8 Trading Habits From Warren Buffett

by Warren Seah

1. Investing With Knowledge

Don’t do anything until you know what you are doing. – Jimmy Rogers

The knowledge in this context doesn’t mean you need an educational degree in finance and economics to invest in the markets. It means learning about the portential markets you are interested to invest in. Knowing and understand them before you put money into the markets.

X Doesn’t realise that a deep understanding of what he is doing is an essential prerequisite to success. Rarely realizes that profitable opportunities exist within his own area of expertise.

2. Predefined Trading Plan

The secret is for a trader to develop a system with which he is compatible. – Ed Seykota

Has developed his own investment philosophy which is suited to his own personalities and objectives. As a result, no two investors in the market trade in the same manner.

X Has no plan, uses other peoples’ system without own’s research. Do not have his own investment philosophy. What it happen is that you see the person change from one systems to another, and failing to understand the importance of writing a plan.

3. Reseached And Tested Strategy

If I’m interested company, I’ll buy 100 shares of all its competitors to get their annual reports. – Warren Buffett

Developed and tested one’s strategy for the pass 5 to 10 years to determine the viability of the systems. Characteristics of the systems are also understood before one put real money into investment strategy.

X Has no system. Or has adopted some one’s system without testing and adapting it to his own personality. (When such a system doesn’t work, he adopts another one blindly. Which doesn’t work for him either.)

4. Capital Preservation

If you don’t bet, you can’t win. If you lose all your chips, you can’t bet. – Larry Hite

First priority is to ensure your investment equity can survive and invest for another day. The market will always be there as long as your investment equity is available. If you protect your money and make it the number one priority in investment, you can survive long enough in the market to profit from the opportunities.

X Investment aim is “to make a lot of money.” As a result, failed to keep them.

5. Follow His Investment Plan

For me, it’s important to be loyal to my system. WHen i’m not… I’ve made a mistake. – Gil Bake

Stick to his rules with discipline as long as its within the bounderies stated in his system plan. The fact is most investments do not win all the time. As investors, we need to be awared that there there is drawdown period for any investment strategy.

X Lack of discipline to follow the rules as layout in the trading plan. (When such a system doesn’t work, he adopts another one. Which doesn’t work for him either.)

6. Learnt From Mistakes

One learns the most from mistakes, not successes. – Paul Tudor Jones

Always treats mistakes as opportunities to improve oneself and never commit the same mistake again. An investor will never stop learning.

X Blame, justify and give excuses about the systems, people or circumstances that are at fault. While overlooking that he can improve his trading results if he identified them as mistakes and learnt from them.

7. Almost Never Talks to Anyone About What He is Doing

My idea of a group decision is to look in the mirror. – Warren Buffett

Not concern about what he’s doing. Not interested or concerned with what others think about his investment decisions.

X Always asking for peoples’ opinions and finding the latest ‘Hot Tip’

8. Be a Risk Averse Investors

Believe that risk can be managed, and always be prepared to beat a hasty retreat.

X Thinks that big profits can only be made by taking big risks.

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