Archives of “February 2019” month

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Fortune Favors the bold

  
  Education
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Trend following, like any entrepreneurial endeavor, demands you be responsible for yourself. Charles Faulkner emphasized the point:

‘Trend trading and even trading in general isn’t for everyone. As too few people check out what the day-to-day life of a trader is like, and trend trading specifically, I strongly recommend they find out before making a life-changing commitment.’

What does ‘life-changing commitment’ involve? You commit to not wanting to be right all of the time. Most people, let’s face it, must be right. They live to have other people know they’re right. They don’t even want success. They don’t even want to win. They don’t want money. They just want to be right. The winners, on the other hand, just want to win.

What else can you do? You commit to patience and faith in a trading system that is not structured on quarterly performance or some artificial measure of the ‘mass’. You work hard to gain experience. Great experience leads to great intuition. You commit to thinking for the long term and not feeling insecure if you don’t have a steady earnings stream of 1-2 percent a month. You might have one year where you are down 10 percent. The following year you might be down 15 percent. The next year you might be up 115 percent. If you quit at the end of the second year, you will never get to the third year. That’s reality.

10 signs you’re a narcissistic investor

  
  Education
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Some amount of narcissism (a strong belief in yourself) can be helpful in giving you the confidence to apply for a new job or ask for a raise but sometimes these same traits can become too extreme and you can find yourself part of the “narcissism epidemic” that psychologist Jean Twnege and Keith Campbell coined in their book of the same name.

The more you identify with these characteristics, the more likely you are to be a narcissistic investor.

  1. You always know what you’re doing.
    1. “I know I’m good because everybody keeps telling me so.”
  2. Everybody likes to hear your stories and you often boast about your latest or greatest winning trade during conversations.
    1. “Seeking admiration is like a drug for narcissists”, said Mitja Back a psychologist at Johannes Gutenberg University in Mainz Germany. “In the long run it becomes difficult because others won’t applaud them so they always have to search for new acquaintances from whom they get the next fix.”
  3. If an investment loses money it’s because someone else made a mistake, not you.
    1. I almost always hear how my broker sold me this (name a losing investment) vs. I bought this (name a winning investment).
  4. You’re a workaholic.You get upset when people don’t notice how well you’re doing financially. (more…)

Preparation -Purpose-Protection

  
  Education
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  • Preparation:  If you put yourself in the best possible position and you lose money at least you spent that money wisely.  Good things happen to those that are prepared because 90% of people do not know how to do it or are unwilling.  
  • Purpose: Acting with purpose.  You prepared, you knew the risks, you executed the way you wanted to execute.  In cold blooded evaluation you would do it the same with the information you had at the time.
  • Protection:  Losing the invisible money is how I have seen many people blow up.  Invisible money is not locking in profits or losing more than your plan allowed.  If you lose what you intended to risk you own the trade, if you lose more the trade owns you.

Great Hunter, Lousy Trader

  
  Education
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Making money in the market is an unnatural act. We humans are predators and hunters evolved to track game on the horizon of an African savanna. Modern humans are maybe 5 million years old, but civilization has been around for only 10,000 years. Our brains have not had time to make the adjustment. In the market, this means that if a stock has gone up, you believe it will continue. This is why market tops and bottoms see volume spikes. To make money, you have to go against these innate instincts. Some people are born with this ability, while others can only learn it through decades of training.

Livermore on patience

  
Analysis, Education

In a narrow market,when prices are not getting anywhere to speak of but move within a narrow range, there is no sense in trying to anticipate what the next big movement is going to be up or down. The thing to do is to watch the market, read the tape to determine the limits of the get-nowhere prices, and make up your mind that you will not take an interest until the price breaks through the limit in either direction. A speculator must concern himself with making money out of the market and not with insisting that the tape must agree with him. Never argue with it or ask it for reasons or explanations. Stock-market post-mortems don’t pay dividends.

Do you wish to gamble blindly in the hope of getting a great big profit or do you wish to speculate intelligently and get a smaller but much more probable profit?

Get Out When You’re Wrong

  
  Education
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wrongSuccessful traders know that discipline is what allows them to enter their trades when the odds are in their favor and, more importantly, to get out when they’re wrong.
Being right is not the problem. What you do when you’re wrong is the crucial issue.

There are a lot of traders who buy then pray while the market goes against them, because they think that it will eventually go their way.
Most traders average down and wait for the market to turn their way.
Trading my way, I always have defined amount of money that I am willing to lose.
I let the market decide how much money I’m going to make.

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