One of my all-around favorite quotes on trading is actually about poker.
It comes from cash game pro Tommy Angelo, who says, “The best way to get better at poker is to get better at everything and let poker rise with the tide.”
An intimidating thought for some. To REALLY up your game (be it poker, trading, or something else entirely) you have to improve as a competitor. As a human. As a thinking, acting, decision-making machine.
For others, though, this thought is not intimidating but inspiring. “Raising the game,” i.e. getting better at everything, is part of the attraction in the first place.
To that end, trading is all about making decisions.
And making good decisions is not just an art, but a skill set — an area of focus where you can learn and practice and improve. (more…)
Archives of “brilliance” tag
rssWhy only 5% Traders earn ?
“I believe there are a few reasons why only 5% make it.
1. They start in a position to not need to make a living from it. The need for steady money like a weekly paycheck will corrupt your thinking and force you to deviate from your plan of action that was so well thought out prior to the heat of the battle.
2. They do not need the money that they loose. The enormous amounts of money that it requires to learn to daytrade would exceed most people’s lifetime income. What makes the number of successful daytraders so low is that even the few who could make it, dont have enough capital to endure the learning curve.
3. They do not give a flying _uck about anything or anyones opinions of what the market will or might do. The very news and opinions that surround them becomes the mortar for their brick wall of defense that protects their completely independent thinking. (more…)
13 Rules for Making Good Trading Decisions
Rule #1
Never, ever, under any circumstance, should one add to a losing position…not ever!
Averaging down into a losing trade is the only thing that will assuredly take you out of the investment business. This is what took LTCM out. This is what took Barings Brothers out, this is what took Sumitomo Copper out, and this is what takes most losing investors out.
Rule #2
Never, ever, under any circumstance, should one add to a losing position…not ever!
We trust our point is made. If “location, location, location” are the first three rules of investing in real estate, then the first two rules of trading equities, debt, commodities, currencies, and so on are these: never add to a losing position.
Rule #3
Learn to trade like a mercenary guerrilla.
The great Jesse Livermore once said that it is not our duty to trade upon the bullish side, nor the bearish side, but upon the winning side. This is brilliance of the first order. We must indeed learn to fight/invest on the winning side, and we must be willing to change sides immediately when one side has gained the upper hand.
Rule #4
Don’t hold on to losing positions
Capital is in two varieties, mental and real, and of the two, the mental capital is the most important.
Holding on to losing positions costs real capital as one’s account balance is depleted, but it can exhaust one’s mental capital even more seriously as one holds to the losing trade, becoming more and more fearful with each passing minute, day and week, avoiding potentially profitable trades while one nurtures the losing position.
Rule #5
Go where the strength is
The objective of what we are after is not to buy low and to sell high, but to buy high and to sell higher, or to sell short low and to buy lower.
We can never know what price is really “low,” nor what price is really “high.” We can, however, have a modest chance at knowing what the trend is and acting on that trend. We can buy higher and we can sell higher still if the trend is up. Conversely, we can sell short at low prices and we can cover at lower prices if the trend is still down. However, we’ve no idea how high high is, nor how low low is.
Rule #6
Sell markets that show the greatest weakness; buy markets that show the greatest strength.
Metaphorically, when bearish, we need to throw our rocks into the wettest paper sack, for it will break the most readily, while in bull markets, we need to ride the strongest wind, for it shall carry us farther than others. (more…)
Dennis Gartman- Trading Rules
R U L E # 1
Never, ever, under any circumstance, should one add to a losing position … not EVER!
Averaging down into a losing trade is the only thing that will assuredly take you out of the investment business. This is what took LTCM out. This is what took Barings Brothers out; this is what took Sumitomo Copper out, and this is what takes most losing investors out.
R U L E # 2
Never, ever, under any circumstance, should one add to a losing position … not EVER!
We trust our point is made. If “location, location, location” are the first three rules of investing in real estate, then the first two rules of trading equities, debt, commodities, currencies, and so on are these: never add to a losing position.
R U L E # 3
Learn to trade like a mercenary guerrilla.
The great Jesse Livermore once said that it is not our duty to trade upon the bullish side, nor the bearish side, but upon the winning side. This is brilliance of the first order. We must indeed learn to fight/invest on the winning side, and we must be willing to change sides immediately when one side has gained the upper hand.
R U L E # 4 DON’T HOLD ON TO LOSING POSITIONS
Capital is in two varieties: Mental and Real, and, of the two, the mental capital is the most important.
Holding on to losing positions costs real capital as one’s account balance is depleted, but it can exhaust one’s mental capital even more seriously as one holds to the losing trade, becoming more and more fearful with each passing minute, day and week, avoiding potentially profitable trades while one nurtures the losing position.
R U L E # 5 GO WHERE THE STRENGTH IS
The objective of what we are after is not to buy low and to sell high, but to buy high and to sell higher, or to sell short low and to buy lower.
We can never know what price is really “low,” nor what price is really “high.” We can, however, have a modest chance at knowing what the trend is and acting on that trend. We can buy higher and we can sell higher still if the trend is up. Conversely, we can sell short at low prices and we can cover at lower prices if the trend is still down. However, we’ve no idea how high high is, nor how low low is.
R U L E # 6
Sell markets that show the greatest weakness; buy markets that show the greatest strength.
Metaphorically, when bearish we need to throw our rocks into the wettest paper sack for it will break the most readily, while in bull markets we need to ride the strongest wind for it shall carry us farther than others.
R U L E # 7
In a Bull Market we can only be long or neutral; in a bear market we can only be bearish or neutral.
In a bull market we can be neutral, modestly long, or aggressively long–getting into the last position after a protracted bull run into which we’ve added to our winning position all along the way. Conversely, in a bear market we can be neutral, modestly short, or aggressively short, but never, ever can we–or should we–be the opposite way even so slightly.
R U L E # 8
“Markets can remain illogical far longer than you or I can remain solvent.”
The University of Chicago “boys” have argued for decades that the markets are rational, but we in the markets every day know otherwise. We must learn to accept that irrationality, deal with it, and move on.
R U L E # 9
Trading runs in cycles; some are good, some are bad, and there is nothing we can do about that other than accept it and act accordingly.
Thus, when things are going well, trade often, trade large, and try to maximize the good fortune that is being bestowed upon you. However, when trading poorly, trade infrequently, trade very small, and continue to get steadily smaller until the winds have changed and the trading “gods” have chosen to smile upon you once again.
R U L E # 10
To trade/invest successfully, think like a fundamentalist; trade like a technician.
It is obviously imperative that we understand the economic fundamentals that will drive a market higher or lower, but we must understand the technicals as well. When we do, then and only then can we, or should we, trade. (more…)
13 Trading Rules
R U L E # 1
Never, ever, under any circumstance, should one add to a losing position … not EVER!
Averaging down into a losing trade is the only thing that will assuredly take you out of the investment business. This is what took LTCM out. This is what took Barings Brothers out; this is what took Sumitomo Copper out, and this is what takes most losing investors out.
R U L E # 2
Never, ever, under any circumstance, should one add to a losing position … not EVER!
We trust our point is made. If “location, location, location” are the first three rules of investing in real estate, then the first two rules of trading equities, debt, commodities, currencies, and so on are these: never add to a losing position.
R U L E # 3
Learn to trade like a mercenary guerrilla.
The great Jesse Livermore once said that it is not our duty to trade upon the bullish side, nor the bearish side, but upon the winning side. This is brilliance of the first order. We must indeed learn to fight/invest on the winning side, and we must be willing to change sides immediately when one side has gained the upper hand.
R U L E # 4 DON’T HOLD ON TO LOSING POSITIONS
Capital is in two varieties: Mental and Real, and, of the two, the mental capital is the most important.
Holding on to losing positions costs real capital as one’s account balance is depleted, but it can exhaust one’s mental capital even more seriously as one holds to the losing trade, becoming more and more fearful with each passing minute, day and week, avoiding potentially profitable trades while one nurtures the losing position.
R U L E # 5 GO WHERE THE STRENGTH IS
The objective of what we are after is not to buy low and to sell high, but to buy high and to sell higher, or to sell short low and to buy lower.
We can never know what price is really “low,” nor what price is really “high.” We can, however, have a modest chance at knowing what the trend is and acting on that trend. We can buy higher and we can sell higher still if the trend is up. Conversely, we can sell short at low prices and we can cover at lower prices if the trend is still down. However, we’ve no idea how high high is, nor how low low is.
R U L E # 6 (more…)
Top 25 All-Time Warren Buffett Quotes
When reading Berkshire Hathaway’s annual letters or hearing him speak, one can always take away a few great quotes from value investor extraordinaire Warren Buffett. It should come as no surprise that he is so good at dishing out words of wisdom. After all, he is known as the Oracle of Omaha. We thought it would be prudent to assemble some of his best advice in one cohesive post.
1. “Rule No.1: Never lose money. Rule No.2: Never forget rule No.1”
2. “In a bull market, one must avoid the error of the preening duck that quacks boastfully after a torrential rainstorm, thinking that its paddling skills have caused it to rise in the world. A right-thinking duck would instead compare its position after the downpour to that of the other ducks on the pond.”
3. “The fact that people will be full of greed, fear or folly is predictable. The sequence is not predictable.”
4. “Be fearful when others are greedy. Be greedy when others are fearful.” (more…)