Traders must first master them-self before they seek to take money from other traders mistakes.
Archives of “January 2019” month
rssWarren Buffett's Worst Trade & Biggest Mistake
Investors always remember their worst trade or biggest mistake. Warren Buffett is no different. However, Buffett’s biggest mistake might surprise you. In an interview with CNBC, the Oracle of Omaha admitted that the worst trade of his career was buying Berkshire Hathaway (BRK.A). Imagine that. But if you dig deeper into his account of the story, you’ll see that while his worst trade might have been buying Berkshire Hathaway, his biggest mistake was letting emotion get the better of him.
Embedded below is the video where Buffett talks about his worst trade in Berkshire Hathaway
Wealthier countries tend to be less religious. The US a strong exception.
Anatomy of a successful trader
The Secrets of The World’s Greatest Traders
Traders and investors have made and lost some of the world’s most significant pools of wealth. It’s no coincidence that many of the wealthiest individuals in the world today (and through history) have been successful investors. Names like Warren Buffet, George Soros, John Paulson, David Einhorn, Bill Gross and Sir John Templeton have become synonymous with strategies that have created astonishing success, in many case creating a groundswell of books and analysts who study their lives with a toothcomb to understand “what” the magic formula was…
Even outside these heavyweights of the trading world, hundreds of thousands of individuals around the world attest to have ‘the best‘ strategy to generate consistent positive returns (in fact, Google alone reveals over 10.4 million results when searching for best trading strategies). At a macro-level, the long-standing efficient market hypothesiswould make it notionally impossible for any trading strategy to be effective (as it asserts a level of information efficiency in the market). The past quarter century however, has seen a gradual move away from the efficient hypothesis to greater considerations of information asymmetry and behavioral biases driving inefficiencies (opportunities) in the market. So faced with this complexity, how do some traders generate such astonishing success?
To learn more, I spoke with Jack Schwager who is perhaps best known for his “Market Wizards” book series in which he has interviewed a cross section of the most successful traders and investors in the world. In May 2012 Jack released the latest book in this best-selling series, “Hedge Fund Market Wizards” (a behind-the-scenes look at the world of hedge funds, from fifteen traders who’ve consistently beaten the markets).
Jack Schwager is a recognized industry expert in futures and hedge funds and the author of a number of widely acclaimed financial books. He is currently the co-portfolio manager for the ADM Investor Services Diversified Strategies Fund, a portfolio of futures and FX managed accounts. He is also an advisor to Marketopper, an India-based quantitative trading firm, supervising a major project that will adapt their trading technology to trade a global futures portfolio. Previously, Mr. Schwager was a partner in the Fortune Group, a London-based hedge fund advisory firm, which specialized in creating customized hedge fund portfolios for institutional clients. His previous experience includes 22 years as Director of Futures research for some of Wall Street’s leading firms and ten years as the co-principal of a CTA.
Q: Is there a strategy or style which is most effective at generating return?
[Jack Schwager] The diversity of strategies people use is truly remarkable, I saw people using completely different strategies to the degree that if I had set out to invent 15 different strategies for a fictional work…. I couldn’t have made the strategies more different to the ones I saw in real life! This illustrates a point I have made in all my works insofar as there really is no ‘holy grail‘ or single style that is most effective. Those people looking for a single unified strategy are not asking the right question.
It’s a matter of finding an approach that works for the individual. A person has to know whether they are comfortable with fundamental or technical, long term or short term, certain types of markets, wider risk or less risk… You can go through a whole checklist of things and find it’s different for each individual.
Even when looking at differences between asset classes we see that every market can be traded using different strategies be they fundamental, technical, or a mixture. If we take equity markets we see that traders can use strategies including fundamental, value, extreme long term, and day. If you want a microcosm that proves diversity, there it is! (more…)
THE STOCK TRADER’S TWO DEEP SEATED INSTINCTS
One of the stock market classics that should be on every speculator’s bookshelf is Edwin Lefevre’s Reminiscences of a Stock Operator. Written in 1923, you may assume its contents have scant application to the more sophisticated traders of today. That assumption could not be farther from the truth, for while technology may change and access to information may level the playing field in many respects, human nature hasn’t changed, especially when it comes to managing risk and the uncertainty associated with it.
While I could list many pertinent Lefevre quotes here, one that affects all of us in one way or another is the following.
TWO DEEP-SEATED INSTINCTS
If you cannot relate to the above, it may be because you have not been in the trading game long enough. If you do survive the learning curve with enough money to continue on it will be because you are able to win the battles that play out in the mind. These are battles we all will face every single trading day because they originate from deep seated instincts that are part of our nature. In other words, we were born with them… and we will die with them. Therefore, we must learn how to manage them or they will manage us. The former can lead to success; the latter to possible ruin.
The trading game is the same as it ever was.
Ave Maria!
Part 2:
Five Rules for Traders
You can avoid the emotionalism, the second guessing, the wondering, the agonizing, if you have a sound trading plan (including price objectives, entry points, exit points, risk-reward ratios, stops, information about historical price levels, seasonal influences, government reports, prices of related markets, chart analysis, etc.) and follow it. Most traders don’t want to bother, they like to ‘wing it.’ Perhaps they think a plan might take the fun out of it for them. If you’re like that and trade futures for the fun of it, fine. If you’re trying to make money without a plan-forget it. Trading a sound, smart plan is the answer to cutting your losses short and letting your profits run.
Do not overstay a good market. If you do, you are bound to overstay a bad one also.
Take your lumps, just be sure they are little lumps. Very successful traders generally have more losing trades than winning trades. They don’t have any hang-ups about admitting they’re wrong, and have the ability to close out losing positions quickly.
Program your mind to accept many small losses. Program your mind to ‘sit still’ for a few large gains.
Recognize that fear, greed. ignorance, generosity, stupidity, impatience. self-delusion, etc., can cost you a lot more money than the market(s) going against you, and that there is no fundamental method to recognize these factors.
90% of time spent on mobile devices is on apps (10% browser)
Embracing Risk
While we tend to focus solely on building our skill sets or expanding our knowledge, the greatest advancement and learning most often comes from action, experience, and taking risk. And our regrets in life reflect this. According to Gilbert, studies show that “in the long run, people of every age and in every walk of life seem to regret not having done things much more than they regret things they did.”
To improve at anything, we must at some point push ourselves outside our comfort zone.