Archives of “January 12, 2019” dayrss
Tired of losing? “The easiest way to make money in the stock market, is to stop losing money” Exit losing trades!
Most Things Never Change (1912 Stock Market Psychology)
In the great game that is trading, the game never really changes.
New technology is introduced; new methodologies are dreamed up; new investment fads come and go. But the essentials of trading are the same now as they were generations ago.
There is a class of books that brings home this timelessness. Four of the best are The Money Game by Adam Smith; Devil Take the Hindmost by Edwin Chancellor; Extraordinary Popular Delusions and the Madness of Crowds by Charles MacKay; and of course Reminiscences of a Stock Operator by Edwin Lefevre (with the guidance of Jesse Livermore).
The oldest of the above is MacKay’s book, written in 1841. The Psychology of the Stock Market, by G.C. Selden, is another addition to the “timeless classics” list.
Though written in 1912, Selden’s book could have been published yesterday. This makes complete sense, as the main topic — human psychology — has not changed at all in the past century.
Nonetheless it is eye-opening to realize, with fresh clarity, the degree to which human emotions and purely human thought processes still dominate the game.
But wait, the skeptics say. Surely the nature of trading is at least a little different than what was written of some 99 years ago? Surely the great masses of market participants have advanced at least modestly since then?
Nope. Still the same.
Selden begins by observing that “Human impulses lead to speculative disasters.” He then goes on to note:
The psychological aspects of speculation may be considered from two points of view, equally important. One question is, What effect do varying mental attitudes of the public have upon the course of prices? How is the character of the market influenced by psychological conditions? (more…)
Three Stages of Trading
These three are mutually inclusive. Without each working together to create the whole, managing your trading success will be difficult. Simple really but difficult to manage. But once managed very difficult to complicate.
ACTION + RESPONSE = COMPLICATED AS IT CAUSES CONFUSION
PREPARATION + ACTION = COMPLICATED AS IT CAUSES DOUBT
PREPARATION + RESPONSE = NOT POSSIBLE WITHOUT TAKING ACTION
PREPARATION + ACTION + RESPONSE = MANAGEABLE SIMPLICITY
Just like the market…. scared money never wins
|“A great deal of trading activity in financial markets is privately profitable but wasteful in the aggregate, since it involves a shuffling of net returns with no discernible effect on production or economic growth.”|