There are three things:
1) Having an edge, which is some methodology for determining with reasonable accuracy the relative probability of the market price hitting your profit target before it hits your stop loss price. An edge is provided by a set of trading strategies, and a set of rules for when to use which trading strategies (briefly, when to follow a trend, when to fade a trend, and when to stay out.)
2) The discipline and emotional fortitude to follow the rules of your trading rules flawlessly.
3) Sound risk and money management rules.
Sound money management and risk control are the keys to being a profitable trader. It is not the prediction or the latest and greatest indicator that makes the profit in trading, it is how you apply sound trading discipline with superior cash management and risk control that makes the difference between success and failure. (more…)
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A Study in the Psychology of Gambling- Written in Year 1873
In a 1873 letter to The Spectator entitled “A Study in the Psychology of Gambling” Saxon-les-Bains describes his gambling experience in Monte Carlo.
And what was my experience? This chiefly, that I was distinctly conscious of partially attributing to some defect of stupidity in my own mind, every venture on an issue that proved a failure; that I groped about within me something in me like an anticipation or warning (which of course was not to be found) of what the next event was to be, and generally hit upon some vague impulse in my own mind which determined me: that when I succeeded I raked up my gains, with a half impression that I had been a clever fellow, and had made a judicious stake, just as if I had really moved skillfully as in chess; and that when I failed, I thought to myself, ‘Ah, I knew all the time I was going wrong in selecting that number, and yet I was fool enough to stick to it,’ which was, of course, a pure illusion, for all that I did know the chance was even, or much more than even, against me. But this illusion followed me throughout. I had a sense of deserving success when I succeeded, or of having failed through my own willfulness, or wrong-headed caprice, when I failed. When, as not infrequently happened, I put a coin on the corner between four numbers, receiving eight times my stake, if any of the four numbers turned up, I was conscious of an honest glow of self-applause…
Evidently, in spite of the clearest understanding of the chances of the game, the moral fallacy which attributes luck or ill luck to something of capacity and deficiency in the individual player, must be profoundly ingrained in us. I am convinced that the shadow of merit and demerit is thrown by the mind over multitudes of actions which have no possibility of wisdom or folly in them, granted, of course, the folly in gambling at all, as in the selection of the particular chance on which you win or lose. When you win at one time and lose at another, the mind is almost unable to realize that there was no reason accessible to yourself why you won and why you lost. And so you invent what you know perfectly well to be a fiction, the conception of some sort of inward divining rod which guided you right, when you used it properly, and failed only because you did not attend ‘adequately to its indications.’
See What George Soros & Paul Tudor Jones Saying about Trading
Consider Factors That Will Affect Market Participants’ Perceptions Even if You Don’t Believe in It
- I have always been a discretionary trader with my analysis based on fundamentals…. Whatever kind of a trader you are, you have to be aware of perceptions in the market place, that can influence the participants’ behavior. If a lot of people are charting and they think that a certain level is a key level for whatever reason – lunar, astrological, who the hell knows – then you have to be aware of it. Because it is going to cause a certain number of market participants to react and you have to be aware of it. You have to understand how that is going to affect your position.
- You have to be aware of all these technical techniques, such as momentum, because a lot of market participants use them and so they can affect the market.
A trader's journey to profitability.
ECB Purchases Of Sovereign Bonds Surge Tenfold Compared To Prior Week, Hit €1.4 Billion
After dropping to a modest €134 million last week, ECB purchases of sovereign debt exploded tenfold in the last ended week to €1.384 billion, confirming that the ECB continues to bid up all Portuguese and Irish bonds available for sale, so the market does not crash. As Reuters notes, this is the highest weekly amount purchase since early July. Once again it is up to the European Fed-equivalent to be the buyer of only resort. And Europe’s continued central bank facilitated life support comes on the heels of the latest joke in recession timing: per Dow Jones, the Center for Economic Policy Research Monday said its Euro Area Business Cycle Dating Committee had determined that the currency area’s recession began in January 2008 and ended in April 2009, lasting a total of 15 months and reducing gross domestic product by 5.5%. Some recovery there, when half the PIIGS have no access to capital markets, have their Prime Ministers mocked during conference calls, and are fighting with an exchange rate last seen long before Greece, Portugal, Spain and Ireland had to be rescued. We wonder what the CEPR’s timing on the end of the European depression will end up being?
Being able to remain calm & disciplined at times of distress is key to trading success & separates men from boys
A high performance culture with leadership who lack integrity is a recipe for disaster
Grade 3 Math Assignment
Grade 3 Math Assignment
Tom has 1 apple.
Tom has promised to give Robbie, Jim, Anne and Mary, half an apple each.
How does Tom get 4 half apples from 1 apple?
Bonus Question:
While Robbie, Jim, Anne, and Mary are waiting for their half apple, Tom gets hungry and takes a couple bites out of the apple. How does Tom now turn a half eaten apple into 4 half apples?
And you aren’t allowed to call it an iApple and say it can do anything.
Here is the basic problem and why Italian and Spanish bonds are getting crushed again today (ignoring horrific unemployment data out of Spain).
If Italy defaults with a 40% recovery, there is 1.613 trillion euro of debt affected (that is up about 10 billion in about a month). That means creditors would lose 970 trbillion. Spain with 663 billion would cost almost 400 billion (its debt has shot up about 15 billion in a month).
The problem is that EFSF doesn’t take default off the table. It may delay the time to default (by helping roll debts as they mature), but all it mainly does is shift who would take the loss. The guarantors can’t handle losses that big. (more…)