Can investors truly cut out emotion from their asset choices?

Anyone with a smartphone can access information on the price of gold, the Tesla share, and even coffee bean prices going up or down – and trade or invest in these assets. So, what prevents us from actually biting the bullet? 

Do we believe that trading is the preserve of the super-wealthy? The advent of online trading, exacerbated by the introduction of the smartphone, has put an end to all that. And we can’t claim lack of knowledge. Because we all have more information about the companies and brands trading on the stock market at our fingertips than we realize.

Consider the frequency of high-impact events and the speed they hit the markets. We’ve witnessed just how fragile tech giants can be when their dominance is challenged. We’ve seen ceasefire agreements hanging by a thread in the Middle East and Trump upsetting the negotiation protocol in Europe. And we have access to all this information, literally in of our hands.

Even the price of coffee beans is the highest it’s been in half a century, and if the price remains where it is, the price of our morning cappuccino is going to spike. It’s all connected. Once we start to notice factors like supply and demand and try to forecast the daily events, we’ll begin to see the direct link to interest rates, inflation, and much more.

The most valuable commodity we can learn is emotional regulation – not making irrational decisions when things go wrong or going ‘all in’ when things look good. The solution isn’t to avoid the markets but to have a yearly macro plan that helps integrate investment activity with our personal lives – and show when we can afford to have lower, or higher, trading emotions.

Making provision for recovery periods is crucial. For instance, if we go on vacation for two weeks, a month prior we’ll need to start trimming our investment positions and reducing risk so we can switch off without stressing over potential market volatility.

Without this recovery plan, we will come unstuck when confronted with bills or times when we might need extra cash at exactly the same moment we’ve maxed out our leverage in the financial markets. This kind of stress bleeds real-life experiences into trading decisions.

Following trading activity year-to-year and keeping tabs on upcoming news on the horizon is non-negotiable, as is integrating educational markers into our roadmap.

We need to understand the products we want to trade in and why certain global events make the market move up or down. This is how we’ll grow.

Try not to fall in love with any trade, and only risk a small percentage of trading capital on any one trade, so that risk on one investment does not climb exponentially. For instance, if we hold a small position in gold and oil and a small position in an equity, a stock index, and a commodity, then we’ve diversified.

The chances of all of those investments getting hit simultaneously and taking us out of the game are lower than having all of our eggs in one basket.

The other part of risk management is planning when to exit a trade position. Choose a number, and don't change it as the time approaches.

It may sound defeatist, but as soon as we put a trade on, we should assume we will lose money. If, for example, this amount is $100, and the idea of losing that leaves us with sleepless nights, we should change the size of the trade to where we feel the risk-reward ratio is worth it — usually somewhere between two to three.

So, if we risk $1,000, we’re aiming for a reward of $2,000.

Even if we only have $100 to spare and little-to-no knowledge of the space, we can still start investing. The main takeaway is starting small with an amount we’re comfortable making mistakes with. It’s a learning process.

The markets have never been as connected as they are today, and many of us constantly scroll social media, following what is being said about the latest iPhone launch and its camera quality and battery life. But what we are not doing is asking ourselves what financial opportunity is tied to having access to this information—this is the type of data we won't see in any forecasting analysis, and is invaluable.