Archives of “Education” category
rssThe 2016 market forecasts are in for S&P 500
Ten Destructive Trading Thoughts
- That resistance is way too close, I really shouldn’t have taken that signal.
- I should definitely trade that breakout. My method doesn’t trade breakouts,but that’s areally good-looking trade.
- I’m long, this is a downtrend. What the heck was I thinking?
- This going to be a loser, for sure.
- Price has ripped so far away from me – please don’t turn into a signal.
- This is clearly in a congestion range. I’m going to ignore that signal and wait for a breakout.
- Buying spikes – this short is doomed. See ya, money.
- Yippeee! It’s not turning into a signal!
- Ooh, nice profit – I should take that while it’s still there.
- Take the profit. TAKE THE PROFIT. TAKE THE DAMN PROFIT!!!!!
Intuition
A hunch can be trusted if it can be explained.
Though intuition is not infallible, it can be a useful speculative tool, if handled with care and skepticism.
If you are hit by strong hunch – put it to the test. Trust it only if you can explained it. That is only if you can identify within your mind a stored body of information out of which that hunch must reasonably be supposed to have arisen.
Be wary of any intuition that seems to promise some outcome you want badly.
10 Insights from Benjamin Graham
Benjamin Graham doesn’t need an introduction. His sober look at the stock market has built an enormous following and for a good reason.
1. “If you are shopping for common stocks, choose them the way you would buy groceries, not the way you would buy perfume.” – It is true that perfumes come and go out of popularity, but no trend lasts forever. There are trends that last 3 months; there are trends that last 3 years.
2. “Obvious prospects for physical growth in a business do not translate into obvious profits for investors.” – it depends on to what level has the expected growth been already discounted. The truth is that it is really hard to forecast growth in quickly developing businesses. The market always overdiscounts at some point, but in the meantime trend followers could make a killing. You never know how long or how fast a trend could go.
3. The only constants in the markets are change and uncertainty. Not only business environment changes, but also people’s perceptions of stocks change.
Most businesses change in character and quality over the years, sometimes for the better, perhaps more often for the worse. The investor need not watch his companies’ performance like a hawk; but he should give it a good, hard look from time to time.
4. Different catalysts matter for the different time frames:
Basically, price fluctuations have only one significant meaning for the true investor. They provide him with an opportunity to buy wisely when prices fall sharply and to sell wisely when they advance a great deal. At other times he will do better if he forgets about the stock market and pays attention to his dividend returns and to the operating results of his companies.
5. The difference between a trader and investor
The most realistic distinction between the investor and the speculator is found in their attitude toward stock-market movements. The speculator’s primary interest lies in anticipating and profiting from market fluctuations. The investor’s primary interest lies in acquiring and holding suitable securities at suitable prices. Market movements are important to him in a practical sense, because they alternately create low price levels at which he would be wise to buy and high price levels at which he certainly should refrain from buying and probably would be wise to sell.
6. How to think about risk (more…)
Are We in Control of Our Own Decisions?
Life Rules
The importance of success in succeeding at trading.
Different shapes and forms.
Failure comes in all different shapes and forms. The distance you fall after a failure, time it took to get to the failure,and whether you get back up determines that shape and form. I realize there are a million posts on why failure is important but success is important, especially in trading.
Failure is different in trading.
Failure/losing in trading is not the same as failure in other contexts. What is working right now is always changing. What happens to many traders is that they waste money until their system is working again or they run out of money before it happens. I believe in having a process so you can adapt to that change. When you find something that works continue to do it till it does not work. A 100x easier said than done.
Trading is gambling for some. (more…)
What does it take to be a winning trader?
THE 3 PHASES OF A TRADE
The ANTICIPATION Phase: this is where all the left hand chart reading takes place in preparation for the right hand chart battle. It’s the PROCESS that precedes the ACTION to put on a trade. A technical trader anticipates that a past price pattern will repeat again, so he identifies the pattern, locates a current one and determines a suitable match is present. Technical analysis is nothing more than finding previous price patterns matched with current market conditions. Traders anticipate such repetitive behavior based on human nature and seek to take advantage of it.
The ACTION phase involves hitting the BUY key based on the previous ANTICIPATION process. Since no one can tell the future or what the right hand side of the chart will reveal, the ACTION is based on the confidence that the trader will do what is right once a trade is put on, which is to exit gracefully at a pre-determined loss line or exit humbly at a pre-determined profit target , fully accepting either/or, or an OUTCOME between one or the other, depending on current market conditions.
The REINFORCEMENT phase occurs after the trade is closed. Whether or not the trade is a win, lose, or draw, the self-talk immediately following trade closure is vitally important for the next trade, and even the next series of trades, as future trades can be negatively or positively affected by building pathways to future success. These pathways are neurologically based and can make or break a successful trading career. While it is important to ANTICIPATE right side chart OUTCOMES, what is more important is DEVELOPING right side brain reinforcement.