Invest with Objectives

When I began trading – and to a degree even now if I’m honest – one of the biggest problems I faced, was deciding when to get out of a position.

Getting in was easy. I began investing back in the dot com boom days of the late 90′s, when I worked for an investor-focused, IT startup in London. I got in as soon as I had the cash. Usually pay day.

Sometimes I doubled or tripled my cash, sometimes I got burnt, but all in all, things were good then – if a little crazy – and there were more wins than loses.

It was usually a case of bailing on an equity when a better option came along or someone in the office gave me the whisper. Sometimes growth was just too quick to be sustainable, so I jumped ship before the inevitable reversal. That felt good. There wasn’t a lot of thought to my trading back then though and if you had of asked me if I had a trade objective, I probably would have replied, “yeah, to make lots of money”. I wasn’t a good investor, I was a very average investor in a ridiculously bullish market. It was hard to fail, but that all changed.

Now I wouldn’t say that I’m a good investor yet, I’m still an average investor but I’m better read and with a lot more experience. And that experience has taught me to trade with an objective. When I enter a trade now I tend to have two defined prices where I’ll be getting out. A stop loss, where enough is enough and it’s time to poke my tail between my legs and sniff for greener pastures and a target price which usually equates to a multiple of my trading price, as I tend to put my money into more volatile, speculative equities. I ain’t gonna die wondering!

If you can do it, trading with an objective takes a lot of the guesswork out of investing. Sure you’re going to miss out on some gains by selling too early or too late but if you’re confident in your abilities you should win more than you lose. Those rules then give your trading structure and there’s nothing stopping you getting back into an equity when the time is right.

Now if only I could practice what I preach.