We have received the below article from one of our traders, Jean Claude. He is not only a trader but a financial advisor who has shared some beneficial advice on how to handle your money and control risk. Hope you will be inspired by his insights.
I started my career in my early 20’s in finance by exploring the industry through options and forex. My first actual exposure was in binary options. It seems a little bit controversial in a Western country, but this investment vehicle taught me a lot, although I lost at least $5000 during my career. However, I didn’t stop learning how finance works and I joined as a financial advisor here in Canada to learn different kinds of investment vehicles available in the market.
After I got my license as a financial advisor in Canada, the most important principle I teach my clients is that there are only limited things you can control in investment, and these are:
As Warren Buffet said, the first rule in investment is to never run out of money and the second rule is to follow the first rule. It is very true in our life because once we run out of money, all the time and effort we invest would turn into nothing. So what I teach to my clients are these 4 important concepts.
- Risk Management - before you invest, you must protect yourself first from the loss. You must ensure that you still have food on your table and a place to live. Just in case you die, you must secure your family from the loss of income so that they can easily manage to do a transition in life
- Debt Management - one of the greatest investment you can do is to get out of debt because you can do better decisions in life if you are free from unnecessary obligation.
- Emergency Management - if things don’t go well in life, it is important that we also invest at least 6 months emergency fund if ever we got fired at our work or also if we are waiting for our health insurance benefits, etc. The point is, you must invest for something that is unpredictable to happen in life that cannot be supported by ordinary risk management.
- Investment Management – once you maximize all the other important things to take care of, it is time to let money work for you. Don’t do it by yourself by just investing in the stock market just because your friend makes money on that stock. Find a financial advisor that can work with your best interest. In my opinion, it is bad to go to a bank to look for a financial advisor because bank people are looking for a provisions and cannot take care of your portfolio for long and consecutively this will be passed on another financial advisor. My point is, banks work for their board members who fund their own projects.
Look for an independent financial advisor who will look after you in a long term relationship and will work with your best interests because at the end of the day, their project is to provide you a better lifestyle and if you make money they also make money. Bank sees you as a data but independent financial advisor sees you as a person to protect and help.
In relation to money management, in order for you to make better decisions in life, you must learn how to read and write finance before you can participate in the arena of this industry. In order to gain confidence with your investment strategy, you must learn this with your mentor or financial advisor who can assess the pros and cons of the market and what particular strategy you are doing. You can actually learn this by yourself through experience, but this might be an expense for you so I advise you that in order to save yourself tons of money, learn the mistake of others and try to avoid it during the course of your investment.
The most important thing to manage is your own state of mind because this is the source of your decision making in life. If you lose your temper, it will correlate to your trades of your account. Even if you master all the technical and fundamental analysis, if you cannot control your own gun you will eventually hurt yourself. No other financial advisor can help you to manage this other than yourself so before you enter into a serious investing such as day trading, you must assess yourself in building your emotional intelligence. This will take years to master through discipline.
You may always hear this concept of buy low and sell high if you are in uptrend position but we obviously go the opposite direction because we want to ride the volatility with the trend and make money as quickly as possible. In making a plan, it is very easy to enter into a market, but we often forget when to exit. It is very important that you need to scale your entry strategy as well as your exit strategy to maximize your profit and minimize your loss.
During my career being a financial advisor, I pursued my dream as a financial analyst specializing in Forex and CFDs. At first, I tried to learn different kinds of strategies that would work for me through demo. I wanted to gain the experience and then I tried to invest my actual money but it was difficult knowing it is your hard-earned money at stake. So I lost a few couple of thousands along the way. However, after a few years of training and experience, I started to gain money on my own. It's not that big but still a good income to use to provide for some of my needs. After a few more months, I discovered FTMO as one way to maximize my potential by proving my skill set. The first trial I made was around December to February and I almost accomplished the objectives, but I failed because I got way too greedy in my trading and let my temper to hamper my decisions, rather than making radical decisions.
Now that I am back again to prove myself, I am worthy with this Challenge and I will make sure that my next article here for FTMO will be a gratification of being rewarded as the FTMO Trader.