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Cut your losses and let your winners ride

  
  Education
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This quote is the perfect corollary to Livermore’s. Just as he preached “sitting”, letting your winners ride is the same idea. If you have on a position and it’s working, let it make you money. Don’t cut it prematurely for the sake of booking a small profit. Don’t get scared and exit on the first reaction, when all of your trading rules dictate staying in. If it’s a winner, and it’s working, then let it ride. Winners are good—embrace them.

The important flip side is how to treat losing trades. The first lesson is that losers have to be cut at some point.  Otherwise, a losing trade can keep eating away at your P&L, undoing the profits from any winning positions. If you cut losses at a pre-defined level, then they stop—and presumably your wins can be larger than your losses.

The math behind this is compelling. If you assume that your average winner make 1.6x what your average loser loses, then you only need to be right 40% of the time in order to make money consistently. By keeping the leash short on your losses, then you can let the math of statistical expectation work in your favor. Cut losses and let your winners ride.

There is another aspect to this. A loser isn’t just a trade where you get stopped out at a pre-defined loss limit. Imagine a trade that isn’t making money and has just been languishing on your books—this is also a loser. Cut it, free up financial and mental capital  and move on.

Most Common Advice is Ineffective

  
  Education
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“Plan the trade, and trade the plan!” is perhaps the most common advice given to traders. As far as advice goes, it’s well meaning, but unfortunately falls well short of addressing the problem most traders actually face. 

Looking at the advice, it has two parts. The first part says you need a plan. No argument there. But the second part, about executing the plan, that’s where the problems appear. Why?

The two parts to the advice ‘plan the trade’ and the ‘trade the plan’ require two very different skill sets. Without understanding the different skills required, it’s highly likely that you will continue to regularly veer from your plan.

Here’s the disconnect. Planning the trade depends on your intellect. And most of the time, the development of the plan does not occur in the heat of battle.  It’s relatively easily to let your intellect guide you, to be the primary driver when you’re not in the heat of battle. But in the heat of battle, when we have to decide right now whether to enter or exit, an entirely different situation occurs. (more…)

We Dare to Challenge

  
  Education
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Always Remember –The principles of successful stock speculation are based on the supposition that people will continue in the future to make the mistakes that they have made in the past.

Yes.  Its confidence in our work than any aberration.  None else in 100 crore Indians have told u about the bear onslaught, not only on Indian Exchanges but across the Globe. Check our web-site, with normal eyes or with magnifiers too. We are cautioning since Last Week about the emerging Bear-spell.

 Yesterday under the caption “Dil Se” this was our adverbatim:  Time Theory Indicates freefall could start tomorrow and heavy selling across the globe in next 4-5 sessions.  On Rise SELL-SELL-SELL is my Mantra.

You all can Click here & see the Yesterday’s written article 

Do I need to enumerate about todays “Descending Triangle Formation” that would break Nifty Futures by 250 points to 4950 levels !!!!!!

 I don’t know if the readers have at least spent 5-10 minutes to read and act upon.  But all our subscribers have minted money by following shorting-calls.  The newly enrolled members must have earned back their entire fee paid to me in single session. 

 Now u all tell: Is it not an understatement that we are unique, special, perfect, accurate, superb, bewildering, …!!!!!  This is precisely the reason why we have crossed 1 Million clicks in just 9 months.

 Others are singing:   

 But Our Members are Bubbling: 

 Technically Yours

Anirudh Sethi/Baroda

Great NEWS :IMF to provide give €10 Billion to Greece

  
Analysis, Economy, Education
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The International Monetary Fund is looking at raising its share of Greece’s financial rescue package by €10bn ($13.2bn) amid fears that the planned €45bn bail-out will fail to prevent the country’s debt crisis from spiralling out of control.

Senior bankers and officials in Washington and Athens told the Financial Times that the IMF was in talks to increase its aid contribution by €10bn. The fund could make that sum available under a planned three-year loan, according to an Athens-based analyst familiar with the talks.

Investors and policy specialists said that expectations of the size of the three-year package in Washington policy circles had increased to at least €70bn. The EU has so far proposed to provide €30bn and the IMF €15bn. “The fund’s current ceiling for Greece is €25bn and the release of the extra amount is under discussion,” the analyst said. The IMF declined to comment on the size of the package.

Dear Readers & Traders ,We are again first in India to give this NEWS.And in afternoon or late by evening once this NEWS will be out.Then watch huge short covering across the Globe.

Technically Yours

ASR Team

Baroda ,India

How Mohnish Pabrai Crushed The Market By 1100% Since 2000

  
Analysis, Education
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Mohnish Pabrai’s long-only equity fund has returned a cumulative 517% net to investors vs. 43% for the S&P 500 Index since inception in 2000.  That’s outperformance of 474 percentage points or 1103 percent. [Disclosure: I and/or some of my clients are long Pabrai’s fund or specific holdings within his fund.]

To anticipate your next question: Yes, his fund is closed to new investors.  But there is still hope.  Read on — sadist that I am, I put the answer at the end

Pabrai is a classic value investor in the tradition of Warren Buffett, Charlie Munger, Seth Klarman and Joel Greenblat. I recently had an opportunity to hear him talk and thought I’d pass along some of my bright yellow highlighting.

How to start investing (more…)

PATIENCE & DISCIPLINE

  
  Education
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  god-grant-me1 A trader has to have patience & discipline to succeed.
The bottom line is – you need to work out a plan, and then stick to it…regardless.
If you decide on trading only a particular strategy, then you must wait for that setup to occur. In the meanwhile, if price makes some moves, you should not trade those, simply because they do not fit within your plan. 
Psychologically, you need a lot of discipline to stick to a plan, because you always feel you are missing out on the moves.
And if you are trading full time, then this becomes a very big issue. Since you keep waiting for a trade & if the opportunity does not occur, then you get tempted to twist your plan & get into the action…..which is the surest way to disaster.
One can make a living from trading…provided it’s done in the correct way.
It’s not an overnight-get-rich-scheme.
It has to be built up slowly & takes a lot of effort & dedication.
Once you accept this fact, it becomes somewhat easier

20 Habits of Wealthy Traders

  
  Education
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1)      Patient with winners and impatient with losers
2)      Making money is more important than being right
3)      View Tech Analysis as a picture of where traders are lining up to buy and sell
4)      Before they enter every trade they will know profit target or stop exit
5)      Approach trade no.5 with the same conviction as the previous 4 losing trades
6)      Use naked charts
a)      As we mature we begin peeling off indicators
b)      Prices action is key
7)      Comfortable making decisions with incomplete information
8)      Stopped trying to pick tops & bottoms long ago
a)      They make their money in the meat/middle of a trend (wait for confirmation)
b)      A trend is much more likely to continue than it is to reverse
9)      Do not think of the market as expensive or cheap
a)      Ignore whether you think something is overpriced or understand, think price action
10)  Aggressive with trade size when doing well or modest when not
a)      Do more of what is making, less of what is not
11)  Realised that the market will be open tomorrow (more…)

Warren Buffett: How I Choose The Next Person To Run Berkshire Hathaway

  
Analysis, Education
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“Four years ago, I told you that we needed to add one or more younger investment managers to carry on when Charlie, Lou and I weren’t around. At that time we had multiple outstanding candidates immediately available for my CEO job (as we do now), but we did not have backup in the investment area.

It’s easy to identify many investment managers with great recent records. But past results, though important, do not suffice when prospective performance is being judged. How the record has been achieved is crucial, as is the manager’s understanding of – and sensitivity to – risk (which in no way should be measured by beta, the choice of too many academics). In respect to the risk criterion, we were looking for someone with a hard-to-evaluate skill: the ability to anticipate the effects of economic scenarios not previously observed. Finally, we wanted someone who would regard working for Berkshire as far more than a job.

When Charlie and I met Todd Combs, we knew he fit our requirements. Todd, as was the case with Lou, will be paid a salary plus a contingent payment based on his performance relative to the S&P. We have arrangements in place for deferrals and carryforwards that will prevent see-saw performance being met by undeserved payments. The hedge-fund world has witnessed some terrible behavior by general partners who have received huge payouts on the upside and who then, when bad results occurred, have walked away rich, with their limited partners losing back their earlier gains. Sometimes these same general partners thereafter quickly started another fund so that they could immediately participate in future profits without having to overcome their past losses. Investors who put money with such managers should be labeled patsies, not partners. (more…)

Up 62% in 9 Months

  
Analysis, Education, US Market
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SPX-6MONTHIt has been exactly nine months since the S&P 500 bottomed on March 9th at 676.53.  Since then, the index has rallied 62%.  Below we provide a chart of the rolling 9-month change (%) for the S&P 500 going back to 1928.  As shown, 1933 was the only other time when the S&P 500 had a bigger 9-month gain.  The 9-month period ending on May 12th, 1983 is the next best behind the current one with a gain of 60%.  Also, the 9-month 62% gain was preceded by a 9-month decline of 51%.  The only time that the index fell more over a 9-month period was in 1931/32 when it dropped 68%.  It’s easy to forget how crazy things were over the last 18 months, but stats like these provide a staggering refresher.

Anger

  
  Education
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As traders, fear and greed are the two emotions that we commonly handle in our trading decisions.

But I believe another emotion that we also sometimes experienced would be – anger.

Most traders have learned to be calm and sensible during trading. But there would certainly be times times when we fumed at missing out a fantastic trade, for not buying more contracts of a great trade, or frustrated for committing that same trading blunder again.

We would blame just about anything or anyone when our trading suffered. Somehow we didn’t realize that the anger have originated from us.

I recently read a book called “Zero Limits” co-written by Dr Joe Vitale & Dr Hew Len. The book was quite an eye-opening read. It mentioned that we are the one who are fully responsible for any circumstances which are happening within & around us.

When we encountered another person pouring out his or her frustrations, whether they were meant for us or not, we should accept that we were partly responsible for that happening, since his or her frustrations had come into our lives.

Naturally, we are responsible for our own anger too.

The way to resolve this would be, strange it may sound, is to keep cleansing ourselves by constantly repeating the phrases “I love you”, “I’m sorry”, “Please forgive me” and “Thank you” to ourselves.

According to the book, these are simple but powerful words that we convey to the Divine. We connect to the Divine by expressing our love and gratitude to him. At the same time, we seek the Divine’s forgiveness of our wrong doings.

Saying these 4 phrases will cleanse the memories of greed, fear and anger associated with anything (including trading) as we give in to the Divine to handle the situation for us.

We would experience a peace of mind that the Divine is taking care of us. Another positive outcome of cleansing ourselves is that we are now open to receive the inspirations from the Divine for us to act upon.

I encourage you to read more about this ancient Hawaiian practice called Ho’oponopono from “Zero Limits” to experience this positive feeling.

I hope that in time you will gradually banish your anger not only in your trading but also in other parts of your life.

“I love you”, “I’m sorry”, “Please forgive me”, “Thank you”.

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