10 worst performing stock markets in 2014

10. Malaysia – Bursa Malaysia stock exchange

Loss in 2014: -10pc

How to access this market: The best route to this stock market is via the iShares MSCI Malaysia ETF, which tracks the up and down movements of shares listed in Malaysia. 

9. Mexico – Bolsa Mexicana de Valores SAB de CV stock exchange

Loss in 2014: -12pc

How to access this market: One option is to buy a fund that has a significant chunk of its money in Mexican shares, such as the Blackrock Latin American Investment trust, which has around 30pc of its money in the country. Alternatively there is SPDR MSCI Mexico Quality Mix ETF and the iShares MSCI Mexico Capped ETF. 

8. Brazil – Bovespa stock exchange Continue reading »

40 Great Quotes from Ed Seykota

  1. “If I am bullish, I neither buy on a reaction, nor wait for strength; I am already in. I turn bullish at the instant my buy stop is hit, and stay bullish until my sell stop is hit. Being bullish and not being long is illogical.”
  2. “Fundamentalists figure things out and anticipate change. Trend followers join the trend of the moment. Fundamentalists try to solve their feelings. Trend followers join their feelings and observe them evolve and dis-solve.”
  3. “The feelings we accept and enjoy rarely interfere with trading.”
  4. “Systems don’t need to be changed. The trick is for a trader to develop a system with which he is compatible”
  5. “It can be very expensive to try to convince the markets you are right.”
  6. “There are old traders and there are bold traders, but there are very few old, bold traders.”
  7. “I would add that I consider myself and how I do things as a kind of system which, by definition, I always follow.”
  8. “Systems trading is ultimately discretionary. The manager still has to decide how much risk to accept, which markets to play, and how aggressively to increase and decrease the trading base as a function of equity change.”
  9. “Trying to trade during a losing streak is emotionally devastating. Trying to play “catch up” is lethal.”
  10. “The elements of good trading are: 1, cutting losses. 2, cutting losses. And 3, cutting losses. If you can follow these three rules, you may have a chance.”
  11. “Losing a position is aggravating, whereas losing your nerve is devastating.”
  12. “The markets are the same now as they were five to ten years ago because they keep changing – just like they did then.”
  13. “Luck plays an enormous role in trading success. Some people were lucky enough to be born smart, while others were even smarter and got born lucky.”
  14. “Having a quote machine is like having a slot machine at your desk – you end up feeding it all day long. I get my price data after the close each day.”
  15. “A losing trader can do little to transform himself into a winning trader. A losing trader is not going to want to transform himself. That’s the kind of thing winning traders do.”
  16. “If you can’t take a small loss, sooner or later you will take the mother of all losses.”
  17. “It is a happy circumstance that when nature gives us true burning desires, she also gives us the means to satisfy them. Those who want to win and lack skill can get someone with skill to help them.”
  18. “Risk no more that you can afford to lose, and also risk enough so that a win is meaningful.”
  19. “Dramatic and emotional trading experiences tend to be negative. Pride is a great banana peel, as are hope, fear, and greed. My biggest slip-ups occurred shortly after I got emotionally involved with positions.”
  20. “Be sensitive to subtle differences between ‘intuition’ and ‘into wishing’.”
  21. “The trading rules I live by are: 1. Cut losses. 2. Ride winners. 3. Keep bets small. 4. Follow the rules without question. 5. Know when to break the rules.”
  22. “I usually ignore advice from other traders, especially the ones who believe they are on to a “sure thing”. The old timers, who talk about “maybe there is a chance of so and so,” are often right and early.”
  23. “I set protective stops at the same time I enter a trade. I normally move these stops in to lock in a profit as the trend continues. Sometimes, I take profits when a market gets wild. This usually doesn’t get me out any better than waiting for my stops to close in, but it does cut down on the volatility of the portfolio, which helps calm my nerves. Losing a position is aggravating, whereas losing your nerve is devastating.”
  24. “I intend to risk below 5 percent on a trade, allowing for poor executions.”
  25. “I don’t judge success, I celebrate it. I think success has to do with finding and following one’s calling regardless of financial gain.” (On losing streaks and over-trading) “Acting out this drama could be exciting. However, it also seems terribly expensive. One alternative is to keep bets small and then to systematically keep reducing risk during equity drawdowns. That way you have a gentle financial and emotional touchdown.”
  26. “In order of importance to me are: 1) the long term trend, 2) the current chart pattern, and 3) picking a good spot to buy or sell.”
  27. “Win or lose, everybody gets what they want out of the market. Some people seem to like to lose, so they win by losing money.”
  28. “Fundamentals that you read about are typically useless as the market has already discounted the price, and I call them “funny-mentals”. However, if you catch on early, before others believe, you might have valuable “surprise-a-mentals”.”
  29. “If you can’t measure it, you probably can’t manage it… Things you measure tend to improve.”
  30. “The key to long-term survival and prosperity has a lot to do with the money management techniques incorporated into the technical system.”
  31. “If you want to know everything about the market, go to the beach. Push and pull your hands with the waves. Some are bigger waves, some are smaller. But if you try to push the wave out when it’s coming in, it’ll never happen. The market is always right”
  32. “To avoid whipsaw losses, stop trading”
  33. “Pyramiding instructions appear on dollar bills. Add smaller and smaller amounts on the way up. Keep your eye open at the top.”
  34. “Markets are fundamentally volatile. No way around it. Your problem is not in the math. There is no math to get you out of having to experience uncertainty.”
  35. “Our work is not so much to treat or to cure feelings, as to accept and celebrate them. This is a critical difference.”
  36. “Before I enter a trade, I set stops at a point at which the chart sours.”
  37. “Trading requires skill at reading the markets and at managing your own anxieties.”
  38. “The positive intention of fear is risk control.”
  39. “Speculate with less than 10% of your liquid net worth. Risk less than 1% of your speculative account on a trade. This tends to keep the fluctuations in the trading account small, relative to net worth. This is essential as large fluctuations can engage {emotions} and lead to feeling-justifying drama.”

How two of history’s greatest investors deal with losses

It’s been a tough month for investors. As of yesterday, roughly half of the stocks in the S&P 500 have fallen into bear markets, with declines greater than 20%. International stock markets have fallen dramatically, with the losses accelerating on the heels of the latest Asian currency “event”.

We’ve seen stuff like this before. There is a worthwhile lesson in considering how a pair of history’s greatest investors have dealt with this kind of thing in the past.

On the surface, Warren Buffett and David Tepper don’t have a lot in common. One runs a diversified conglomerate and reinvests the insurance premiums into both long-term common stock positions and outright acquisitions of great companies. The other manages a hedge fund and aggressively trades in the markets each day.

But they have something in common that is worth considering today: Both Warren Buffett and David Tepper know that volatility is where returns come from and the losses of today set up the outsized gains of tomorrow. They’ve “lost” some money on the way to earning tons of it.

In the summer of 1998, there was a currency crisis that originated in the far east and eventually wound its way around the globe, culminating in the devaluation of the ruble and the blow-up / bailout of the first systemically risky hedge fund in history, Long Term Capital. Both Buffett and Tepper took quite a beating during this so-called “Asian Contagion” event.

As Nick Murray explains, Warren Buffett was down quite a bit that summer.

$6,200,000,000

A very large sum of money, wouldn’t you say? Now what, you ask, does it represent?
It is roughly how much Warren Buffett’s personal shareholdings in his Berkshire Hathaway, Inc. declined in value between July 17 and August 31, 1998. And now for the six billion dollar question. During those forty-five days, how much money did Warren Buffett lose in the stock market? 
The answer is, of course, that he didn’t lose anything. Why? That’s simple: he didn’t sell.

Continue reading »

Let the market make the decisions, not your ego.

The rules are not hard to understand. Recognizing a profit from a loss is simple. If the rules are easy to grasp and a profit is distinguishable from a loss, where does the problem lie? What makes it so hard to apply the rules? There is something within each of us that has a power over our minds that prevents our acting according to what we have agreed is the proper course of action. That something is present in all of us and is very powerful, more powerful than anything I know. Let’s call it ego. Until we learn to get rid of our ego, we will never make money in the market consistently. Those who haven’t identified the ego’s ways will eventually be destroyed in the market because of their ego’s tendencies. It is just that powerful. The market rewards those who have subdued their egos. Those who rid themselves of their egos are rewarded greatly. They are the superstars of their fields. In the market, rewards come in the form of profits. In the world of art, masterpieces are the results. In sports, the players are all-stars and command enormous salaries. Every pursuit has its own manifestation of victory over the ego.

WHY BEING WRONG IS THE RIGHT WAY TO BE A SUCCESSFUL TRADER!

From a very young age, we are ingrained with a powerful short-term reward system. We are taught to eat on day one and we get the reward of satisfying our hunger. This immediate gratification teaches us to always eat when we are hungry.

As we began with our education, we are rewarded when we do well in our exams and tests, by going up grade levels.

And as you get better with our grades, we soon realize that we get more approval from parents, teachers, and peers.

This gives us the reason to study very hard before we take an exam.  Because we get the assurance that we’ll receive a better grade from it. As we enter the job-market, a day’s work is rewarded with a monthly salary.

In many cases, an immediate commission is rewarded for each sale we make – or it is aggregated into a bonus at the end of the year.

How all off this reflects on trading?

Very small percentage of people makes a real income and success out of trading. Continue reading »

Perseverance is one of the Best Traits to Have When Trend Following!

It is never easy…and those that promise you that are not telling you the truth.

Perseverance is one of the Best Traits to Have When Trend Following!
Trend following is a marathon. There will always be those that say it is over!

It takes losses in the stock market to make future great traders and learning from mistakes is one of the best teachers.

Have a trading plan….and more importantly…Make sure you follow your own rules!

Just Give Up These 10 Things If You Are A Trader

  • Give up your need to be right: The market is always right, do not strive to be right in your predictions and opinions. Strive to go with the flow of the market.
  • Give up control: No matter how long you watch a live stock stream, you have no power over the movements. Save your emotional energy by not trying to cheer on your positions and get wrapped up in every price tick.
  • Give up blaming other factors for your losses: There is no mysterious ‘They’ causing you to lose money. Your choices cause you to lose money, or your system just had a losing trade. It is a free country and free market.
  • Give up beating yourself up for losing trades: If you followed your trading plan, then there should be zero regrets involved in a losing trade. If you did not follow your plan and lost, then money was the tuition and you paid  to learn the lesson. You must move on to the next trade. 
  • Give up your own opinions: If you took a trade based on your own opinion, you have to give up your opinion and get out if the trade moves to a place that proves you were wrong.
  • Give up your inability to change your mind: The more you believe a trade just can’t miss, the more dangerous it is. It will cause you to trade too big and stay in too long. You have to always be ready to be wrong.
  • Give up your past trades: Each trade is a new trade. Do not hold grudges against stocks and think they ‘owe’ you for past losses. Do not fall in love with a stock and hold it as it falls lower and lower.
  • Give up letting your trading define your self worth: Do not let your trading define you. Diversify your life with friends, family, hobbies, and other interests. It is not healthy to become overly obsessed with the markets.
  • Give up on losing trades quickly when your stop is hit: Your best trades will be the ones that are profitable from the start. If they immediately go against you, be prepared to be stopped out. You can destroy your trading account when you start the “It will come back, I just have to wait” chant in the midst of a death spiral.
  • Give up on price targets let your winners run as far as they will go: In the right market conditions trends can go on to unbelievable levels. The big wins during these trends can make your entire career. If you set a predefined profit target, you will not miss the opportunity when it comes. Let a trailing stop take you out.

Trading Wisdom – Larry Hite

Larry Hite – Turned a $2 million managed account into $800 million in 8 years.


Throughout my financial career, I have continually witnessed examples of other people that I have known being ruined by a failure to respect risk. If you don’t take a hard look at risk, it will take you. If you argue with the market, you will lose. It is incredible how rich you can get by not being perfect. Never risk more than 1% of your total equity in any one trade. By risking 1%, I am indifferent to any individual trade. Keeping your risk small and constant is absolutely critical. I have two basic rules about winning in trading as well as in life:
  1. If you don’t bet, you can’t win. 
  2. If you lose all your chips, you can’t bet. Frankly, I don’t see markets. I see risks, rewards, and money.