Stock trading is similar to driving a car.  The driver should have obtained a license to drive. An experienced driver could drive safely even using one eye or one hand holding the steering wheel. If the car is given to a 8 years old kid, this could be a disaster. Similarly, a stock trader should master the skill to trade, a licence to drive the investment car.  A beginner who starts stock trading or investing without proper knowledge is considered risky while an experienced investor is used to the thunderstorms (financial crisis) in stock market, knowing when to slowdown or speed up.

The driving skill would give the driver a good start but it could not guarantee safety all the time as car condition could be different. A strong car is similar to strong fundamental stock, even when there is an unexpected accident (financial crisis), it could protect the driver (investor).  In the world of stock market, an investor could even diversify the risks with 10 stocks, as if having 10 different cars driving at the same time, even when one breaks down, there are other 9 other choices to move on, journey of financial freedom is not affected.

For additional safety, besides wearing safety belt, a driver could buy comprehensive insurance coverage to protect against unforeseen accidents. Similarly, an investor could consider low-debt strong cash company for investment as safety belt, following price trend with breakout for confirmation as premium for insurance.

Some drivers (traders) like a fast Ferrari (short term trading) while others prefer slower antique car (long term investing), there is no right or wrong in the choice. Each driver has to operate the car within safety margin under own’s control.  Beyond the limitation, accident could happen which is beyond driver’s tolerance level.  Similarly, a stock trader or investor has to know the risk tolerance level and reward expectation.  Alignment of personality with own investment strategy is the key for success. A good driver would find own’s favorite car which matching own needs: price, color, speed, functions, etc.

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