Archives of “January 8, 2019” day

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The Wisdom of Bear Stearns’ Ace Greenberg

  
Analysis, Education
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In his awesome new book The Rise and Fall of Bear Stearns, Ace Greenberg spends the majority of the time setting the record straight from divergences from he thought was the truth. The majority of these divergences came from the mouth of Jimmy “I put it to my mouth and I did inhale” Cayne.

This is a blog about trading so I’ll spare you all the details, but frankly, my take on the whole she-bang as delineated in the book, is that dealing with Cayne was like dealing with a teenager for 30 years. He was a complete pain in the ass, but every now and then he’d make a big play in the game, so his parent (Greenberg) would be proud. Cayne’s ego would be his undoing. He fell on his own saber.

Greenberg gives Cayne credit where it was due and appears genuine. I could not tolerate anyone like Cayne and it’s why I enjoy being a prop trader. If you bust my chops enough, I can tell you to “go forth and procreate with yourself.”

What you’ll get from this book is a great history of Bear Stearns, during which Greenberg spent the majority of the career we know him to have had. Bear was 21 years old when Greenberg started and he spent the next 61 years there. (more…)

Psychological Risk Management

  
Analysis, Education
  • If you’re out of balance, you’re going to make bad decisions, and trading the market is a decision game
    • If you’re overtrading, you’re out of balance
    • If you’re overcommited, you’re out of balance.
    • If your dollar risk is too high, you’re out of balance.
    • If you’re hung over, you’re out of balance.
    • If you’re sick, you’re out of balance.
    • If you need the money, you’re out of balance.
    • If you make too much money, you’re out of balance.
    • You’ve got to take time off. You can’t trade every day.
  • Pay more attention when you account size gets bigger
    • I’ve noticed over the years that when my account has been small for whatever reason, I have been really careful with it. I watch it like a hawk. When my account gets rich, I tend to fall into a habit of neglect. I’m making money. I have profits, and I’m more comfortable. I don’t keep as close an eye on it. That’s very foolish.
  • Take profits out of your account
    • You should spend some profits rather than letting the money stay in your account indefinitely. That’s been important to me over the years. I withdraw money from time to time and take a vacation or buy a new car. From a behaviorist’s standpoint, it gives a sense of reward. It provides conscious and subconscious motivation.

Learn From And Cut Your Losses

  
  Education

Because you won’t always be right, you’ll undoubtedly experience some losses. The stock market is incredibly humbling, and a long stretch of winning trades can instantly be cut short by devastating losses. But losing trades are healthy in the long run of your trading career, so long as you learn from them. Ask yourself why the trade went awry, and learn how to minimize similar mistakes in the future. Also, make sure that you exit a position as soon as your risk is fulfilled or a technical barrier — such as support, resistance, volume, etc — has been broken.

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