Market gurus, financial astrology, divination.

Joseph Granville, a market technician, started his newsletter (Gransville Market Letter) in 1963 and is still going strong at age 80 . He was accurate to predict market decline in 1976 but was wrong in 1982 and 1995. Given statistical nature of investing, he had his successful calls and his fair share of blunders as well. The redeeming feature of this man must be his willingness to apologize for his mistakes.

Why do people continue to subscribe to his newsletter? This author suspects that his loyal customers are those who can form their own opinions and views on market but, they are receptive to a different perspective or viewpoint they may have missed in their own analyzes.

It is same with other reputable market gurus. It seemed media and public are intolerant of their success rates as being not good enough. The forecasts of these market gurus should be treated like a tsunami early warning system. Nine times out of ten, warning turns out to be false and people accept it and go own with their normal lives. Every warning is taken seriously and costs of taking precautions are minimal. When a warning turns out to be accurate, it will save lives. It should be same with these market gurus’ predictions of market crashes. Investors just have to prepare themselves as they would with an impending tsunami warning.

After seeing a BBC program on Membrane theory, 11-dimensional worlds and parallel universes, financial astrology, feng-shui and other methods of divination may have some merit. This author encourages investors to have open-minds and more importantly, understand strengths and weaknesses of any method. By capitalizing on strengths, one can indeed enjoy benefits.

The concluding part 2 will provide an outline of fundamental analysis, technical analysis plus some tips on successful investing.

One last point - no single method in technical analysis is sufficient for real-world investing. For example, even if you master Elliott Wave Theory or Gann techniques, by itself it would bring more heartache and disappointment. Often, you will need knowledge from other disciplines and sources to improve your overall investing skills.

Some tips for successful investing in stock markets.

1. Investing is a business. The rules of running a profitable business are same as investing in stock markets.

2. Learn to spot your own mistakes fast. When a mistake is made, exit your position and live to fight any day. The faster you realize your own mistake and faster you react will reduce your losses, hence increasing your chances of winning in long run. A useful method is using a 10% stop loss exit strategy. If you are long, and your stock price goes down by 10%, exit. If this same stock reverses and starts to surge, take this as your mistake of not identifying a more accurate (lower) entry point.

3. Understand yourself inside out. What makes you happy, sad, excited, depressed, ecstatic - whole spectrum of human emotions are merely states of mind. This is easier said than done but you have to keep improving your own control mechanisms.

4. Learn methods of successful fund managers – diversification, emotional detachment and having realistic expectations. Investing is a marathon not a sprint.

5. Money management skills. Whether amount is $10,000 or $10 billion, same rules apply. There are plenty of sources of information on this subject from internet.

6. Learn technical analysis.

The main thrust of this article is to avoid making mistakes that will cost you dearly. How you prepare yourself for bear markets, sideways markets and market crashes are vital to your success.

There are no secrets in investing – no magic formula, no discovery of some useful ancient secrets. Just knowledge, hard work, common sense and discipline will serve you well in years ahead. This verse from a 2500-years-old text is a useful reminder:

“Those who know do not speak, Those who speak do not know.” - Tao Te Ching, 56th verse

Stan Seecrets’ Postulate: “There are two types of people in world – those who know what they don’t know and those who don’t know what they don’t know.”