2/27/2013

Focus on vehicle selection



Most successful investors focus on vehicle selection. Vehicle selection based expertise is what most traders who have built big fortunes in their life time starting with small trading account have focused on

Market is a composite of many stocks (vehicles). While in some small windows of periods vehicle selection has not been very helpful in most of the years your vehicle selection makes a difference to your returns.

Currently due to Fed dominated moves all stocks tends to move up or down together but that is not how market traditionally behave. In normal markets there is wide distribution of returns on individual stocks. Some stock will be up 1000 % or more in a year and some will be up just 25%. Which offers opportunities for explosive returns to shrewd vehicle selectors.

Focusing on vehicle selection has been time tested method to get explosive returns. So instead of putting bulk of your effort in market timing , put your effort in vehicle selection.

If you know commonly used vehicle selection strategies you will not be reinventing the wheel. You can build on the knowledge and wisdom of people that came before you.

Look at history of the market for last 100 years look at traders who started with small account and built big fortunes, what vehicle selection strategy did they use.

If you know that you will not be digging in wrong place...

There is lot of emphasis in trading on indicators and timing tools and chart patterns . That kind of a approach skips the basic foundation skill of vehicle selection.

Vehicle selection answers the question of which stocks or futures or etf or instruments to trade.

Very little effort in most cases is put in to this vital are compared to other tactical areas. If you go through bulk of the trading blogsor trading courses or books or training programs, there is little emphasis on vehicle selection.

For a short tern trader a vehicle selection may or may not be critical because holding periods is small and profit expectation is small but for intermediate to long term periods holding vehicle selection is key. If you are working person or position trader the most critical skill you need to build is vehicle selection skill.

Since the birth of speculation speculators have experimented with various vehicle selection strategies and have found some strategies are better than others.

If you know what has worked you will not spend time chasing wrong things...

So look at historical evolution of thinking and expertise in this field .....

What is your vehicle selection strategy?

If you can not answer that question, then you do not have one...



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