Archives of “January 4, 2019” day

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reminiscences

  
  Education
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RSOonlinestocktrading

Here is a link to a pdf version of Livermore’s story.  I couldn’t get the link to work, so you’ll have to copy and paste it in your browser.

http://www.trading-naked.com/library/jesse_livermore.pdf

Anyone interested in trading, here is the bible. Read it, re-read it, and live it, then go back and re-read it again.  While very outdated, this was one of the most influential books I ever read.  This book made me want to be a speculator.  Livermore made many mistakes in his life and died peniless, but what a run while he had it.

(Already I had read this book more then 10 times till today in last 14 years )

The Two Trading Problems

  
  Education
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The old saying indicates that fear and greed are the emotions that dominate markets.

Eliminating emotion from trading is both impossible and undesirable. The “feel” for markets possessed by the best traders is a form of emotion; Antonio Damasio’s writings on this subject are must reading.

When we become very anxious or frustrated, however, our assessments of risk and reward are impaired: that is the enduring message of behavioral finance research. Regional cerebral blood flows no longer activate those executive parts of the brain responsible for planning, judgment, and decision-making. Rather, we regulate our motor activity as part of “flight or fight”. In the flight mode, we flee from risk and inhibit trading decisions. This leads to immediate safety, but also missed opportunity. In the fight mode, we confront risk and activate trading decisions. This leads to the relief of taking decisive action, but also poses increased possibilities of loss.

With market volatility at record levels, it’s not unusual to experience outsized losses when trades are wrong. These losses place a figurative magnifying glass on our flight or fight responses, activating stress modes at exactly the times we want to be most deliberate and planful. (more…)

Improving Trading -4 Points

  
  Education
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  • Eliminate the potential that the market will disappoint you, think probabilities before executing a trade.
  • Don’t look at a trade outcome as being right or wrong, but again in terms of probabilities
  • When a pattern you know presents itself, trade it, don’t think, just respect your stops.
  • When analyzing your trade, how much are you willing to put at risk to see if other market participants will come alongside your view. In other words, look first at the loss potential instead of focusing on gains.

 


No Control

  
  Education
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Don’t think about what the market’s going to do; you have absolutely no control over that. Think about what you’re going to do if it gets there. In particular, you should spend no time at all thinking about those rosy scenarios in which the market goes your way, since in those situations, there’s nothing more for you to do. Focus instead on those things you want least to happen and on what your response will be

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