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OVERCONFIDENCE in Trading

  
  Education
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It is common for traders to complain of a lack of confidence in their trading, but very often it is overconfidence that does them in. Overconfidence results from a lack of appreciation of the complexity of markets and an underestimation of the challenges of trading them successfully. In a sense, overconfident traders lack respect for the markets. They think that reading about a few setups or buying the newest software will prepare them to make money. Overconfident traders don’t want to work their way up the trading ladder: they resist the idea that screen time is the best teacher. They also chafe at the idea of growing their account. Rather than start with one contract and wait until they’re profitable before trading larger size, they want big positions—and profits—right away. Because they’re so eager to make money—and so sure they can make it—overconfident traders generally trade impulsively. They won’t wait for the setup to form; they’ll jump the gun—and get whipsawed in the process. Instead of being patient and waiting for short-term patterns to align with longer-term patterns, they will take every trade, enriching their brokers in the process. (more…)

What To Worry About This Year

  
  Education
  Tags

Things to worry about:
Worry about courage
Worry about Cleanliness
Worry about efficiency
Worry about horsemanship
Worry about…
Things not to worry about:
Don’t worry about popular opinion
Don’t worry about dolls
Don’t worry about the past
Don’t worry about the future
Don’t worry about growing up
Don’t worry about anybody getting ahead of you
Don’t worry about triumph
Don’t worry about failure unless it comes through your own fault (more…)

Emotional Intelligence

  
  Education
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A recent review highlighted different models and definitions of emotional intelligence. Among the features associated with emotional intelligence are:

* Ability to accurately read emotion in others and respond in empathic and appropriate ways;

* Ability to effectively assimilate emotion in thought and action for coping and problem solving;

* Ability to regulate emotion, channeling it into motivation, persistence, and effective relationships.

The traits assessed by questionnaires measuring emotional intelligence are wide ranging:

* Adaptability – Flexibility and willingness to adapt to new conditions;
* Emotional Regulation – Ability to control emotions and their expression;
* Low Impulsiveness – Ability to refrain from giving into urges;
* Self Motivation – Tendency to persist in the face of adversity;
* Social Awareness – Ability to effectively network with others;
* Stress Management – Ability to withstand pressure and perform effectively;
* Empathy – Ability to take the perspective of others;
* Optimism – Tendency to look on the bright side of life;
* Happiness – Tendency toward cheerfulness and satisfaction. (more…)

Marc Faber Discusses Chinese Economic Cooling Off, Sees Day Of Reckoning Delayed

  
Economy, Education
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Nothing notably new here from the man who has called for a Chinese crash in as little as 12 months. Now that the Chinese PMI came at the lowest level in 17 months (in line with the drop in the US ISM but completely the opposite of Europe’s PMI as everyone makes up their own data on the fly now with no rhyme or reason), Faber seems to have mellowed out a little on the Chinese end-play. He now sees the China government stepping in and prevent a collapse of the economy when needed, as the economy has dropped from a near 12% GDP growth to a collapse in the PMI in the span of a few months, even as Chinese banks lent another quarter trillion renminbi billion in July, and issued who knows how many hundreds of billions in CDOs to keep the ponzi afloat.

From Bloomberg TV:

On the cooling of China’s economy:

“I mean I’ve been arguing this year that the economy would inevitably slow down, because the impact of the stimulus would diminish. But having said that, the economy hasn’t crashed yet. It could still crash. But on the other hand, if you look at the performance of equities worldwide, it seems that the worse the economic news is, that the more the markets go up, because the market participants expect further easing measures, and maybe further stimulus. So altogether I would say it’s not going to be a disaster for stock investors yet. It’s interesting. The Chinese stock market began to discount the slowdown in economic growth actually precisely a year ago, in August, 2009. The market peaked out. And then drifted lower, but now that the bad news is essentially out, the market has started to rebound.”

On whether the property market is the biggest weakness in China:

“I’d like to make the following observation. We have a global economy, and an economy has different sectors. And you can have recession in some sectors of the economy. You can have a crash, say, in the property market, and you can have other sectors expanding. [Bolton: That’s the biggest weakness, right Marc, as far as you’re concerned, in the Chinese economy right now, it is the overheating in the property market?….] Well, I’m not sure. Because if they ease again, the speculation will go on. But we have credit problems in the property market undoubtedly. We have Ponzi schemes like loan sharking operations all over China. That’s a very dangerous. But what I would like to point out is that the agricultural sector, the rural sector in China and everywhere in the world is doing relatively well, because agricultural prices have started to rebound. And that was also seen in Thailand. In Thailand, new car sales are up very strongly.”

On whether the Chinese government will delay increasing interest rates this year:

“I think even if they increase it marginally it’s meaningless. Because interest rates are far below nominal GDP growth, and in my opinion far below inflation.”

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