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Thought from Peter Brandt

  
  Education
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“The irony is that in real time, I never fully feel like I am trading successfully because I am always aiming for performance that is higher than I am attaining. I am generally my own worst critic and constantly set the bar higher than my last jump. The result is that it is difficult for me to crow about the “successes” of my trading career.

But, to the degree I have been consistently successful through the years, I believe it is due to three factors. First, I am obsessed with risk management. I spend more time and mental energy focusing on risk control protocols than on anything else. Managing losses and losing periods is my number one priority. If I can just tread water during the inevitable tough periods, sooner or later I will find myself caught in a favorable tide.

Second, my trading approach is overly simple by design. The result is that I know with as much certainty as is possible with a discretionary approach when there is a trade entry in my program. It does not mean that the trade will be profitable – only that the trade is there.

Third, I have tried to engage market speculation systematically, breaking down the process of trading into every conceivable component. What flows from this is an understanding of what components of trading are controllable and measurable and what components are uncontrollable. By the way, whether the next trade or series of trades will be profitable is not a controllable factor. Once a trader learns this — it is then possible to remove ego from the equation.” – Peter Brandt

Two Americas

  
Analysis, Economy, Education
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Income tax day, April 15, 2010, now divides Americans into two almost equal classes: those who pay for the services provided by government and the freeloaders. The percentage of Americans who will pay no federal income taxes at all for 2009 has risen to 47 percent.

That isn’t the worst of it. The bottom 40 percent not only pay no income tax, but the government sends them cash or benefits financed by the taxes dutifully paid by those who do pay income tax.

The outright cash handouts include the Earned Income Tax Credit (EITC), which can amount to as much as $5,657 a year to low-income families. Other financial benefits can include child tax credits, welfare, food stamps, WIC (Women, Infants, Children), housing subsidies, unemployment benefits, Medicaid, S-CHIP and other programs.

This is both a massive transfer of wealth and a soak-the-rich racket. The top 10 percent pay 73 percent of the income taxes collected by the federal government.

Thoughts on Reminiscences of a Stock Operator

  
  Education
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Dear Reader/Traders….If u had not Read this Book…then u had not read anything……its a Bible …Buy and Read atleast once ………..

One of the fascinating things in Reminiscences of a Stock Operator is the constant interplay between duplicit and dishonest practices of Livermore himself and the crooks he deals with. It reminds one of the crossroaders book where the two best friends cheat each other with a mechanical mirror and other means in constant games between them. Only when they realize that the stake between them keeps getting smaller do they realize that they’re both getting poorer because they have to pay the third crook, the “mechanic” for the use of the mirror. The rake was constant. They both show no compunction about cheating their best friends until they realize they’ve been viged to death by a third party.

Livermore is constantly appalled that in the nefarious schemes of manipulation and cornering that the holders of worthless securities engage in with him, that his customers have no honor among mutual thieves like the crossroaders. His terms for a manipulation are as follows: suppose the manipulators have 200000 shares of a listed stock at 40. Livermore will take call on all 200000 shares of stock at 40 for 1 year. They will also put up 6 million in cash for him to make a market and engage in his own insider trading with.

I doubt that the two most wealthy fellow travelers themselves and friends of the Oval who engage in such transactions with the triangle of their colleagues in the banking, and legislative branches receive such favorable terms or insider information today, albeit they seem to have more influence on the terms and policies.

In any case, how would you value what Livermore’s normal take was for such a manipulation? He receives a call for 1 year on 2000000 shares and that’s worth about 10%, so 800000. Then use of 6 million for manipulation for 1 year, enablling him to front run with that stake. How to value that aspect? Let’s say 500000.

He engaged in these transactions in the 1920-1929 period. No wonder Livermore was worth 50 million at the height of 1929 before losing it all, and declaring bankruptcy the fourth time, and going bust for at least the twelth time in 1934, before his suicide at the Sherry Netherlands.

it reminds one of the radi0 show tag line “crime does not pay”.

10 Trading Mistakes !

  
  Education
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tradingmistake1

  1. Refusing to define a loss.
  2. Not liquidating a losing trade, even after you have acknowledged the trade’s potential is greatly diminished.
  3. Getting locked into a specific opinion or belief about market direction. From a psychological perspective this is equivalent to trying to control the market with your expectation of what it will do: “I’m right, the market is wrong.” [private] (more…)
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