Jim Rogers’ Keys to Success (taken from the titles and sub headings of each chapter of the new book, “A Gift To My Children”):
1. Do not let others do your thinking for you
2. Focus on what you like
3. Good habits for life & investing
4. Common sense? Not so common
5. Attention to details is what separates success from failure
6. Let the world be a part of your perspective
7. Learn philosophy & learn to think
8. Learn history
9. Learn languages (make sure Mandarin is one of them)
10. Understand your weaknesses & acknowledge your mistakes
11. Recognize change & embrace it
12. Look to the future
13. “Lady Luck smiles on those who continue their efforts”
14. Remember that nothing is really new
15. Know when not to do anything
16. Pay attention to what everybody else neglects
17. If anybody laughs at your idea view it as a sign of potential success
Archives of “January 3, 2019” day
rssSurround yourself with trading friends like these. They eat bulls & bears
Peter Lynch on Picking Bottoms
– If they don’t scare you out, they will wear you out
Bottom fishing is a popular investor pastime, but it’s usually the fisherman who gets hooked. Trying to catch the bottom on a falling stock is like trying to catch a falling knife. It’s normally a good idea to wait until the knife hits the ground and sticks, then vibrates for a while and settles down before you try to grab it. Grabbing a rapidly falling stock results in painful surprises, because inevitably you grab it in the wrong place. If you get interested in buying a turnaround, it ought to be for a more sensible reason than the stock’s gone down so far it looks like up to you. Maybe you realize that business is picking up, and you check the balance sheet and you see that the company has $ 11 per share in cash and the stock is selling for $ 14. But even so, you aren’t going to be able to pick the bottom on the price. What usually happens is that a stock sort of vibrates itself out before it starts up again. Generally this process takes two or three years, but sometimes even longer.
How many times have you heard people say this? Maybe you’ve said it yourself. You come across some stock that sells for $ 3 a share, and already you’re thinking, “It’s a lot safer than buying a $ 50 stock.” I put in twenty years in the business before it finally dawned on me that whether a stock costs $ 50 a share or $ 1 a share, if it goes to zero you still lose everything. If it goes to 50 cents a share, the results are slightly different. The investor who bought in at $ 50 a share loses 99 percent of his investment, and the investor who bought in at $ 3 loses 83 percent, but what’s the consolation in that?
The point is that a lousy cheap stock is just as risky as a lousy expensive stock if it goes down. If you’d invested $ 1,000 in a $ 43 stock or a $ 3 stock and each fell to zero, you’d have lost exactly the same amount. No matter where you buy in, the ultimate downside of picking the wrong stock is always the identical 100 percent.
Sometimes it’s always darkest before the dawn, but then again, other times it’s always darkest before pitch black.
Five Defining Features of Market Pros
Upon thinking about the differences between the highly successful traders I recently talked with and their less successful counterparts, five features stand out. Pretty much everything else follows from these five:.
1) The less successful traders are anticipating market movement and trading accordingly. The highly successful traders are identifying asset class mispricings and trading off those.
2) The less successful traders are trading particular instruments and pretty much stick to those. The highly successful traders recognize that any combination of trading instruments can be considered an asset class and appropriately priced (and gauged for mispricing).
3) The less successful traders think of their market as *the* market. The highly successful traders focus on interrelationships among markets that cut across nationalities and asset classes.
4) The highly successful traders place just as much emphasis on understanding markets as predicting them. The less successful traders don’t ask “why” questions.
5) The less successful traders are convinced they have proprietary information of value that they must not disclose to anyone. The highly successful traders use their proprietary information to selectively share with other highly successful participants, thereby gaining a large informational edge.
If I had to use one phrase to capture the essence of the highly successful traders, it would be analytical creativity. These traders are creative in their thinking about markets and rigorous in their pursuit of this creativity
5 Thoughts for Traders-Must Read
1. We want all trades to be winners. The foolproof system for trading profits is attractive and the seller of such systems can be convincing, yet the profits are elusive. The market could care less about our system, a past trading record, or the trading record of the one selling the system. You do know that the market’s attorney requires that the following be posted in a prominent place…like on our foreheads beside the big L sign!: “Past results are not indicative of future returns.” By the way, the market says, “you’re doing it wrong”.
2. We want to add to losers. The last time I checked the only reason we add to a loser is when the discussion is about our weight! Get on the scales and add up more losing pounds! Be the BIGGEST LOSER! The market, however, says the way to tip the scales in our favor is to add to the winners and lighten up on the losers. To do otherwise is to “do it wrong”.
3. We want to be right. Two wrongs don’t make a right in life but in the stock market two wrongs (and plenty more) will help you get on the right road to making money. The market says the trading game is about making money not about stroking the ego. The “right” road is the “wrong” road when your on Wall Street. Hey, if you doing it to be right, then you’re “doing it wrong!” (more…)
This is one of the best anecdotes of behavioral psychology
19+1 Trading Rules For Traders
1. Forget the news, remember the chart. You’re not smart enough to know how news will affect price. The chart already knows the news is coming.
2. Buy the first pullback from a new high. Sell the first pullback from a new low. There’s always a crowd that missed the first boat.
3. Buy at support, sell at resistance. Everyone sees the same thing and they’re all just waiting to jump in the pool.
4. Short rallies not selloffs. When markets drop, shorts finally turn a profit and get ready to cover.
5. Don’t buy up into a major moving average or sell down into one. See #3.
6. Don’t chase momentum if you can’t find the exit. Assume the market will reverse the minute you get in. If it’s a long way to the door, you’re in big trouble.
7. Exhaustion gaps get filled. Breakaway and continuation gaps don’t. The old trader’s wisdom is a lie. Trade in the direction of gap support whenever you can. (more…)
My mind has to be free…
To execute trades without making mental errors you have to be free of thinking that “this trade will be a winner”. The typical trader expects “this trade” to be a winner, or why would they take it, right? But, you can’t think this way if you want to make consistent money. Once you start expecting each trade to win, you become emotionally attached to it, when as you should know by now, it is not any ONE trade that matters, but the overall series of trades and your ability to remain disciplined over that series that matters.
Avoid these Mistakes
Don’t trade to trade. Understand that there are 3 positions you can take as a trader: a long position, a short position and a position to NOT be in a position. There will be plenty of trading opportunities that will come along. Don’t give money to the markets simply because you are bored! .
Avoid trading a strategy without having a good understanding of how the strategy works. What is the typical winning percentage? What is the largest drawdown? In general, high winning percentage strategies have smaller average profits per trade. Lower winning percentage strategies might not have as many winners, but when you are a winner, you typically win big. If you expect your strategy to bring big profits without losses, you can also expect a check made out to “REALITY” to come your way any day.
Learn From Paul Tudor Jones: Risk Size Is Key
We’ve all heard the “experts” preach to us that we should only take trades which offer at least a 2:1, or better yet a 3:1 reward to risk ratio and on the surface this seems like sound advice, but is it really?
RETHINK YOUR STRATEGY
I used to be one of those educators who would jump on the risk/reward bandwagon until one day when I stepped back and took an objective look at what trading is and how I can best optimize my chances of success. When I did this I realized that not only was the whole risk/reward premise false but that it had the potential to ruin chances for trading success by keeping me out of some of the best trades.
YOUR WINNERS CAN RUN….IF YOU LET THEM
The proponents of risk/reward ratios say that in order to be successful the trade must out produce the amount of money you have at risk by at least double or triple your risk amount but what they fail to take into consideration is that the reward side of any trade is unknown.
WHAT YOU CONTROL
You see the only part of the trading equation that you have any control over is the risk side of the trade. The reward side of any trade is a complete mystery. Oh sure, we all have our best guesses as to where the market might go next, but in the end it’s really just a crap shoot. Sometimes we’re right and sometimes we’re wrong and if we’re honest with ourselves we will admit that we really don’t know where the market is going next. (more…)