Archives of “January 18, 2019” day

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You Need To Learn How To Dance In The Rain

  
  Education
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Dance in RainEvery trader will experience storms during their trading career.

You might have days or even weeks without any storms, but they will come. Violent movements, large losses, markets that react opposite than your strategy tells you will happen and so much more.

We cannot keep these situations from happening; however we can make a decision to either wait for the storms to pass or step out and dance in the rain.

If we are planning on waiting until there are no storms, no struggles, no disappointments or no losing trades then we will be waiting for a very long time. Expect the storms to occur and have a plan as to how you will work through the storm.

When we work through the storm with a higher awareness of our risk management, money management and patience we will come out the other side stronger than before and will be ready for the next time a storm breaks out.

It is not the fact that storms happen, it is being ready to get out in the storm and still be productive. Instead of fearing the storm, learn how to dance in the rain.

Calmness

  
  Education
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How do you handle adversity? What do you do when the markets go against you? Do you get angry and defensive or do you stay calm and play offensive?

 When the markets go against you, do you overtrade? Do you try to make all of your losses in one deal? Or do you stay calm, take a breather and reevaluate the market? 

When our emotions go up, our intelligence comes down. We make bad decisions. We take it personally. Then we start doubting ourselves and we start losing confidence. Then we start losing more and more…

When we stay calm, we can evaluate the market from an objective place. We can see the market for what it is and not what we want it to be. Then we can take a calculated risk. 

Trading Wise Words

  
  Education
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Think about it
Turtle Trading Principle
Trade with an edge, manage risk, be consistent, and keep it simple.
The entire Turtle training, and indeed the basis of all successful trading, can be summed up in these four core principles.

Curtis Faith, Way Of Turtle
Why Chart Patterns Repeat Themselves
All through time, people have basically acted and re-acted the same way in the market as a result of: greed, fear, ignorance, and hope.
That is why the numerical formations and patterns recur on a constant basis.

Jesse Livermore, How To Trade In Stocks
Stick To Your Trading Rules
Successful trading is about finding the rules that work and then sticking to those rules.

William J. O’neil

Perfect Speculator
Perfect speculator must know when to get in; (more…)

Book Review: Wall Street and the Wilds

  
  Education
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Wall Street and the Wilds by A.W. Dimock, 1915, contains the sage of the rise and fall and rise and fall of a Wall Street gold trader, options seller, stock manipulator, developer of the clearing house, pool operator, Steamship promoter, real estate developer of Elizabeth, New Jersey, telegraph line builders, railroad builder, hunter, photographer and naturalist from 1850 to 1915.

It includes chapters on black Friday, the day that the gold bulls broke the US Treasury in 1870, the effect on prices of the civil way, the way manipulations were carried out in those days, the relation of the flexions to financiers in those days (not much different from today), systems for profiting in gold, the legal system in those days (fees of a million dollars for routine cases were common even in 1880, the early developments of photography in the wilds, hair raising tails of wars between the Native Americans and the US military, pinpoint shooting, advanced fly casting techniques, and much more.

Everything talked about is totally a propos of current techniques in Wall Street. Dimock was a minister’s son born in 1840 who went to Andover and came to Wall Street at 15 and got his start scalping odd lots in insurance stocks. He developed a system of selling gold every 1/8 up and buying it every eight down. He became the Little Napoleon of Wall Street and dominated the gold exchange the way the big grain companies dominate the grain market today, using some of the same techniques. He made so much money that it was easy come, easy go, and he lost it all by guaranteeing the purchase of friends, defrauding by the Goulds during Black Friday, and finally in the crash of 1873.

The book is compelling, and instructive and a great history of 19th century stock and commodity markets, very much akin and resonant of today. It’s highly instructive. I’ll quote from some of the more resonant and sagacious passages: (more…)

Psychological

  
  Education
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The goal of any trader is to turn profits on a regular basis, yet so few people ever really make consistent money as traders. What accounts for the small percentage of traders who are consistently successful is psychological—the consistent winners think differently from everyone else.
The defining characteristic that separates the consistent winners from everyone else is this: The winners have attained a mind-set—aunique set of attitudes—that allows them to remain disciplined, focused,and, above all, confident in spite of the adverse conditions.
Those traders who have confidence in their own trades, who trust themselves to do what needs to be done without hesitation, are the ones who become successful.They
no longer fear the erratic behavior of the market. They learn to focus on the information that helps them spot opportunities to make a profit, rather than focusing on the information that reinforces their fears.
You don’t need to know what’s going to happen next to make money; anything can happen, and every moment is unique, meaning every edge and outcome is truly a unique experience.
The trader that it’s his attitude and “state of mind” that determine his results.

Jesse Livermore quote

  
  Education
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jjlivermoreIf you had read Livermore, the guy’s puzzled too.
Let me quote an excerpt from Richard Smitten’s How to Trade Like Jesse Livermore

Livermore believed that the game of speculation is the most uniformly fascinating
game in the world. But it is not a game for the stupid, the mentally lazy, or the person of inferior emotional balance, or for the get-rich-quick adventurer. They will die poor.
There is a very true adage that Livermore loved: “You can beat a horse race, but you can’t beat the races.”
So it is with market operations. There are times when money can be made investing and speculating in stocks, but money cannot consistently be made by trading every day or every week during the year. Only the foolhardy will try it.

Learning From Losers

  
  Education
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Traders will typically approach a large loss in one of two ways. First is the dumb way, and that is to become a petulant whiner and throw a fit. Next is the more-constructive way, and that is to use the loss as a means of developing as a trader and to “quote” — learn from your mistakes. But there is a third way. And that is to view the loss as the cost of information.

I don’t mean the cost of doing business per se. This is not typically associated with large losses. Small losses, yes. Because to make money you have to lose some along the way, as casinos do every day.  And not the cost of tuition where the market charges a fee to school us. No, I mean information.

Instead of asking yourself about where you placed your stops and getting all personal about the whole thing, ask yourself what happened. Why did the market move the way it did? If you haven’t suffered a capital depletion, you are not likely to demand an answer and more likely to throw off the question with a wave of the hand and a shrug. “Who knows, who cares. I only play odds.”

Markets are a beast and if you want to play with them, you’ll have to be careful. Wear protective goggles and gloves. If you want to tame them though, you’ll need to wrestle with them. And sometimes you lose some body parts along the way. 

Leeson: Rogue trader culture is more rife than ever

  
Economy, Education
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Nick Leeson, the original rogue trader whose actions led to the collapse of the venerable Barings Bank and to a six-year prison sentence, yesterday warned that the culture of the City has spun out of control.

With banks reeling from numerous scandals and the London financial district under intense pressure to reform itself, Mr Leeson said that unless punishments are increased traders will continue to run amok.

“Rogue trading is on the increase. The latest scandals are just a sign that the culture is running riot without any checks in place.

“Every day you wake up and see something different,” he told The Independent. (more…)

Evolve

  
Analysis, Education

“I just want to evolve.” -Ray Dalio
Ray Dalio is the epitome of quirky, eccentric hedge fund investor.
His complete obsession with questioning every fact, every belief system, even himself enthralls me.
I could never work for him (FD: I did interview with Bridgewater, but I am an equity long/short person at heart and that is not what they do, so I did not go further).
His way of looking at Macro really impresses me though, because it’s kind of like “Beginner’s Mind” in that he questions every belief constantly.
Relates to “the market is right” idea from yesterday.
Here is a short 5 minute clip of him with Charlie Rose which gives insight into the VERY unconventional way that this man thinks:  https://www.youtube.com/watch?v=iSn9T66is7A

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