While investing is entirely different from trading, these 5 Berkshire Hathaway values can be successfully applied to trading.
1. Be wary of "the new paradigm." Once the market reaches a euphoric state, this particular term is thrown around quite loosely. In todays day and age, you will see a lot of similar terms and grandiose predictions on social media in particular. This is a classic sign of a bearish shift growing closer. There is no "new paradigm" and we see the exact same behaviors in the market at every top and at every bottom.
2. Stay in your lane! Charlie and Warren are the quintessential "boomer" investors. They are very open about not having a deep understanding or expertise in the technology sector. Therefore, they avoided it until opportunities arose that they could fully comprehend with their expertise. Find a sector and a trading plan that compliments your personality and skills. Spend as much time as you can perfecting your craft, studying your chosen sector and becoming an expert in your trading plan.
3. Proper capital structure is extremely important and high leverage is dangerous and to be avoided at all costs. Berkshire Hathaway will NOT invest in an over leveraged company. While too much leverage in the form of CFDs or options contracts is obvious, position sizing is the true risk management. Most large moves happen over night and you can wake up in the morning 30% below your stop loss. Your life jacket is not using too much capital per trade.
4. Use filters. Berkshire Hathaway has a strict filter that companies must be able to pass through for them to even consider purchasing. This saves them time and mitigates risk. There is no edge if you're too diversified in your strategy. Stick to a rule based trading plan and filter out any assets that do not fit your criteria. Doing so will keep you from making emotional decisions and promote a higher strike rate and discipline.
5. Maintain a circle of competence. For Warren and Charlie, this is a good idea of how the business will perform in the next 5 to 10 years. In context for trading, we need to know all possible price action scenarios. What is the trend? What are the next two support levels, the next two resistance levels, and the highest probability scenario?