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Four Keys to Understanding Uncertainty

  
  Education
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1) Uncertainty is always subjective. It is a state of mind that is derived from a mix of objective data, emotions and personal experience. To say that the market is always equally uncertain is to say that mood is always the same. It is not. It constantly changes.

If the perceived uncertainty is always the same, earnings reports would not have such huge impact on prices. We all know that this is not the case. In many cases, earnings reports provide new data that changes market expectations and therefore prices. Options premium is higher before earnings exactly because uncertainty is higher.

2) Uncertainty has become a synonym for bad mood in our everyday life.

The future is always uncertain, but our perceptions of the future vary. And perceptions define actions. Actions (supply and demand) define prices. Somehow uncertainty is used with a highly negative connotation in our everyday life. It is a game of words. Just like the weather people always say that there is a 30% chance of rain and never that there is 70% chance of sun.

3) Uncertainty is basically another word for market sentiment. High levels of perceived uncertainty (bad mood) and high levels of perceived certainty (good mood) have historically been good contrarian indicators, IF your investing horizon is long enough.

4) There are different types of uncertainty.

There is an economic uncertainty. Uncertainty leads to a decline in economic activity. Less people are hired. Old machines and software licences are used longer. Investments are cut. This is what it has been happening in Europe for 2 years.

You might be a bad trader if……….

  
  Education
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There are young people in the market that are really bad traders and there is also old traders that are very good, but there are no old bad traders in the market because they went broke and gave up a long time ago.

You might be a bad trader if……….

…your primary method is to try to call tops and pick bottoms.

“Don’t try to buy at the bottom and sell at the top. It can’t be done except by liars.”  -Bernard Baruch

 You might be a bad trader if……….

…instead of benefiting from the 200 point run in Apple this year you actually lost money by fighting the trend.

“Cardinal Rule #1 is to sell short only during what you believe is a developing bear market, not a bull market.” -William O’Neil (more…)

Full Concentration – No Compromise

  
  Education
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Anything less than full concentration is destined for failure on the average. How many of us carry our personal worries to the trading room ? Avoid completely !Its simple, the trading mind requires as much computing power as possible, nothing less.OK, I do concentrate, now what ? Now, don’t relax ! Keeping going at the same level of concentration. The only trap here is that you tire. So regular breaks are a must. One very important point you must note: after taking a break the performance may not be as good. Scalpers will generally make this observation.

15 Trading Rules

  
  Education
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1.  Don’t be a tradeaholic

  • Someone who has to have a trade on at all times or they feel their missing out

2.  You trade to make money – not for fun, games, or to escape boredom

3.  Never add to a bad trade

  • This may work occasionally, but will hurt you in the long run

4.  Once you have a profit on a trade, never let it turn into a loss

5.   No hoping, no wishing, no would’ve, no opinions, no should’ve

 6.   Don’t be a one way trader – be flexible, opportunities on both sides

7.   Know your risk on each trade. Trade with stops to limit losses

  • Sell down to the sleeping point (My favourite since 15 yrs )

8.   Look for 3-1 profit objective trade

9.  When initiating a trade, always get your price (use a limit order)

10.  When liquidating a bad trade, always use a market order

11.  Have a plan. Trade it. Monitor it.

12.  Make 10 points on a million trades, not a million points on one trade

  • Aim for consistency (it adds to your batting average)
  • There are more opportunities to make many reasonable trades

13.  Learn from your own mistakes

14.  Pay attention to weekly lows and highs

15.  Technicals and fundamentals are equally important.

Defeat is for the valiant.

  
Education, Life
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Defeat is for the valiant. Only they will know the honour of losing and the joy of winning.
I am not here to tell you that defeat is part of life: we all know that. Only the defeated know Love. Because it is in the realm of love that we fight our first battles – and generally lose.
I am here to tell you that there are people who have never been defeated.
They are the ones who never fought.
They managed to avoid scars, humiliations, a sense of helplessness, as well as those moments when even warriors doubt the existence of God.
Such people can say with pride: ‘I never lost a battle.’ On the other hand, they will never be able to say: ‘I won a battle.’
Not that they care. They live in a universe in which they believe they are invulnerable; they close their eyes to injustices and to suffering; they feel safe because they do not have to deal with the daily challenges faced by those who risk stepping out beyond their own boundaries.

Defeat ends when we launch into another battle. Failure has no end: it is a lifetime choice.

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