Money and human tolerance From 'Sapiens: A Brief History of Humankind'
Archives of “February 6, 2019” day
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“Good judgment comes from experience, and experience comes from bad judgment.” Barry Le Platner
All beginning traders lack one key ingredient for success: experience. Experience is simply exposure to a particular activity over an extended period of time. Good judgment is a by-product of experience and is necessary for success in all areas of life, from driving, cooking, golf, to surgery, etc, as well as, you guessed it, stock and options trading. We can sum it up as follows:
EXPERIENCE = TIME + SPECIFIC ACTIVITY = GOOD JUDGMENT
Unfortunately, very few beginning traders have enough “education” money to succeed at trading because good judgment requires that a person remain focused on a specific activity long enough to draw sound conclusions. In other words, good judgment is based on trust in the specific activity without doubting its overall effectiveness. (more…)
Trading Wisdom of William Eckhardt
TRADE WHAT IS NOT WHAT YOU THINK SHOULD BE
Trade what is… for in doing so your trading is based on fact, substance and reality. It provides clarity, confidence, manageability, and useful feedback for consistent success where appreciation for winning, and respect for losing, keeps you in the game.
Do not trade what you think should be….for in doing so your trading is based on egotism, a false sense of foresight, the desire for validation and approval, and the “win at all cost” mentality, which leads to confusion, anxiety, anger, and despair…not to mention the inability to trade another day.
Bernard Baruch's Ten Rules.
1. Don’t speculate unless you can make it a full-time job.
2. Beware of barbers, beauticians, waiters, of anyone, bringing gifts of ‘insider’ information or ‘tips.’
3. Before you buy a security, find out everything you can about the company, its management and competitors, its earnings and possibilities for growth.
4. Don’t try to buy at the bottom and sell at the top. This can’t be done – except by liars.
5. Learn how to take your losses quickly and cleanly. Don’t expect to be right all the time. If you have made a mistake, cut your losses as quickly as possible.
6. Don’t buy too many different securities. Better have only a few investments which can be watched.
7. Make a periodic reappraisal of all your investments to see whether changing developments have altered their prospects.
8. Study your tax position to know when you can sell to greatest advantage.
9. Always keep a good part of your capital in a cash reserve.
10. Don’t try to be a jack of all investments. Stick to the field you know best.
See this really clever ad by Durex. Genius Work.
INFLATABLE YELLEN TIME
The Largest Companies by Market Cap
FRUSTRATION
“Your success as a trader at times hinges on your ability to conquer frustration. Frustration will always appear on the path toward greatness. Some will triumph over it, while others succumb to its pettiness. When you encounter obstacles on your trail toward achievement, remind yourself that they were placed there in order for you to overcome them, so you can learn from them and become better than you were before”
3 most critical aspects of trading
Discipline - Timing
- Stock selection
Discipline Discipline alway is on top. Be accountable to yourself. Treat your money as if it was entrusted to you by whomever you most love, respect, fear… whatever works.
Have a reason to make every trade. Be able to verbalize that reason. As importantly, have a reason to exit a trade. You hear “cut your loses and let your winners run”….That is so true. I so often have seen traders get our of good positions because they have achieved their “target price” “target of profit”….I say this is bad thinking. If the trade REMAINS a trade you would put ON at the time you “achieve target”, why in the world would you take it off? To me, it is as important to have a reason to get out of a trade as to get in. Anyone can say to themselves they have a reason to exit a losing trade…”cut your losses”..Why then is it so hard for so many to have a real reason to get our of a winner?
It should be, and is, easy. It just takes DISCIPLINE. If you give back X% of your profit; if the market changes, if the group starts to get weak, whatever. You have to have your disciplines and stick to them. Make your own rules, and stay consistant to them.
I hope that all this typing can result in just one positive thought to just one person here. I have gone to so many “brainstorming” meetings in my career. I have listened to a million opinions, statements and arguments. I go though because I KNOW that if I pick up one single constructive thought I will have spent my time wisely. and believe me, they are few and far between. But I can remember single sentences said years ago in long boring meetings. Those senteces have added up to serve me well.
Timing should be easier for new traders to learn. Just be patient and buy or short at the price you pre-determine. Don’t chase.
Stock selection…this is a bit tougher. I could write a hundred pages on this issue. But not being so inclined, have standards. Volume, percent of average volume, relative strength, news, whatever you are comfortable with. Know what your quote provider can tell you other than quotes alone. Look for trades, but don’t be impulsive. Sometimes not making a trade is a great trade.