Only Once in A While ,You're Smarter than the Market
Latest Posts
rssThis is great! No nonsense approach to life! Use the same technique in trading, too.
How hard is it to time the Market?
As a simplified illustration of how hard it is to time the market, assume that you are 70% accurate calling market turns. If you are in the market, two calls are required: a sell and a subsequent buy. The probability of being correct (buying back in at a lower price than your selling price) is 70% times 70%, or 49%. That shows you have to be very good (and most people are not much better than a coin toss) to be successful at market timing.
Happy Fibonacci Day!
All banks and markets remain open
Today is a big day for traders around the world! It is Fibonacci Day!
Why is it Fibonacci Day? Well if you are from a country that uses the MM/DD format, 11/23 are 4 digits in the Fibonacci Sequence. A Fibonacci sequence is a series of numbers where a number is the sum of the two numbers before it. For example: 1, 1, 2, 3…is a Fibonacci sequence. Here, 2 is the sum of the two numbers before it (1+1). Similarly, 3 is the sum of the two numbers before it (1+2).
The next two digits in the Fibonacci sequence are 5 and 8 (2+3 = 5 and 3 + 5 = 8). That means 11/23/58 (2058) will be the biggest of Fibonacci Day’s. It is never to early to start preparing a celebration.
Let’s see, 2058 is in 43 years. That would make me 97 years young. If I don’t make it, will someone please remember and be sure to give the day, the credit it deserves.
Happy Fibonacci Day.
PS. Arguably, the most famous media use of the Fibonacci Sequence was from the book and movie The Da Vinci Code starring Tom Hanks written by Dan Brown. This is the scene where Hanks enters the Fibonacci Sequence as part of the clues left behind by Jacques Sauniere, the murdered curator. Sauniere raised his granddaughter, coaching her in endless puzzles. As an adult she became a cryptographer. When presented with the numbers in a scrambled form, she recognizes the sequence, and understands that it is part of a message.
10 Points For Every Trader
- You have no trading plan – you need to treat your trading like a business and plan how you’re going to trade. If you don’t have a trading plan, then google for it, there are loads of free resources out there to get you started.
- You have no money management rules – You can start with the 1% rule and work from there. Calculate your risk for each trade and ensure it’s 1% or less of your trading capital.
- You’re prone to emotional swings – If you feel tremendous excitement when you win a trade, then something’s wrong. Sure at first it’s exciting, but after a while your trading just becomes a process and the emotional aspects should start to fade.
- You’re nervous when in a trade – This is usually a result of trading too big for your account size. See point 2.
- You try to predict rather than react – Leave the predictions for the economists. For every trade have a thesis for how you’re going to respond for different scenarios. Think in terms of “if x then y” type statements instead.
- You revenge trade – The market doesn’t give a shit if you win or lose. Who are you having revenge on? This is more likely a result of you’re own unconscious desire to blow up your account and to go back to doing whatever it was before you played around in the markets.
- You don’t cut your losses fast enough – Don’t just wait for your trade to “bounce back”, man up and take the loss. You can always re-enter if you see a good setup. (more…)
The Crowd: A Study of the Popular Mind -5 Lessons from Gustave Le Bon’s
Lesson #1: Crowds Make the Impossible Possible
The improbable does not exist for a crowd, and it is necessary to bear this circumstance well in mind to understand the facility with which are created and propagated the most improbable legends and stories.
Crowds, being incapable both of reflection and of reasoning, are devoid of the notion of improbability; and it is to be noted that in a general way it is the most improbable things that are the most striking.
Crowds being only capable of thinking in images are only to be impressed by images. It is only images that terrify or attract them and become motives of action.
Clarification: If crowds are incapable of distinguishing between the improbable and the probable, and the images it associates with the improbable invoke action, then odd things are designed to happen.
Lesson #2: Crowds Create Bulldozer-Like Momentum
…the individual forming part of a crowd acquires, solely from numerical considerations, a sentiment of invincible power which allows him to yield to instincts which, had he been alone, he would perforce have kept under restraint.
A crowd …is not prepared to admit that anything can come between its desire and the realisation of its desire.
Thought For A Day
Learn to evaluate trading strategies using the Profit Factor.
A to Z : Weaknesses and Strengths of Traders
Ambitious
Makes and follows long term business plan
•Unambitious
Will ignore long term business plan
•Calm
Will handle times of market volatility and make smart decisions
•Worrying
Will panic when markets are volatile and make stupid decisions
•Cautious
Strictly follows Stop-Loss rules and Protects Trading Capital
•Rash
Will not be diligent with Stop losses and will risk trading capital
•Cheerful (more…)
10 Signs Your Trading Is Getting Better
Your losses are getting smaller and smaller.
- Your losing streaks are not as long as they use to be.
- Your draw downs are not as big as they use to be.
- You are very picky about entries and only take the ones with the best probabilities of success with good risk/reward skewed in your favor.
- You have become much more patient with holding winning trades and very impatient with holding losing trades. (more…)