Tom Scollon
Tom Scollon
Chief Editor

In some recent editorial I have referred to methodology and making sure whatever system you use is well founded and has been successfully tested. I would like to elaborate a little more on this.

Firstly let’s look at methodology. Basically these fall into four categories. The first is Fundamental and even though I don’t personally use this approach nevertheless it is used by the vast majority of investors – retail and institutional.

The next three are technical. The first are what I would call trend following indicators; the second range trading indicators and the third are what I would call pattern recognition such as Elliott Wave and Gann.

I personally use Elliott and have so for the last 15 years. Perhaps conservative at times but it does not lose you money in my view. If you are going to use technical’s then it is important to have at least a basic understanding of each of the three so you can make an informed decision. No approach is the Holy Grail. Yet I see many would-be successful investors waste effort searching for the easy route to riches. It does not exist. It is like the ‘Long March’ it is one step at a time. But with experience under your belt there are short cuts.

The reason I mention this is that I also see many study one approach, try it and give up as it does not bring the instant riches. And they then spend a fortune studying the next system.

But I also see others who are too mite minded to properly invest in education.

I will also say here that it does not matter which system you use as long as you use it with an applied approach and with discipline. They all work. I would say you could choose any approach and apply it in this way and you will succeed.

The other key point is that you must apply it in a measured way. That is, you try your new found knowledge steadily. Many investors jump in head first after a training seminar. You apply your learning in small easy comfortable steps at first using a small trading kitty.

The sleep test is important here but to mix my metaphors – you must at some point fully immerse yourself after putting your toe in the water.

It reminds me of that old adage ‘slowly slowly catchee monkey’.

Enjoy the ride

Tom Scollon
Chief Analyst