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Possibility

  
  Education
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Traders often hear about the potential benefits of preparing actionable trade plans prior to the next trading day. The goal of such preparation is to make yourself immune to mental edge breakdown. One of the greatest threats to your mental edge is coming across something that’s unexpected during the trading day. Seeing an unexpected price move (especially one you perceive to be a big move) is likely to stress and panic you and therefore cause your psychology to shift into an emotional, reactive state. An effective way to prevent this is to prepare with possibility mapping. 
Possibility mapping is a process which will mentally prepare you to expect the potentially unexpected, and therefore will allow you to numb, in advance, any potential emotional responses.  (more…)

20 Timeless Money Rules

  
Analysis, Education, Life

1. Be humble
When you do not know a thing, to allow that you do not know it–this is knowledge.
–Confucius

2. Take calculated risks
He that is overcautious will accomplish little.
–Friedrich von Schiller

3. Have an emergency fund
For age and want, save while you may; no morning sun lasts a whole day.
–Benjamin Franklin

4. Mix it up
It is the part of a wise man to keep himself today for tomorrow and not to venture all his eggs in one basket.
–Miguel de Cervantes

5. It’s the portfolio, stupid
Asset allocation…is the overwhelmingly dominant contributor to total return.
–Gary Brinson, Brian Singer and Gilbert Beebower

6. Average is the new best
The best way to own common stocks is through an index fund.
–Warren Buffett

7. Practice patience
It never was my thinking that made the big money for me. It was always my sitting. Got that? My sitting tight!
–Edwin Lefevre

8. Don’t time the market
The real key to making money in stocks is not to get scared out of them.
–Peter Lynch

9. Be a cheapskate
Performance comes and goes, but costs roll on forever.
–Jack Bogle

10. Don’t follow the crowd
Fashion is made to become unfashionable.
–Coco Chanel

11. Buy low
If a business is worth a dollar and I can buy it for 40 cents, something good may happen to me.
–Warren Buffett

12. Invest abroad
The World is a book, and those who do not travel read only a page.
–St. Augustine

13. Keep perspective
There is nothing new in the world except the history you do not know.
–Harry Truman

14. Just do it
It takes as much energy to wish as it does to plan.
–Eleanor Roosevelt

15. Borrow responsibly
As life closes in on someone who has borrowed far too much money on the strength of far too little income, there are no fire escapes.
–John Kenneth Galbraith

16. Talk to your spouse
“In every house of marriage there’s room for an interpreter.”
–Stanley Kunitz

17. Exit gracefully
Only put off until tomorrow what you are willing to die having left undone.
–Pablo Picasso

18. Pay only your share
The avoidance of taxes is the only intellectual pursuit that carries any reward.
–John Maynard Keynes

19. Give wisely
The time is always right to do the right thing.
–Martin Luther King Jr.

20. Keep money in its place
A wise man should have money in his head, but not in his heart.
–Jonathan Swift

Never hurts to learn from people smarter and/or more experienced than yourself . . .

Learning From Losers

  
  Education
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Traders will typically approach a large loss in one of two ways. First is the dumb way, and that is to become a petulant whiner and throw a fit. Next is the more-constructive way, and that is to use the loss as a means of developing as a trader and to “quote” — learn from your mistakes. But there is a third way. And that is to view the loss as the cost of information.

I don’t mean the cost of doing business per se. This is not typically associated with large losses. Small losses, yes. Because to make money you have to lose some along the way, as casinos do every day.  And not the cost of tuition where the market charges a fee to school us. No, I mean information.

Instead of asking yourself about where you placed your stops and getting all personal about the whole thing, ask yourself what happened. Why did the market move the way it did? If you haven’t suffered a capital depletion, you are not likely to demand an answer and more likely to throw off the question with a wave of the hand and a shrug. “Who knows, who cares. I only play odds.”

Markets are a beast and if you want to play with them, you’ll have to be careful. Wear protective goggles and gloves. If you want to tame them though, you’ll need to wrestle with them. And sometimes you lose some body parts along the way. 

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