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JOHN KENNETH GALBRAITH ON STOCK MARKET MEMORY LOSS

  
  Education
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Where else but in the markets can short term memory loss be both beneficial and profitable?

John Kenneth Galbraith, an economist, says the financial markets are characterized by…

“…extreme brevity of the financial memory.  In consequence, financial disaster is quickly forgotten.  In further consequence, when the same or closely similar circumstances occur again, SOMETIMES IN A FEW YEARS, they are hailed by a new, often youthful, and always extremely self-confident generation as a brilliantly innovative discovery in the financial and larger economic world.  There can be few fields of human endeavor in which history counts for so little as in the world of finance.” [emphasis mine].

Manage risk in the markets and in life.

  
  Education
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No question that there is volatility in the markets right now. Too much volatility can lead to an increase in stress, especially if your trading involves holding positions longer than 5 minutes. Stress is part of the business so we have to adapt to it, both physically and mentally, or fade away. For some it is easier than others to find an activity to unwind and release some stress. Hitting the batting cages, taking in a movie, attending a sporting event, going for a jog or simply reading a good book are some examples.

I’d argue that those who have a difficult time taking a break from the trading world and thus the accompanying stress are also poor managers of risk. Having risk in the market is a given. Not having discipline to manage that risk is where they fail. We’ve all had that gut feeling that X is going to happen and a loss will occur, it’s part of the business. Those that take that loss, learn from it and move on are those that are able to escape the markets when needed.

Those that choose to not manage risk in the market fail to manage risk in life. Instead of taking the edge off at the local watering hole they stay there ’til last call, neglecting other duties in life. Instead of spending the weekends with family and friends to recharge they pore over charts, financial statements and twitter looking for the next holy grail. Always chasing, never catching.

Top 8 Ways To Lose All The Money In Trading

  
  Education
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 tradingloss8 – Put all of your efforts into finding the perfect technical indicator. Once you find this magical indicator, it will be like turning on a water faucet. Go all in. The money will just flow into your account!

7 – Make sure to visit a lot of stock trading forums and ask them for hot stock tips. Also, ask all your friends and family for stock tips. They are usually right, and acting on these tips can make you very rich.
6 – Watch what other traders do and be sure to follow the crowd. After all, they have been trading a lot longer than you so naturally they are smarter.
5 – Pay very close attention to the fundamentals of a company. You MUST know the P/E ratio, book value, profit margins, etc. Once you find a “good company”, consider going on margin to pay for shares in their stock. (more…)

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