Archives of “February 12, 2019” day

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Mark Douglas-Quotes

  
  Education
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I know it may sound strange to many readers, but there is an inverse relationship between analysis and trading results. More analysis or being able to make distinctions in the market’s behavior will not produce better trading results. There are many traders who find themselves caught in this exasperating loop, thinking that more or better analysis is going to give them the confidence they need to do what needs to be done to achieve success. It’s what I call a trading paradox that most traders find difficult, if not impossible to reconcile, until they realize you can’t use analysis to overcome fear of being wrong or losing money. It just doesn’t work!” – Mark Douglas

If you really believe in an uncertain outcome, then you also have to expect that virtually anything can happen. Otherwise, the moment you let your mind hold onto the notion that you know, you stop taking all of the unknown variables into consideration. Your mind won’t let you have it both ways. If you believe you know something, the moment is no longer unique. – Mark Douglas

To whatever degree you haven’t accepted the risk, is the same degree to which you will avoid the risk. Trying to avoid something that is unavoidable will have disastrous effects on your ability to trade successfully. – Mark Douglas

Seven habits of successful traders

  
  Education
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number71) Understand the true realities of the markets. 2) Be responsible for your own trading destiny. 3) Trade only with proven methods. 4) Trade in correct proportion to your capital. 5) Manage risk. 6) Stay long-term oriented. 7) Keep trading in correct perspective and as part of a balanced life. The common theme is self-control. As I’ve often said, if you can master yourself, you can master the markets.

Martin, The Risk Takers-Book Review

  
  Education
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Individual traders are often told that they should view their activity as a business. But what exactly does this mean? After all, one business after the other fails; presumably these aren’t the best models. Renee and Don Martin, successful entrepreneurs themselves, come to the rescue with The Risk Takers: 16 Women and Men Share Their Entrepreneurial Strategies for Success (Vanguard Press, 2010). No, it’s not a new book, but I hadn’t read it and I suspect most of you haven’t either.

With two exceptions, the entrepreneurs founded their companies—Curves, Alvarado Construction, Kinko’s, Liz Lange Maternity, Geek Squad, The Corcoran Group, World Wide Technology, Build-A-Bear Workshop, John Paul Mitchell Systems, Spanx, Amy’s Kitchen, Trilogy, Invacare, Tova, The WW Group (Weight Watchers), and (the author’s own) The Cal-Surance Companies.

Many—actually, probably most—of the entrepreneurs were dreadful students. Many went from rags to riches, sometimes back to rags again before they ultimately triumphed, but I won’t recount any of these personal journeys. Rather, I’m going to pull out a few quotations that may have applicability to the trading business, although I’ll point out how some of them can steer the trader wrong. (more…)

Never Invest in Something You Cannot Understand

  
  Education
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One lesson from Warren Buffett has served me particularly well over the years:

“Never invest in a business you cannot understand.”

Of course, this can be extended across much of the financial world.  As a general rule I adhere to “never invest in something you cannot understand”. I bring this up as the Chinese stock market collapses.  Their stock market has cratered 40%+ in just a matter of weeks. It’s a truly breathtaking collapse. And it reminds me of my own personal experience in Chinese stocks during the 2007 bubble.

In my book I go into some detail about the story, but the short version is that I shorted the Chinese stock market bubble without fully understanding what was going on in the market. At the time there was a discrepancy between mainland China shares and Hang Seng traded shares and the markets traded differently due to a government induced arbitrage that was occurring between the two.  I had literally timed the Shanghai peak to the day, but the Hang Seng market continued to trade higher. And so I was caught short in a vicious bubble during which I rode a 20% rally higher which eventually unwound entirely and left me relatively unscathed, but emotionally scarred. (more…)

The Market Makes You Feel Bad Majority of the Time

  
  Education
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  • Unless you nail it right exactly, you will feel frustration / regret / fear in all other outcomesTraders are always choosing among the lesser of the evils. Feeling regretful is practically inescapable.
    • When you get the trade direction wrong
    • When you got out too early
    • When you got out too late
    • When you miss a trade
  • Regret Theory says that people have the desire to avoid future regret when they make their decisions.
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