Lesson One - Keep It Simple

Article Summary

• Set rules for your trades ahead of time using limit orders
• Find the intrinsic value of the companies in your portfolio
• Think long term

No Emotions

The best traders set rules and stick to them. What does that mean in practice? One example that we love is limit order stock trading.

Rather than buying a stock at the current market price, you set a limit order to buy the stock at a specific price you're willing to pay. If the stock price drops to your limit price, your order will be executed. If it doesn't, you won't buy the stock.

The same goes for selling the stock. When the stock price has gone up by an unusual degree, that means either the company is overvalued or the company has outmaneuvered the competition. In either case, it's a good idea to set a limit order to sell the stock at a specific price. From there, you can do manual analysis about whether you want to buy the stock back.

No Gambling

We don't believe in get rich quick schemes or any sort of gambling. This is why our analysis (and hopefully yours, too) is based on determining the intrinsic value of a company and buying it when it's trading below that value.

How do we determine intrinsic value?

• Financial reports
• Management quality
• Technology or performance moats (does a delivery company have 10x the shipping speed as their competition, for example?)

These are just a few examples, but you can find much more info on our Rankings page.

No Day Trading

97% of day traders lose money in the long term. As Warren Buffet says:

The main thing to do is just buy into a wonderful business and just sit there with it

That's why we think long term, measuring our performance across quarters and years rather than days.