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Trading Strategies for Success

  
  Education
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A great excerpt from “Trading Rules: Strategies for Success” by William Eng. It’s a great reminder that market prediction is a fool’s errand:

When you buy something, you want it to go up. When you sell something, you want it to go down. The chance of entering the trade correctly is small, but the chance of exiting the trade correctly is smaller. The chance of being right on both entering and exiting is the smallest. With such diminishing odds of coming through with a completely correct and, therefore, profitable trading campaign, the fewer decisions you make in the markets, the more profitable your trading should be. How many people actually get to sell at the top or buy at the bottom? At most, a handful in each reversal area. First, you must be a market follower, once the market has told you want it wants to do. If the market is a raging bull, you have no alternative but to buy. If it is bearish, you have no alternative but to sell every time you get the opportunity. Let the market tell you what to do. To do otherwise is to try to control the markets-something that is only reserved for God and natural disasters. Secondly, selling at the top and buying at the bottom does not guarantee profits. How many times have you heard of traders who managed to sell near the highs or buy near the bottoms, only to miss the ensuing move completely.

1+28 Rules for Trend Following -1 liner

  
  Education
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 1.Price is everything.

2. Ignore the news.

3. Buy a stock when it breaks out of a range.

4. Sell a stock when the trend changes.

5. Buy a stock when it makes a new high.

6. Short a stock when it makes a new low.

7. It’s harder to short stocks than it is to buy stocks.

8. Some stocks trend more than others.

9. Diversify when you can.

10. Ignore the whipsaws.

11. Don’t chase the market.

12. Let your winners run.

13. Cut your losses short.

14. A stock can always go higher and always go lower. (more…)

A Trading Psychology Lesson :Know Who You Are

  
  Education
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A good analyst is someone who can figure out that markets are going from Point A to Point B;

A good trader is someone who can navigate the path from Point A to Point B;
A good investor is someone who can weather the path from Point A to Point B;
Good analysts often are not good traders.
Good traders often are not good investors.
Good investors often are not good traders.
Good traders and investors often need to hire good analysts.
So much of success boils down to knowing who you are and accepting that.Doll-ASR

How to Win the Loser’s Game

  
Education, Video
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Most of what we see and hear about how to invest comes from either the fund industry or the financial media – both of which have their own agendas. This landmark documentary is an attempt to redress the balance.

Nine months in the making, How to Win the Loser’s Game aims to provide ordinary investors with the information they need to achieve their investment goals. It includes contributions from some of the biggest names and brightest minds in the investing world.

It’s being released in ten weekly, stand-alone parts, followed by the full-length, 80-minute film. Please share these videos with family, friends and colleagues, and help us to build a better, fairer and more transparent investment industry for all.

10 Favorite Quotes from Reminiscences of a Stock Operator

  
  Education
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Markets, trading methodologies and products may change, but timeless investing advice does not. That’s why my favorite trading book remains Reminiscences of a Stock Operator by Edwin Lefevre with Jessie Livermore—it is chocked full of great advice for any investor. First appearing as a series of articles in the Sunday Evening Post during the 1920s, the book is largely a biographical account of Livermore’s professional life. He is remembered as one of the world’s greatest traders who won and lost tremendous fortunes before tragically taking his own life in 1940.

Although Jessie’s life ended too early, his words of wisdom live on for discovery. The book is filled with obscure references and colorful characters long forgotten by the general public, but the key themes of the text remain as relevant as ever. Therefore, I’ve pulled out my favorite quotes, below, though I highly recommend reading the entire text.

There is nothing new in Wall Street. There can’t be because speculation is as old as the hills. Whatever happens in the stock market today has happened before and will happen again.

The desire for constant action irrespective of underlying conditions is responsible for many losses in Wall Street even among professionals.

I never lose my temper over the stock market. I never argue the tape. Getting sore at the market doesn’t get you anywhere.

They say you can never go poor taking profits. No, you don’t. But neither do you grow rich taking a four-point profit in a bull market. Where I should have made twenty thousand I made two thousand. That was what my conservatism did for me.

Remember that stocks are never too high for you to begin buying or too low to begin selling.

A man may see straight and clearly and yet become impatient or doubtful when the market takes its time about doing as he figured it must do. That is why so many men in Wall Street…nevertheless lose money. The market does not beat them. They beat themselves, because though they have brains they cannot sit tight.

After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It never was my thinking that made the big money for me. It always was the sitting. Got that? My sitting tight!

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Why Traders Have Problems

  
  Education
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Today I read another article that went along these lines- here are some excerpts:

On why traders have problems:

No, it is not your fear of losing, it isn’t your inability to read the market correctly, nor is it your lack of charting knowledge that causes your trading difficulties.

In a nutshell: The number one reason for all your problems revolves around the fact that you have reality back to front.”

The author then goes on to explain what they mean – that our mind is focused on the wrong things- that we are weighed down by preconditioning.

 The presented solution:

“First of all you must let go of the idea that you need to fix your trading. No, you don’t need to fix your trading, in fact, you don’t really need to fix anything. How can you? You are looking at old stuff that was created yesterday. However, you do need to fix the way you look at your life in general. This requires that you learn a thing or two about how you generate reality, learn a few basic things about quantum physics and understand how this applies to your trading and indeed to your life.

Your refusal to do this and instead carry on with the same old tried and tested paradigms, expecting different results in your trading account, is akin to placing a plaster on a festering wound.”

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Steven Drobny, Inside the House of Money (Book Review )

  
  Education
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If you haven’t read Steven Drobny’s Inside the House of Money: Top Hedge Fund Traders on Profiting in the Global Markets, newly revised and updated (Wiley, 2014) you should immediately add it to your “to do” list. It doesn’t matter whether you’re a global macro trader or not. I’m not, and yet it’s one of the very few books I keep returning to and learning from.

Originally published in 2006, the book is a collection of twelve interviews with top global macro practitioners. Although times have changed—the interviews were conducted before the financial meltdown and since then global macro has gone mainstream—the book remains a font of trading wisdom.

Few of the interviewees are household names; notable exceptions are Jim Rogers and Peter Thiel, and Thiel has since closed down his fund. The other named traders (one is anonymous) are Jim Leitner, Christian Siva-Jothy, John Porter, Sushil Wadhwani, Yra Harris, Dwight Anderson, Scott Bessent, Marko Dimitrijevic, and David Gorton and Rob Standing.

It’s, of course, impossible to summarize this book, which is one reason it’s so valuable. But, just to give a bit of its flavor, here are a couple of excerpts. (more…)

The Essence of Success

  
Education, Life
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Charles Dow used to counsel that no individual should ever be promoted if they hadn’t made a large error at some point. Phil Fisher used to insist only in investing in those stocks that had management teams willing to make big mistakes. If they didn’t make mistakes, they wouldn’t also take the risks required for success. Is this the essence of success? How does a corporate management team, upon the fruition of such errors, survive being “stopped out” of their positions in today’s hair twitch paradigm? Is being expropriated from your career rather than your capital not the bigger risk today? And thus can it only be stocks with founder, family or veto shareholdings that make for truly great growth stocks today? Should not Tim Cook undertake an LBO with the Qataris?

10 Tips For Managing Trader Stress

  
  Education
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Traders should never underestimate the role that stress plays in their trading. Many more will succeed or fail based on their ability to handle stress than will have their winning and losing determined by a robust method, mentor, or risk management. It is even possible for a trader to win consistently and still not be able to win in the long term due to the fact that they can not get comfortable being uncomfortable with capital on the line with an unknown outcome. Others will simply burn themselves out stressing excessively while losing and also stressing when they win scared they will give back their profits. If you are  going to be a successful trader you will need to manage the weakest link in any trading system: the trader. Stress management is the traders weakest spot. You have to be able to handle the heat of trading so you don’t melt.

 Here are the ten ways to manage your stress in trading:

1). When you get over excited calm down by concentrating on your breath.
2). Never trade so big that one trade will make or break your account, trading career, or lifestyle. 
3). Only trade systems and methods that you fully understand and have faith in for profitable in the long term.
4). Visualize yourself being a success as a trader.
5). Slow down your trading to a pace that does not rattle your nerves. 
6). Connect with like minded traders that understand your battles and goals.
7). Study and do so much homework about trading that you begin to have unshakable confidence in yourself. 
8). Stop doing what does not work in your trading and start doing more of what does work for you and makes you money.
9). Do not let others shake your confidence, do not accept any unsolicited advice from anyone, stick to your game plan. 
10). Accept your losses quickly when stops are hit to avoid emotional damage and stress from big losses.

Do everything you can to prevent the damaging effects of stress on your trading and life. (more…)

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