Two Steps for Making Investment Decisions

in LeoFinance5 days ago

In my experience there are basically just two steps that should guide and define all your investment and trade decisions. I have talked about it before and thought to revisit it as a reminder to keep things simple is always good.


1.) Know your Goal

Why would you ever invest in anything if you do not know exactly what you are looking to get out of it and how you will exit it when that goal is reached?

You see this more in active trading as people just jump in and out of stuff aimlessly with no clear target in mind. However, you see it happen in my illiquid investments like real estate too.

You have to know what the end goal is before you enter an investment otherwise I promise you that you'll be changing it on the fly and making emotional decisions on the fly.

It is not rocket since. Say for instance you are entering into a trade on bitcoin - is it a swing trade, a day trade? What is your upside and downside targets? Are you going to hold for one of those or look to book profits on daytrade?

It seems so trivial these questions, but they are actually very much a key to success.

2.) Define and Accept Risk

If you do not define what the risk is on an investment then a couple things happen. First, you leave yourself open to unknown exposure and then will have to make emotional decisions on the fly. Second, you cannot accept the risk because you don't know what the heck it is!

Accepting the risk on a trade or any investment is paramount before entering it. If you do not truly accept the risk then you will not have the fortitude to stick with the plan and get to your goal.

I know this from my own experience and from years of watching others do it. Truly accepting the risk on an investment liberates you to make logical decisions based on information.

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I just maid morning coffee and I going to think this two ideas what you name here :)
I try see what my mind say or think when I use this ideas :)

Maybe falls under goal setting, but, accepting the opportunity cost of investing. Investing X dollars means that you are missing out on that much of Y today. Y could be dinner, concerts, bigger car, whatever. It is part of the first step and can be difficult for someone who has never prioritized future gains over instant gratification.

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I totally agree with you.

I also think, similar to what we see in marketing where people jump from one program to the next, we must also decide on one strategy and stick to it. Are we going to HODL? Are we going to do day trading or swing trading?

We need to decide on what type of trading/investing we want to do and then also the strategy, and then stick to it.

I guess the problem with many investors, especially in crypto is that they don't have goals. How many have set themselves selling targets and exist strategies?...

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Very good perspective! It is actually that simple, but way over complicated by the big dogs to the extent that people are scared away from investing altogether. Good post, reblogging to share with the community!

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Yep, that is my aim when investing, keep it simple. I do it with my charts as well.

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If someone does not have any goals and enters a trade to make money, he can be trapped easily. When someone has a goal, he knows when to take profit, if it goes to the opposite direction, when to cut the loss and exit the trade.

Whether you invest or trade, it will not come without risk. So need to accept the risk to make investment and trade. Thank you @scaredycatguide for sharing your experience.

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Yup, have to have targets at a minimum.

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You know what i think cat. I think for now on i'm going to invest in myself. Invest in my own crypto i can control.. I followed you guys up the mountain of the $250k bitcoin.. then i followed you all in doge coin.. i followed you all on ethereum.. Now you all want me to do this defi cubfinance stuff. well i think i'm going my own direction now. i'm going my own way.. i'm going to do it my way".

i keep messing you guys i'm going to lose my girlfriend and my dog.

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LMAO! I did not jump on with the followers of doge train, heck no. Luckily I jumped on with RUNE. And yeah, come on the cubdefi train, it is only getting better. More platforms, more offerings, more earnings. Not investment advice ;-)

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Unfortunately, not everyone thinks this way and they start investing without knowing anything, only with the desire to become millionaires.

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Yup, most of just gambling

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