Archives of “January 6, 2019” day

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Placing Time Limits On Reading Others

  
  Education
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opinion-There’s a Danish proverb that says that “he who builds according to every man’s advice will have a crooked house.” The same is true with trading and the experience you share is quite common.

While there are some excellent role models out there to read and learn from, it takes time and lots of experience to be able to properly filter through the noise and learn how to recognize subjective and/or faulty analysis. It really is a unique skill and one that is not very common unless you’ve been at it for awhile and/or developed that skill through your education and career.

Although most traders don’t feel confident about their strategies to be able to trade in complete isolation (at least not for very long), there is a tremendous benefit from doing so. In my view, traders are now being flooded with too much real-time data, information, and opinions and they’re struggling to cope, make sense of it, and then focus on what matters. Remember, more information and analysis does not translate into better performance and we all have to place strict time limits on the energy we devote to reading the thoughts of others.

"Maintaining Sanity in a Schizophrenic Market"

  
  Education
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The current market seems to be manic depressive without even a shred of memory from one day to the next.  How does a trader preserve control and commitment when faced with this challenge?

I think the first place to begin is with the questions we ask ourselves.  Is there an opportunity here? Where is the opportunity now?  How can I take advantage of this opportunity?

Then ask yourself, how do I deal with the volatility?  Do I decrease size and stretch out the risk parameters?  Do I increase size to take advantage of this extraordinary opportunity?  Do I shorten or increase my time frames to increase my safety and profitability?  As traders we are always faced with the dual needs to seize a significant opportunity and to preserve our capital.  This balancing act is at the core of trading.

Of course, you need to address the underlying fundamentals.   What are they? Are they becoming more so or less so?  Are they changing or remaining the same?

Define the problems you are facing and redefine them.  Einstein was asked how he would go about solving a problem if he only had 60 minutes in which to solve it.  He answered that he would spend the first 59 minutes defining the problem.  Once you’ve identified and defined the issues you’re facing, look for workable solutions.  See problems as challenges not as threats.  I always assume if there is a problem, there is a solution.  Once you’ve found a solution, test it.

You need to sustain an optimistic outlook.  This means not taking market conditions personally.  Know that the difficulties will pass as well as the opportunities.  You can learn from difficulties and let them go even as you learn from and utilize opportunities.  Keep honing your skills and see the glass as more than half full.  You can heal your trading by finding a way to understand evil even as you find a way to make the best of a situation.  Any crisis can make you stronger if you don’t let it make you weaker.

So let’s go back to the original question.  Where is the opportunity here and now, and how do you go about taking full advantage of it?  When you find it, go for it.  If you don’t find it, wait for it to develop, and carpe diem (seize the day).

4 Ways Your Brain Is Making You Lose Money

  
  Education
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brainYour brain doesn’t like to lose

Loss aversion, or the reluctance to accept a loss, can be deadly.  For example, one of your investments may be down 20% for good reason.  The best decision may be to just book the loss and move on.  However, you can’t help but think that the stock might comeback.

This latter thinking is dangerous because it often results in you increasing your position in the money losing investment.  This behavior is similar to the gambler who makes a series of larger bets in hopes of breaking even.

Your brain remembers everything.

How you trade in the future is often affected by the outcomes of your previous trades.  For example, you may have sold a stock at a 20% gain, only to watch the stock continue to rise after your sale.  And you think to yourself, “If only I had waited.”  Or perhaps one of your investments fall in value, and you dwell on the time when you could’ve sold it while in the money.  These all lead to unpleasant feelings of regret. 

Regret minimization occurs when you avoid investing altogether or invests conservatively because you don’t want to feel that regret. (more…)

The secret to trading success: You.

  
  Education
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The secret to trading success: You.

You are the weakest part of your system. It is a defeatist statement. It makes your expectation to fail easier to accomplish and more importantly it makes failure easier to handle. It shifts the pressure away from you and unto fate.

Would you fly on an airline if their motto was “Our pilots are the weakest part.” I do not think so. You are your system. Even if your system is automated you added the inputs, parameters.

Taking responsibility for your action is not easy. Taking control of the outcomes of trading or life is a huge responsibility. You will have moments of weakness, but you are not weak. The market does not go straight up and either does the road to success.

8 Things To Learn From Japan’s Biggest Day Trader -Last Year Earned 6 Billion Yen ( More Then Rs 300 Crore )

  
  Education
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Bloomberg did a small profile on a Japanese day trader who made 6 billion yen last year and pretty much started from scratch to build a small fortune, it sounds a lot like the Dan Zanger story.  While many on the social media front were making fun of the article and down playing it they’re a few things worth noting.

“Self-control is so important. You have to conserve your assets. That’s what insulates you from the downturns and gives you the ammunition to make money.”  This is a classic rule for traders, you need to be able to survive the learning years in order to stay in this game for the long haul, you do that by taking small losses so you can live to fight another day.  You need to protect your capital and emotional capital in choppy downtrending markets in order to take advantage of the healthy markets.
“CIS discovered he had a talent for winning games. At 15, he says, he could earn 400,000 yen a month gambling. One secret was identifying the machines most likely to give bigger payouts. Another was being able to endure 13 hours at a time in smoke-filled and deafeningly loud pachinko parlors; he had to play thousands of consecutive games to take advantage of the odds”.  You need to find an edge and exploit that edge and do it over and over again.  If you are day trader or a swing trader then you know that you have to do a lot of trades to make a difference in your account for the year.
“That’s how he now plays the stock market. CIS says he bets wrong four out of 10 times. The trick is to sell the losers fast while letting the winners ride. For him, a well-played stop-loss is just about the most beautiful trade there is.”  It doesn’t matter how much research you do, how much time you spend in front of your computer, how much you scrutinize your entries, etc…you are going to be wrong half the times, one of the biggest hurdles for beginning traders is accepting that fact and that’s when they get in trouble.  Risk management is everything.
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