Updated: Jun 3
You cannot understand diversification without understanding the correlation between markets and those correlations can change from time to time depending on the waves. To assist you with understanding how these interrelationships work I recommend a book down below and even though I am sure there are many, this one is a pretty good read as a starting point.
Know the Waves
When it comes to making investment decisions learning the waves is highly recommended and I cannot stress that enough because it’s hard enough to try and manage your investments and at the same time understand the interrelationships between markets.
Yes it’s always important to mention money management and come up with fantastic principles of only investing a certain percent on any particular trade or stock, and that investing of any sort is a long term game but if your psychology and mindset is not right then this is useless so unless you want to be blown out the water and out of your investing career quick I suggest you read my Investing Vs Gambling post and don’t put all your eggs in one basket. Also check out the Biases post.
Know the Waves
So you realise by now that there are a few components to learning how to play this game and it will test your patience and resolve. One thing I have learnt really well from the school of hard knocks is that the most difficult obstacle to overcome is yourself because we tend to be our own worst enemy when it comes to discipline which is why I highlight this point over and over again. If you learn the waves that’s a tremendous obstacle out of the way and then you can put your time where it’s needed most.
Just in case you do decide to invest in yourself some more I recommend John Murphy’s book – Intermarket Analysis.
Want to learn how to read market waves properly? check out The Online Course