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13 One Liner Trading Rules For Traders

  
  Education
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Trade Management

  • Let winners run. While momentum is in phase, the market can run much further than might be expected.
  • Corollary to that rule: Do not exit winners without reason!
  • Be quick to admit when wrong and get flat.
  • Sometimes a time stop is the right solution. If a position is entered, but the anticipated scenario does not develop then get out.
  • Remember: if one thing isn’t happening the other thing probably is. Historically, this has never been good for me…
  • Be careful of correlations. Several positions can often equal one large position bearing unacceptable risk. Please think.

Other thoughts

  • I am responsible for risk management, money management, trade management, doing the analytical work and putting on every trade that comes.
  • I am not responsible for the outcome of any one trade. Markets are highly random. I do not have a crystal ball. I am not as smart as I think I am.
  • Risk management is the first and last responsibility. I can make almost any mistake and be ok as long as I do not violate my risk management parameters.
  • Opportunity comes every day. Do not neglect the work. Must do analysis every day.
  • Opportunity comes every day. Get out of poor positions. Move on.
  • I am a better countertrend trader than a trend trader. Sometimes the crowd is right, and they will run me over at those times if I’m not quick to admit I’m wrong.
  • If you’re going to do something stupid, at least do it on smaller size.

Bunting’s Laws of Investing

  
  Education
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1. Sell stocks of companies that announce huge acquisitions, that overdiversify, or that spend a fortune on a lavish new headquarters.

2. Avoid stocks where management picks fights with analysts (or, by extension, hedge funds). See Overstock.com in 2005; Netflix in 2010.

3. Watch out when executives start selling a lot of stock — regardless of plausible-sounding excuses. Top execs in homebuilders, mortgage underwriters and Wall Street dumped billions before the 2008 crash.

4. “Run a mile” from all stocks in an industry going through a huge investment boom: Massive overcapacity and consequent collapse is inevitable.

5. Steer clear of investing in manufacturing companies. Their industries are usually plagued with extreme cycles of boom and bust, overcapacity and slumps.

6. Pay little attention to economists or market gurus.

7. Mistrust all mathematical trading formulas as well — they invariably fail just when you most need them to work.

8. Look for companies where the insiders are buying lots of stock.

9. Look for companies generating a lot of cash — a great sign of sustained outperformance.

10. Look for companies which have monopolies (or near monopolies), and those which manage to take out their main competitors.

11. Remember you are buying businesses, not just stocks. Pay close attention to the quality of the business, and especially the quality of the management.

12. Look for companies which have earned the trust of consumers, and which have very strong brand names.

12 Market Wisdoms from Gerald Loeb

  
  Education
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1. The most important single factor in shaping security markets is public psychology.

2. To make money in the stock market you either have to be ahead of the crowd or very sure they are going in the same direction for some time to come.

3. Accepting losses is the most important single investment device to insure safety of capital.

4. The difference between the investor who year in and year out procures for himself a final net profit, and the one who is usually in the red, is not entirely a question of superior selection of stocks or superior timing. Rather, it is also a case of knowing how to capitalize successes and curtail failures.

5. One useful fact to remember is that the most important indications are made in the early stages of a broad market move. Nine times out of ten the leaders of an advance are the stocks that make new highs ahead of the averages.

6. There is a saying, “A picture is worth a thousand words.” One might paraphrase this by saying a profit is worth more than endless alibis or explanations. . . prices and trends are really the best and simplest “indicators” you can find. (more…)

The need to be Right

  
  Education
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right_wrongGood trading is not about being right, it is about making money.   If you trade to be right you are most likely trading too often in order to 1) impress someone other than yourself, and 2) feed your ego.  If this is your problem it mostly stems from a failure to focus on your trading plan, if you have one.  If you don’t then you are really heading for disaster.  Sticking to a well thought out plan of action based on a high probability trading edge will keep you from making frequent, unnecessary trades.  This is where the professionals pull way ahead of the masses.  The professionals wait for the market to come to them instead

"Men's Hormone Levels Might Affect Financial Markets"

  
  Education
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Hormones can affect the body and mind in a number of ways, and now it turns out that they may even have an impact on men’s financial risk taking.

A new study published today in Scientific Reports suggests that alterations in the levels of cortisol and testosterone in male market traders may predict risk taking and price instability, at least in lab experiments designed to resemble real-world financial markets.

The researchers conducted two experiments. First, 142 men and women played an asset-trading game in groups of about 10 people each. The game mimicked some of the characteristics of real-world financial markets, in which multiple participants trade stocks as buyers and sellers, and the behavior of each trader is affected by the behavior of other traders. The researchers measured naturally-occurring levels of cortisol and testosterone in saliva samples taken from the people in the study. They found that, in men, high levels of cortisol were linked to increased trading activity as well as the likelihood of mispricing and overall price instability.

In the second experiment, the researchers administered cortisol to 34 men ages 18 to 30, and testosterone to 41 men in the same age group before the men played the asset-trading game. The participants in both groups were also given placebo in a different stage of the experiment so that the researchers could compare hypothetical effects of both hormones on risk-taking behavior with placebo. The investigators found that the men in the study were more likely to invest in riskier assets after receiving either of the two hormones than they were after receiving placebo. (more…)

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