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Losers Average Losers

  
  Education
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There are so many concepts about the stock market that are taught in the classrooms, promoted throughout the media, and passed along from generation to generation but, unfortunately, most of them are FLAT OUT WRONG!

I decided to write a 5-part series (this is part 2 of 5) on the common misconceptions that really need to stop being promoted. Keep in mind, these are all my humble opinions, but after 16 years of trading and studying market history, one really begins to notice what works and what doesn’t.

Common Misconception #2 – Dollar Cost Averaging

Paul Tudor Jones is one of the greatest traders in market history. Why? Because he’s consistently profitable. The best “anything” in the world are the best because they perform at a consistent, superior level for long periods of time. Michael Jordan isn’t considered the best basketball player ever because he scored 30 points ONCE in a game. It’s because he averaged 30 points per game over his ENTIRE career. (more…)

10 Lessons

  
  Education
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learn-lead1. Markets tend to return to the mean over time.
2. Excesses in one direction will lead to an opposite excess in the other direction.
3. There are no new eras – excesses are never permanent.
4. Exponential rising and falling markets usually go further than you think.
5. The public buys the most at the top and the least at the bottom.
6. Fear and greed are stronger than long-term resolve.
7. Markets are strongest when they are broad and weakest when they narrow to a handful of blue-chips.
8. Bear markets have three stages.
9. When all the experts and forecasts agree – something else is going to happen.
10. Bull markets are more fun than bear markets.

The Tortoise and the Hare

  
  Education
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Once upon a time, there was a young hare, a hotshot rabbit investor who would always brag to anyone that would listen and that he was the smartest, fastest, best performing investor in the world. He would constantly tease the old tortoise about his slow, solid investment style.

Then, one day, the annoyed tortoise answered back: “There is no denying that you are very aggressive in your investment strategy. You take very high risks and get high returns. But even you can be beaten.”

The young hare squealed with laughter. “Beaten? By whom? Surely not by you. I bet there’s nobody in the world that can win against me, because I’m so good. If you think that you can beat me, why don’t you try?”

Provoked by such bragging, the tortoise accepted the challenge. Each of them put an equal amount of money into a new account and the race was on. The hare yawned sleepily as the meek tortoise trudged slowly off.

As might be expected, the tortoise invested in high quality blue chips, companies with household names.

The hare, as anticipated, invested his money in dotcom stocks and options.

You know the story. The aggressive hare jumped out to a big early lead. In a rising market, the highest risk stocks perform the best. This is called momentum investing. Money flows into the investments that are performing the best.

The hare, having jumped out to such a large early lead, stopped paying attention to the market environment. Basically, he fell asleep. He thought to himself, “I’ll have 40 winks and still remain way ahead of that stupid old turtle.” (more…)

10 Trading Lessons

  
  Education
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1. Markets tend to return to the mean over time.
2. Excesses in one direction will lead to an opposite excess in the other direction.
3. There are no new eras – excesses are never permanent.
4. Exponential rising and falling markets usually go further than you think.
5. The public buys the most at the top and the least at the bottom.
6. Fear and greed are stronger than long-term resolve.
7. Markets are strongest when they are broad and weakest when they narrow to a handful of blue-chips.
8. Bear markets have three stages.
9. When all the experts and forecasts agree – something else is going to happen.
10. Bull markets are more fun than bear markets.

10 Lessons

  
  Education
#  #  #  #  #  #  #  #  #  #  #

1. Markets tend to return to the mean over time.
2. Excesses in one direction will lead to an opposite excess in the other direction.
3. There are no new eras – excesses are never permanent.
4. Exponential rising and falling markets usually go further than you think.
5. The public buys the most at the top and the least at the bottom.
6. Fear and greed are stronger than long-term resolve.
7. Markets are strongest when they are broad and weakest when they narrow to a
handful of blue-chips.
8. Bear markets have three stages.
9. When all the experts and forecasts agree – something else is going to happen.
10. Bull markets are more fun than bear markets.

Ten Trading Lessons

  
  Education
#  #  #  #  #  #  #  #  #  #  #

teacher-point1. Markets tend to return to the mean over time.
2. Excesses in one direction will lead to an opposite excess in the other direction.
3. There are no new eras – excesses are never permanent.
4. Exponential rising and falling markets usually go further than you think.
5. The public buys the most at the top and the least at the bottom.
6. Fear and greed are stronger than long-term resolve.
7. Markets are strongest when they are broad and weakest when they narrow to a handful of blue-chips.
8. Bear markets have three stages.
9. When all the experts and forecasts agree – something else is going to happen.
10. Bull markets are more fun than bear markets.

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