Archives of “adage” tag

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The only way to be successful in the markets

  
  Education
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Successful businesswomanSome might have longer holding periods they like to stick to. Some might prefer switching positions on a much more frequent basis. It all comes down to the same. Getting exposure to opportunities. Here’s a quote from Nassim Nicholas Taleb’s book ‘The Black Swan’ describing that phenomenon. Quote from page 170:

“… seemed to follow implicitly, though not explicitly, Louis Pasteur’s adage about creating luck by sheer exposure. ‘Luck favors the prepared,’ Pasteur said, and, like all great discoverers, he knew something about accidental discoveries. The best way to get maximal exposure is to keep researching. Collect opportunities…”

So whenever a trade doesn’t work keep in mind the outcome of one single trade doesn’t really matter. What it all comes down to is to repeat the process over and over again. In the long run doing research on a regular basis and getting exposure to opportunities is the only way to be successful in the markets.

William Eckhardt-Quotes

  
Analysis, Education
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I take the point of view that missing an important trade is a much more serious error than making a bad trade. 

Buying on retracement is psychologically seductive because you feel you’re getting a bargain versus the price you saw a while ago. However, I feel that approach contains more than a drop of poison. 
You shouldn’t plan to risk more than 2 percent on a trade. Although, of course, you could still lose more if the market gaps beyond your intended point of exit. 
I haven’t seen much correlation between good trading and intelligence. Some outstanding traders are quite intelligent, but a few aren’t. Many outstanding intelligent people are horrible traders. Average intelligence is enough. Beyond that, emotional makeup is more important. 
The answer to the question of whether trading can be taught has to be an unqualified yes. Anyone with average intelligence can learn to trade. This is not rocket science. 
If you bring normal human habits and tendencies to trading, you’ll gravitate toward the majority and inevitably lose.  (more…)

Trading Should Be Effortless

  
  Education
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  • Money comes in bunches.

That one says it all. You can’t force trades. You can’t simply work harder in order to be ‘in sync’. Sometimes you are, sometimes you are not. You simply have to accept that as being part of the trading business. What you can do, is to closely monitor if your performance is in sync with the market’s performance. If the markets make new highs and your overall portfolio is going down something is wrong. You need to address that issue. Fast. The best way is to step aside and drastically reduce exposure and risk. That’s what I did.

  • Trading should be effortless.

A true piece of wisdom. In my experience when I trade well it is like shooting fish in a barrel. Almost everything works. I don’t need to be overly patient with positions. The money comes in very fast. That’s exactly how trading should be. The exact opposite was the case during the first 2 months of this year. So I did what I had to do. I recognized the situation for what it was and admitted my efforts were not leading my portfolio anywhere. It was like folding when you are dealt a bad hand in poker. So I folded. Now I am waiting for the next hand. If it is a bad one I fold again. If a series of trades start to really go my way I push it hard and increase exposure and trade aggressively.

  • When in doubt stay out.

This one is key. That’s how I interpret the adage: It doesn’t mean you don’t trust your instincts or your methodology. As a trader you should adapt to new situations. You constantly analyze the markets and your performance. Then you adjust your trading. Then you compare your expectations with the actual outcome. Then you adjust your trading. Then you repeat the process. At times things simply do not work. That’s when doubt creeps in. You know something is not ‘feeling right’. Your job is to protect your capital. Your job is not ‘to be right’. Put another way: You should be able to exit or reduce exposure without the need for explanations. The markets usually give you those explanations at some later point in time.

On Losses (and Profits).

  
  Education
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  • ‘Tradings only real secret is… The best loser is the long-term winner’ – Phantom
  • “Trading is a losing game, the best loser is the long-term winner” – Anonymous.
  • ‘Losses can either be lost money, or tuition in the school of trading’ – Courtesy of Mark Moskowitz.
  • ‘The worst advice I use to get was. – ‘No one went broke taking a profit’’. – Courtesy of John Berra.
  • “It seems that the necessary thing to do is not to fear mistakes, to plunge in, to do the best that one can, hoping to learn enough from blunders to correct them eventually.” – Abraham Maslow
  • ‘“Learn to like your losses”. Why? Because they are small!’ – Courtesy of Stuart A.Brown.
  • “One common adage…that is completely wrongheaded is: You can’t go broke taking profits. That’s precisely how many traders do go broke. While amateurs go broke by taking large losses, professionals go broke by taking small profits.” – William Eckhardt.
  • “Its not about being right or wrong, rather, its about how much money you make when you’re right and how much you don’t lose when you’re wrong.” – George Soros.
  • “The first loss is the best loss.” – Jim Rogers.
  • “Losers average Losers”…Paul Tudor Jones.
  • “You learn nothing from your winners and everything from your losers.” – Courtesy of Jeff Horn.
  • ·“To become a Master Trader, you must first be a successful loser.” – Jeff Horn.

William Eckhardt Quotes

  
  Education
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Partner of perhaps the best-known futures speculator of our time, Richard Dennis.Created the famous trading group known as the Turtles. William has averaged over 62 percent return.  

“I take the point of view that missing an important trade is a much more serious error than making a bad trade”. 
”Buying on retracement is psychologically seductive because you feel you’re getting a bargain versus the price you saw a while ago. However, I feel that approach contains more than a drop of poison.”
”You shouldn’t plan to risk more than 2 percent on a trade. Although, of course, you could still lose more if the market gaps beyond your intended point of exit.”
”I haven’t seen much correlation between good trading and intelligence. Some outstanding traders are quite intelligent, but a few aren’t. Many outstanding intelligent people are horrible traders. Average intelligence is enough. Beyond that, emotional makeup is more important.”
”The answer to the question of whether trading can be taught has to be an unqualified yes. Anyone with average intelligence can learn to trade. This is not rocket science.”
”If you bring normal human habits and tendencies to trading, you’ll gravitate toward the majority and inevitably lose.”
”Watch idly while profit-taking opportunities arise, but in adversity run like a jackrabbit.”
”One adage that is completely wrongheaded is that you can’t go broke taking profits. That’s precisely how many traders do go broke. While amateurs go broke taking large losses, professionals go broke by taking small profits.”
”What feels good is often the wrong thing to do.”
”Human nature does not operate to maximize gain but rather to maximize the chance of a gain. The desire to maximize the number of winning trades (or minimize the number of losing trades) works against the trader. The success rate of trades is the least important performance statistic and may even be inversely related to performance.”
”Two of the cardinal sins of trading – giving losses too much rope and taking profits prematurely – are both attempts to make current positions more likely to succeed, to the severe detriment of long-term performance.”
”Don’t think about what the market’s going to do; you have absolutely no control over that. Think about what you’re going to do if it gets there.”
”It is a common notion that after you have profits from your original equity, you can start taking even greater risks because now you are playing with ‘their money’. We are sure you have heard this. Once you have profit, you’re playing with ‘their money’. It’s a comforting thought. It certainly can’t be as bad to lose ‘their money’ as ‘yours’? Right? Wrong. Why should it matter whom the money used to belong to? What matters is who it belongs to now and what to do about it. And in this case it all belongs to you.”  

Jesse Livermore quote

  
  Education
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jjlivermoreIf you had read Livermore, the guy’s puzzled too.
Let me quote an excerpt from Richard Smitten’s How to Trade Like Jesse Livermore

Livermore believed that the game of speculation is the most uniformly fascinating
game in the world. But it is not a game for the stupid, the mentally lazy, or the person of inferior emotional balance, or for the get-rich-quick adventurer. They will die poor.
There is a very true adage that Livermore loved: “You can beat a horse race, but you can’t beat the races.”
So it is with market operations. There are times when money can be made investing and speculating in stocks, but money cannot consistently be made by trading every day or every week during the year. Only the foolhardy will try it.

Master Talk Presents…William Eckhardt!

  
  Education
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“One adage that is completely wrongheaded is that you can’t go broke taking profits. That’s precisely how many traders do go broke. While amateurs go broke taking large losses, professionals go broke by taking small profits. What feels good is often the wrong thing to do. Human nature does not operate to maximize gain but rather to maximize the chance of a gain. The desire to maximize the number of winning trades (or minimize the number of losing trades) works against the trader. The success rate of trades is the least important performance statistic and may even be inversely related to performance. Two of the cardinal sins of trading – giving losses too much rope and taking profits prematurely – are both attempts to make current positions more likely to succeed, to the severe detriment of long-term performance. Don’t think about what the market’s going to do; you have absolutely no control over that.
Think about what you’re going to do if it gets there. It is a common notion that after you have profits from your original equity, you can start taking even greater risks because now you are playing with “their money”. We are sure you have heard this.
Once you have profit, you’re playing with “their money”. It’s a comforting thought. It certainly can’t be as bad to lose “their money” as “yours”? Right? Wrong. Why should it matter whom the money used to belong to? What matters is who it belongs to now and what to do about it. And in this case it all belongs to you.”

The Win/Loss Ratio

  
  Education
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42-21056354“One common adage on this subject that is completely wrongheaded is: You can’t go broke taking profits. That’s precisely how many traders do go broke. While amateurs go broke by taking large losses, professionals go broke by taking small profits. The problem in a nutshell is that human nature does not operate to maximize gain but rather to maximize the chance of a gain. The desire to maximize the number of winning trades (or minimize the number of losing trades) works against the trader. The success rate of trades is the least important performance statistic and may even be inversely related to performance. … (more…)

Six One Liners for Traders

  
  Education
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“Don’t trade just because you can afford to lose.” 

 “Practice makes perfect is an old copybook adage that works well in the market place.”

 “If a trade fails to come out right, the error will be found in the operator-not the market.”

  “Trading is simple another form of business.  Treat it as such.”

  “Trend to the investor is like the vein of gold to the miner, who must follow the vein faithfully if he expects to get the yellow metal.”

 “Stocks are made to buy and sell…not to be bought and held.”

Trading Wisdom

  
  Education
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Trading wisdom“The trend is your friend” – perhaps the best known trading adage of all time, it is meant to remind traders to always identify the prevailing trend, and never to trade against it, but rather wait for retracements and then enter trades in the direction of the trend.

“The market can stay irrational longer than you can stay solvent” – The way the market reacts to certain news or events may not seem rational at times, but there is no sense in trying to fight the market – it moves where it moves and does not care one bit about your opinion.

“A fool and his money are soon parted” – If you are not smart about where you put your money, you will most likely lose it.

“The trading rules I live by are: (a) Cut losses, (b) Ride Winners, (c) Keep bets small, (d) Follow the rules without question, and (e) Know when to break the rules.” – Rules are important, but following them blindly does not necessarily lead to success. Know which conditions produced those rules in the first place, so that when the conditions change, the rules can too.

“Amateurs Focus On Rewards. Professionals Focus on Risk.” – Experienced traders think first about how much they can lose on a trade, base their calculations on that, and then see if they are happy with the potential reward the trade offers. Novices usually do the opposite, blinded by the allure of quick riches.

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