Trading Wisdom-One Liners

  • “It’s human nature to pick out the stunning successes of a method and to overlook the day-in, day-out losses that grind you down to the bone.”
  • Trade at a reasonable level, if you have too much exposure, override system and cut back
  • Missing a good trade is generally demoralizing (Basso’s silver trade)
  • “Buying on retracements is one of those ploys that gives psychological satisfaction rather than providing any benefits in terms of increased profits.  As a general rule, avoid those things that give you comfort; it’s usually false comfort.
  • If you have the resources to evaluate systems, your time is better spent developing your own idea.  I wouldn’t recommend buying systems.
  • “The human eye tends to pick up the times these indicators accurately called minor tops and bottoms, but it misses all the false signals and the extent to which they were wrong during trends.”
  • What would you do differently?  “Concentrate more on money management.”
  • Average human likes to take profits and play with losses, the exact wrong thing
  • “Watch idly while profit-taking opportunities arise, but in adversity run like a jackrabbit.”
  • Don’t think about what the market is going to do, only on what you will do
  • “It helps not to be preoccupied with your losses.  If you’re worried channel that energy into research.”
  • The majority of people trade worse than a purely random trader would.

Brain test Learn to trade self assesment

giraffe_in_refrigeratorThe Giraffe Test

1. How do you put a giraffe into a refrigerator?

Stop and think about it and decide on your answer before you scroll down.

The correct answer is: Open the refrigerator, put in the giraffe, and close the door. This question tests whether you tend to do simple things in an overly complicated way.

2. How do you put an elephant into a refrigerator?

Did you say, Open the refrigerator, put in the elephant, and close the refrigerator?

Wrong Answer.

Correct Answer: Open the refrigerator, take out the giraffe, put in the elephant and close the door. This tests your ability to think through the repercussions of your previous actions.

3. The Lion King is hosting an animal conference. All the animals
attend …. Except one. Which animal does not attend?

Correct Answer : The Elephant. The elephant is in the refrigerator. Didn’t you just put him in there? This tests your memory. Okay, even if you did not answer the first three questions correctly, you still have one more chance to show your true abilities. Continue reading »

9 Trading Rules

1. Move: Always be flexible.  The beauty of the stock market is polygamy is perfectly acceptable.  Never get married to a particular position or a particular strategy.   The market is complex, dynamic and always changing.  Learn to change with it if necessary.

2.  Plan de Vida: Always invest with a plan.  Have strict rules and a machine-like approach.

3.  Downshift: Pulling yourself out of the game when you’re not certain will help you from making debilitating mistakes.  When in doubt get out.

4. 80% Rule: Never let more than 20% of your portfolio put 80% of your portfolio at risk.  Position sizing is key to risk management.

5. Hope is a 4 letter word: Holding and hoping is not a strategy.  Cut your losses, learn from it and never look back.   Never ever get into something you can’t get out of.

6. Understand your risks: You can’t avoid black swans, but they don’t have to rip your face off.  Understand your risks and your rewards.

7. Goals and accountability: Set goals and keep track of your performance.  You are responsible for your own decisions.  Own your mistakes.

8. Psychology: Learn to control your emotions and understand the emotions of those around you.  Always remember what General Patton said: “if everyone is thinking the same then someone isn’t thinking”.   Also the famous Buffett quote: “Be fearful when others are greedy and greedy when others are fearful.”

9. Your Tribe: Always remember that there is more to life than investing.  Don’t live to invest.  Invest to live.  Being the richest man/woman in the graveyard is worthless if there isn’t anyone to bury you there

NOISE

75% of the price movement in most stocks takes place in 20% of the time. The rest is nothing but noise within a range. Relevant information  that causes repricing doesn’t change quickly and frequently. This is why trends exist. Higher prices often attract more buyers and lower prices attract more sellers until the rules of the game change. Focus on the main drivers and forget the rest.

11-Rules For Being Human

1. You Will Receive A Body                                                                  You may like it or hate it, but it will be yours for the entire period this time around.

 2. You Will Learn Lessons

You are enrolled in a full-time informal school called Life. Each day in this school, you will have the opportunity to learn lessons – you may like the lesson or think them irrelevant and stupid.

3. There Are No Mistakes, Only Lessons
There is a process of trial and error; experimentation. The ‘failed’ experiments are as much a part of the process as the experiment that ultimately ‘works’.

4. A Lesson Is Repeated Until It Is Learned
A lesson will be presented to you in various forms until you have learned it. When you have learned it, you can go on to the next lesson.

5. Learning Lessons Does Not End. 
There is no part of Life that does not contain its lessons. If you are alive, there are lessons to be learned.

6. ‘There’ Is No Better Than ‘here’. 
When your ‘there’ has become a ‘here’, you will simply obtain another ‘there’ that will again look better than ‘here’. Continue reading »

Be responsible

Be responsible for your own trading destiny. Analyze your trading behavior. Understand your own motivations. Traders come into Future  trading with a view to making money. After awhile they find the trading process to be fascinating, entertaining and intellectually challenging. Pretty soon the motivation to make money becomes subordinated to the desire to have fun and meet the challenge. The more you trade to have fun and massage your ego, the more likely you are to lose. The kinds of trading behaviors that are the most entertaining are also the least effective. The more you can emphasize making money over having a good time, the more likely it is you will be successful.

Be wary of depending on others for your success. Most of the people you are likely to trust are probably not effective traders. For instance: brokers, gurus, advisors, system vendors, friends. There are exceptions, but not many. Depend on others only for clerical help or to support your own decision-making process.

Don’t blame others for your failures. This is an easy trap to fall into. No matter what happens, you put yourself into the situation. Therefore, you are responsible for the ultimate result. Until you accept responsibility for everything, you will not be able to change your incorrect behaviors.