rss

Stop It

There’s an old joke about the investor who never used any stop losses. His friend knew his big positions were getting crushed.
Out of concern, the friend asked, “How are you sleeping?”
“Like a baby” he answered.
“Really? You aren’t nervous or upset?”
“I sleep like a baby” he repeated.
“That’s amazing. I’d never be able to sleep through the night with those types of losses.”
“Who said anything about sleeping through the night? I said I slept like a baby: I wake up every two hours, wet myself and cry for 30 minutes before falling back to sleep.”
That’s why risk management is so critical: to save you from sleeping like a baby, and in the long run to save you a lot of money.

There’s a reason flight attendants show you where the emergency exits are before takeoff. The same thinking should apply to investors. Prudent investors have a sell strategy in place beforethey get involved with a stock. Using any of these stop strategies helps keep your emotions out of the process when an investing emergency arises.

Think More, React Less

Yesteraday finally watched Inception over the weekend and found it to be the most enjoyable movie so far of the summer. Of course, that’s not saying much as we continue to despise much of the garbage coming out of Hollywood these days, but we both found the movie fascinating.

One of the things in the movie that got me to thinking is the concept that when we sleep our minds keep working through problems at a higher level in order find and create solutions. I don’t know about you, but I immediately identified with this. In fact it caused me to remember something I use to do many years ago while in college  but haven’t been doing lately due to my early-morning “up at 5″ work schedule. That is, whenever I ran into a difficult impasse in my research and work, I would often spend the last 30 minutes before bed simply thinking and studying the problem I was facing. Then after going to bed while I was asleep my mind would continue working on it so that when I would awake the next morning I’d have a new angle or approach to work on.

While the process didn’t always work and sometimes resulted in an unrestful night’s sleep as I tossed and turned throughout the night, by taking time out of my day to think about a problem without distractions before bed at times did enable me to find creative solutions that seemed to work more often than not. Although I’ve done the same thing for years through daily meditation (20 minutes each and every day), I must confess I think there is something to the process of preparing your mind to work on problems while you sleep and completely free from distractions, especially if you’re faced with a particularly cumbersome or complicated challenge.

Many of you are probably not surprised to hear me say that I think time spent to concentrated thought without any distractions is something I think many traders lack these days. As all of us continued to be constantly bombarded with real-time information, I think many have become far more reactionary than “thought” driven. At some level that is ok for some strategies (like day trading for example), but it wreaks havoc on others.

It has also been my experience through working one-on-one with members in the mentorship group that most are not devoting enough “think time” in their daily routines. In my experience, the average person only takes less than 5 minutes a day (if that) to actually think through their trades, strategies, and plans. That’s not enough! Not by a long shot!

For that reason alone, mixing up your routine to enable your mind to think without distractions while you sleep may be at least something you’ll want to try. While I know from experience that I always receive dubious feedback whenever I recommend utilizing meditation and breathing techniques to help clear the mind, boost productivity, and overall performance, you may want to at least try mixing up your work schedule a little bit in order to gear and ramp up your mental state more effectively. In addition, if you’re not devoting some time every day (at least 30 minutes) free from all distractions to think about your strategies, positions, and performance, then I truly believe you are not really giving yourself the best chance for success.

The more the world speeds up and becomes even more reactionary, the more important I think it will be for those of us engaged in the markets to think more and react less.

Focus & Discipline

The stock market is always one step ahead of you. The sooner you accept this fact, the better for your trading results. It helps to think of the market like the rabbit on the rail at the greyhound racetrack. As an investor, you should never mistake yourself for the rabbit or else the market will have to humble you and remind you that you are just a dog. The best you can expect to be is a greyhound in close pursuit, tethered to this market rabbit by an invisible rope. The fact is that the market rabbit is not really in the race. You are racing your fellow greyhounds. They are the ones whom you want to stay out in front of.

The questions you should ask are twofold. The first question is how to stay tethered to this rabbit. The second question is how closely tethered you actually want to be. Candidly answering the first may result in your answering the second by default. So focus on the first question and then ask yourself this: what you are willing to do each day to maintain your connection to the market? Your personal daily circumstances as well as your emotional commitment and discipline should guide you to generate a reasonable answer. With those inputs, you can then decide whether you allocate 30 minutes a day or 30 minutes a week. (more…)

Sixty Ways To Make Life Simple Again

  1. Don’t try to read other people’s minds.  Don’t make other people try to read yours.  Communicate.
  2. Be polite, but don’t try to be friends with everyone around you.  Instead, spend time nurturing your relationships with the people who matter most to you.
  3. Your health is your life, keep up with it.  Get an annual physical check-up.
  4. Live below your means.  Don’t buy stuff you don’t need.  Always sleep on big purchases.  Create a budget and savings plan and stick to both of them.
  5. Get enough sleep every night.  An exhausted mind is rarely productive.
  6.  Get up 30 minutes earlier so you don’t have to rush around like a mad man.  That 30 minutes will help you avoid speeding tickets, tardiness, and other unnecessary headaches.
  7. Get off your high horse, talk it out, shake hands or hug, and move on.
  8. Don’t waste your time on jealously.  The only person you’re competing against is yourself.
  9. Surround yourself with people who fill your gaps.  Let them do the stuff they’re better at so you can do the stuff you’re better at.
  10. Organize your living space and working space.  Read David Allen’s bookGetting Things Done for some practical organizational guidance.
  11. Get rid of stuff you don’t use.
  12. Ask someone if you aren’t sure.
  13. Spend a little time now learning a time-saving trick or shortcut that you can use over and over again in the future.
  14. Don’t try to please everyone.  Just do what you know is right.
  15. Don’t drink alcohol or consume recreational drugs when you’re mad or sad.  Take a jog instead. (more…)

Trading Wisdom

There’s an old joke about the investor who never used any stop losses. His friend knew his big positions were getting crushed.

Out of concern, the friend asked, “How are you sleeping?”

“Like a baby” he answered.

“Really? You aren’t nervous or upset?”

“I sleep like a baby” he repeated.

“That’s amazing. I’d never be able to sleep through the night with those types of losses.”

“Who said anything about sleeping through the night? I said I slept like a baby: I wake up every two hours, wet myself and cry for 30 minutes before falling back to sleep.”

That’s why risk management is so critical: to save you from sleeping like a baby, and in the long run to save you a lot of money.

—There’s a reason flight attendants show you where the emergency exits are before takeoff. The same thinking should apply to investors. Prudent investors have a sell strategy in place beforethey get involved with a stock. Using any of these stop strategies helps keep your emotions out of the process when an investing emergency arises.

Stoploss for Traders

There’s an old joke about the investor who never used any stop losses. His friend knew his big positions were getting crushed.

Out of concern, the friend asked, “How are you sleeping?”

“Like a baby” he answered.

“Really? You aren’t nervous or upset?”

“I sleep like a baby” he repeated.

“That’s amazing. I’d never be able to sleep through the night with those types of losses.”

“Who said anything about sleeping through the night? I said I slept like a baby: I wake up every two hours, wet myself and cry for 30 minutes before falling back to sleep.”

That’s why risk management is so critical: to save you from sleeping like a baby, and in the long run to save you a lot of money.

There’s a reason flight attendants show you where the emergency exits are before takeoff. The same thinking should apply to investors. Prudent investors have a sell strategy in place before they get involved with a stock. Using any of these stop strategies helps keep your emotions out of the process when an investing emergency arises.