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Wall Street Its Mysteries Revealed Its Secrets Exposed By William C Moore 1921 – Greed

  
  Education
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It’s been a while since I last posted an excerpt or quoted from one of the trading books I own. Tonight’s small excerpt is from the book: ‘Wall Street. Its Mysteries Revealed: Its Secrets Exposed’ published in New York, 1921 by William C. Moore. The book contains short and to the point chapters like: ‘The crowd mind’, ‘How the public speculates’, ‘Mental suggestion’ and ‘Market advice’ to name but a few. I chose the one on ‘Greed’ as I consider it great advice and timeless wisdom. Enjoy.

Greed p. 123-124

An avaricious or keen desire for profits is one of the most prevalent causes of failure in speculation. This weakness is general among traders. They desire “just a little more ” profit. If the stock or commodity bought advances, then that’s proof to them that it will advance further and so they hang on. They usually overstay and thus miss their market. If they fail to obtain the top price and it reacts, then they assure or console themselves by the expression: “Oh, it will come back.” It may “come back” but often it does not, and instead, declines to below the purchase price and frequently results in a loss. The same observations apply to a short sale for a further anticipated decline. It is a good policy to be satisfied with a reasonable profit and be willing to leave some for the other fellow. The market is always there and other opportunities for making profits will present themselves while the greedy trader is waiting to get the last eighth.

Greed leads to disaster in another way. A speculator has started in to buy at the inception of a bull movement. He makes money. The more he makes, the more avaricious he becomes as the market moves forward. His confidence in himself increases until he develops a mental state known in the vernacular as “big head” or “swelled head”. He now has unbounded confidence in himself and “plays the limit”. Soon thereafter the market culminates at the top and the trend reverses, but Mr. Swelled Head is ignorant of this, so continues to buy on set-backs instead of selling on rallies. A drastic slump follows and Mr. B.H. goes to the scrap pile – BUSTED.

Greed is a bottomless pit which exhausts the person in an endless effort to satisfy the need without ever reaching satisfaction. – Erich Fromm

Trading Thoughts

  
  Education

There is a meaningful difference between trading to win and trading to not lose. The average person feels more psychological pain over a loss than they feel pleasure over a gain–particularly once they have already “booked” that gain mentally. If I’m expecting a bonus from my employer, I’ll be happy when I receive the paycheck–but I’ll be much more upset if I find out the bonus has been rescinded.

*We can never eliminate loss from life or trading; nor can we repeal the basic uncertainties of markets. What we *can* do is develop an edge in the marketplace and, over the course of many trades, let that edge accumulate in our favor.

And, if you’re trading well, maybe that losing trade will offer you a fresh perspective about how the market is trading: an insight that can make you money the next time around. Then it’s not a loss. It’s information that you’ve paid for.

The Risk of Mental Ruin for Traders

  
  Education

“Losing a position is aggravating, whereas losing your nerve is devastating.” – Ed Seykota

In my experience there are three components of trading that have to be managed correctly for the trader to be successful.

There is risk management, system management, and mental management.  
I believe that the majority of the 90% of traders that do not succeed fail not because of their system or risk management but because of their own mind. This also includes professionals along with retail traders. There are countless profitable systems out there and risk management should just be math, so it comes down to discipline, self control, and perseverance to eventually make it as a trader yet so many fail.

A trader can be mentally ruined by stress, ego, arrogance, stubbornness, fear, greed, and emotional instability. These factors cause the  bad decisions that inflict so much emotional and mental pain that it leads to just giving up. The majority of new traders make the decision in their first year that trading is not for them and they quit.  (more…)

Isaac Newton’s Secret Papers

  
  Education
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“The Strange, Secret History of Isaac Newton’s Papers”. It’s a must read. 

“But then at the same time he left us 10 million words, which is one of the most extensive of any scientist, or even any one person.”

You need to live until about 90 and be averaging about 400 words a day from the days you’re out of short trousers. Albeit the 10m seems an exaggeration since much of it was transcripts of others stuff.

“Academics have spent much time assessing Mr Niederhoffer’s papers in light of his contribution to quantitative finance. It has surprised many that he had a burning obsession with furniture, being that he constantly referred to chairs in reverential fashion. He was also fascinated by forearm strength, regularly making reference to the world’s grip. Most surprising of all was a seeming chemical discovery in terms of a compound called flex-ions. Sadly the papers do not elucidate and scholars continue to debate the implications.”

The Newton was very good with the alchemy. And I have a few of his letters where he transcribed the alchemy. As for the Niederhoffer, he has an unquestionable shibboleth against the charting, and the trend following, which led to his premature death on many occasions.

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