Archives of “February 10, 2019” day

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Great Nuggets from the Book-A Better Way to Make Money.

  
  Education
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1.  The secret to losing money in the market is to know why.  “The losers “were ‘playing the market’, not using it intelligently.  The fellow at the other end of the deal, who was using it intelligently, not ‘playing the market’, is the one who got the money.”

2.  “It is an undeniable fact that indiscriminate trading in a hectic market will send one to financial oblivion quicker than any other known process.”

3.  “The most careful preparation-a systematic plan-is one of the essentials of success.”

4.  “Market action is not complex but surprisingly simple.  Yet it is often made to appear complex by newspaper forecasters and market letter writers.”

5.  “Market action is human nature in action.”

6.  All market movements are based on “two deep-seated and entirely natural emotions:  the desire for gain and the fear of loss.”

7.  “So anxious are people to find some talisman, some magic wand, that will help them secure the hidden riches of the market, that they will try anything from coin-flipping to crystal gazing to secure the desired assistance.”

8.  “What marvelous results could be attained in the business of making money if those who buy stocks would take a little time to learn a few simple facts about the market in which they are blindly reposing their faith.”

9.  “Market students are continually diverted from making true evaluations of securities and commodities because they study the statistics made by prices instead of the psychology of prices.”

10.  “Adopt one system of trading and stick to it, just as you employ and stick to one physician in whom you learn to have confidence.”

11.  “One of the most important points in your market education is to learn as early as possible that the customary and supposedly weighty market news is of very small importance.  The news only looks important.”

12.  “Don’t trade just because you can afford to lose.”

13. “Practice makes perfect is an old copybook adage that works well in the market place.”

14.  “If a trade fails to come out right, the error will be found in the operator-not the market.”

15.  “Trading is simple another form of business.  Treat it as such.”

16.  “Trend to the investor is like the vein of gold to the miner, who must follow the vein faithfully if he expects to get the yellow metal.”

17.  “Stocks are made to buy and sell…not to be bought and held.”

18.  No matter what a thing costs, stocks or otherwise, “it is worth only what you can somebody to pay for it.”

19.  People will always be prone to be extravagantly optimistic or dolefully in the slumps and “in this action is unlimited wealth for the men who realize this fact and will use it with confidence and decision.”

20.  “Success is the most desirable thing in the world, but it is an eliminating contest.  It may trample the thoughtless trader into the dust, but it will pour large treasure into the laps of those who work in sincere harmony with its laws.”

Stress management

  
  Education
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A lecturer, when explaining stress management to an audience, raised a glass of water and asked,

“How heavy is this glass of water?” Answers called out ranged from 20g to 500g. The lecturer replied,

“The absolute weight doesn’t matter. It depends on how long you try to hold it. If I hold it for a minute, that’s not a problem. If I hold it for an hour, I’ll have an ache in my right arm. If I hold it for a day, you’ll have to call an ambulance.”

“In each case, it’s the same weight, but the longer I hold it, the heavier it becomes.” He continued,

“And that’s the way it is with stress management. If we carry our burdens all the time, sooner or later, as the burden becomes increasingly heavy, we won’t be able to carry on.” (more…)

Successful, positive people have different brain connections

  
Analysis, Education, Video
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Scientists have for the first time observed a connection between particular brain centers and the presence of talent, success and positive lifestyle choices in people. The fMRI technique opens the door to extensive research which could improving human cognition.

The research was undertaken by the University of Oxford’s Centre for Functional MRI of the Brain (FMRIB). It took a large sample of 461 individuals, and crossed them with 280 behavioral traits, as well as demographic, traits – including language, vocabulary, education, income and others.

 

 

The initiative was part of the $30 million Human Connectome Project (HCP), funded by the US National Institutes of Health, aimed at studying the neural pathways of the brain. In this particular study, the Oxford team wished to create an average map of the brain’s processes.

“You can think of it as a population-average map of 200 regions across the brain that are functionally distinct from each other,” Professor Stephen Smith of Oxford University, said.

“Then, we looked at how much all of those regions communicated with each other, in every participant.”

The resulting maps, which the scientists called connectomes, included 280 behavioral and demographic traits for each subject. Compiling all data, a ‘canonical correlation analysis’ was able to establish correlations between the two data sets.

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Book Review: MarketPsych

  
  Education

Traders, especially discretionary traders, have long recognized the importance of psychology to their endeavor—trying to fathom not only what’s in their own heads, but what’s in the heads of those on the other side of their trades.

As a result, there is a fairly extensive bibliography of books and articles on trader psychology. Not so with investor psychology, at least not outside the world of academe. Richard L. Peterson and Frank F. Murtha, co-authors of MarketPsych: How to Manage Fear and Build Your Investor Identity (Wiley, 2010), seek to help fill that void.

The authors, by training a psychiatrist and a psychologist, are also the co-founders of MarketPsych LLC, a company that “trains financial advisors, portfolio managers, traders, and executives in emotion management and intuitive decision skills.” Its website offers free personality tests for investors and traders.

Throughout the book the authors draw on the findings of research in 

behavioral finance. For instance, in one chapter the authors identify ten investor blind spots (or mental traps), some of which should be familiar to those who have read (or read summaries of) the work of Kahneman, Tversky, Thaler, and their colleagues and followers.

The traps are: win/lose mentality, down with the ship syndrome, anchoring, mean reversion bias, endowment effect, media hype effect, short-termism, overconfidence, herding, and hindsight bias. The authors profile hypothetical investors, each of whom falls into between two and five of these traps. We meet the Wicked Gardener, Corporal Clinger, Mr. Magoo, the Roulette Player, and Maxwell Smart. Let your imaginations run wild trying to match them up! (more…)

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