Archives of “February 2019” month

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Thoughts on Reminiscences of a Stock Operator

  
  Education
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Dear Reader/Traders….If u had not Read this Book…then u had not read anything……its a Bible …Buy and Read atleast once ………..

One of the fascinating things in Reminiscences of a Stock Operator is the constant interplay between duplicit and dishonest practices of Livermore himself and the crooks he deals with. It reminds one of the crossroaders book where the two best friends cheat each other with a mechanical mirror and other means in constant games between them. Only when they realize that the stake between them keeps getting smaller do they realize that they’re both getting poorer because they have to pay the third crook, the “mechanic” for the use of the mirror. The rake was constant. They both show no compunction about cheating their best friends until they realize they’ve been viged to death by a third party.

Livermore is constantly appalled that in the nefarious schemes of manipulation and cornering that the holders of worthless securities engage in with him, that his customers have no honor among mutual thieves like the crossroaders. His terms for a manipulation are as follows: suppose the manipulators have 200000 shares of a listed stock at 40. Livermore will take call on all 200000 shares of stock at 40 for 1 year. They will also put up 6 million in cash for him to make a market and engage in his own insider trading with.

I doubt that the two most wealthy fellow travelers themselves and friends of the Oval who engage in such transactions with the triangle of their colleagues in the banking, and legislative branches receive such favorable terms or insider information today, albeit they seem to have more influence on the terms and policies.

In any case, how would you value what Livermore’s normal take was for such a manipulation? He receives a call for 1 year on 2000000 shares and that’s worth about 10%, so 800000. Then use of 6 million for manipulation for 1 year, enablling him to front run with that stake. How to value that aspect? Let’s say 500000.

He engaged in these transactions in the 1920-1929 period. No wonder Livermore was worth 50 million at the height of 1929 before losing it all, and declaring bankruptcy the fourth time, and going bust for at least the twelth time in 1934, before his suicide at the Sherry Netherlands.

it reminds one of the radi0 show tag line “crime does not pay”.

10 Trading Mistakes !

  
  Education
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tradingmistake1

  1. Refusing to define a loss.
  2. Not liquidating a losing trade, even after you have acknowledged the trade’s potential is greatly diminished.
  3. Getting locked into a specific opinion or belief about market direction. From a psychological perspective this is equivalent to trying to control the market with your expectation of what it will do: “I’m right, the market is wrong.” [private] (more…)

Latest Headlines From Europe

  
Analysis, Economy, Education
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Time for European headlines. Because we haven’t had any in about 3 minutes or so. Courtesy of Bloomberg, here is Angela Merkel doing her best channeling of Hank Paulson.

  • MERKEL SPEAKS AT TRICHET FAREWELL IN FRANKFURT
  • MERKEL SAYS EURO IS STABLE, HAS PROVED ITSELF IN TURBULENT TIME
  • MERKEL SAYS IF THE EURO FAILS, EUROPE FAILS
  • MERKEL SAYS EUROPE STANDS BEFORE SIGNIFICANT CHALLENGES
  • MERKEL SAYS EUROPE MUST BE READY TO USE UNCONVENTIONAL TOOLS
  • MERKEL SAYS ‘WE SHALL NOT ALLOW’ EURO TO FAIL
  • MERKEL SAYS NEXT EU SUMMIT IS `NOT THE END POINT’ FOR CRISIS

And most importantly…

  • MERKEL SAYS NO ‘MAGIC WAND’ TO SOLVE EURO DEBT CRISIS
  • MERKEL SAYS PAST ERRORS WILL NOT BE SOLVED IN ONE STROKE

True, many, many strokes will be needed. But what about the market which has already priced in not only the Magic Wand but the Quidditch match victory over Slitherin. What now?

Trend Following Doesn’t Always Mean Crowd Following

  
  Education
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“Trading has taught me not to take the conventional wisdom for granted. What money I made in trading is testimony to the fact that the majority is wrong a lot of the time. The vast majority is wrong even more of the time. I’ve learned that markets, which are often just mad crowds, are often irrational; when emotionally overwrought, they’re almost always wrong.”

– Richard Dennis  (Famous Trend Follower) 

Richard J. Dennis, a commodities speculator once known as the “Prince of the Pit,”. In the early 1970s, he borrowed $1,600 and reportedly made $200 million in about ten years.

Discipline for Traders

  
  Education
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  • Discipline is doing whatever needs to be done to achieve your goals. You do what needs to be done whether or not you feel like it.
  • If I have a goal, then my actions support that goal. If I don’t act upon my goal, then I’m just wishing. Successful traders know what needs to be done, and they do it. No excuses. No evasions. Simple, clean thought and action.
  • If you’re trying to do or not do something in your trading and you’re not succeeding, you need to shift something. Ask yourself, “What would I need to believe in order to do or not do this?” “How would I have to interpret this event in order to handle it differently?” “What are my real underlying intentions in regard to this situation?” “How would I have to feel about myself in order to succeed at this?”.
  • Don’t try and try again. Do something different. Discipline is doing, not trying. Change your interpretations, modify a belief, alter your guidelines, allow yourself to feel differently about the consequences of the behavior you’re trying to do or not to do.
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