- Men trade more than women. And unmarried men trade more than married men. 5
- Poor, young men, who live in urban areas and belong to specific minority groups invest more in stocks with lottery-type features. 5
- Within each income group, gamblers under perform non-gamblers. 4
- Investors tend to sell winning investments while holding on to their losing investments. 6
- Trading in Taiwan dropped by about 25% when a lottery was introduced in April 2002. 7
- During periods with unusually large lottery jackpot, individual investor trading declines. 8
- Investors are more likely to repurchase a stock that they previously sold for a profit than one previously sold for a loss. 9
- An increase in search frequency [in a specific instrument] predicts higher returns in the following two weeks. 10
- Individual investors trade more actively when their most recent trades were successful.11
- Traders don’t learn about trading. “Trading to learn” is no more rational or profitable than playing roulette to learn for the individual investor.
Archives of “Business_Finance” tag
rssDavid Halsey,Trading the Measured Move -Book Review
David Halsey throws out the old notion of a measured move: that you copy an AB move up (or down) and paste it on a retracement low (or high) of C to get your price target D. In Trading the Measured Move: A Path to Trading Success in a World of Algos and High Frequency Trading(Wiley, 2014) he substitutes Fibonacci levels.
He uses three trade setups: the traditional 50% retracement measured move (MM), the extension 50% MM, and the 61.8% failure. When a trade is entered, its target is 123% from a swing high or low (and sometimes from a breakout) that is followed by a retracement (50% in the traditional setup). That is, the target is AB + 23%. Halsey shows both successful and failed MM trades on charts—unfortunately usually grey bars on a black background, which makes them hard to decipher.
The measured move trade setups are not stand-alones. Halsey discusses the use of multiple time frames, seasonality, NYSE tools, tick extremes and divergences, and gaps. He also discusses how to manage positions and take profits, advanced (actually, pretty basic) risk management, trading psychology, and having a trading plan and journal. (more…)
"Markets have consistently experienced once in a 100-year events every five years" – Paul Tudor Jones
What You Can and Cannot Control In Trading
-You can control how much money you put behind the idea.
-You can control which markets you trade in.
-You can control how much you are willing to risk per trade barring any gap downs, or halt situations that might impact you negatively.
-You can control what type of set ups you buy.
-You can control when you get in or out, barring a halt.
-You can’t control the outcome of the trade.
-You can’t control how the market will react to news, try not to impose your views too much.
The point is not to fret over what you can’t control, once you put the trade in along with your stop for the most part everything else is out of your control.
Active vs Passive Catalysts
Catalysts have the potential to change investors and traders’ expectations. There are two distinctive types of catalysts in the stock market – active and passive.
Active catalysts tell you when to buy or sell.
Passive catalysts tell you what is the potential behind a move once an active catalyst is introduced. Their role is to explain intelligently the reason behind a move.
The only active catalyst is Price action. Simply put, it does not matter how smart you are or how genius your investing thesis is. Unless and until the market agrees with you, you won’t make a cent. (more…)
How To Reduce The Effects of GREED?- 6 Points
- Trade Small: If you are a beginner, trading a small account can be a worthwhile exercise. Use small position sizes and manage risk fiercely. Many traders get into trouble when they haven’t considered risk exposure while taking positions that are too large for their accounts.
- Expect to Lose: Be prepared to lose when you enter a trade and DEFINE how much you are ready to lose. Don’t panic and change your mind if the market reaches that point.
- Plan to WIN: Likewise, DETERMINE the amount of profit that is enough to quench your Greed Buds.
- Time Horizon: Trade with short time horizon. Even if you are not an intraday trader, a shorter-term viewpoint in today’s volatile market environment gives a quick feedback about your analysis and can decrease the time you are exposed to the unpredictable marketplace.
- Scared Money Never Wins: Trade only with money you can afford to lose that is less important and not significant enough to be protected. Treat your money well and trade well.
- Nothing Ventured, Nothing Gained: Be a little greedy! If you don’t trade, you are engulfed by fear. Come up with a trading style that cuts down the influence of greed and fear and is easy for you.
15 Trading Paradoxes
Here are 15 paradoxes that I have learned on my own path to consistent profitable trading.
- The less I trade the more money I make.
- All my biggest profits were made on option contracts I bought not ones I sold.
- My number one job as a trader is to manage risks not make money.
- The best traders in history were the best risk managers not the best at entries and exits.
- The ability to admit you are wrong about a trade and get out is more important than being confident in a wining trade and staying in no matter what.
- Winning traders think like a casino losing traders think like gamblers.
- Opinions, projections, and predictions are worthless, trade the price action. (more…)
Citi forecasts Greek devastation, unstoppable debt spirals in Italy and Portugal
If Citigroup is right, the slight rebound in Europe over the summer will not be enough to stop Club Med going from bad to worse, with a string of soft defaults/restructurings.
I pass their latest forecasts on to readers. I do not endorse them.
Italy will bounce along in near-permanent recession with growth of 0.1pc in 2014, zero in 2015, and 0.2pc in 2016. The debt will punch above 140pc of GDP, beyond the point of no return for a country with no economic growth or sovereign currency.
“We do not expect the public debt ratio will enter a downtrend in coming years, and we suspect that some form of debt restructuring (maturity lengthening and/or coupon reductions) may be likely eventually,” said the bank.
Portugal is in an even worse state, with growth of: 0.6pc, 0.0pc, 1.0pc, over the next three years, with debt hitting 149pc of GDP by 2015, and unemployment rising again to 18.3pc:
Given the fiscal tightening still to come, ongoing private deleveraging and ensuing poor nominal GDP growth prospects, doubts still exist about the sustainability of the Portuguese public debt in our view.”
A second full bail-out programme remains a clear risk in the event of market sentiment deteriorating. In any case, we think a Greek-style public debt restructuring unlikely in the near future, but a restructuring of some government contingent liabilities is still possible. (more…)
Paul Tudor Jones Quotes on Trading Method
“I believe the very best money is made at the market turns. Everyone says you get killed trying to pick tops and bottoms and you make all your money by playing the trend in the middle. Well for twelve years I have been missing the meat in the middle but I have made a lot of money at tops and bottoms.”
“The secret to being successful from a trading perspective is to have an indefatigable and an undying and unquenchable thirst for information and knowledge.”
“The concept of paying one-hundred-and-something times earnings for any company for me is just anathema. Having said that, at the end of the day, your job is to buy what goes up and to sell what goes down so really who gives a damn about PE’s?”
“The whole world is simply nothing more than a flow chart for capital.”
John S. Wasik,Keynes’s Way to Wealth-Book Review
John Maynard Keynes was not only a renowned economist, he was an investor. He managed his own money as well as that of King’s College, his friends and family, and insurance companies. As John C. Bogle writes in his introduction to the book, “His spectacular success showed not only his passion for making money, but his growing aversion to losing it. As someone who had gained two fortunes through his trading prowess and lost them through his hubris, Keynes is a stellar example of how an investor can learn, fall on his face more than once, and still come out ahead.” (p. xxxiv)
John S. Wasik explores this investing journey in Keynes’s Way to Wealth: Timeless Investment Lessons from the Great Economist(McGraw-Hill, 2014). Let me start with the rewards of the journey: what Keynes did with his wealth. He bought art as well as rare books and manuscripts. The Keynes collection of rare books, bequeathed to King’s College in 1946, is, according to the college’s web site, “especially strong in editions of Hume, Newton and Locke, and in sixteenth and seventeenth century literature. About 1300 books in this collection have been catalogued on the online catalogue. … Keynes’s collection of manuscripts by Newton, Bentham, John Stuart Mill, etc., is housed in the Modern Archive Centre.” A man after my own heart, but with a bigger budget.
Keynes was a speculator. According to his own definition, “The essential characteristic of speculation … is superior knowledge. We do not mean by this the investment’s actual future yield … we mean the expected probability of the yield. The probability depends upon the degree of knowledge in a sense, therefore it’s subjective. If we regard speculation as a reasoned effort to gauge the future from present known data, it may be said to form the reins of all intelligent investing.” (p. 8) (more…)