We all want certainty both in and outside the charts. Problem is certainty is nothing more than hope wrapped in expectation. Life is uncertain. A successful trade is uncertain. If certainty is what we want then certainty we will get. However, be prepared to meet certainty’s friends, doubt and disappointment. Doubt and disappointment are, shall we say, in “cahoots” with certainty. You can’t have one without the other. This is a blessing really that we all too often turn into a curse. A blessing because we have two new friends who can help keep us balanced, honest, and above all, human. A curse because we choose to ignore their advice when we should be embracing it. Embrace it you say? Yes. Because doubt and disappointment can lead to new discoveries and a deeper appreciation for what life has to offer. Maybe, just maybe, what we believe to be certain, you know, that which we wrap up in hope and expectation, is not so certain after all. Maybe, just maybe, our friends doubt and disappointment can lead us down a better path and a better life. Maybe, just maybe, doubt and disappointment can teach us a new understanding about the markets and the charts, wherein we pin so many of our hopes and expectations. (more…)
Latest Posts
rssThe Visual Story Of The Biggest Fraud In Gold Mining History
This infographic documents the rise and fall of Bre-X.
From initial private offerings at 30 cents a share, Bre-X stock climbed to more than $250 on the open market. Near the peak of Bre-X share prices, major banks and media were on board:
The Peak
- It was touted by media and banks as the “richest gold deposit ever”
- In December 1996, Lehman Brothers Inc. strongly recommended a buy on “the gold discovery of the century.”
- Major mining companies such as Barrick Gold, Placer Dome, and Freeport-McMoRan Copper & Gold, among other top producers, fought an epic battle to get a piece of Bre-X’s Busang deposit.
- Indonesia’s Suharto regime managed to grab 40% of the deposit for Indonesian interests.
- Fidelity Investments, Invesco Funds Group, and other mutual-fund companies piled into the stock.
- J.P. Morgan bankers talked up Busang in a conference call in which Bre-X’s top geologist predicted the deposit might contain a staggering 200 million oz of gold, worth over $240 billion in 2014 prices. Morgan declined to comment.
- Egizio Bianchini, stock broker and one of Canada’s top gold analysts, said “What most people are now realizing is that Bre-X has made one of the great gold discoveries of our generation.”
Courage Conquers our only adversary–Fear.
Manage Your Ego
“Everyone wants to feel like a winner. It’s tempting to pat ourselves on the back for making a winning trade, but it’s essential to face the facts: Many times a winning trade is a combination of an astute insight AND being at the right place at the right time. In other words, external circumstances such as plain good luck make you a winner. (more…)
Gambling vs. Trading
The expectancy in gambling is ALWAYS terrible, while market speculation at times offers outstanding opportunities. To get a 2:1 or 3:1 opportunity in gambling, one needs to accept incredibly low odds of victory. In financial markets, those 2:1 or above opportunities come around like clockwork and offer high enough probability that long-term positive expectancy is possible. Not only that, but the market speculator has the opportunity to adjust his or her position after the game begins…when was the last horse race where you could take a little off the table after the first turn? Or reclaim most of your bet when your horse stumbles out of the gate?
Active vs Passive Catalysts
Catalysts have the potential to change investors and traders’ expectations. There are two distinctive types of catalysts in the stock market – active and passive.
Active catalysts tell you when to buy or sell.
Passive catalysts tell you what is the potential behind a move once an active catalyst is introduced. Their role is to explain intelligently the reason behind a move.
The only active catalyst is Price action. Simply put, it does not matter how smart you are or how genius your investing thesis is. Unless and until the market agrees with you, you won’t make a cent. (more…)
RISK MANAGEMENT- 10 Points
1. Never enter a trade before you know where you will exit if proven wrong.
2. First find the right stop loss level that will show you that you’re wrong about a trade then set your positions size based on that price level.
3. Focus like a laser on how much capital can be lost on any trade first before you enter not on how much profit you could make.
4. Structure your trades through position sizing and stop losses so you never lose more than 1% of your trading capital on one losing trade.
5. Never expose your trading account to more than 5% total risk at any one time.
6. Understand the nature of volatility and adjust your position size for the increased risk with volatility spikes.
7. Never, ever, ever, add to a losing trade. Eventually that will destroy your trading account when you eventually fight the wrong trend.
8. All your trades should end in one of four ways: a small win, a big win, a small loss, or break even, but never a big loss. If you can get rid of big losses you have a great chance of eventually trading success.
9. Be incredibly stubborn in your risk management rules don’t give up an inch. Defense wins championships in sports and profits in trading.
10. Most of the time trailing stops are more profitable than profit targets. We need the big wins to pay for the losing trades. Trends tend to go farther than anyone anticipates.
Who Does Greece Owe?
How To Reduce The Effects of GREED?- 6 Points
- Trade Small: If you are a beginner, trading a small account can be a worthwhile exercise. Use small position sizes and manage risk fiercely. Many traders get into trouble when they haven’t considered risk exposure while taking positions that are too large for their accounts.
- Expect to Lose: Be prepared to lose when you enter a trade and DEFINE how much you are ready to lose. Don’t panic and change your mind if the market reaches that point.
- Plan to WIN: Likewise, DETERMINE the amount of profit that is enough to quench your Greed Buds.
- Time Horizon: Trade with short time horizon. Even if you are not an intraday trader, a shorter-term viewpoint in today’s volatile market environment gives a quick feedback about your analysis and can decrease the time you are exposed to the unpredictable marketplace.
- Scared Money Never Wins: Trade only with money you can afford to lose that is less important and not significant enough to be protected. Treat your money well and trade well.
- Nothing Ventured, Nothing Gained: Be a little greedy! If you don’t trade, you are engulfed by fear. Come up with a trading style that cuts down the influence of greed and fear and is easy for you.
Good Times -Bad Times
Sometimes in trading you have to pick yourself up and dust yourself off. It is the simple truth and anyone who has been involved in the game for longer than a cup of coffee will tell you the same. There will be times when you are caught with a blow up, caught in a squeeze or simply caught leaning in the wrong direction but over the years what I have learned is it is always about getting back into the ring for another round.
—
It’s important to have a routine for handling those times when not only your financial capital gets bitten but your emotional capital sinks as well.
1) Reposition: Whether you are caught in a downturn or short squeeze, removing the position is often the best way to remain objective. So often when people start to see a position run against them they freeze up and start to rely on hope rather than remaining in control of the trade. When I see stocks breaking down or acting poorly, they are sold immediately and I am able to start fresh.
2) Check the Charts and your Bias: I have written many times before that price action is never wrong. If you are caught on the wrong side of price action it is a must to re-evaluate the charts you are viewing and check any bias you may have. It is imperative to embrace the prevailing direction and avoid seeing what is not there. Having raised cash and avoiding any further significant draw, take a fresh look at the action and once again analyze your position accordingly. (more…)
Sometimes in trading you have to pick yourself up and dust yourself off. It is the simple truth and anyone who has been involved in the game for longer than a cup of coffee will tell you the same. There will be times when you are caught with a blow up, caught in a squeeze or simply caught leaning in the wrong direction but over the years what I have learned is it is always about getting back into the ring for another round.