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 Investing
philosophy is a fundamental core for making money. Most traders are
not aware how important it is to have a thorough understanding of how
you perceive stock market, valuation, risk tolerance, and many other
factors working together that play a big role in your decision making
process.
In its essence, stock trading is a
simple game - you can buy, sell, hold or stay out of the market. For
anyone that has traded, it is a well known fact that it is far from
simple to actually execute trades successfully, follow a trading system
through discipline, manage risk exposure, analyze new marketplace
information, and interplay of other factors that complicate the
equation.
In a fast moving and chaotic nature of price
movement, your mind can play many games on your trading decisions and
convince you of anything if you let it to. You never know what's around
the corner in the marketplace, the sooner you accept this and learn how
to trade without predicting future the faster you will succeed.
This may initially sound incorrect, but real
life philosophy has very little to do with market philosophy, and that's
where novice investors usually fall into trouble.
Small cap stock trading is in may ways more
about time than money. Our success lies in leveraging capital in terms
of timing the market, so our money always works more efficiently.
 For
example, there is a big difference taking a profit on a stock that went
from $0.10 to $10 - in 40 years versus 4 years.
Money is inventory of the trading business
and unless the inventory is put to work you are not getting the most
value for your trading account.
As a direct analogy, think of business
inventory that is sitting in storage and depreciating as time is
passing.
It is important to mention that we are not
day traders because it takes time to grow value (or lose value), and
cost of going in and out of the market frequently greatly ramps up the
business overhead (because of broker commissions).
The more you trade the greater the cost of
running your business and dealing with price slippage.
As far as emotional attachment, it is
important to understand that Winning and Losing is what stock
market game is all about - and you have to learn to handle both. The
sooner you learn how to properly take losses to protect your inventory -
the better.
If you had an infected batch of inventory
risking to spoil the good inventory - you would dispose of quickly to
protect your overall investment; but for some reason this is rarely
applied in the trading.
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