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QUALITIES ESSENTIAL TO THE EQUIPMENT OF THE SPECULATOR

  
  Education

DickinsonSpeculation As A Fine Art is written by Dickson G. Watts and can be consider as one of the first book on speculations. Reminiscences of a Stock Operator the book aboutJesse Livermore written by Edwin Lefèvre constantly references Speculation As A Fine Art

All business is more or less speculation. The term speculation, however, is commonly restricted to business of exceptional uncertainty. The uninitiated believe that chance is so large a part of speculation that it is subject to no rules, is governed by no laws.

There is no royal road to success in speculation. We do not undertake, and it would be worse than folly to undertake, to show how money can be made. Those who make for themselves or others an infallible plan delude themselves and others. Our effort will be to set for the great underlying principles of the “art” the application of which must depend on circumstances, the time and the man.

Let us first consider the qualities essential to the equipment of the speculator. We name them: Self-reliance, Judgment, Courage, Prudence, Pliability. (more…)

5 Ways to Reduce Your Losses When Trading

  
  Education
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Trading is an evolutionary process. Nobody can wake up being a Master Trader. Unfortunately there is no book or magic trick that can turn you into the highly profitable trader . Although the belief and the hope to obtain those skills instantly is still in place.

 The statistics say that only the ones with the self-dedication and discipline succeed in this business.

The most common mistakes leading to losses:

-Trading against the market;

-No trade potential;

-No serious buyers or sellers in the stock;

-Wide stop-loss;

-Fear of loss.

Traders should stay calm during the trading, this helps to observe and analyze the situation on the market much better, see some small details and make a competent decision.

Panic, stress or fear, always lead to mistakes.

One of the serious problems in trading is rush and mania to be present on the market all the times, opening positions when there is no potential for a trade or where the market is either flat or going the other direction.

Tips to resolve the mistakes:

1. Always look at the market. If there is no clear picture of the market’s behavior, don’t risk your money.

2. Always look at a trade potential.

3. Always look either at the Open Book or Market Maker window and Tape.

4. Always know where you are going to place you stop-loss order.

5. If you’re just not sure, or if the situation is uncertain, don’t enter the trade.

Following these tips requires some work and changes to our habits. It is not easy at all! We always hear sayings that the trader should be disciplined. What it actually means is changing your old habits and training yourself to have new ones. It is not comfortable, but it brings positive results, which will be noticeable on your month-end P/L report.

You'll learn more from your losing trades than your winners

  
  Education

“You’ll learn more from your losers than your winners will ever provide.”


Now I believe in studying success and I also think you can learn a lot from your best trades and life decisions. In fact, I sometimes think that people put too much emphasis on the value of learning from one’s mistakes instead of studying what went right (and the reasons why). 

Having said that, I’m a big believer in journaling your trades and taking the time to honestly examine your results. That includes our missteps, the less than optimal trades, and those flat out wrong or near-disastrous moves that take big chunks of money out of our accounts.

So if you’ve hit a rough patch in your trading or your investing returns aren’t all they could be, maybe it’s time to take a good, hard look at your records and figure out what you can learn from your losing trades. You may just improve your long-term results.

Greed

  
  Education
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 Small excerpt is from the book: ‘Wall Street. Its Mysteries Revealed: Its Secrets Exposed’ published in New York, 1921 by William C. Moore. The book contains short and to the point chapters like: ‘The crowd mind’, ‘How the public speculates’, ‘Mental suggestion’ and‘Market advice’ to name but a few. I chose the one on ‘Greed’ as I consider it great advice and timeless wisdom. Enjoy.

Greed p. 123-124

An avaricious or keen desire for profits is one of the most prevalent causes of failure inspeculation. This weakness is general among traders. They desire “just a little more ” profit. If the stock or commodity bought advances, then that’s proof to them that it will advance further and so they hang on. They usually overstay and thus miss their market. If they fail to obtain the top price and it reacts, then they assure or console themselves by the expression: “Oh, it will come back.” It may “come back” but often it does not, and instead, declines to below the purchase price and frequently results in a loss. The same observations apply to a short sale for a further anticipated decline. It is a good policy to be satisfied with a reasonable profit and be willing to leave some for the other fellow. The market is always there and other opportunities for making profits will present themselves while the greedy trader is waiting to get the last eighth.

Greed leads to disaster in another way. A speculator has started in to buy at the inception of a bull movement. He makes money. The more he makes, the more avaricious he becomes as the market moves forward. His confidence in himself increases until he develops a mental state known in the vernacular as “big head” or “swelled head”. He now has unbounded confidence in himself and “plays the limit”. Soon thereafter the market culminates at the top and the trend reverses, but Mr. Swelled Head is ignorant of this, so continues to buy on set-backs instead of selling on rallies. A drastic slump follows and Mr. B.H. goes to the scrap pile – BUSTED.

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