Throughout centuries and decades, the skill of trading has been rewritten, repackaged, and marketed to many generations. However, learning how to trade isn’t as complicated or nuanced as history illustrates it. Everyday, millions of people with varying backgrounds of financial knowledge consistently receive steady income from the markets. One thing is common among these trade gurus: they mastered the basics principles of trading, developed a custom strategy, and avoided dangerous practices like predictions and blackbox strategies. If people interested in accumulating wealth follow these principles, they can almost be guaranteed profitable, yet safe returns. Therefore, new traders must heed the fundamental rules of the craft before jumping into the deep end.
Tom Basso, a chemical engineer who eventually became a leading fund manager and independent trader swears by these principles and encourages people interested in trading to practice them. Nicknamed, “Mr. Serenity” in Jack Schwager’s best-selling book The New Market Wizards, Basso lives and trades in a relaxed style.
"Knowing how to use your money to make money should simply be viewed as a healthy habit. If you don't save, read about best practices, or slowly dip your toe into low-risk ROI activities, then you will probably never achieve the degree of financial freedom you're hoping for, so it should be something you experiment with early," says Basso.
Successful trading requires profound financial knowledge in the key areas of pricing assets, which is usually combined with the ability to set the trade entry and exit points. Many novice traders are oblivious of this skill, leading to messy financial events and tainting their idea of trading. Setting both the entry and exit points in advance helps a trade maximize returns and shouldn’t be overlooked. Traders need to ensure these details are done correctly to create a risk-reward ratio that is conducive for sustained portfolio growth, and a possible way out that has minimal risk factors.
Having a well planned trading strategy also helps an investor measure and improve their portfolio’s performance. A process of trading that lacks a specific strategy or pattern leaves no opportunity for performance assessment, stock taking, or having a template for achieving growth and meeting targets. The art of strategic trading also helps someone internalize a particular winning formula for seamless operations. This is because the strategy becomes routine, helping to build a statistical database that helps in gauging performance for constant improvement.
Tom Basso, says intelligent trading requires traders, especially those just entering the world of finance, to look beyond predicting market trends. Basso also advises them to avoid following social media analyses and instead focus on developing unique strategies that suit their personal circumstances and protect their neutrality.
“I have been trading for 50 years and have written three books about the various ways to become a successful trader. When speaking on the pitfalls new traders encounter, the biggest one involves a lack of strategy. The vast majority are only listening to predictions or posts online that don’t come with any facts. Following these kinds of ‘signals’ leads to an unproductive trial and error process that doesn’t provide reliable returns, healthy risk control, or even a way out if things do not go as planned. The art of investing is not a one-size-fits-all thing. Everybody's trade strategy should be subjective to their own personal situation. This is because a particular person might have different risk levels depending on the peculiarities of the investor and some personal factors. Some of the differences might include understanding of a particular trade, personal risk tolerance, knowledge of math, and how much time a person can dedicate to the process,” Basso explains.
According to Basso, every successful trader needs to have properly tested trading strategies, as this is crucial for surviving the intense competition in the financial markets.
Having been retired for 20 years, Basso’s website EnjoyTheRide.World functions as a treasure trove of free educational material any new or knowledgable trader can use to apply to their own activities. Besides spending 40 minutes everyday trading, the only other work Tom is doing involves consulting for SimTrader, an innovative platform that will soon provide new traders with market simulations and simple frameworks. He believes this will allow more people to responsibly enjoy the art of trading without making common mistakes. Overall, Tom hopes more young trade enthusiasts employ the principles of intelligent and successful trading to achieve financial freedom.
“I started out like a lot of traders did. I was only 12 and a paper boy, putting away $10 a week,” Basso says, “I was home when a mutual fund marketer came to sell a hedge fund to my dad. I ended up buying the mutual fund. My father didn't. I owned it for about 6 years before I was able to break even. While I didn’t make money, I learned a lot about market values and I understood more about what risk actually meant and that stayed with me throughout the last 50 years of trading.”
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