Archives of “January 18, 2019” day
rssGeorge Soros- “The Master of Speculation”
Soros: “The Myth”
Soros’ “The Alchemy of Finance” is a seminal investment book… it should be read, underlined, and thought out page-by-page, concept-by-idea. He’s the best pure investor ever… probably the finest analyst of the world in our time.”
-Barton Biggs
Soros: “The Reality”
“My father will sit down and give you theories to explain why he does this or that. But I remember seeing it as a kid and thinking, Jesus Christ, at least half of this is B.S., I mean, you know the reason he changes his position in the market or whatever is because his back starts killing him. It has nothing to do with reason. He literally goes into a spasm, and it’s his early warning sign.”
-George Soros’ son, Robert
George Soros on Himself
“My approach works not by making valid predictions but by allowing me to correct false ones.”
-George Soros
Soros and Exits
“When George is wrong, he gets the hell out. He doesn’t say, ‘I’m right, they’re wrong.’ He says, ‘I’m wrong,’ and he gets out, because if you have a bad position on, it eats you away. All you do is think about it — at night, at your home. It consumes you. Your eye is off the ball completely. This is a tough business. If it were easy, meter maids would be doing it.”
– Alan Raphael (Ex-Soros CIO)
During and After the Trade- 16 POINTS
1. What’s your game plan if it goes against you and threatens your survival?
2. Will you be able to get out? Did you take that into account in your workout?
3. More typically, what will you do if it goes way against you and then meanders back to give you a breakeven? Or if it immediately goes for you or aginst you?
4. Would you be willing to take a ½% profit if you get it in the first 10 minutes?
5. Did you test whether taking small opportunistic profits turns a winning system into a bad one?
6. How will unexpected cardinal events affect you like the “regrettably,” or the pre-annnouncement of something you expected for the next open? And what happens if you’re trading an individual stock and the market goes up or down a few percent during the day, or what’s the impact of a related move in oil or interest rates?
7. Are you sure that you have to monitor the trade during the day? If you’re using stops, then you probably don’t have to but then your position size would have to be reduced so much that your chances of a reasonable profit taking account of vig are close to zero. If you’re using 10% of your capital on a trade, they you’ll have to monitor it for survival. But, but, but. Are you sure you won’t be called away by phone calls, or the others?
8. Are you at equilibrium in your personal life? You’re not as talented as Tiger Woods, and you probably won’t be able to handle distressed calls for money or leaks on the home front. Are you sure that if you’re losing you won’t get hit on the head with a 7-iron, or berated until you have to give up at the worst possible time? (more…)
7 Lessons for Traders
1. You always have to have cash, especially when no one else has it. (John Burbank of Passport Capital has said the same: “Cash is most valuable when others don’t have it.”)
2. No free lunch- it’s not free, or it’s not lunch.
3. You can’t change people! You can change yourself, but not others.
4. You only see reality under extreme stress- you want to get to know someone, you need to see them under extreme stress.
5. Volatility is not risk!
6. Always assume you will have bad luck.
7. Few variables to win. Once you have to think about more than 3 variables, your odds of winning are low.
Most people overestimate what they can do in one year and underestimate what they can do in ten years. ―Bill Gates
Ignore benchmark and the crowd, and accept volatility to produce higher annual returns.
Trading Psychology
Your biggest enemy, when trading, is within yourself. Success will only come when you learn to control your emotions. Edwin Lefevre’s
Reminiscences of a Stock Operator (1923) offers advice that still applies today.
Caution
Excitement (and fear of missing an opportunity) often persuade us to enter the market before it is safe to do so. After a down-trend a number of rallies may fail before one eventually carries through. Likewise, the emotional high of a profitable trade may blind us to signs that the trend is reversing.
Patience
Wait for the right market conditions before trading. There are times when it is wise to stay out of the market and observe from the sidelines.
Conviction
Have the courage of your convictions: Take steps to protect your profits when you see that a trend is weakening, but sit tight and don’t let fear of losing part of your profit cloud your judgment. There is a good chance that the trend will resume its upward climb.
Detachment
Concentrate on the technical aspects rather than on the money. If your trades are technically correct, the profits will follow.
Stay emotionally detached from the market. Avoid getting caught up in the short-term excitement. Screen-watching is a tell-tale sign: if you continually check prices or stare at charts for hours it is a sign that you are unsure of your strategy and are likely to suffer losses.
Focus
Focus on the longer time frames and do not try to catch every short-term fluctuation. The most profitable trades are in catching the large trends.
Expect the unexpected
Investing involves dealing with probabilities ? not certainties. No one can predict the market correctly every time. Avoid gamblers? logic.
Average up – not down
If you increase your position when price goes against you, you are liable to compound your losses. When price starts to move it is likely to continue in that direction. Rather increase your exposure when the market proves you right and moves in your favor.
Limit your losses
Use stop-losses to protect your funds. When the stop loss is triggered, act immediately – don’t hesitate.
The biggest mistake you can make is to hold on to falling stocks, hoping for a recovery. Falling stocks have a habit of declining way below what you expected them to. Eventually you are forced to sell, decimating your capital.
Human nature being what it is, most traders and investors ignore these rules when they first start out. It can be an expensive lesson.
Control your emotions and avoid being swept along with the crowd. Make consistent decisions based on sound technical analysis.
Remember -12 Things in Life
With every market defeat lessons are learned
Here are some of the lessons I learned: 
- 1)When faced with severe losses, it’s nearly impossible to objectively evaluate your position.
- 2)Leverage can be a killer.
- 3)A trading plan should be simple, not based on the collective opinions of 15 financial authors.
- 4)Never buy front month out of the money options, they are strictly for crazy speculators. If you’re going to use these, sell them to crazy speculators against your longer-term positions.
- 5)Bullish and Bearish divergences fail frequently.
- 6)If you want to arrive early to the party, be prepared to wait a long time for the action to arrive.
- 7)Those funny Greek names, Delta and Theta, actually mean something!
- 8)It’s not acceptable to have multiple blowups like this. Many great traders have suffered a crushing capital blow early in their careers, only to return stronger and wiser. Others, like Jesse Livermore, ended his career (and life) after one too many detonations.
Trading To Win – The Psychology of Mastering the Markets
The Ten Cardinal Rules
1. Learn to function in a tense, unstructured, and unpredictable environment.
2. Be an independent thinker versus a conventional thinker.
3. Work out a way to handle your emotions and maintain objectivity.
4. Don’t rely on hope and fear in the conventional sense.
5. Work continuously to improve yourself, giving importance to self-examination and recognizing that your personality and way of responding to events are a critical part of the game. This requires continuous coaching.
6. Modify your normal responses to certain events.
7. Be willing to face problems, understand them, and recognize that they are in some way related to your behavior.
8. Know when problems can be resolved and then apply methods to solve them. That may mean giving up some control in order to gain a different control. It may mean changes in your personality, learning self-reliance, or giving up independence and ego to become part of a trading team.
9. Understand the larger framework in which trading occurs—how the complexity of the marketplace and your personality both must be taken into account in order to develop the mastery of trading.
10. Develop the right mind-set for trading—a willingness to commit to the kinds of changes in personal habits and beliefs that will drastically alter your life. To do this requires a willingness to surrender to the forces of the game. In order to be able to play at a maximum level, you have to let go of your egoand your need to have things your way.