Case Study of My Success in Stock Market Investment

Several members of my investment club often inquire about my personal success story of stock market investment. They request me to share lessons learned in stock trading and investment for everybody's benefit.

So, let me share with you the most decisive moment of my life, which turned me into a successful stock market investor.

I dreamt of making millions in stock trading. To fulfill my desire of a 4-bedroom apartment on the beach, a red Ferrari and a big plasma TV in an office overlooking the beach 12 floors below.

On that particular Sunday morning of April '92 I was sitting at my computer studying the market. My daughter asked me when we would be rich enough to enjoy a family vacation at Greek Islands. I gazed into her eyes, and found a simple question "Daddy, why aren't we rich?"

My silent answer to my daughter was that I had yet to achieve financial freedom. I was still trying to come out of the rut, even though I had somehow survived the October 1987 crash on black Monday.

I looked back at my past and realized I had tried to create wealth for the last 10 years, without real success. Even though I was not in loss, I didn't really make it big in the stock market.

I decided to scrutinize all my transactions to find out what where I had gone wrong.

I had bought some shares that were going down, and then didn't sell them soon enough. First, I asked myself why I had bought those stocks. Then I started to analyze what triggered me to sell the stocks. After some number crunching, I discovered there was no reason to buy those shares in the first place. And then I had no reason to hold on to them when they kept going down.

Thus I learnt my first lesson in investment - to ask "why" for every decision.

After some days, I reached my "Aha!" moment and I changed my strategy of stock market investment. I started by writing out my vision - what I wanted my life to look like when I became a successful trader and investor. Once I visualized that, I started taking small steps to achieve my dream of earning millions from stock investing and option trading.

I wrote a new strategy of stock market investment and I promised myself not to do anything beyond my own trading rules.

Here are my trading rules for your benefit:

1. I visualized all the fabulous benefits of becoming a successful trader.

2. I realized that I was scared of losing, and to let it control my life any longer was just too costly.

3. I decided that I would no longer accept anything less than full compliance with my trading plan. Of course, I would educate myself to improve my option trading and investing skill.

4. I decided that I would take every trade entry signal and follow my trading plan as if my life depended on it.

5. Whenever I closed a trade, I started a detailed investigation on why I entered the trade, where I placed my stop losses, why I exited when I did. This was the most important rule as I could examine my success and failure against my own rules. I also used to take clues from my success and failure to change my trading rules.

6. I started following trends for all my stock trading activities. I looked for selected stocks with strong trends i.e. trading above their respective moving averages for long trades, or below for short trades. Another parameter was stock price moving strongly in one direction

7. I started taking every trade selected by my trading system i.e. based on technical, fundamental analysis. I also started using golden ratio of Fibonacci sequence.
I put stop loss orders at a place where the trend had to change to take me out of the trade.

This single decision, to change my strategy, increased my profit margin because I started holding until the trend changed.

Why My New Trading Rules and System Made Me a Successful Trader

• I started making rational decisions based on facts, not emotions.

• I started buying, using logical reasons and holding until there was a valid reason to sell.

• I controlled my emotions and fear of loss.

What I Do When I Am Not Comfortable With My Trading Position

• When I'm afraid of losing money, I reduce my position size until the fear goes away

• Once I make a series of small profits, I start trading with the markets money. I increase my position size according to my growing confidence and account balance.

• If I have a series of losses, I reduce my position size again until I get back on the right track.

Hence, the best suggestion I can give any body who wants to be successful in stock market investment and trading is, maintain discipline and follow a plan.

Arindam is an active trader for last 17 years. He published 5 books on stock market investment and writes regularly in leading newspaper. If you would like to know my
trading rules for stock market investment in more detail, subscribe to my newsletter at financial planning for retirement. Here you can find my review on an excellent e-book on
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