Archives of “January 9, 2019” dayrss
This is not going to endure me to my fellow traders but I think it is important that we all are reminded what the market promises us.I am not talking from my gold and diamond encrusted throne. I am not exactly killing it. I am not perfect; I do not make money every trade or every day. This is a reminder to me, more than a reminder to you.
It promises a playing field, not the game.
It promises to reward risk, not proportionately.
It promises opportunity, it does not promise profits.
It promises a lesson, not learning.
It promises that the quality of indicators and analysis is proportionate to quantity of participants, not quality.
Once again I am not without my struggles; this market is not easy for me or anyone I talk to regularly. I have had to make changes that I did not want to make. I thought once 2008 happened it would always be like that. It has been a rude awakening. Is there something I missed? Let me know.
Michael Douglas reprises the role of Gordon Gekko that won him an Oscar two decades ago in the sequel to the Oliver Stone directed classic, with Shia LaBeouf and Carey Mulligan on board.
“I think successful trading, or poker playing for that matter, involves speculating rather than gambling. Successful speculation implies taking risks when the odds are in your favor. Just like in poker, where you have to know which hands to bet on, in trading you have to know when the odds are in your favor.” – Sperandeo
It is interesting that Sperandeo makes a point to define the difference between speculating and gambling. He discusses how he never viewed playing poker to be gambling in the same respect that slot machines are gambling. In poker, he had the knowledge of which hands had the highest probability of winning and the option to only play the highest probability hands. This draws a direct correlation to trading. We know from our study of historical winners what qualities make up stocks that go on big runs and we have the option to only play those key stocks.
Looking at trading in this respect breaks it down into two important goals. We have to know which kinds of stocks have the best odds of going on huge runs. We also have to have the timing skills and the guts to play those stocks when we encounter them and the patience to sit on the sidelines when when there aren’t good options.
“Trading the market without knowing what stage it is in is like selling life insurance to twenty-year-olds and eighty-year-olds at the same premium.” – Sperandeo
Again here, we see Sperandeo drawing a real world comparison to stock trading. He discusses that you just as the odds would be better if you sell life insurance to a twenty-year-old compared to an eighty-year-old, the same can be said when trading a young trend compared to trading an extended trend. He doesn’t necessarily say you should trade a new trend or shouldn’t trade an extended trend, but that you should strongly factor that in to your timing decisions. (more…)
Life is like a big bike race, with the path to the finish line being your personal path.
At the start, we all ride together – sharing the camaraderie and enthusiasm. But as the race progresses, the initial joy gives way to the real challenges: tiredness, monotony, doubts about our own abilities.
Notice that some friends will give up, they are still going, but only because they do not know how to stop in the middle of a road, they are numerous, pedaling alongside the support car, talking amongst themselves and meeting an obligation.
Eventually we distance ourselves from them and are forced to cope with loneliness and unfamiliar bends in the road, not to mention problems with the bike. After some time, we may begin to wonder if it’s worth the effort.
Yes, it’s worth it. You just can’t quit.
Furthermore, if you stop pedaling, you begin falling.
“I think the secret is cutting down the number of trades you make. The best trades are the ones in which you have all three things going for you: Fundamentals, Technicals, and Market Tone. If you can restrict your activity to only those types of trades, you have to make money, in any market, under any circumstances.”
It makes it hard to make successful, opinion based trades.
You enter a trade on the basis that everyone is wrong, accepting scope for the crowd to get it even more wrong before waking up to reality. When the crowd does eventually realise the error of it’s ways, the price turns in your favour. However, it is extremely difficult to hold on to the trade and enjoy ‘being right’, because the crowd is always wrong, and if it is now moving in your favour, then you are also wrong, an equal fool.
This unhealthy skepticism leads to early culling of winners and ensures that one’s portfolio spend most of it’s time holding on to losing positions.
This is probably the single biggest factor which divides the winners from the losers, not just in trading, but in any other walk of life. Yes, it pays to have money and time on your side, but you could have all the money and time in the world and still fail at trading if you do not have the drive to do well at it. On the other hand, you could have a lack of resources, but have a greater chance of success because you have the drive to win. That drive will help you preserver when the going gets tough.
A trader who can admit his mistakes to himself and also recognize his positive traits is one who is likely to succeed. Honesty gives you clarity, and clarity allows you to make sound decisions which have a basis in reality. If you do not know yourself and cannot be honest with yourself about your trading activities, you cannot see what is going on. Imagine getting into a car blindfolded, turning the key, and driving out into rush hour traffic. That is what trading is like if you are dishonest with yourself. Another good metaphor would be driving drunk. An inebriated driver has no idea whether or not he is even making mistakes, and does not hold himself accountable from his actions. Stay sober and check your windows and mirrors when you trade.