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Do you trade your opinions? Some warning signs

  1. You find it hard to be enthusiastic for something until you know that others oppose it.
  2. You have little interest in getting clear on what exactly is the position being argued.
  3. Realizing that a topic is important and neglected doesn’t make you much interested.
  4. You have little interest in digging to bigger topics behind commonly argued topics.
  5. You are less interested in a topic when you don’t foresee being able to talk about it.
  6. You are uncomfortable taking a position near the middle of the opinion distribution.
  7. You are uncomfortable taking a position of high uncertainty about who is right.
  8. You care far more about current nearby events than similar distant or past/future events.
  9. You find it easy to conclude that those who disagree with you are insincere or stupid.
  10. You are reluctant to change your publicly stated positions in response to new info.
  11. You are reluctant to agree a rival’s claim, even if you had no prior opinion on the topic.
  12. You are reluctant to take a position that raises the status of rivals.
  13. You care more about consistency between your beliefs than about belief accuracy.
  14. You go easy on sloppy arguments by folks on “your side.”
  15. You have little interest in practical concrete implications of commonly argued topics.
  16. Your opinion doesn’t much change after talking with smart folks who know more.
  17. You are especially eager to drop names when explaining positions and arguments.
  18. You find it hard to list weak points and counter-arguments on your positions.
  19. You feel passionately about a topic, but haven’t sought out much evidence.
  20. You are reluctant to not have an opinion on commonly discussed topics.
  21. More?

If u have any……..send me at [email protected]

Don't Get Trapped

1) Anchoring trap. The mind gives a disproportionate amount of weight to the first information received on a topic. Keeping an open mind and avoiding premature conclusions is a way to avoid this trap.

2) Status quo trap. Forecasts tend to perpetuate recent observations. If inflation has been high, it is expected to remain high. It is a psychological risk to assume something different. The authors suggest rational analysis within decision-making to avoid falling into this trap.

3) Confirming evidence trap. Individuals give greater weight to information that supports an existing point of view. Being honest to oneself about one’s motives, examining all evidence with equal rigor, and enlisting independent-minded people to argue against you are ways of mitigating this bias.

4) Overconfidence trap. Individuals overestimate the accuracy of their forecasts. Widening the range of expected possible outcomes is one way to mitigate this tendency.

5) Prudence trap. There is a tendency to temper forecasts that appear extreme. If a forecast turns out to be extreme and then wrong, it could be damaging to one’s career. Therefore, sticking to the herd is safer. The authors again suggest widening the range of expected possible forecasts to avoid falling into this trap.

6) Recallability trap. Individuals are overly influenced by events that have left a strong impression on a person’s memory. These events tend to be catastrophic or dramatic. To avoid falling into this trap, individuals should ground their conclusions in objective data rather than emotion or memories.

Doom and gloomers fight amongst themselves

bear-fight1Roubini says we have asset bubble everywhere and everything is going to end badly.

Jim Rogers says Roubini knows nothing and that he doesn’t see any bubble. Jim Rogers sees commodities going higher.

Peter Schiff takes a stab at Roubini and says Roubini doesn’t understand gold. Schiff says gold is going higher.

Harvard University financial historian Niall Ferguson claims he’s a better doom and gloomer than Roubini in terms of timing and accuracy.

Disarray in the bear camp is probably good for bulls.

What makes a trader consistently profitable?

There are three things:
 
1) Having an edge, which is some methodology for determining with reasonable accuracy the relative probability of the market price hitting your profit target before it hits your stop loss price.  An edge is provided by a set of trading strategies, and a set of rules for when to use which trading strategies (briefly, when to follow a trend, when to fade a trend, and when to stay out.)
 
2) The discipline and emotional fortitude to follow the rules of your trading rules flawlessly.
 
3) Sound risk and money management rules.  
 
Sound money management and risk control are the keys to being a profitable trader. It is not the prediction or the latest and greatest indicator that makes the profit in trading, it is how you apply sound trading discipline with superior cash management and risk control that makes the difference between success and failure.  (more…)

Everyone has a plan, until they get punched in the mouth

I heard Mike Tyson say this years ago, and it immediately stuck with me because of so many ties it has to trading your trading plan with focus, discipline, and repetition.

Our main focus in training new and veteran traders is to build a belief in the system through repetition. After seeing the performance of a trade over 150 times within a 2 month period, it becomes evident that you begin to move away from a fear-based internal dialogue regarding your trade. You already know the system is consistently profitable, so the only X-factor in the entire process is that little 6-inch universe between your ears. Now, the focus of accuracy has everything to do with you, the trader, following your rules with consistency and repetition and nothing to do with the system.

Now back to my original point. We have seen the trades. We know the system is profitable. We have simulated the system and are showing a profit. We are ready to trade live hard earned cash that we have an emotional attachment to. Every dollar we are trading equals a loaf of bread, so to speak. Our hard earned trading capital is now taking the INEVITABLE equity draw-down, as dictated by the system. We WILL lose trades, traders, this is a fact that we must embrace on all levels. But remember, contraction leads to expansion. Your draw-down will inevitably lead to a run-up. The KEY is NOT TO MISS IT!

Now, we’ve had the draw-down, and to put it bluntly we’ve “Been punched in the mouth”. THIS is where the magic happens. At this very moment what will you do? Will you let the fear and painful associations of the market dictate your trading executions? Or will you draw upon your training, having fully accepted that this equity swing is nothing more than another step to consistent profitability?

Will you continue to place those next trades with consistency? Will you remove all mpulsive trades from your trading style? Will you follow the trading plan that you’ve put so much thought and process into developing for yourself?

If you have a pen, WRITE THIS DOWN and tape it to your Monitor:

“WHEN I TRADE MY PLAN WITH CONSISTENCY AND REPETITION THE MONEY WILL FOLLOW.”

Remember, every trader gets punched in the mouth. The magic is how you apply
your trading when this happens.

Trading Profits in relate to Time and Accuracy

 

The size of profits of a trading system, is related to time and accuracy. They are inter-related and it is not possible to get the best out of all 3 factors in any trading system.

 

Before I elaborate further, I shall define what these 3 factors mean.

 

Size of profits – I am referring to the average amount of profits the system will earn per trade.

 

Time – The average length of time you held on to a trade.

 

Accuracy – The percentage that the system is correct and earns you a profit.

 

Big Profits = Long Time = Low Accuracy

 

For systems that aim for big profits, they must allow a greater range of fluctuations for the trade. By having a large trading range will in turn prevent you from getting stopped out so soon. Hence, you will be in a trade for a longer period of time. Besides having a larger profits, it will also serve you losses that are bigger, because your stop loss limit has to be further from your entry point. It is more difficult to grasp for the relationship with accuracy.

 

Small Profits = Short Time = High Accuracy (more…)

Trading Profits in relations to Time and Accuracy

The size of profits of a trading system, is related to time and accuracy. They are inter-related and it is not possible to get the best out of all 3 factors in any trading system.

Before I elaborate further, I shall define what these 3 factors mean.

Size of profits – I am referring to the average amount of profits the system will earn per trade.

Time – The average length of time you held on to a trade.

Accuracy – The percentage that the system is correct and earns you a profit.

Big Profits = Long Time = Low Accuracy

For systems that aim for big profits, they must allow a greater range of fluctuations for the trade. By having a large trading range will in turn prevent you from getting stopped out so soon. Hence, you will be in a trade for a longer period of time. Besides having a larger profits, it will also serve you losses that are bigger, because your stop loss limit has to be further from your entry point. It is more difficult to grasp for the relationship with accuracy.

Small Profits = Short Time = High Accuracy

On the contrary, a highly accurate trading system allows you to be right most of the time but each time when you are right, you take very small profits. This is possible by making very tight stops in your trades such that you lock in profits as soon as you make them. Hence, you will be in and out of the trades very fast and frequently. This is typical to intraday trading or mean reversion models or even band trading. (more…)

Kiev, Hedge Fund Masters

I took notes on Kiev’s book when I first read it, and I’m going to select four self-therapeutic passages from them for this post. I suspect that most of my notes are quotations, but I don’t think it’s important to check their accuracy, though I will provide page references.

* * *

By establishing a vision, you have promised to achieve something. The promise means you are giving yourself permission to begin to act in the realm of the impossible, to create all kinds of openings. In that one promise, you begin to abandon self-doubt and the need for approval. This way of being in the world lets loose huge reserves of energy and creates enormous possibilities. Yet none of this can happen until you take the first step forward in pursuit of a goal with no guarantee of outcome. (p. 218)

Living in the gap makes you vulnerable. Once you’re out there, on the cutting edge, you’ll suffer breakdowns as well as breakthroughs. Although it will not always be comfortable, living in the gap between where you are and where you want to be will make your days far more interesting and action packed than if you traded with the intention of avoiding pain and discomfort. (p. 229)

It is useful to note when an activity becomes tedious, dull, and routine and leads to withdrawal and avoidance. This is the time to consider whether you are facing obstacles and are retreating behind your survival needs or whether these feelings signify that you have reached your goal and now need to raise the stakes. (p. 236)

The development of mastery is, in a sense, an existential and experiential methodology, directed at what is and what can be. You invent your own future through commitment to a goal, identifying what is necessary to produce specific results, and learning how to handle the unknown. (p. 247)

Confidence

Confidence can be an important psychological tool for the trader – important enough to make the difference between a winning trade and a losing trade. When you develop your trading plan, it is obviously important that you have confidence in its accuracy and usefulness and in your belief that you can follow your plan closely and execute it successfully. 
Often, traders fall into a mental “I know it all” trap, where they use their confidence to nurture their ego instead of using it to be appropriately decisive in their trading and investing decisions. Such misplaced confidence can be crippling to trading success, because any potential influence from the environment (media, others’ opinions, etc.) that could sway the trader from sticking to his trading plan will have far more power. When a trader is caught in this type of trap, his ability to question his opinions and ideas diminishes. If his initial reaction to a suggestion is to accept it, he loses the capacity to question his acceptance; and if his initial reaction is to disagree, then he loses the capacity to question his disagreement, which can cause even the slightest suggestions from news, colleagues, and other influential sources to be magnified in the trader’s psyche.  (more…)

25 Unwritten Rules of Management

1. Learn to say, “I don’t know.” If used when appropriate, it will be often.
2. It is easier to get into something than it is to get out of it.
3. If you are not criticized, you may not be doing much.
4. Look for what is missing. Many know how to improve what’s there, but few can see what isn’t there.
5. Viewgraph rule: When something appears on a viewgraph (an overhead transparency), assume the world knows about it, and deal with it accordingly.
6. Work for a boss with whom you are comfortable telling it like it is. Remember that you can’t pick your relatives, but you can pick your boss.
7. Constantly review developments to make sure that the actual benefits are what they are supposed to be. Avoid Newton’s Law.
8. However menial and trivial your early assignments may appear, give them your best efforts.
9. Persistence or tenacity is the disposition to persevere in spite of difficulties, discouragement, or indifference. Don’t be known as a good starter but a poor finisher.
10. In completing a project, don’t wait for others; go after them, and make sure it gets done.
11. Confirm your instructions and the commitments of others in writing. Don’t assume it will get done!
12. Don’t be timid; speak up. Express yourself, and promote your ideas.
13. Practice shows that those who speak the most knowingly and confidently often end up with the assignment to get it done.
14. Strive for brevity and clarity in oral and written reports. (more…)