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Don’t be a hero. Don’t have an ego

  
  Education
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What does it mean to be a hero in trading?

In poker, a “hero call” is sometimes appropriate. It refers to the call of a very large river bet with medium strength — or even Ace-high — based on a strong read that your opponent whiffed on a draw and is representing a huge hand to steal the pot.

In markets and trading, there is no official definition, but we can more or less surmise being a “hero” looks like the following:

Putting your foot down and saying “markets will do X, I’m sure of it!”

Pointing to the sky like Babe Ruth — “this is where my profits on this trade are going to go!” (more…)

Keep perspective

  
  Education
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perspective

IF you can keep your head when all about you
Are losing theirs and blaming it on you
If you can trust yourself when all men doubt you
But make allowance for their doubting too;
If you can wait and not be tired by waiting,
Or being lied about, don’t deal in lies,
Or being hated, don’t give way to hating,
And yet don’t look too good, nor talk too wise:If you can dream – and not make dreams your master;
If you can think – and not make thoughts your aim;
If you can meet with Triumph and Disaster
And treat those two impostors just the same;
If you can bear to hear the truth you’ve spoken
Twisted by knaves to make a trap for fools,
Or watch the things you gave your life to, broken,
And stoop and build ’em up with worn-out tools: (more…)

Qantas Explosion– from the Cockpit

  
  Education
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This is an absolutely brilliant interview that is full of insights for the market. The interviewee is one of the pilots aboard the Qantas Airbus A380 last month that had an extremely serious uncontained engine explosion shortly after take-off.

In the interview they cover – inter alia – such things as

– The importance of checklists
– Dealing with contradicting signals
– Over-riding systematic considerations in favour of discretionary controls
– Keeping your head during a major catastrophe which constantly shifts its dynamics and has a lot of what we might call negative gamma…rapidly developing, interacting, non-linear issues that can rapidly move beyond your ability to keep up with them
– The importance of training and professionalism
– The importance of excess redundancy and robustness
– The importance of improvisation – and the ability to keep a clear enough head in a panic to ensure your creativity can be brought to bear on the problem.
– Power of teamwork.

Best part are the pictures of the cockpit showing the checklists and procedures they are working through.

As it turns out, this incident was very much more serious than the media ever picked up on. What an amazing story. I’m sure all will benefit greatly from reading this. For myself, I will be referring to this interview many times. A banquet for a lifetime.

Hope it benefits you all as much as it did me. Also hoping Mr. Tucker weighs in with some insights!

Eyes Wide Shut

  
  Education
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Why does it take so long for a trader to learn?

eyes wide shut

Like I’ve said before, I’ve seen as much so-called wisdom over the years that I’ve eventually learned to hold as inviolate truth, as that which should be thrown out with yesterday’s garbage. Yet why does the eventual accumulation of pertinent knowledge translate so slowly into one’s trading results? If we are capable of weeding out the good stuff from the bad, why doesn’t the good stuff just take over and guide us directly towards success?

Aside from the fact that I might just be a dumbass, one thing I’ve figured out is that the distance between the brain and the finger might not be so close as you’d think — if you’re not careful. I know I’m not the only trader who has a tendency to repeat the usual mistakes, or variations of same, despite having berated myself 10 times in the previous week to make an effort not to do it again. My contention is that old habits die hard. Real hard. And only if you go out of your way to kill them outright. (more…)

Profitability -Market Timing

  
  Education
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How often you are right on a trade is only half of the equation. The other half is how much do you make when you’re right and how much you lose when you’re wrong. You can remember that with this formula: Probability (odds of it going up or down) x Magnitude (how much it goes up or down) = Profitability.

“Market timing is the art of making investment decisions using indicators and strategies to observe and determine the direction of prices. Many believe that market timing involves predicting the future, when in reality, the goal of market timing is to participate in periods of price strength and avoid periods of price weakness.? 

Have a Goal

  
  Education
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There is no reward without risk, and there should be no risk without reward.  Knowing this, there’s absolutely no reason why each trade shouldn’t have some favorable objective associated with it, so set a goal for each trade.  A realistic one that could quite feasibly be reached during the course of the trade.

Perhaps you’ll set a hard target and book profits once that level is reached regardless of how strong the momentum seems at the time.  Or perhaps you’ll plan to book partial profits at intervals along the way.

At the very least, having some idea of a level where your stock could move to is still going to help you formulate a game plan, even if you don’t choose to leave a resting order in that zone to book profits.

If you know your stop and you have some kind of upside expectation, then you’ll have a far better grasp of just what your risk is on a given trade and whether or not it should be taken.

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