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Victor Sperandeo -Quotes

  
  Education
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The key to investment success is emotional discipline. Making money has nothing to do with intelligence. To be a successful investor, you have to be able to admit mistakes. I trained a guy to trade who had a 188 IQ. He was on “Jeopardy” once and answered every question correctly. That same person never made a dime in trading during 5 years!
-Victor Sperandeo

Most people lose money because of lack of emotional discipline
-the ability to keep their emotions removed from investment decisions. Dieting provides an apt analogy. Most people have the necessary knowledge to lose weight—that is they know that in order to lose weight you have to exercise and cut your intake of fats. However, despite this widespread knowledge, the vast majority of people who attempt to lose weight are unsuccessful. Why? Because they lack the emotional discipline.
-Victor Sperandeo

In my opinion, the greatest misconception about the market is the idea that if you buy and hold stocks for long periods of time, you’ll always make money. Let me give you some specific examples. Anyone who bought the stock market at any time between the 1896 low and the 1932 low would have lost money. In other words, there’s a 36 year period in which a buy-and-hold strategy would have lost money. As a more modern example, anyone who bought the market at any time between the 1962 low and the 1974 low would have lost money.
-Victor Sperandeo
-Victor Sperandeo
Once a price move exceeds its median historical age, any method you use to analyze the market, whether it be fundamental or technical, is likely to be far more accurate. For example, if a chartist interprets a particular pattern as a top formation, but the market is only up 10% from the last low, the odds are high that the projection will be incorrect. However, if the market is up 25% to 30%, then the same type of formation should be given a great deal more weight.
-Victor Sperandeo
To use a life insurance analogy, most people who become involved in the stock market don’t know the difference between a 20 year old and an 80 year old. Investing in the market without knowing what stage it is in is like selling life insurance to 20 year olds and 80 year olds at the same premium.

Nicolas Darvas

  
  Education
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Great links with Nicolas Darvas interviews

“Since he has to do trading from wherever he is dancing he ignores tips, financial stories and brokers’ letters, and has never been in a broker’s office. Basically, his approach is that of a chartist: he watches price and volume … When a stock makes a good advance on strong volume, he begins watching it, buys when he feels that informed buyers are getting in. For example, when he was playing in Calcutta, he noticed E. L. Bruce moving up in the stock tables. Suddenly, on 35,000 shares it moved from 16 to 50. He bought in at 51, though he knew nothing about the company, and ‘I didn’t care what they made.’ (They make hardwood flooring.) He sold out at 171 six weeks later.

Darvas places his buy orders for levels that he considers breakout points on the upside. At the same time, he places a stop-loss sell order just below his buy order, so that if the stock does not move straight up after he buys, he will be sold out and his loss cut. ‘I have no ego in the stock market,’ he says. ‘If I make a mistake I admit it immediately and get out fast.’ Darvas thinks his system is the height of conservatism … If he has a big profit in a stock, he puts the stop-loss order just below the level at which a sliding stock should meet support. He bought Universal Controls at 18, sold it at 83 on the way down after it had hit 102.

Darvas trained for the market just as methodically as he had studied his dancing, read some 200 books on the market and the great speculators, spent eight hours a day until saturated. Two of the books he rereads almost every week: Humphrey Neill’s Tape Reading and Market Tactics and G. M. Loeb’s The Battle for Investment Survival. He still spends about two hours a day on his stock tables.”

That line, “[He] buys when he feels that informed buyers are getting in,” made me chuckle. It should read “He buys when he suspects that uninformed fools are piling in.”

An Interview With Nicolas Darvas in 1974:

Don’t forget I too went through a period of learning from 1953 to 1958 where I lost a substantial amount of capital before I worked out what worked and then was lucky enough to time it in the 1958-1960 bull market.”


Max Gunther set forth basic trading principles called The Zurich Axioms

  
  Education
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On Risk:
– Worry is not a sickness but a sign of health – if you are not worried, you are not risking enough.
– Always play for meaningful stakes – if an amount is so small that its loss won’t make any significant difference, then it isn’t likely to bring any significant gains either.
– Resist the allure of diversification.

On Greed:
– Always take your profit too soon.
– Decide in advance what gain you want from a venture, and when you get it, get out.

On Hope:
– When the ship starts sinking, don’t pray. Jump.
– Accept small losses cheerfully as a fact of life. Expect to experience several while awaiting a large gain.

On Forecasts:
– Human behaviour cannot be predicted. Distrust anyone who claims to know the future, however dimly.

On Patterns:
– Chaos is not dangerous until it starts to look orderly. (more…)

Trading Wisdom from Market Wizards

  
  Education
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Michael Marcus

“The best trades are the ones in which you have all three things going for you: fundamentals, technicals, and market tone. First, the fundamentals should suggest that there is an imbalance of supply and demand, which could result in a major move. Second, the chart must show that the market is moving in the direction that hte fundamentals suggest. Third, when news comes out, the market should act in a way that reflects the right psychological tone. For example, a bull market should shrug off bearish news. If you can restrict your activity to only those types of trades, you have to make money, in any market, under any circumstances.”

“I think to be in the upper echelon of successful traders requires an innate skill, a gift. It’s just like being a great violinist. But to be a competent trader and make money is a skill you can learn.”

“Perhaps the most important rule is to hold on to your winners and cut your losers. Both are equally important. If you don’t stay with your winners, you are not going to be able to pay for the losers.”

Bruce Kovner

“The more a price pattern is observed by speculators, the more prone you are to have false signals. The more a market is the product of nonspeculative activity, the greater the significance of technical breakouts.”

On asking which is better, technical analysis or fundamental analysis, he answered, “That is like asking a doctor whether he would prefer treating a patient with diagnostics or with a chart monitoring his condition. You need both. But, if anything, the fundamentals are more important now. In the 1970s, it was a lot easier to make money using technical anaylsis alone. There were far fewer false breakouts. Nowadays, everybody is a chartist, and there are a huge number of technical trading systems. I think that change has made it much harder for the technical trader.”

Advice to novice traders: “First, I would say that risk management is the most important thing to be well understood. Undertrade, undertrade, undertrade is my second piece of advice. Whatever you think your position ought to be, cut it at least half.” “They personalize the market. A common mistake is to think of the market as a personal nemesis. The market, of course, is totally impersonal; it doesn’t care whether you make money or not. Whenever a trader says, “I wish,” or “I hope,” he is engaging in a destructive way of thinking because it takes attention away from the diagnostic process.”

Richard Dennis

“when you start, you ought to be as bad a trader as you are ever going to be.”

“I always say that you could publish trading rules in the newspaper and no one would follow them. The key is consistency and discipline. Almost anybody can make up a list of rules that are 80 percent as good as what we taught people. What they couldn’t do is give them the confidence to stick to those rules even when things are going bad.”

“my research on individual stocks shows that price fluctuations are closer to random than they are in commodities. Demonstrably, commodities are trending and, arguably, stocks are random.”

“There will come a day when easily discovered and lightly conceived trend-following systems no longer work. It is going to be harder to develop good systems.”

“The secret is being as short term or as long term as you can stand, depending on your trading style. It is the imtermediate term that picks up the vast majority of trend followers. The best strategy is to avoid the middle like the plague.” (more…)

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