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Winning Investor
I have messed up an incredible number of investing opportunities by not following proper money management routines.  In the end, it was all Murphy's law in action. The stocks I was sure about hurt me the most, and the stocks I was afraid of went up through the roof. Sound familiar?  

Today through the use of my Scaling Strategy, I simulate a mutual fund in my own personal portfolio.  I don't look to make a fortune on one pick, but I don't lose big either, it's my overall portfolio's growth, and ability to sleep at night that makes me successful. 

The most important aspect to your trading, is money management.   Money management is that portion of one's trading system that tells you how many units of your investment should you put on a given trade. How much risk should you be willing to take? 

Using picks, I have been experimenting with position sizing for many years.  It was hard for me to accept the idea of investing 1% per trade.  How can anyone make any real money investing 1% per trade?  The one thing I knew was the fact that I was subjecting myself to a lot of stress by investing heavily in each position, and I was frozen if a position went against me, because I was already in too deep.  

Position sizing and buying at the wrong time will be your biggest mistakes.  Buy 1000 shares of a stock and watch it go down the next day. By the time your stock would come back up, you will be a much humbler rabbit, ready to sell just to break even. Then several weeks later, the stock is 10 points higher, but you are already out of the game.  

One of my first stock buys almost 20 years ago was CompUSA (CPU); and what a terrible buy it turned out to be. Well, I was following the stock at the time and saw it fall from $35 to $25. At the time I liked the company, so I went in and bought 1,000 shares at $25. Two days later, the stock fell to $20 and I bought another 1,000 (thinking I will just average down a great buy). A week later, I had accumulated 4,000 shares, and was almost to the point of a heart attack. The stock, obviously knowing I was in deep pain, continued to fall to $13. I was horrified and disgusted with myself, the stock, and the market in general. Just to get peace back in my life I had to get out. So, I sold at $13 and you guessed it, it so happened to be the low.  I took a loss of $20,000 and went into a shock for the next 2 weeks. The odd thing was, two months later the stock was back at $30. 

What did I learn from the CPU experience? absolutely nothing.  Following CPU I almost regularly fell into similar traps by investing large portions of my capital into what I thought were good companies, but with the lack of money management and risk control in my approach, these investments quite often turned into large losses.   

I could waste your time with a few other good loss stories, but I want to move on to the important part.  The part when I finally decided that enough was enough and I was not going to lose money anymore.  Now some of you may argue that losing money has nothing to do with what I want, and that the market is bigger than me, so how could I say that I am not going to lose money anymore?

This page is not about a psychological pep talk, and even though I am a believer that you do get what you see in life, the reason why I finally matured into a winning investor is because I had to.  After years of losses I no longer had  substantial capital at my disposal, and to put it in simple terms, I had to win.  As someone once said failure was no longer an option for me.

It was about that time when I finally started to understand that yes, Technical and Fundamental analysis are important, but without a sound money management incorporated into my investing I would never be a winner at this game.

Luckily for me, I was always good at what I did and working hard never stopped me, and so I started reading and learning about the effect of position sizing on my strategy. I knew I had the best Technical Analysis available, but I needed more than that.  I needed to make sure that regardless of what the market did or did not do, I would always be successful.

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