Archives of “January 4, 2019” day

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Market Manipulation

  
  Education
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Jesse Livermore learned the art of stock market manipulation, manipulating the prices of thinly traded stocks, in bucket shops.

On March 13, 1925, Arthur Cutten – one of his biggest rivals – accused Livermore of continuing his shady dealings – not in bucket shops – but, very seriously, on the Chicago Futures Exchange.

At the beginning of his career, Jesse Livermore had traded exclusively in bucket shops. He had prospered and built up his funds. Bucket shops weren’t set up to lose money, however, and soon they were refusing to deal with Livermore or worse, were cheating him. (more…)

5 Characteristics of less Successful Traders

  
  Education
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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.

Our Favorite Non-Investing Books About Investing

  
  Education
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A few people have asked me over the past couple of weeks to share some of my favorite books outside of finance that are applicable to investing. The majority of these books are based on psychology because it plays such an important role in making better investment decisions. Here’s my list:

Mindless Eating: Why We Eat More Than We Think by Brian Wansink
The analogy between your finances and losing weight has been used over and over again throughout the years. It’s a useful analogy because the decisions in both activities are mainly affected by people’s behavior (or a lack of behavioral change). A couple of my favorites stats from this book: (1) People make an average of over 200 food-related decisions each day and (2) It’s estimated that 95% of all people who lose weight on a diet gain it all back.

Influence: The Psychology of Persuasion by Robert Cialdini
This one has been recommended by Charlie Munger on a number of occasions so I finally read it this year. It’s one of the best psychology books I’ve ever read. This book really helps you step into the shoes of the mind of a marketer or sales-person trying to get you interested in their product. These people are masters at getting into people’s heads to get them to act. Cialdini also touches on the social proof theory, which states that most people look to see what others are doing to figure out acceptable behavior. (more…)

Anger & Revenge in Trading

  
  Education
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  1. Anger: Anger generally comes when we do not get what we want. Choose carefully what you want and understand what you have to go through to get there.

  2. Revenge: Trading to get even with a stock or the market is the most destructive thing that a trader can do. This usually happens in the late stages of a new trader’s destruction as they trade bigger and more obsessively because they have to get back to even and prove something to the market and themselves. It is like a surfer getting mad at the ocean for a wave, the ocean doesn’t care about the surfer or even know that they exist. It is the same thing with the market, it is neutral you create your own results.

Universal Laws of Success

  
Education, Life
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Universal Laws of Success(1) Law of LOVE – It says in essence – “LOVE ALL PEOPLE AS YOURSELF”. All other rules are subordinate to this one Law – they must NOT conflict with it. It’s biblical. It applies to everything we do – as individuals – families – business teams – organizations – countries. It is Global in its reach.
(2) Law of CAUSE & EFFECT – This is an orderly universe. There are no accidents. Everything happens for a reason. For every effect there’s a cause or a set of causes.
(3) Law of MIND – Thoughts objectify themselves. We ‘become’ what we ‘think about’.
(4) Law of MENTAL EQUIVALENCY – To achieve success in any area, we must have a ‘clear image’ of that success in our mind a mental picture of our idea of success – a vision. (more…)

Common Characteristics between Successful Gamblers and Successful Speculators

  
Education, Video
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Just Listen :

On a warm summer’s evenin’ on a train bound for nowhere,
I met up with the gambler; we were both too tired to sleep.
So we took turns a starin’ out the window at the darkness
‘Til boredom overtook us, and he began to speak.
He said, “Son, I’ve made my life out of readin’ people’s faces,
And knowin’ what their cards were by the way they held their eyes.
So if you don’t mind my sayin’, I can see you’re out of aces.
For a taste of your whiskey I’ll give you some advice.” (more…)

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