Archives of “January 22, 2019” day

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Why Gold Is Such A Dog

  
Analysis, Education, Gold / Silver

Summary

  • Gold prices have been in a bear market since the August 2011 peak at $1920
  • Prices are making new 52-week lows
  • Gold has primarily been a monetary asset throughout history and moves closely with the global monetary base (GMB), the sum of the U.S. monetary base and total international reserves
  • Gold has lost some of its luster as a store of value as goods and services inflation failed to materialize after the printing presses flooded the global economy with trillions of reserve currencies during Great Financial Crisis
  • Surprisingly,  demand remained steady or even increased as the major central banks emitted trillions in new currency
  • The broken credit mechanism resulted in an overall monetary contraction and  shortage of dollars
  • The gold bugs had their day as gold moved 650 percent from August 1999 to August 2011 while the GMB moved 455 percent during the same period, the result, mainly of a massive build in international reserves
  • The global monetary base will continue to contract over the next several months as the Fed shrinks its balance sheets and emerging markets continue to lose international reserves
  • Gold prices will thus linger and drift down toward and below $1,000 unless a major global shock results in a flight to quality
  • Just as the simultaneous unfolding of umbrellas do not cause but, instead, reflect a reaction to similar external forces – rain;  so to do comovements in the dollar and gold. In other words, moves in the dollar do not cause moves in gold but reflect a reaction to similar external stimuli
  • The next round of QE, which will probably be the result of a G7 sovereign debt crisis, should cause the massive spike in gold prices that the bugs were looking for in round one
  • We could be wrong

HOPE

  
  Education

It’s human nature to be optimistic. It’s human nature to hope. Furthermore, hope is a component of a healthy state of mind. Hope is the opposite of negativity. Negativity in life can lead to anger, disappointment, and depression. After all, if the world is a negative place, what’s the point of living in it? To be negative is to be anti-life.

“Ironically, it doesn’t work that way in the stock market. In the stock market hope is a hindrence, not a help. Once you take a position in a stock, you obviously want that stock to advance. But if the stock you bought is a real value, and you bought it right, you should be content to sit with that stock in the knowledge that over time its value will out without your help, without your hoping.”

Trading Wisdom – Gary Bielfeldt

  
  Education
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The most important thing is to have a method for staying with your winners and getting rid of your losers. By having thought out your objective and having a strategy for getting out in case the market trend changes, you greatly increase the potential for staying in your winning positions. The traits of a successful trader: The most important is discipline – I am sure everyone says that. Second, you have to have patience; if you have a good trade on, you have to be able to stay with it. Third, you need courage to go into the market, and courage comes from adequate capitalization. Fourth, you must have a willingness to lose; that is also related to adequate capitalization. Fifth, you need a strong desire to win. You have to have the attitude that if a trade loses, you can handle it without any problem and come back to do the next trade. You can’t let a losing trade get to you emotionally. If a trade doesn’t look right, I get out and take a small loss.

Specific Observations for Traders

  
Economy, Education
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  • If you find yourself holding a winning position, adding up your profits, and confidently projecting larger gains on the horizon, you are probably better off exiting the trade. The odds are that the trade has run its course.
  • When entering a trade with a market order and your fill is clearly better than expected, odds are it will end up being a losing trade. Good fill, bad trade. Get out!
  • If all your ‘trading buddies’ agree with your expectations regarding the next big move, it probably will not work out. If everyone’s conviction level is as strong as the consensus, do the opposite.

 

48 Trading Laws

  
  Education
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1. Never outshine the master. (You can trade better than your mentor, just don’t expect him to like it. You’ll also learn more from people who you help, than from those who you work against.)

2. Never put too much trust in friends. Learn how to use enemies. (The only one you can trust as a trader is yourself and your own decisions. When the herd is against your positions, find something that is misunderstood, overlooked, or not fully recognized in the current stock price.)

3. Conceal your intentions. (Limit orders are good for the novice and undisciplined, but the market makers will never let you pick off the bottoms and tops using these.)

4. Always say less than necessary. (Talk is cheap and being concise is a good thing. It’s ok to keep some things you learn and strategies you create all to yourself.)

5. So much depends on reputation – guard it with your life. (Wall Street watches where the smart money is going at all times and herd-like patterns typically follow. Find those with the best reputation and figure out what they’re doing now. It will help unlock some secrets to their success.)

6. Court attention at all cost. (The key is to be ahead of the tape before Wall Street takes notice. Find stocks that few are looking at which offer tremendous growth prospects. They’ll be tomorrow’s winners, not the stocks you hear so much about right now.)

7. Get others to do the work for you, but always take the credit.(It’s ok to use others’ research and opinions, but realize that none of these can serve as a substitution for common sense and developing your own edge in the market. What is already known and published by others has already been acted upon no matter what you may think or have been told. Assume you’re always the last to know.)

8. Make other people come to you – use bait if necessary.(Success breeds popularity. If others think that they can learn or profit from you, you’ll never be lonely. However, with respect also comes responsibility to act in the best interests of others, many times before your own.)

9. Win through your actions, never through argument. (Don’t waste time convincing others on message boards how good or bad a stock is and/or telling people how smart you were because of good calls you’ve made in the past. Instead, trade the stock and make your profit. Talk will never pay your bills. Show others by demonstration, not by time wasting chatter.)

10. Infection: avoid the unhappy and unlucky. (This is right on the money. I couldn’t have said this better myself. Who you surround yourself with will ultimately determine your destiny. Marry for love, choose your friends carefully, and spend time with people who’ve been more successful and who are much smarter than you. Good and bad emotional states are as infectious as a disease.)

11. Learn to keep people dependent on you. (If you tell everyone everything you know, they’ll end up knowing more than you know. Having others dependent on you will also serve as great motivation, especially when times are tough and you need a reason to work harder than ever before.)

12. Win through your actions, never through argument. (At the end of the day, all that matters is that you make good trades or investment decisions. There’s lots of hype in this business and you should run, not walk, from anyone who spends more time talking than learning.)

13. Use selective honesty and generosity to disarm your victim.(Sorry, I’m not in agreement with this. In my view, you have to be honest with yourself and others at all times. In addition, generosity is always a good thing, especially when it is done without the desire of getting something in return. Having good Karma through generous acts also go a long way in keeping the trading gods on your side!)

14. When asking for help, appeal to people’s self-interest, never to their mercy or gratitude. (Sad, but true. If you can help others, they’ll be far more likely to help you. I know I always make a tremendous effort to help those who’ve helped me in the past.)

15. Pose as a friend, work as a spy. (You can find out more about people and companies you invest in by having friends who have specialized knowledge about certain industries. Their unique insight can be a powerful edge if you can get it. Sometimes a simple phone call or email to someone who works in the business will tell you much more than any chart or balance sheet.)

16. Crush your enemy totally. (When you’re right in a trade or investment and things are going well, don’t back off UNTIL you have good reason to sell.)

17. Use absence to increase respect and honor. (Knowing when not to trade is a skill few possess. Take vacations and breaks away from the market. It will only empower you to return refreshed, relaxed, and well-motivated. Remember, we trade to live, not live to trade. Achieving balance in your work and personal life will lay the foundation for long-term success.)

18. Keep others in suspended terror: cultivate an air of unpredictability. (It’s good to mix it up from time to time to relieve trading/investing boredom. If you think you’re in a rut, make some changes and go find something you can get excited about again.)

19. Do not build fortresses to protect yourself – isolation is dangerous. (Take time to bounce ideas off of people who are smarter than you. At all times, seek out opinions that are against you instead of with you – you’ll learn a great deal more. And, remember, no one is right all of the time. But some people are more right than others.)

20. Know who you’re dealing with – do not offend the wrong person. (As a small investor, it is best to avoid picking fights with market elephants (i.e. institutions, hedge funds) who think they know your stock better than you do. They have the power to move the market and your stock for longer than you have time or money to fight it.) (more…)

Brett N. Steenbarger , Trading Psychology 2.0 -Book Review

  
  Education

Brett N. Steenbarger is always worth reading, no matter where you are in your trading career. If you’re just beginning, he lays out the highs and lows you can expect, the work you’ll be required to do, and the commitment necessary to sustain you. If you’re stuck, he counsels you—prodding if necessary, praising if warranted (and it usually is)—with a view to getting you back on a profitable path. If you’re doing well, he cautions that this too will pass, unless you remain adaptable to changing market conditions.

Trading Psychology 2.0: From Best Practices to Best Processes (Wiley, 2015) is Steenbarger’s best book to date. In four chapters and over 400 pages he tackles adapting to change, building on strengths, cultivating creativity, and developing and integrating best practices—57 in all (think Heinz, but not just varieties, distinctly different best practices).

Steenbarger is a felicitous writer, able to blend ideas from psychological and market research with stories from the field. He is also self-reflective. He not only analyzes his own behavior; the book itself is a case study in what he advocates. He himself has adapted his way of thinking about trading to changes in the field. As he writes, “The old trading psychology emphasized planning your trades and trading your plans. The new trading psychology—Trading Psychology 2.0—stresses the changing nature of markets and the need to develop fresh plans for new contingencies. The old psychology placed a premium on controlling emotions. Trading Psychology 2.0 is about cultivating positive emotional experience through the exercise of signature talents and skills. The ideal trader, according to the old trading psychology, is a disciplined rule follower. The ideal trader V.2.0 is a creative entrepreneur, uncovering and exploiting fresh patterns and rules.” (p. 199) I personally like the new trader a lot better. (more…)

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