These 3 rules apply to any trading activity but when it comes to auctions are guidelines which can be followed:
- Do your homework. Have a look and know what you are buying. Assess the risks and ask questions. Can you learn anything from people who have tried this before? Caution follows from the respect of risk. I believe that you can always avoid unnecessary risks, and that taking risks is fine if they can be calculated and pre-empted. Sometimes you can take big risks but then the upside margin (the profit) must warrants larger risk. Sometimes an asset is so cheap that you can be more risky but preparation is the key to any business or trading activity.
- Strike for success. As Dickson Watts wrote in his 19th century classic Speculation as a Fine Art, risk taking requires “prudence and courage; prudence in contemplation, courage in execution.” Once you have done your background homework, you must decide to act and then you move quickly and decisively. If you want to ride a bicycle, you have got to jump on and pedal. Of course you might crash, but you might also learn how to ride. If the risk is too great, then don’t get on the bike. Going slowly guarantees both not learning and taking a fall. Taking risk is at the very essence of business. When you see an opportunity strike; and strike quickly.
- Your attitude. The only asset you can really count on when trading are the ones inside of you; your character, your tenacity and your will. The true risk taker does not fold up with despair and a sense of loss when trading goes wrong. The true trader will always encounter a few losses but however big the setback, he will survive because of his attitude. Isn’t it true that the Universe applauds the person who has the ability to never give up and who refuses to say enough?
Let me emphasise that these three simple rules are not a recipe for success. I don’t have one of those, but at least if you master all three, you are certain not to fail