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Trading Wisdom

  
  Education
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If we want to be successful as traders it is crucial that we have great filters. We must filter out all the noise that separates us from the actual price action. In the end it is just us versus the market. We need to seek  to learn how to trade from others and not look for trades. We have to play a lone hand because we have our own tolerance for pain, our own goals, and we should have our own trading plan with a robust methodology. Others do not know our time frame and we do not know theirs. Their position sizing may be ten times what ours is.

Before we trade we should have a watch list, a risk percent per trade, a methodology, and a trading plan. We should be running our trading like a business not a casino. Information and opinions can bias our trading. Be very careful about the information that you let into your mind. You should attempt to trade as close to your system and methodology as possible without allowing anyone’s opinions our thoughts to come between you and the charts. Actual price action is the king everyone’s opinions are just that, opinions. (more…)

What Does a $450M DaVinci Tell Us About Markets?

  
Analysis, Education

In Search of Market Signals in the $450 Million Da Vinci
Price contains information, but how much does an outlier art sale say about stocks or the economy?
Bloomberg, November 20, 2017
Economist Friedrich Hayek wrote that “price contains information.” So what information is contained in the almost a half billion-dollar price for a painting?
The Last da Vinci, as the “Salvator Mundi“ has been called, sold at auction last week for $450 million, a record and blowing past the previous high of $179 million paid for Picasso’s “Les Femmes d’Algers” in 2015.
But before we debate just what this does mean, let’s quickly dispatch with what is does not: This isn’t a sign of a bubble economy or a top in equities. Why? As we discussed last time out, a single outlier transaction is merely an anecdote, and not a market. Anecdotes tell us what a tiny subset of investors is doing with their money; it doesn’t measure the emotional state of the crowd. Bubbles reflect a collective madness, when the masses go crazy with greed. As noted previously:

They are…one-off transactions in a ludicrously small market dominated by a ludicrously wealthy clientele. Given the choice between quantifiable data or anecdotal tidbits, you should always choose the data.  So no, these sales are not proof of anything other than the simple truth that some people have very large bank accounts that they are unable to exhaust through normal profligacy or by paying insane prices for a handful of unique objects of art.

An IBM Hard Drive Being Loaded Onto An Airplane In 1956

  
Education, Life
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IBM-HARD DISK
 

This is a picture of an IBM hard drive being loaded onto an airplane in 1956. According to @HistoricalPics, which tweeted the picture, it’s a 5 mega-byte drive, and it weighed more than 2,000 pounds. 

To put that in context, 55 years later, the weakest iPhone 5S has a 16 gigabyte drive, about 3,200-times as big. And it weighs a quarter of a pound. The IBM hard drive could have stored exactly one iPhone picture, and nothing more.

Believe in Yourself and Your Judgement (Chapter III -Reminiscences of a Stock Operator )

  
  Education
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Livingstone lets us look over his views on the type of determination needed to win at this game.

         “A man must believe in himself and his judgment if he is to make a living at this game.”

He gives a few great examples of the hard lessons he learned by going with someone else’s opinion or trading advice. Your own opinion based on your own research, by trying it with money, is the only way to have the confidence to go against everyone else’s advice at the correct time.

He walks us through his learning phases, with the benefit of hindsight added like a mystery story, edging the reader to uncover the source of the self-admitted blind-spot in his trading. What general principal was he ignoring that could be so surely fatal?

“I was dead right and – I lost every cent I had!” (more…)

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