Money management - the key to financial success. Whether in the market or outside of it, it really doesn't matter. If you can't manage your money well, you may as well give it to someone else.
I started in the market with $20k and no idea how to even buy or sell a stock on the market. Watched it double in about 3 months, then watched whilst dazed in the headlights as it tumbled down to virtually nothing by the 5 month. I knew nothing about the market or different trading/investing strategies. Hell I didn't even know trading was a 'thing'. I only knew of investing - conservative family. It was only whilst contemplating my failure and stewing on the fact that I hate losing in anything in life (regardless of what it is) that I thought to myself, if I had of sold on the 3rd month I would have had double my initial investment and then I could have bought something else to try keep the compounding going. Woila! I decided there and then that is what I will do going forward. Then I found out trading actually is a 'thing' and I wasn't so unique in coming up with this idea
. Anyway, has turned out to be the best decision I could have made - I love it. I also scalp trade with smaller parcels for pocket money when the market is good and I have time, but otherwise, if the market is not amazing I usually don't bother as more often than not I will give back anything that I've gained. It can also be a lot of work for not a lot, or no reward at all.
Evolution has led myself to having much larger position sizes now than that of only a few years ago. Naturally, this leads to larger wins in dollar value, however, it also can also lead to much larger losses, in dollar value - even if using stop losses etc. For example, if using a similar stop strategy as previous - 10% of $1000 is a lot less than 10% of $50,000. $100 loss vs $5000 loss for the same 10% stop loss strategy. Obviously there a ways to combat this, small pilot buys, pyramid buying etc throughout an uptrend so that there is always a profit barrier should things start going pear shaped, tighter stops etc. Or whatever your strategy might be, there's always pros and con's to each method.
I much prefer to have 5 pyramid buys to total a $50k holding and lose a little potential profit along the way than to buy $50k in one hit as the immediate exposure to down-side risk is too high for my risk profile. Obviously the numbers you are comfortable will vary depending on ones financial situation, this is where psychology comes into it... you then need to learn a new skill that may not be anything to do with FA or TA education. The only way I've learnt what I am comfortable with (i.e position sizes/loss sizes) is to find out in the real world, make the mistakes myself and have read the occasional book. Still do make those mistakes, only a little less than I once did. Most recent doozy was AOU gap down on results - nature of the junior explorer beast sometimes. Suck it up and carry on is all you can do.
So as your financial situation increases, you also need to adapt your brain and emotions to be able to manage those larger figures too (if re-investing/trading profits into the market). When you're not a financial expert, this is easier said than done and one of the hardest things about 'the game' imo. It takes time, lots of experimentation and both success and failure along the way to find out what you are capable of. Me, I like doing things the hard way so best not to listen to me if you prefer to find success quicker than me.
Happy Australia Day (for how long?) troops.
I love beer.
