Archives of “January 2019” month

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Market Truisms and Axioms

  
  Education
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Commandment #1: “Thou Shall Not Trade Against the Trend.”

• Portfolios heavy with underperforming stocks rarely outperform the stock market!

• There is nothing new on Wall Street. There can’t be because speculation is as old as the hills. Whatever happens in the stock market today has happened before and will happen again, mostly due to human nature.

• Sell when you can, not when you have to.

• Bulls make money, bears make money, and “pigs” get slaughtered.

• We can’t control the stock market. The very best we can do is to try to understand what the stock market is trying to tell us.

• Understanding mass psychology is just as important as understanding fundamentals and economics.

• Learn to take losses quickly, don’t expect to be right all the time, and learn from your mistakes.

• Don’t think you can consistently buy at the bottom or sell at the top. This can rarely be consistently done.

• When trading, remain objective. Don’t have a preconceived idea or prejudice. Said another way, “the great names in Trading all have the same trait: An ability to shift on a dime when the shifting time comes.”

• Any dead fish can go with the flow. Yet, it takes a strong fish to swim against the flow. In other words, what seems “hard” at the time is usually, over time, right.

• Even the best looking chart can fall apart for no apparent reason. Thus, never fall in love with a position but instead remain vigilant in managing risk and expectations. Use volume as a confirming guidepost.

• When trading, if a stock doesn’t perform as expected within a short time period, either close it out or tighten your stop-loss point.

• As long as a stock is acting right and the market is “in-gear,” don’t be in a hurry to take a profit on the whole positions. Scale out instead.

• Never let a profitable trade turn into a loss, and never let an initial trading position turn into a long-term one because it is at a loss.

• Don’t buy a stock simply because it has had a big decline from its high and is now a “better value;” wait for the market to recognize “value” first. (more…)

Follow these 13 Rules

  
  Education
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1. I will create game plans for all my trades.
2. I will only trade when I have an edge.
3. If I have 3 losing trades in a row, I will take a break, walk away, and clear my head.
4. I will never trade for revenge.
5. Any time I’m hoping, wishing, or praying, I will exit the trade immediately.
6. I will never give back more than half my profit on any trade.
7. I will keep a daily trading journal and email it to someone who will hold me accountable.
8. I will think in terms of probabilities and risk/reward.
9. I will remain objective in my trades by asking, “If I had no trade on, what would I do?”
10. I will never put more than 20% of my capital at risk in any single position.
11. I will not make trades just because I’m afraid to “miss out.”
12. I will quickly recognize my emotions and compartmentalize them raither than waste time trying to get rid of them.
13. I will trade to make money, not to be right..  

Master Talk Presents…William Eckhardt!

  
  Education
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“One adage that is completely wrongheaded is that you can’t go broke taking profits. That’s precisely how many traders do go broke. While amateurs go broke taking large losses, professionals go broke by taking small profits. What feels good is often the wrong thing to do. Human nature does not operate to maximize gain but rather to maximize the chance of a gain. The desire to maximize the number of winning trades (or minimize the number of losing trades) works against the trader. The success rate of trades is the least important performance statistic and may even be inversely related to performance. Two of the cardinal sins of trading – giving losses too much rope and taking profits prematurely – are both attempts to make current positions more likely to succeed, to the severe detriment of long-term performance. Don’t think about what the market’s going to do; you have absolutely no control over that.
Think about what you’re going to do if it gets there. It is a common notion that after you have profits from your original equity, you can start taking even greater risks because now you are playing with “their money”. We are sure you have heard this.
Once you have profit, you’re playing with “their money”. It’s a comforting thought. It certainly can’t be as bad to lose “their money” as “yours”? Right? Wrong. Why should it matter whom the money used to belong to? What matters is who it belongs to now and what to do about it. And in this case it all belongs to you.”

14 Words That Are Their Own Opposites

  
  Education
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Here’s an ambiguous sentence for you: “Because of the agency’s oversight, the corporation’s behavior was sanctioned.” Does that mean, ‘Because the agency oversaw the company’s behavior, they imposed a penalty for some transgression’ or does it mean, ‘Because the agency was inattentive, they overlooked the misbehavior and gave it their approval by default’? We’ve stumbled into the looking-glass world of “contronyms”—words that are their own antonyms.

1. Sanction (via French, from Latin sanctio(n-), from sancire ‘ratify,’) can mean ‘give official permission or approval for (an action)’ or conversely, ‘impose a penalty on.’
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2. Oversight is the noun form of two verbs with contrary meanings, “oversee” and “overlook.” “Oversee,” from Old English ofersēon ‘look at from above,’ means ‘supervise’ (medieval Latin for the same thing: super- ‘over’ + videre ‘to see.’) “Overlook” usually means the opposite: ‘to fail to see or observe; to pass over without noticing; to disregard, ignore.’
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3. Left can mean either remaining or departed. If the gentlemen have withdrawn to the drawing room for after-dinner cigars, who’s left? (The gentlemen have left and the ladies are left.)
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4. Dust, along with the next two words, is a noun turned into a verb meaning either to add or to remove the thing in question. Only the context will tell you which it is. When you dust are you applying dust or removing it? It depends whether you’re dusting the crops or the furniture.
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5. Seed can also go either way. If you seed the lawn you add seeds, but if you seed a tomato you remove them.
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6. Stone is another verb to use with caution. You can stone some peaches, but please don’t stone your neighbor (even if he says he likes to get stoned). (more…)

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