Archives of “catalyst” tag

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Ideas that spread

  
  Education
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Not all great investing/trading ideas are profitable. Ideas that spread are. If no one else sees what you see and acts, you can’t make money. Hoping that eventually the rest of the market will understand and embrace your thesis is a loser’s strategy or a privilege for someone with very deep pockets. Markets often know more than you as they constantly try to discount all the available public and private information. You might be convinced that your analysis is right and the market is wrong, but it could remain wrong longer than you could remain solvent. The question again is do you have deep enough pockets to ride the storm out and aren’t there more plausible alternatives for your capital at the time. Smart people like to scale in and out of positions, knowing that no one can consistently pick tops and bottoms.

Take for example Jim Rogers. He is a typical contrarian investor, who likes to buy low and sell high. But he is not buying anything that is low priced and neglected. He buys cheap things only when he sees a fundamental change on the horizon – a catalyst that will help other market participants to re-evaluate their thesis and act on their new observations.

Catalyst that could lead to a crash

  
Economy, Education
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“Chinese banks face state loans turmoil; about Rmb1,550B in questionable loans. “
This simple sentence reminds me of the Japanese Banks prior to the big Nikkei crash, that has not yet recovered (over 20 years).
What did we learn from the subprime mess ? The banks lied to us …..
What did we learn about the Nikkei crash ? The banks lied ….
1) Watch the Shanghai Index ! It has risen from its July’s low to almost 2600 ; a key resistance level.
2) Watch light crude oil prices (key indicator for the Chinese demand)
3) Did you just make some money on this rally ? SELL !!!!
I am bearish ? No, its just NOT the time to “buy and hold”

Money solves all of your problems.

  
  Education
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It is often said, trading introduces you to yourself. I was in my second year of trading when I heard that phrase.  She would go on to ultimately teach me much about life and myself.  The benefit of being in my early 20′s and teaching people in their 40′s and 50′s.  I helped them with trading, they helped me grow up.

What that phrase means is that who ever you are that day will show up in your trading.  This of course comes in varying degrees.

In many professions your emotional state may not effect your earnings or employment.  In trading, a “bad” day can  create a cascading effect. You lost when you should have made money.  You created a bad habit.  Losing doesn’t trigger the right response, etc.

A trader views the market through themselves.  Now, most of the time it is little things that can be easily passed over.  Human beings are always going to have to deal with things they rather would not have to.  Every person has a bad day. (more…)

Being prepared

  
  Education
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Make a list of everything that can go wrong and determine how you will respond to that situation. That will be the key to your success – knowing how to respond to the unexpected.”

Ask 3 essential questions:

1. Why am I taking this particular trade? ( is it part of carefully prepared plan, or is it an emotional reaction; what is the catalyst behind the move and does it have the potential to sent the stock’s price higher; are there other better trading alternatives for my money)

2. What if a am wrong? (figure out where and when I will exit, before I initiate the trade; where is my stop loss and does it makes sense to be put there; how much am I risking? How am I going to protect my capital against “unexpected” gaps)

3. What if I am right? (how am I going to protect my profits; where I would exit and why)

Remember that good trading is all about managing risk. If you are entering a position without knowing where you are getting out when you’re wrong, then you’re sunk before you begin.

Mark Cuban On Story Stocks

  
  Education
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Don’t Miss to Read :
Different catalysts matter for the different time frames. In short-term perspective, price momentum is the most powerful catalyst. Short-term could sometimes be a couple years in the market. Here are a few wise words, written in 2004, by someone who has been on both sides of the table – as a shareholder and company owner:

For years, a company’s price can have less to do with a company’s real prospects than with the excitement it and its supporters are able to generate among investors. That lesson was reinforced as I saw the Gandalf experience repeated with many different stocks over the next 10 years. Brokers and bankers market and sell stocks. Unless demand can be manufactured, the
stock will decline.
If the value of a stock is what people will pay for it, then Broadcast.com was fairly valued. We were able to work with Morgan Stanley to create volume around the stock. Volume creates demand. Stocks don’t go up because companies do well or do poorly. Stocks go up and down depending on supply and demand. If a stock is marketed well enough to create more demand from buyers than there are sellers, the stock will go up. What about fundamentals? Fundamentals is a word invented by sellers to find buyers. (more…)

10 Essential Trading Words

  
  Education
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1. Simplicity – have a simple, well defined way to generate trading ideas. Have a simple approach towards the market. You can’t simply take everything into account when you try to make an educated decision. Filter the noise and focus on several key market components. For me, they are relative strength and earnings’ growth.

2. Common sense – create a trading system that is designed on the basis of proven trading anomaly. For example, trend following in different time frames.

3. Flexibility – be open to opportunities in both directions of the market. Be ready to get long and short.

4. Selectivity – chose only trades with the best risk/reward ratio; stocks with the best set ups; it doesn’t make sense to risk a dollar to make a dollar.

5. Don’t overtrade – two or three well planned trades in a week (month) might be more than enough to achieve your income goals. Patiently wait fot the right set up to form and offers good risk/reward ratio.

6. Exit strategy – Always, absolutelly always have an exit strategy before you initiate a trade. Know at which point the market is telling you that you are wrong and do not hesitate to cut your losses short immediatelly. Don’t be afraid or ashamed to take a trading loss. Everyone has them. Just make sure that you keep their size to a minimum.

7. Let’s profits run – one or two good trades might make your month. One or two good months might make your year. Letting profits run is as important as cutting losses short. Bigger winners will allow you the luxury to be right in less than half of the trades and still be profitable.

8. Consistency – Stick to your method of trading ideas’ generation.

9. Specialize – Specialize in one or two distinct setups. It could be a combination of technicals and fundamentals, certain timeframe or special event as a trading catalyst, certain sector or trading vehicle.

10. Have a plan – Which are stocks that you will be paying special attention to – this week, today. Why those stocks? In which direction you expect them to continue their move? What will give you a clue for the beginning of the move? Follow them exclusivelly and enter without a hesitation when they give you a signal. Don’t  just wake up and sit in front of your monitor without having a clue what are you going to trade today.

The “secret” ingredients

  
  Education
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To be successful in the markets you need to know:

– what to buy (equity selection);

– When to buy it and when to pass on it (risk management);

– When to exit (time management).

The most essential part of equity selection is finding/creating a trading system with positive expectancy. Look for the catalyst/catalysts than has/have the potential to start a big move in the desired direction. There are two catalysts I focus on – earnings related and sector related. I pay attention to price, because it measures the only factor than really moves markets – confidence. It always says more than any other source of information. Reaction to news is more important to news itself.

Risk management has two basic elements: defining risk/reward ratio for every position I consider to get involved in and position sizing (how much to buy, what % of capital to put on risk).

Time management involves taking into account the opportunity cost. How long to stay in a position?

10 Essential Trading Words

  
  Education
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1. Simplicity – have a simple, well defined way to generate trading ideas. Have a simple approach towards the market. You can’t simply take everything into account when you try to make an educated decision. Filter the noise and focus on several key market components. For me, they are relative strength and earnings’ growth.

2. Common sense – create a trading system that is designed on the basis of proven trading anomaly. For example, trend following in different time frames.

3. Flexibility – be open to opportunities in both directions of the market. Be ready to get long and short.

4. Selectivity – chose only trades with the best risk/reward ratio; stocks with the best set ups; it doesn’t make sense to risk a dollar to make a dollar.

5. Don’t overtrade – two or three well planned trades in a week (month) might be more than enough to achieve your income goals. Patiently wait fot the right set up to form and offers good risk/reward ratio.

6. Exit strategy – Always, absolutelly always have an exit strategy before you initiate a trade. Know at which point the market is telling you that you are wrong and do not hesitate to cut your losses short immediatelly. Don’t be afraid or ashamed to take a trading loss. Everyone has them. Just make sure that you keep their size to a minimum. (more…)

10 Essential Trading Words

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

1. Simplicity – have a simple, well defined way to generate trading ideas. Have a simple approach towards the market. You can’t take everything into account when you try to make an educated decision. Filter the noise and focus on several key market components. For me, they are relative strength and earnings’ growth.
2. Common sense – create a trading system that is designed on the basis of proven trading anomaly. For example, trend following in different time frames.
3. Flexibility – be open to opportunities in both directions of the market. Be ready to get long and short.
4. Selectivity – chose only trades with the best risk/reward ratio; stocks with the best set ups; it doesn’t make sense to risk a dollar to make a dollar.
5. Don’t overtrade – two or three well planned trades in a week (month) might be more than enough to achieve your income goals. Patiently wait fot the right set up to form and to offer good risk/reward ratio.
6. Exit strategy – Always, absolutelly always have an exit strategy before you initiate a trade. Know at which point the market is telling you that you are wrong and do not hesitate to cut your losses short immediatelly. Don’t be afraid or ashamed to take a trading loss. Everyone has them. Just make sure that you keep their size to a minimum.
7. Let’s profits run – one or two good trades might make your month. One or two good months might make your year. Letting profits run is as important as cutting losses short. Bigger winners will allow you the luxury to be right in less than half of the trades and still be profitable.
8. Consistency – Stick to your method of trading ideas’ generation.
9. Specialize – Specialize in one or two distinct setups. It could be a combination of technicals and fundamentals, certain timeframe or special event as a trading catalyst, certain sector or trading vehicle.
10. Have a plan – Which are the stocks that you will be paying special attention to – this week, today. Why those stocks? In which direction you expect them to continue their move? What will give you a clue for the beginning of the move? Follow them exclusivelly and enter without a hesitation when they give you a signal. Don’t just wake up and sit in front of your monitor without having a clue what you are going to trade today.

Money solves all of your problems.

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

What that phrase means is that who ever you are that day will show up in your trading.  This of course comes in varying degrees.

In many professions your emotional state may not effect your earnings or employment.  In trading, a “bad” day can  create a cascading effect. You lost when you should have made money.  You created a bad habit.  Losing doesn’t trigger the right response, etc.

A trader views the market through themselves.  Now, most of the time it is little things that can be easily passed over.  Human beings are always going to have to deal with things they rather would not have to.  Every person has a bad day.

Money solves all of your problems, till it doesn’t.  The difficult part about trading is the problems start and the money (win or loss) CAN come at different times.  Think about this concept another way, a headline comes out and the market reacts to it (or it is reasonable to think it is a catalyst).  Well it turns out the headline is old and everyone already knew about it.  The story/money and what it bears can often come at the “wrong” or different times.  You are rewarded or punished just not always easy to connect the actions in real time.

Money does not necessarily mean your actions are correct.  Yes over time it evens out but some run out of money, patience, emotional currency before it corrects.  They weren’t honest about who they were that day.  It is prudent to always look a gift horse in the mouth.

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