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4 Market Principals

  
  Education
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4-pThere are four basic principles of price behavior which have held up over time. Confidence that a type of price action is a true principle is what allows a trader to develop a systematic approach. The following four principles can be modeled and quantified and hold true for all time frames, all markets. The majority of patterns or systems that have a demonstrable edge are based on one of these four enduring principles of price behavior. Charles Dow was one of the first to touch on them in his writings.
Principle One: A Trend Has a Higher Probability of Continuation than Reversal
Principle Two: Momentum Precedes Price
Principle Three: Trends End in a Climax
Principle Four: The Market Alternates between Range Expansion and Range Contraction!

21 Quotes for Traders

  
  Education
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1. “Twenty years from now you will be more disappointed by the things that you didn’t do than by the ones you did do.” ~ Mark Twain

2. “The market can stay irrational longer than you can stay solvent.” ~ John Maynard Keynes.

3. “I never buy at the bottom and I always sell too soon.” ~ Baron Rothschild

4. “When the facts change, I change my mind. What do you do, sir?” ~ John Maynard Keynes

5. “Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it.” ~ Warren Buffett

6. “It is not our duty as speculators to be on the bull side or the bear side but upon the winning side.” ~ Jessie Livermore in Edwin Lefevre’s Reminiscences of a Stock Operator

7. “The  principles of successful speculation are based on the supposition that people will continue in the future to make the mistakes that they made in the past.” ~ Thomas F. Woodlock

8. “It never was my thinking that made the big money for me. It was always my sitting tight. Got that?” ~ Mr. Partridge in Edwin Lefevre’s Reminiscences of a Stock Operator

9. “They say you never grow poor taking profits. No, you don’t.  But neither do you grow rich taking a four-point profit in a bull market.” ~ Jessie Livermore in Edwin Lefevre’s Reminiscences of a Stock Operator

10. “Remember that prices are never too high for you to begin buying or too low to begin selling.  But after the initial transaction, don’t make a second unless the first shows you a profit.” ~ Jessie Livermore in Edwin Lefevre’s Reminiscences of a Stock Operator

11. “A loss never bothers me after I take it. I forget it overnight. But being wrong – not taking the loss – that is what does the damage to the pocketbook and the soul.” ~ Jessie Livermore in Edwin Lefevre’s Reminiscences of a Stock Operator (more…)

Top Ten Trading Affirmations

  
  Education
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I AM RESPONSIBLE FOR MY THOUGHT, FEELING AND ACTION  
 
I ACCEPT THE PRESENT AS REALITY AND TAKE ACTION ACCORDINGLY
 
I TAKE WHAT THE MARKETS GIVE ME AND AM GRATEFUL FOR THESE GIFTS
 
I AM WILLING TO MAKE MISTAKES, LEARN FROM THEM, FORGIVE MYSELF AND MOVE ON
 
I AM FLEXIBLE AND ADAPTABLE
 
I CAN EASILY AND TRUTHFULLY SAY “I DON’T KNOW”
 
I TRUST MYSELF TO DO WHAT IS IN MY BEST INTEREST
 
THE MARKET IS MY BEST TEACHER
 
I LEARN SOMETHING NEW EVERY DAY
 
I AM BECOMING A BETTER TRADER

Global Assets, 1900 – 2017

  
Analysis, Education


Via Credit Suisse
Meb Faber’s Idea Farm reminds us that the Credit Suisse Global Investment Returns Yearbook 2018 should be oin your reading list. It is chock full of wonderful charts and tables and notes.
Two images struck me as so very insightful and revealing.
The first is the relative sizes of world stock markets, from 1900-2017. As you can see above, the US was a mere 15% of the global pie at the start of last century; today it is over half (by capitalization). That makes me wonder if those prior levels of high U.S. returns will be sustainable for the next century.
Second, look at the ebbs and flows in the chart below, titled evolution of equity markets over time from end-1899 to end-2017. The USA has seen its global share rise and fall several times. Note how Japan ballooned up during 1990s & 90s; it became almost half of the global market cap.
The lesson for investors is three part: Be aware of your own home country bias; understand how this balance shifts over time; and hold a globally diversified portfolio.
Review your own portfolios (investment, retirement, etc.) If you find your holdings significantly overweight US stocks, consider more exposure to Emerging Markets and Developed Ex-US. You will likely reduce overall volatility, lower risk, and could actually improve your returns.

Via Credit Suisse

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