The Benefits of an Investment Strategy
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Being immersed in the financial world, trading and cryptocurrencies, we hear many people talking about their investment strategy, how it makes them enter a certain asset in the right place on the charts and how thanks to it they can make money. Even the most experienced and famous traders and investors have highly profitable strategies, some of them come from a very long time ago and may not be as effective as now, but certainly every investor has a plan, in order to beat the markets at their own game.
This is the reason for this post, how a strategy is so beneficial and what differentiates us from those who do not yet have one and are investing in the markets without a concrete plan, putting their money on a 50/50 scale, as without a set plan or strategy, many unexpected things can happen that these novice investors are clearly not prepared for. So without further ado I will begin.
What is a strategy related to stock trading?
A strategy is a set of rules that we establish according to our knowledge and experience in order to enter the market with a pre-established administration and/or management, which will allow us to minimize the risk in each operation and maximize our profits. This is basically a definition that I myself have given to the word strategy related of course to investments in financial markets and/or trading.
Of course, as I said, this brings many benefits in the short, medium and long term, since, as I said before, it is constituted to minimize our risk, which is extremely important in this work.
What are the benefits of having a strategy?
The benefits of a strategy are many, as I already mentioned, even the great investment experts have a strategy, since it would be totally illogical to enter a market without one and pretend to make money without having rules.
Among the benefits we have:
- A strategy allows you to know where you are in the market and on the chart of course. What I mean is that, before investing in any operation, whatever type of trader you are, in your strategy will be a very important rule, which is to place yourself on the chart and know what is the current context in which the market is going through.
- Another benefit is that when we know where we are located in the market, whether the trend is up or down, we will be able to determine what type of investment we will make. A clear example is that if the trend is bullish, we will only look for operations in favor of this, i.e. upwards and if it is bearish we will do the opposite.
- The following benefit of course complements the others, since once we know the context and the trend of the asset we are analyzing, our next rule has to do with the conditions that the price has to meet for us to be able to make an investment. At this point, for example, we can expect a price retracement to a specific zone that will allow us to enter the upside and follow the trend.
- Last but not least, to complement the previous point, is to determine the risk that we are about to assume in this investment. After determining the previous conditions to be able to enter and buy since in this case and example, we want the price to go up.
To conclude
Every investor must have a strategy of operation, capital and risk management to face the financial markets, we cannot go without a previously established rules or plan because we will be entering deep waters and most likely we will end up losing our money. LEO ON
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