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The Successful Investment Journey

The most successful investors were not made in one day. Learning the ins and outs
of the financial world - and your personality as an investor - takes time and patience,
not to mention trial and error. In this article, we'll lead you through the first seven
steps of your expedition into investing and show you what to look out for along the
way.


1. Getting Started



. Know What Works
Read books or take an investment course that deals with modern financial ideas. The
people who came up with theories such as portfolio optimization, diversification and
market efficiency received their Nobel prizes for good reason. Investing is a
combination of science (financial fundamentals) and art (qualitative factors).
Science, however, is a solid place to start and should not be ignored. But don't fret if
science is not your strong suit: there are many texts, such as "Stocks For The Long
Run" (1994) by Jeremy Siegel, that explain high-level finance ideas in a way that is
easy to understand.

Know what works in the market, you can come up with simple rules that work for you.
For example, Warren Buffett is one of the most successful investors ever. His simple
investment style is summed up in this well-known quote: "If I cannot understand it, I
will not invest in it." It has served him well. While he missed the tech upturn, he
avoided the subsequent devastating downturn of the high-tech bubble of 2000.

3. Know Yourself
Nobody knows you and your situation better than you do. Therefore, you may be the
most qualified person to do your own investing - all you need is a bit of help. Identify
the personality traits that can assist you or prevent you from investing successfully
and manage them accordingly.

4. Know Your Friends and Enemies
Your friends may be reliable investment books, reputable media and investment
professionals with experience, long-term perspective and integrity. However, beware
of false friends who only pretend to be on your side, such as certain unscrupulous
investment professionals whose interests may conflict with yours. You must also
remember that as an investor, you are competing with large financial institutions that
have more resources, including greater and faster access to information.

Bear in mind that you are potentially your own worst enemy. Depending on your
personality, strategy and particular circumstances, you may be sabotaging your own
success. If you are a guardian and you see all your friends making a ton of money in
the short term on the latest market craze, you would likely be going against your
personality if you joined in . Because you are risk averse and a wealth preserver, you
would be affected far more by large losses that can result from high-risk, high-return
investments. Be honest with yourself - identify and modify factors that are preventing
you from investing successfully or are moving you away from your comfort zone.

5. Find the Right Path
Your level of knowledge, personality and resources should determine the path that
you choose. Generally, investors adopt one of the following strategies:

Don't put all of your eggs in one basket. In other words, diversify.
Put all of your eggs in one basket, but watch your basket carefully.
Combine both of these strategies by making tactical bets on a core passive portfolio.
Most successful investors start with low-risk diversified portfolios and gradually learn
by doing. As investors gain greater knowledge over time, they become better suited
to taking a more active stance in their portfolios (i.e. tactical bets).

6. Be Disciplined
Sticking with the optimal long-term strategy may not be the most exciting investing
choice. However, your chances of success increase if you stay the course without
letting your emotions, or "false friends", get the upper hand.

7. Be Willing to Learn
The market is hard to predict but one thing is certain: it will be volatile. Learning to
be a successful investor is a gradual process and the investment journey is typically a
long one. At times, the market will prove you wrong - acknowledge it and learn from
your mistakes. When you succeed, celebrate.

Conclusion
What you achieve as an investor will depend on your goals, but sticking to these
seven simple steps will help keep you on the right path. Bon voyage!
Ten Tips For The Successful Long-Term Investor

While it may be true that in the stock market there is no rule without an exception, there are some
principles which are tough to dispute. We'll review 10 general principles to help investors get a better
grasp of how to approach the market from a long-term view. Keep in mind that these guidelines are
quite general, each with different applications depending on the circumstance. But every point
embodies some fundamental concept every investor should know.


1) Sell the losers and let the winners ride! - Time and time again, investors take profits by selling their
appreciated investments, but they hold onto stocks that have declined in hopes of a rebound. If an
investor doesn't know when it's time to let go of hopeless stocks, he or she can, in the worst-case
scenario, see the stock sink to the point where it is almost worthless. Of course, the idea of holding
onto high-quality investments while selling the poor ones is great in theory, but hard to put into
practice. The following information might help

2) Don't chase the "hot tip" - Whether the tip comes from your brother, cousin, neighbor, or even
broker, no one can ever guarantee what a stock will do. When you make an investment, it's important
you know the reasons for doing so: do your own research and analysis of any company before you
even consider investing your hard earned money. Relying on a tidbit of information from someone
else is not only an attempt at taking the easy way out, it's also a type of gambling. Sure, with some
luck, tips may sometimes pan out. But they will never make you an informed investor, which is what
you need to be to be successful in the long run.

3) Don't sweat the small stuff - In tip No.1, we explained the importance of realizing when your
investments are not performing as you expected them to - but remember to expect short-term
fluctuations. As a long-term investor, you shouldn't panic when your investments experience short-
term movements. When tracking the activities of your investments, you should look at the big picture.
Remember to be confident in the quality of your investments rather than nervous about the inevitable
volatility of the short term. Also, don't overemphasize the few cents difference you might save from
using a limit versus market order.

Granted, active traders will use these day-to-day and even minute-to-minute fluctuations as a way to
make gains. But the gains of a long-term investor come from a completely different market movement
- the one that occurs over many years - so keep your focus on developing your overall investment
philosophy by educating yourself.

4) Do not overemphasize the P/E ratio - Investors often place too much importance on the P/E ratio.
Because it is one key tool among many, using only this ratio to make buy or sell decisions is
dangerous and ill-advised. The P/E ratio must be interpreted within a context, and it should be used
in conjunction with other analytical processes. So, a low P/E ratio doesn't necessarily mean a
security is undervalued, nor does a high P/E ratio necessarily mean a company is overvalued.

Resist the lure of penny stocks - A common misconception is that there is less to lose in buying a low-
priced stock. But whether you buy a $5 stock that plunges to $0 or a $75 stock that does the same,
either way you'd still have a 100% loss of your initial investment. A lousy $5 company has just as
much downside risk as a lousy $75 company. In fact, a penny stock is probably riskier than a company
with a higher share price, which would have more regulations placed on it.

6) Pick a strategy and stick with it - Different people use different methods to pick stocks and fulfill
investing goals. There are many ways to be successful and no one strategy is inherently better than
any other. However, once you find your style, stick with it. An investor who flounders between different
stock-picking strategies will probably experience the worst, rather than the best, of each. Constantly
switching strategies effectively makes you a market timer, and this is definitely territory most investors
should avoid. Take Warren Buffett's actions during the dotcom boom of the late '90s as an example.
Buffett's value-oriented strategy had worked for him for decades, and - despite criticism from the
media - it prevented him from getting sucked into tech startups that had no earnings and eventually
crashed.

7) Focus on the future - The tough part about investing is that we are trying to make informed
decisions based on things that are yet to happen. It's important to keep in mind that even though we
use past data as an indication of things to come, it's what happens in the future that matters most.

A quote from Peter Lynch's book "One Up on Wall Street" about his experience with Subaru
demonstrates this: "If I'd bothered to ask myself, 'How can this stock go any higher?' I would have
never bought Subaru after it already went up twenty fold. But I checked the fundamentals, realized
that Subaru was still cheap, bought the stock, and made sevenfold after that." The point is to base a
decision on future potential rather than on what has already happened in the past.




8) Investors adopt a long-term perspective - Large short-term profits can often entice those who are
new to the market. But adopting a long-term horizon and dismissing the "get in, get out and make a
killing" mentality is a must for any investor. This doesn't mean that it's impossible to make money by
actively trading in the short term. But, as we already mentioned, investing and trading are very
different ways of making gains from the market. Trading involves very different risks that buy-and-hold
investors don't experience. As such, active trading requires certain specialized skills.

Neither investing style is necessarily better than the other - both have their pros and cons. But active
trading can be wrong for someone without the appropriate time, financial resources, education and
desire.  Most people don't fit into this category.

9) Be open-minded when selecting companies - Many great companies are household names, but
many good investments are not household names (and vice versa). Thousands of smaller companies
have the potential to turn into the large blue chips of tomorrow. In fact, historically, small-caps have
had greater returns than large-caps: over the decades from 1926-2001, small-cap stocks in the U.S.
returned an average of 12.27% while the S&P 500 returned 10.53%.

This is not to suggest that you should devote your entire portfolio to small-cap stocks. Rather,
understand that there are many great companies beyond those in the Dow Jones Industrial Average,
and that by neglecting all these lesser-known companies, you could also be neglecting some of the
biggest gains.

10) Taxes are important, but not that important - Putting taxes above all else is a dangerous strategy,
as it can often cause investors to make poor, misguided decisions. Yes, tax implications are
important, but they are a secondary concern. The primary goals in investing are to grow and secure
your money. You should always attempt to minimize the amount of tax you pay and maximize your
after-tax return, but the situations are rare where you'll want to put tax considerations above all else
when making an investment decision .

Conclusion
In this article, we've covered 10 solid tips for long-term investors. We started off saying that there is an
exception to every rule, and we can't overemphasize this point. Depending on your circumstances,
you might even disagree with some of these pointers. However, we hope that the common sense
principles we've discussed benefit you overall and provide some insight into how you should think
about investing.
Having A Plan: The Basis Of Success

Any veteran market player will tell you, it's vital to have a plan of attack. Formulating
the plan is not particularly difficult, but sticking to it, especially when all other
indicators seem to be against you, can be. This article will show why a plan is
crucial, including what can happen without one, what to consider when formulating
one as well as the investment vehicle options that best suit you and your needs.


The Benefits
As the "Sage of Omaha" says, if you can grit your teeth and stay the course
regardless of popular opinion, prevailing trends or analysts' forecasts, and focus on
the long-term goals and objectives of your investment plan, you will create the best
circumstances for realizing solid growth for your investments.

Maintain Focus
By their very nature, financial markets are volatile. Throughout the last century, they
have seen many ups and downs, caused by inflation, interest rates, new
technologies, recessions and business cycles. In the late 1990s, a great bull market
pushed the Dow Jones Industrial Average (DJIA) up 300% from the start of the
decade. This was a period of low interest rates and inflation and increased usage of
computers - all of these fueled economic growth. The period between 2000 and
2002, on the other hand, saw the DJIA drop 38%. It began with the bursting of the
internet bubble, which saw a massive sell-off in tech stocks and kept indexes
depressed until mid-2001, during which there was a flurry of corporate accounting
scandals as well as the September 11th attacks, all contributing to weak market
sentiment.

Amid such a fragile and shaky environment, it's crucial for you to keep your emotions
in check and stick to your investment plan. By doing so, you maintain a long-term
focus and thus assume a more objective view of current price fluctuations. If an
investor had let their emotions be their guide near the end of 2002 and sold off all
their positions, they'd have missed a 44% rise in the Dow from late-2002 to mid-2005.

Sidestepping the Three Deadly Sins
The three deadly sins in investing play off three major emotions: fear, hope and
greed. Fear has to do with selling too low - when prices plunge, you get alarmed and
sell without re-evaluating your position. In such times, it is better to review whether
your original reasons (i.e. sound company fundamentals) for investing in the security
have changed. The market is fickle and, based on a piece of news or a short-term
focus, it can irrationally oversell a stock so its price falls well below its intrinsic value.
Selling when the price is low, which causes it to be undervalued, is a bad choice in
the long run because the price may recover.

The second emotion is hope, which, if it is your only motivator, can spur you to buy
stock based on its price appreciation in the past. Buying on the hope that what has
happened in the past will happen in the future is precisely what occurred with
internet plays in the late '90s - people bought nearly any tech stock, regardless of its
fundamentals. It is important that you look less at the past return and more into the
company's fundamentals to evaluate the investment's worth. Basing your investment
decisions purely on hope may leave you with an overvalued stock, with which there
is a higher chance of loss than gain.

The third emotion is greed. If you are under its influence, you may hold onto a
position for too long, hoping for a few extra points. By holding out for that extra point
or two, you could end up turning a large gain into a loss. During the internet boom
investors who were already achieving double-digit gains held on to their positions
hoping the price would inch up a few more points instead of scaling back the
investment. Then when prices began to tank, many investors didn't budge and held
out in the hopes that their stock would rally. Instead, their once large gains turned
into significant losses.

An investment plan that includes both buying and selling criteria helps to manage
these three deadly sins of investing. (For further reading, see When Fear And Greed
Take Over, The Madness of Crowds and How Investors Often Cause The Market's
Problems.)

The Key Components
Determine Your Objectives
The first step in formulating a plan is to figure out what your investment objective is.
Without a goal in mind, it is hard to create an investment strategy that will get you
somewhere. Investment objectives often fall into three main categories: safety,
income and growth. Safety objectives focus on maintaining the current value of a
portfolio. This type of strategy would best fit an investor who cannot tolerate any loss
of principal and should avoid the risks inherent in stocks and some of the less secure
fixed-income investments.

If the goal is to provide a steady income stream, then your objective would fall into
the income category. This is often for investors who are living in retirement and
relying on a stream of income. These investors have less need for capital
appreciation and tend to be adverse to stock market risks.

Growth objectives focus on increasing the portfolio's value over a long-term time
horizon. This type of investment strategy is for relatively younger investors who are
focused on capital appreciation. It's important to take into account your age, your
investment time frame and how far you are from your investment goal. Objectives
should be realistic, taking into account your tolerance for risk.

Risk Tolerance
Most people want to grow their portfolio to increase wealth. But there remains one
major consideration - risk. How much, or how little, of it can you take? If you are
unable to stomach the constant volatility of the market, your objective is likely to be
safety or income focused. However, if you are willing to take on volatile stocks then a
growth objective may suit you. Taking on more risk means you are increasing your
chances of realizing a loss on investments, as well as creating the opportunity of
greater profits. However, it is important to remember that volatile investments don't
always make investors money. The risk component of a plan is very important and
requires you to be completely honest with yourself about how much potential loss
you are willing to take.  

Asset Allocation
Once you know your objectives and risk tolerance, you can start to determine the
allocation of the assets in your portfolio. Asset allocation is the dividing up of
different types of assets in a portfolio to match the investor's goals and risk tolerance.
An example of an asset allocation for a growth-oriented investor could be 20% in
bonds 70% in stocks and 10% in cash equivalents.

It is important that your asset allocation is an extension of your objectives and risk
tolerance. Safety objectives should comprise the safest fixed-income assets
available like money market securities, government bonds and high-quality
corporate securities with the highest debt ratings. Income portfolios should focus on
safe fixed-income securities, including bonds with lower ratings, which provide
higher yields, preferred shares and high-quality dividend-paying stocks. Growth
portfolios should have a large focus on common stock, mutual funds or exchange-
traded funds (ETFs). It is important to continually review your objectives and risk
tolerance and to adjust your portfolio accordingly.

The importance of asset allocation in formulating a plan is that it provides you with
guidelines for diversifying your portfolio, allowing you to work towards your objectives
with a level of risk that is comfortable for you.  

The Choices
Once you formulate a strategy, you need to decide on what types of investments to
buy as well as what proportion of each to include in your portfolio. For example if
you are growth oriented, you might pick stocks, mutual funds or ETFs that have the
potential to outperform the market. If your goal is wealth protection or income
generation, you might buy government bonds or invest in bond funds that are
professionally managed.

If you want to choose your own stocks it is vital to institute trading rules for both
entering and exiting positions. These rules will depend on your plan objectives and
investment strategy. One stock trading rule - regardless of your approach - is to use
stop-loss orders as protection from downward price movements. While the exact
price at which you set your order is your own choice, the general rule of thumb is
10% below the purchase price for long-term investments and 3-5% for shorter-term
plays. Here's a reason to use stops to cut your losses: if your investment plummets
50%, it needs to increase 100% to break even again.

You may also consider professionally managed products like mutual funds, which
give you access to the expertise of professional money managers. If your aim is to
increase the value of a portfolio through mutual funds, look for growth funds that
focus on capital appreciation. If you're income-orientated, you'll want to choose
funds with dividend-paying stocks or bond funds that provide regular income. Again,
it is important to ensure that the allocation and risk structure of the fund is aligned
with your desired asset mix and risk tolerance.

Other investment choices are index funds and ETFs. The growing popularity of these
two passively managed products is largely due to their low fees and tax efficiencies;
both have significantly lower management expenses than actively managed funds.
These low-cost, well-diversified investments are baskets of stocks that represent an
index, a sector or country, and are an excellent way to implement your asset
allocation plan.

Summary
An investment plan is one of the most vital parts for reaching your goals - it acts as a
guide and offers a degree of protection. Whether you want to be a player in the
market or build a nest egg, it's crucial to build a plan and adhere to it. By sticking to
those defined rules, you'll be more likely to avoid emotional decisions that can
derail your portfolio, and keep a calm, cool and objective view even in the most
trying of times.

However, if all of the above seems like too tall an order, you might want to engage
the services of an investment advisor, who will help you create and stick to a plan
that will meet your investment objectives and risk tolerance.
Five Things To Know About Asset Allocation

With literally thousands of stocks, bonds and mutual funds to choose from, picking
the right investments can confuse even the most seasoned investor. However,
starting to build a portfolio with stock picking might be the wrong approach. Instead,
you should start by deciding what mix of stocks, bonds and mutual funds you want
to hold - this is referred to as your asset allocation.


What Is Asset Allocation?

Asset allocation is an investment portfolio technique that aims to balance risk and create
diversification by dividing assets among major categories such as cash, bonds, stocks, real estate
and derivatives. Each asset class has different levels of return and risk, so each will behave
differently over time. For instance, while one asset category increases in value, another may be
decreasing or not increasing as much. Some critics see this balance as a settlement for
mediocrity, but for most investors it's the best protection against major loss should things ever go
amiss in one investment class or sub-class.

The consensus among most financial professionals is that asset allocation is one of the most
important decisions that investors make. In other words, your selection of stocks or bonds is
secondary to the way you allocate your assets to high and low-risk stocks, to short and long-term
bonds, and to cash on the sidelines.

We must emphasize that there is no simple formula that can find the right asset allocation for
every individual - if there were, we certainly wouldn't be able to explain it in one article. We can,
however, outline five points that we feel are important when thinking about asset allocation:

Risk vs. Return
The risk-return tradeoff is at the core of what asset allocation is all about. It's easy for everyone to
say that they want the highest possible return, but simply choosing the assets with the highest
"potential" (stocks and derivatives) isn't the answer. The crashes of 1929, 1981, 1987, and the
more recent declines of 2000-2002 are all examples of times when investing in only stocks with
the highest potential return was not the most prudent plan of action. It's time to face the truth:
every year your returns are going to be beaten by another investor, mutual fund, pension plan,
etc. What separates greedy and return-hungry investors from successful ones is the ability to
weigh the difference between risk and return. Yes, investors with a higher risk tolerance should
allocate more money into stocks. But if you can't keep invested through the short-term
fluctuations of a bear market, you should cut your exposure to equities. (To learn more about
bond investing, see Bond Basics Tutorial.

Don't Rely Solely on Financial Software or Planner Sheets
Financial planning software and survey sheets designed by financial advisors or investment firms
can be beneficial, but never rely solely on software or some pre-determined plan. For example,
one rule of thumb that many advisors use to determine the proportion a person should allocate to
stocks is to subtract the person's age from 100. In other words, if you're 35, you should put 65% of
your money into stock and the remaining 35% into bonds, real estate and cash.

But standard worksheets sometimes don't take into account other important information such as
whether or not you are a parent, retiree or spouse. Other times, these worksheets are based on a
set of simple questions that don't capture your financial goals. Remember, financial institutions
love to peg you into a standard plan not because it's best for you, but because it's easy for them.
Rules of thumb and planner sheets can give people a rough guideline, but don't get boxed into
what they tell you.

Determine Your Long and Short-Term Goals
We all have our goals. Whether you aspire to own a yacht or vacation home, to pay for your
child's education, or simply to save up for a new car, you should consider it in your asset
allocation plan. All of these goals need to be considered when determining the right mix.

For example, if you're planning to own a retirement condo on the beach in 20 years, you need
not worry about short-term fluctuations in the stock market. But if you have a child who will be
entering college in five to six years, you may need to tilt your asset allocation to safer fixed-
income investments.




Time Is Your Best Friend
The U.S. Department of Labor has said that for every 10 years you delay saving for retirement (or
some other long-term goal), you will have to save three times as much each month to catch up.
Having time not only allows you to take advantage of compounding and the time value of
money, it also means you can put more of your portfolio into higher risk/return investments,
namely stocks. A bad couple of years in the stock market will likely show up as nothing more than
an insignificant blip 30 years from now.

Just Do It!
Once you've determined the right mix of stocks, bonds and other investments, it's time to
implement it. The first step is to find out how your current portfolio breaks down. It's fairly
straightforward to see the percentage of assets in stocks vs. bonds, but don't forget to categorize
what type of stocks you own (small, mid, or large cap). You should also categorize your bonds
according to their maturity (short, mid, long-term). Mutual funds can be more problematic. Fund
names don't always tell the entire story. You have to dig deeper in the prospectus to figure out
where fund assets are invested.

There is no one standardized solution for allocating your assets. Individual investors require
individual solutions. Furthermore, if a long-term horizon is something you don't have, don't worry.
It's never too late to get started. It's also never too late to give your existing portfolio a face-lift:
asset allocation is not a one-time event, it's a life-long process of progression and fine-tuning.
The Importance Of Diversification

Diversification is a technique that reduces risk by allocating investments among
various financial instruments, industries and other categories. It aims to maximize
return by investing in different areas that would each react differently to the same
event. Most investment professionals agree that, although it does not guarantee
against loss, diversification is the most important component of reaching long-
range financial goals while minimizing risk. Here we look at why this is true, and
how to accomplish diversification in your portfolio.


Different Types of Risk
Investors confront two main types of risk when investing:

Undiversifiable - Also known as "systematic" or "market risk", undiversifiable risk is
associated with every company. Causes are things like inflation rates, exchange
rates, political instability, war and interest rates. This type of risk is not specific to a
particular company and/or industry, and it cannot be eliminated or reduced
through diversification; it is just a risk that investors must accept.
Diversifiable - This risk is also known as "unsystematic risk", and it is specific to a
company, industry, market, economy or country; it can be reduced through
diversification. The most common sources of unsystematic risk are business risk and
financial risk. Thus, the aim is to invest in various assets so that they will not all be
affected the same way by market events.

Why You Should Diversify
Let's say you have a portfolio of only airline stocks. If it is publicly announced that
airline pilots are going on an indefinite strike and that all flights are canceled,
share prices of airline stocks will drop. Your portfolio will experience a noticeable
drop in value. If, however, you counterbalanced the airline industry stocks with a
couple of railway stocks, only part of your portfolio would be affected. In fact, there
is a good chance that the railway stocks' prices would climb as passengers turn to
trains as an alternative form of transportation.

But you could diversify even further because there are many risks that affect both
rail and air because each is involved in transportation. An event that reduces any
form of travel hurts both types of companies - statisticians would say that rail and
air stocks have a strong correlation. Therefore, to achieve superior diversification,
you would want to diversify across not only different types of companies but also
different types of industries. The more uncorrelated your stocks are, the better.

It's also important that you diversify among different asset classes. Because
different assets - such as bonds and stocks - will not react in the same way to
adverse events, a combination of asset classes will reduce your portfolio's
sensitivity to market swings. Generally, the bond and equity markets move in
opposite directions, so, if your portfolio is diversified across both areas, unpleasant
movements in one will be offset by positive results in another.

There are additional types of diversification and many synthetic investment
products have been created to accommodate investors' risk tolerance levels;
however, these products can be very complicated and are not meant to be created
by beginner or small investors. For those who have less investment experience and
do not have the financial backing to enter into hedging activities, bonds are the
most popular way to diversify against the stock market.

Unfortunately, even the best analysis of a company and its financial statements
cannot guarantee that it won't be a losing investment. Diversification won't prevent
a loss, but it can reduce the impact of fraud and bad information on your portfolio.




How Many Stocks You Should Have
Obviously owning five stocks is better than owning one, but there comes a point
when adding more stocks to your portfolio ceases to make a difference. There is a
debate over how many stocks are needed to reduce risk while maintaining a high
return. The most conventional view argues that an investor can achieve optimal
diversification with only 15 to 20 stocks spread across various industries. (To learn
more about what constitutes a properly diversified stock portfolio.

Summary
Diversification can help an investor manage risk and reduce the volatility of an
asset's price movements. Remember though, that no matter how diversified your
portfolio is, risk can never be eliminated completely. You can reduce risk
associated with individual stocks, but general market risks affect nearly every stock,
so it is important to diversify also among different asset classes. The key is to find a
medium between risk and return; this ensures that you achieve your financial goals
while still getting a good night's rest.
Ten Steps to Building a Winning Trading Plan

There is an old saying in business: "Fail to plan and you plan to fail." It may sound glib, but
those who are serious about being successful, including traders, should follow these eight
words as if they were written in stone. Ask any trader who makes money on a consistent basis
and they will tell you, "You have two choices: you can either methodically follow a written
plan, or fail."


If you have a written trading or investment plan, congratulations! You are in the minority. While
it is still no absolute guarantee of success, you have eliminated one major roadblock. If your
plan uses flawed techniques or lacks preparation, your success won't come immediately, but at
least you are in a position to chart and modify your course. By documenting the process, you
learn what works and how to avoid repeating costly mistakes.

Whether or not you have a plan now, here are some ideas to help with the process.

A plan should be written in stone while you are trading, but subject to re-evaluation once the
market has closed. It changes with market conditions and adjusts as the trader's skill level
improves. Each trader should write his or her own plan, taking into account personal trading
styles and goals. Using someone else's plan does not reflect your trading characteristics.

Building the Perfect Master Plan
What are the components of a good trading plan? Here are 10 essentials that every plan
should include.
Skill assessment - Are you ready to trade? Have you tested your system by paper trading it and
do you have confidence that it works? Can you follow your signals without hesitation? If not, it's
a good idea to read Mark Douglas's book, "Trading in the Zone", and do the trading exercises
on pages 189–201. This will teach you how to think in terms of probabilities. Trading in the
markets is a battle of give and take. The real pros are prepared and they take their profits from
the rest of the crowd who, lacking a plan, give their money away through costly mistakes.

1-Mental preparation – How do you feel? Did you get a good night's sleep? Do you feel up to
the challenge ahead? If you are not emotionally and psychologically ready to do battle in the
markets, it is better to take the day off - otherwise, you risk losing your shirt. This is guaranteed
to happen if you are angry, hungover, preoccupied or otherwise distracted from the task at
hand. Many traders have a market mantra they repeat before the day begins to get them ready.
Create one that puts you in the trading zone.

2-Set risk level – How much of your portfolio should you risk on any one trade? It can range
anywhere from around 1% to as much as 5% of your portfolio on a given trading day. That
means if you lose that amount at any point in the day, you get out and stay out. This will
depend on your trading style and risk tolerance. Better to keep powder dry to fight another day
if things aren't going your way.

3-Set goals – Before you enter a trade, set realistic profit targets and risk/reward ratios. What is
the minimum risk/reward you will accept? Many traders use will not take a trade unless the
potential profit is at least three times greater than the risk. For example, if your stop loss is a
dollar loss per share, your goal should be a $3 profit. Set weekly, monthly and annual profit
goals in dollars or as a percentage of your portfolio, and re-assess them regularly.

4-Do your homework – Before the market opens, what is going on around the world? Are
overseas markets up or down? Are index futures such as the S&P 500 or Nasdaq 100 exchange-
traded funds up or down in pre-market? Index futures are a good way of gauging market mood
before the market opens. What economic or earnings data is due out and when? Post a list on
the wall in front of you and decide whether you want to trade ahead of an important economic
report. For most traders, it is better to wait until the report is released than take unnecessary risk.
Pros trade based on probabilities. They don't gamble.

5-Trade preparation – Before the trading day, reboot your computer(s) to clear the resident
memory (RAM). Whatever trading system and program you use, label major and minor support
and resistance levels, set alerts for entry and exit signals and make sure all signals can be
easily seen or detected with a clear visual or auditory signal. Your trading area should not offer
distractions. Remember, this is a business, and distractions can be costly.

6-Set exit rules – Most traders make the mistake of concentrating 90% or more of their efforts in
looking for buy signals but pay very little attention to when and where to exit. Many traders
cannot sell if they are down because they don't want to take a loss. Get over it or you will not
make it as a trader. If your stop gets hit, it means you were wrong. Don't take it personally.
Professional traders lose more trades than they win, but by managing money and limiting
losses, they still end up making profits.

Before you enter a trade, you should know where your exits are. There are at least two for every
trade. First, what is your stop loss if the trade goes against you? It must be written down. Mental
stops don't count. Second, each trade should have a profit target. Once you get there, sell a
portion of your position and you can move your stop loss on the rest of your position to break
even if you wish. As discussed above in number three, never risk more than a set percentage of
your portfolio on any trade.

7-Set entry rules – This comes after the tips for exit rules for a reason: exits are far more
important than entries. A typical entry rule could be worded like this: "If signal A fires and there
is a minimum target at least three times as great as my stop loss and we are at support, then
buy X contracts or shares here." Your system should be complicated enough to be effective,
but simple enough to facilitate snap decisions. If you have 20 conditions that must be met and
many are subjective, you will find it difficult if not impossible to actually make trades.
Computers often make better traders than people, which may explain why nearly 50% of all
trades that now occur on the New York Stock Exchange are computer-program generated.
Computers don't have to think or feel good to make a trade. If conditions are met, they enter.
When the trade goes the wrong way or hits a profit target, they exit. They don't get angry at the
market or feel invincible after making a few good trades. Each decision is based on
probabilities.

8-Keep excellent records – All good traders are also good record keepers. If they win a trade,
they want to know exactly why and how. More importantly, they want to know the same when
they lose, so they don't repeat unnecessary mistakes. Write down details such as targets, the
entry and exit of each trade, the time, support and resistance levels, daily opening range,
market open and close for the day, and record comments about why you made the trade and
lessons learned. Also, you should save your trading records so that you can go back and
analyze the profit/loss for a particular system, draw-downs (which are amounts lost per trade
using a trading system), average time per trade (which is necessary to calculate trade
efficiency), and other important factors, and also compare them to a buy-and-hold strategy.
Remember, this is a business and you are the accountant.

9-Perform a post-mortem – After each trading day, adding up the profit or loss is secondary to
knowing the why and how. Write down your conclusions in your trading journal so that you can
reference them again later.

10-Parting Notes
"No one should be trading real money until they have at least 30 to 60 profitable paper trades
under their belts in real time in real market conditions before risking real money," says Novak.




Successful paper trading does not guarantee that you will have success when you begin
trading real money and emotions come into play. But successful paper trading does give the
trader confidence that the system he or she is going to use actually works.

The exercises in "Trading in the Zone" walk the trader through trading a system based on a
simple indicator, entering the market when the indicator gives a buy and exiting when it gives
a sell. Deciding on a system is less important than gaining enough skill so that you are able to
make trades without second guessing or doubting the decision.

There is no way to guarantee that a trade will make money. The trader's chances are based on
his or her skill and system of winning and losing. There is no such thing as winning without
losing. Professional traders know before they enter a trade that the odds are in their favor or
they wouldn't be there. By letting his or her profits ride and cutting losses short, a trader may
lose some battles, but he or she will win the war. Most traders and investors do the opposite,
which is why they never make money.

Traders who win consistently treat trading as a business. While it's not a guarantee that you will
make money, having a plan is crucial if you want to become consistently successful and
survive in the trading game.
FINANCIAL KNOWLEDGE: The Successful Investment Journey, Ten Tips For The Successful Long-Term Investor, Having
A Plan: The Basis Of Success. --------SEE BELOW, GO BELOW!
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A step by step guide to gaining
control of your financial life.
Setting priorities
Here's help for the first -- and often the
hardest -- step in achieving your financial
goals: deciding which goals to pursue.
LESSON 2
Making a budget, saving money
How to bring your spending under control, so
that you get the most out of every dollar.
LESSON 3
Basics of banking and saving
Here's how to get the best banking services
at the best price, either online or off.
LESSON 4
Basics of investing
An introduction to making money in stocks,
bonds and mutual funds REIT'S, real estate.
LESSON 5
Investing in stocks
The market can be a great place to turn
savings into wealth -- or to lose your shirt.
Here are some fundamentals of investing
wisely.
LESSON 6
Investing in mutual funds
It's a mutual-fund jungle out there. Here's
how to create a simple portfolio that works.

LESSON 7
Investing in bonds
Bonds can provide a steady and reasonably
secure income, while adding ballast to your
portfolio--but only if you really understand
what you're buying.
LESSON 8
Buying a home
Owning your home is part of the American
Dream, but if you’re not prepared, buying it
can be a nightmare. Here are some
fundamentals for buyers and sellers.
LESSON 9
Controlling debt
You've got to know when to hold debt--and
when to fold it. This lesson shows you how
to accomplish your financial goals by making
debt work for you.
LESSON 10
Home Selling
WAYS TO SELL A PROPERTY FAST AND
EASY FOR THE TOP PRICE!
Selling a home is a big decision and
requires a lot of work. From getting the
house ready to reviewing the escrow papers,
our helpful guide will walk you through the
process of selling your home.
LESSON 11
INSURANCE
Health Insurance, Life Insurance, Home
Insurance, Car Insurance
Great things to know about insurance

Buying a car, Auto loans. Great things to
know:
Buying a car is like no other shopping
experience. The choices seem to be
endless. This lesson helps you sort through
your options.

FINANCIAL FREEDOM: A SMARTEST WAY TO
PREPARE A BETTER FUTURE. YOUR PATH TO
WEALTH STARTS RIGHT NOW.
It's a fact: today, anyone can become a
millionaire
–  In the history of the world, there has never
been
a better time to create wealth than right here,
right
now in real estate.
FORECLOSURE INVESTMENT
The Time is Now to Profit from Foreclosure
A “Perfect Storm” of events has made investing in
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THE HOME BUYING GUIDE!--------------------
IMPORTANT THINGS TO KNOW BEFORE
BUYING...
The home-buying process doesn't need to be
scary. Our step-by-step guide will walk you
through the process and answer your questions on
what you should expect from us as your realtor,
where
to look for loans, and what to watch out for when
closing the deal.

HOME SELLING: WAYS TO SELL A PROPERTY
FAST AND EASY FOR THE TOP PRICE!
Selling a home is a big decision and requires a
lot of work. From getting the house ready to
reviewing the escrow papers, our helpful guide
will walk you through the
process of selling your home.

SHORT SALE: REAL ESTATE INVESTMENT
OPPORTUNITY FOR ALL
SHORT SALE allows you  to buy as many
properties as you want.
Flip them, Hold them, Rent them, Refinance
them and make profits.

PRE-CONSTRUCTION, A GREAT WAY TO
INVEST IN REAL ESTATE. BUT YOU HAVE TO
KNOW THE SECRETS OF IT.

Florida Real Estate for sale: Wonderful prices,
great location,extraordinary view,very spacious.
NO OTHER INVESTMENTS BUILD WEALTH
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NOW REALLY IS A GREAT TIME TO BUY A
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COMMERCIAL REAL ESTATE; A BETTER WAY
TO INVEST AND GET RICHER!  MULTI-WAYS
TO WIN BIG IN REAL ESTATE

1031 Exchange, Tax Saving Tips for Real Estate
Investors and landlords Give Financial Advantage

MIAMI REAL ESTATE: The Time is Now to Profit
from Real Estate investing--
A “Perfect Storm” of events has made
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CALL Mr. ANTONY AT: 786-709-6577 --- Fortune
International Realty

COMMERCIAL LEASE: Before you rent space
for your business, be sure you understand
these basic facts about commercial leases.

Manufactured Homes, Mobile Homes, an
Affordable Housing Alternative
We are dedicated ourselves to helping bring
prospective buyers of manufactured homes in
contact with retailers who sell homes in their
area. We aim to help buyers wade through the
excess  of information  providing a simple
directory that enables buyers to quickly and
efficiently contact  us to help them find the
dealers in which they are interested.
WHAT GUIDELINES ARE REQUIRED FOR
A MORTGAGE LOAN?
Mortgages are used by individuals and
businesses wishing to make large value
purchase of real estate without payment the
entire value of the purchase up front.
Mortgages are also known as lien against
property, or claims on property. Mortgage is
a legal agreement that creates an interest
in a real estate property between borrower
and the lender.

HOW TO UNDERSTAND THE HOME LOAN
PROCESS?
Understand that in order to finance or
refinance a loan the lender requires
documentation to verify and substantiate
your employment, credit and financial
situation to assure its investors
that you have the ability to repay the MONEY

HOME REFINANCING: 10 GREAT
REASONS TO REFINANCE A PROPERTY.
NOW IT'S THE BEST TIME FOR
REFINANCING, THE INTEREST RATE IS
VERY LOW.

MORTGAGE LOAN MODIFICATION
PROGRAMS; AN ALTERNATIVE TO
REDUCE MONTHLY MORTGAGE
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FHA: F H A MORTGAGE LOANS, THE
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CONTACT US WE WILL SHOW YOU THE  
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MORTGAGE LOAN PRE-QUALIFICATION,
LOW INTEREST RATES,
8 Reasons to Get Pre-Approved for a Home
Loan
Learn why pre-approval is one of the
smartest moves you can make when
shopping for a home


Subprime Mortgage
        A type of mortgage that is normally
made out to borrowers with lower credit
ratings. As a result of the borrower's
lowered credit rating, a conventional
mortgage is not offered because the lender
views the borrower as having a larger-than-
average risk of defaulting on the loan.

FINANCING YOUR REAL ESTATE
INVESTMENT; BUYING YOUR FIRST,
SECOND, AND OR THIRD PROPERTY.
HOW AND WHERE TO FIND MONEY?
CLICK RIGHT HERE!

RENTAL PROPERTY / COMMERCIAL REAL
ESTATE / COMMERCIAL LEASE Tips for
Making Solid Business Agreements and
Contracts
..Life Insurance Advantages, Benefits, & Features While Alive and After Death... Learn More Here!

..Insurance General Information: Ways to Make Money & Save Money on Your Insurance. Learn More...

..Term Insurance Advantages, Term Insurance General Knowledge. Buy the Term, and invest the difference. Learn More...

..Life Insurance Quote. Find out if You Pay too much for Your Insurance, Or Check How Much You Can Pay For a Life
Insurance...

..Investment Products: Investing & Money Management Basics.  FINANCIAL  SOLUTIONS, TOOLS & RESOURCES.  LEARN
MORE...

Insurance Products:  How to make profits with the insurance companies? Learn More...

-AMERICAN DOLLAR. What are the letters, numbers, and symbols, the latin words, The pyramid  
mean? FIND-OUT...
..Life Insurance
Advantages, Benefits,
& Features While Alive
and After Death...
Learn More Here!

..Insurance General
Information: Ways to
Make Money & Save
Money on Your
Insurance. Learn
More...

..Term Insurance
Advantages, Term
Insurance General
Knowledge. Buy the
Term, and invest the
difference. Learn
More...

...Investment Products:
Investing & Money
Management Basics.  
FINANCIAL  
SOLUTIONS, TOOLS
& RESOURCES.  
LEARN MORE...

Insurance Products:  
How to make profits
with the insurance
companies? Learn
More...
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AMERICAN DOLLAR. What are the
letters, numers, and symbols, the latin
words, the glowing eyes mean?

BUILDING WEALTH
RICH GUIDE: WHY AREN'T YOU RICH?
BUILDING FINANCIAL WEALTH, OBTAIN  
FINANCIAL FREEDOM, BECOME A RICH
PERSON; YES YOU CAN... Learn More!

Financial Education - Financial
Knowledge  Everything You Need To
Know About Finance.

Dubai- The World Largest, Biggest,
Tallest, Greatest of Almost Everything.
Learn more about this magnificent
place and as well as other countries.

COPYRIGHT-- What is Copyright?   The
Basics About Copyright Registration.
The procedure for copyright
registration.
Do I need copyright protection? How
do I register? Learn More!

''AUTO LOANS: Great Car, Great
Price…. but what about the Financing?
Explore your financing options!
Five Tips for Getting the Best Deal On
a Car...

AUTO DEALERSHIP: 5 Car Dealer
Extras You May Not Need, Or You Don't
Need...
Before buying a car; learn this first...

..News Letter: Tax Saving Business
News, financial news, the world  
market.
..Biography & History of the world
greatest personalities & politicians,,

..The world worst natural disasters &
earthquakes in the history of
humanity,,

.Inventions. Great Inventions and
discoveries of the century,, What are
they?

.. HAITI: Things you don't know & what
you
must know. Learn More!,,
The Dangers of Using a Debit Card.  ---
knowledgefinancial.com

Consumers need to be particularly careful during vacation season
because identity thieves come out in droves. That makes it pivotal that
consumers keep their debit cards on ice, said Beth Givens, director of the
Privacy Rights Clearing House and one of the nation's foremost experts on
keeping your private information private.

What makes debit cards so dangerous? Givens has so many reasons, her
organization has put out an exhaustive fact sheet on whether you should
use cash, credit or debit cards when shopping. (The report also explains
the shortcomings of gift cards.)

Here's the short version of the dangers of debit:

1. Loss Limits   ----knowledgefinancial.com

Like credit cards, federal law limits your liability for fraudulent transactions
on a debit card to $50. But that's only if you notify your financial institution
within two days of discovering the theft. If you're a space cadet and don't
check your bank statements for a couple of months, you could lose
everything

2. Pay Now/Reimburse Later

If someone has fraudulently used your credit card, you don't have to pay
the charge. But when somebody has fraudulently used your debit card, the
money comes directly out of your account in real time.

That means you're out the money while the bank does a leisurely
examination of their records to investigate your fraud claim. Many
consumers complaining to Privacy Rights Clearing House said they lost
access to their funds for several weeks. In the meantime, they were
caught short and unable to pay their bills, Givens said.

3. Merchant Disputes    ---KNOWLEDGEFINANCIAL.COM

The same problem affects merchant disputes. If you pay with a credit card
when ordering something online, and that product comes damaged,
broken or not at all, you can dispute the charge and stop payment with your
credit card. If you used your debit card, the charge is paid when you made
the order. By the time you find out the goods weren't what was advertised,
the merchant has your cash and you're in the unenviable position of having
to fight to get your money back.

4. Phantom Charges   ----KNOWLEDGEFINANCIAL.COM

If you use a credit card at a hotel, the hotel takes an imprint when you
check in, but doesn't charge your card until you check out. It's a far
different story with a debit card. Generally, hotels will put a “hold” on funds
in your account for more than you're spending. Yes, more.

They hold the full amount of your stay, plus an estimated amount for
“incidentals,” such as meals at the hotel restaurant and dipping into the
mini-bar. This is not an actual charge–the hold will come off your account
at the end of your stay.

But it affects the available balance in your checking account anyway and
can lead to overdrafts. One consumer said these phantom charges cost
him $140 in overdraft fees. These “holds” are commonly placed on debit
card transactions made at hotels, gas stations and rental car companies.

5. Overdrafts, Overdrafts and More Overdrafts  ---

Overdraft charges have been soaring in recent years and the vast majority
of consumers who pay them explain that their overdraft was the result of a
debit card transaction. Many consumers naively assumed that if they didn't
have sufficient funds in their accounts, their bank wouldn't approve a debit
swipe.

But they were wrong. The result: a $4 coffee could trigger a $35 overdraft
fee. Government regulators are reigning in these fees by demanding that
banks give consumers a chance to “opt out” of automatic overdraft
protection, but that doesn't start for existing accounts until August. (If you
have a new account, it's starts in July.)

6. Skimming    ----KNOWLEDGEFINANCIAL.COM

Financial crooks have gotten sophisticated in recent years and are using
“skimming” machines to read your card data and charge your account,
Givens said. When your debit card is skimmed, your bank account can be
drained before you know that you've been had.