was doing wrong.
My turning point was reading Robbie Burns Naked Trader. This book has been my bible through thick and thin. It served me well and still does. But what was so special about this book than all the other books that I have read on investing? Well Robbie's book is the only book that taught me something very important. I was taught how to control losses. I was taught not only to have an exit plan on profitable companies, but also how to manage losses so they do not build up in a diversified portfolio.
But every time I try to promote the system that works for me on bulletin boards and even by the most respected successful investors; I feel that I am very much in a minority. I have struggled to understand why the majority of private investors are against using stop losses. But then I have realised that many investors follow the opinions of many successful investors who do not use them.
An important question often asked by professional private investors is..
'Why if a high quality, company with a strong cash flow, solid balance sheet, positive outlook share price goes down 10% - 15%, then should one sell up automatically? The fundamentals have not changed and thus we should use the dip as an opportunity to buy the same company on discount.
This is fair and perfectly understandable.
But here is my problem…
I am not as good as reading balance sheets, income and cash flow statements etc. In fact I am as bad as reading financial statements…
