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Warp Speed or Turtle Speed?

  
  Education
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A lot of statistics are published about the number of traders that are ’successful’ even though we don’t always receive their definition of successful.

Whether it is 70% or 95% of new traders that are said to lose all of their capital in the first 30-60 days, the real question is WHY??

In almost every case that I hear about when a person states that they quit trading because they lost all of their money in the first 30-60 days so they got discouraged and said that trading was not for them, these individuals attempted to move too fast when they started. They had acquired very little, if any, type of training and then jumped into a live account without any direction or plan.

Anyone who steps into the trading world (or any endeavor) without training to acquire the skills needed to approach the new program is setting themselves up for a very challenging situation and generally more failures than successes.

You can approach a new situation in life at warp speed and take the consequences or at the speed of a turtle and build your skills and experience so as to eventually acquire warp speed movement, but with turtle-like results, which is what the turtle always experienced when he raced the rabbit….. Success!!

17 Keys To Success

  
  Education
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Jim Rogers’ Keys to Success (taken from the titles and sub headings of each chapter of the new book, “A Gift To My Children”):
1. Do not let others do your thinking for you
2. Focus on what you like
3. Good habits for life & investing
4. Common sense? Not so common
5. Attention to details is what separates success from failure
6. Let the world be a part of your perspective
7. Learn philosophy & learn to think
8. Learn history
9. Learn languages (make sure Mandarin is one of them)
10. Understand your weaknesses & acknowledge your mistakes
11. Recognize change & embrace it
12. Look to the future
13. “Lady Luck smiles on those who continue their efforts”  
14. Remember that nothing is really new
15. Know when not to do anything
16. Pay attention to what everybody else neglects
17. If anybody laughs at your idea view it as a sign of potential success

Peter Lynch on Picking Bottoms

  
Analysis, Education

– If they don’t scare you out, they will wear you out

Bottom fishing is a popular investor pastime, but it’s usually the fisherman who gets hooked. Trying to catch the bottom on a falling stock is like trying to catch a falling knife. It’s normally a good idea to wait until the knife hits the ground and sticks, then vibrates for a while and settles down before you try to grab it. Grabbing a rapidly falling stock results in painful surprises, because inevitably you grab it in the wrong place. If you get interested in buying a turnaround, it ought to be for a more sensible reason than the stock’s gone down so far it looks like up to you. Maybe you realize that business is picking up, and you check the balance sheet and you see that the company has $ 11 per share in cash and the stock is selling for $ 14. But even so, you aren’t going to be able to pick the bottom on the price. What usually happens is that a stock sort of vibrates itself out before it starts up again. Generally this process takes two or three years, but sometimes even longer.

How many times have you heard people say this? Maybe you’ve said it yourself. You come across some stock that sells for $ 3 a share, and already you’re thinking, “It’s a lot safer than buying a $ 50 stock.” I put in twenty years in the business before it finally dawned on me that whether a stock costs $ 50 a share or $ 1 a share, if it goes to zero you still lose everything. If it goes to 50 cents a share, the results are slightly different. The investor who bought in at $ 50 a share loses 99 percent of his investment, and the investor who bought in at $ 3 loses 83 percent, but what’s the consolation in that?

The point is that a lousy cheap stock is just as risky as a lousy expensive stock if it goes down. If you’d invested $ 1,000 in a $ 43 stock or a $ 3 stock and each fell to zero, you’d have lost exactly the same amount. No matter where you buy in, the ultimate downside of picking the wrong stock is always the identical 100 percent.

Sometimes it’s always darkest before the dawn, but then again, other times it’s always darkest before pitch black.

Five Defining Features of Market Pros

  
  Education
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Upon thinking about the differences between the highly successful traders I recently talked with and their less successful counterparts, five features stand out. Pretty much everything else follows from these five:.

1) The less successful traders are anticipating market movement and trading accordingly. The highly successful traders are identifying asset class mispricings and trading off those.

2) The less successful traders are trading particular instruments and pretty much stick to those. The highly successful traders recognize that any combination of trading instruments can be considered an asset class and appropriately priced (and gauged for mispricing).

3) The less successful traders think of their market as *the* market. The highly successful traders focus on interrelationships among markets that cut across nationalities and asset classes.
4) The highly successful traders place just as much emphasis on understanding markets as predicting them. The less successful traders don’t ask “why” questions.

5) The less successful traders are convinced they have proprietary information of value that they must not disclose to anyone. The highly successful traders use their proprietary information to selectively share with other highly successful participants, thereby gaining a large informational edge.

If I had to use one phrase to capture the essence of the highly successful traders, it would be analytical creativity. These traders are creative in their thinking about markets and rigorous in their pursuit of this creativity

5 Thoughts for Traders-Must Read

  
  Education
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1.  We want all trades to be winners. The foolproof system for trading profits is attractive and the seller of such systems can be convincing, yet the profits are elusive.  The market could care less about our system, a past trading record, or the trading record of the one selling the system.  You do know that the market’s attorney requires that the following be posted in a prominent place…like on our foreheads beside the big L sign!: “Past results are not indicative of future returns.”  By the way, the market says, “you’re doing it wrong”.

2.  We want to add to losers. The last time I checked the only reason we add to a loser is when the discussion is about our weight!  Get on the scales and add up more losing pounds!  Be the BIGGEST LOSER!  The market, however, says the way to tip the scales in our favor is to add to the winners and lighten up on the losers.  To do otherwise is to “do it wrong”.

3.  We want to be right.  Two wrongs don’t make a right in life but in the stock market two wrongs (and plenty more) will help you get on the right road to making money.   The market says the trading game is about making money not about stroking the ego.  The “right” road is the “wrong” road when your on Wall Street.  Hey, if  you doing it to be right, then you’re “doing it wrong!” (more…)

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