Archives of “COMMODITIES” tag

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Jim Rogers: Here's The Most Important Thing On What Investors Should Do

  
  Education
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I would say one lesson we all need to learn is that after you’ve had a great success, you really should be very worried. Let’s say you sell and say you’ve made 10 times on your money. You should be extremely worried. You should close the curtains, not read, look at the TV, or anything because that’s when you’re full of hubris, arrogance, confidence. You think, “God, this is something easy,” and you’re desperate to jump around to something new. You should do your very best to avoid making another play until you’ve calmed down a lot. Just wait. It’s a very dangerous time for any investor.

Likewise, if you take a huge loss and there’s a big panic and things are dumped on your head because you’re overextended or wrong for whatever reason, calm down, don’t say, “I’m never gonna invest in stocks again or commodities or whatever.” That’s the time you really should be willing to invest again if you can gather together some capital money. The investments can be terribly emotional. You have to figure out a way to control your emotions and deal with your emotions if you’re going to survive in these markets.

My advice is that, most of the time, most investors should do nothing. They should look out the window or go to the beach. You should wait until you see money lying in the corner and all you have to do is go over and pick it up. That’s how most investors should invest. The problem is we all think we need to jump around all the time and be jumping in and out and that’s not good. (more…)

Doom and gloomers fight amongst themselves

  
  Education
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bear-fight1Roubini says we have asset bubble everywhere and everything is going to end badly.

Jim Rogers says Roubini knows nothing and that he doesn’t see any bubble. Jim Rogers sees commodities going higher.

Peter Schiff takes a stab at Roubini and says Roubini doesn’t understand gold. Schiff says gold is going higher.

Harvard University financial historian Niall Ferguson claims he’s a better doom and gloomer than Roubini in terms of timing and accuracy.

Disarray in the bear camp is probably good for bulls.

Donchian's 20 Trading Guides

  
  Education
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richard-donchian
Richard Donchian is best known for developing the Donchian Channel Indicator. This is a simple trend following tool that detects and alerts you to breakouts by plotting the highest high and the lowest low over the last period time interval which the user specifies.
Through his many years of trading and writing weekly newsletters (Commodity Trend Timing), Richard Donchian shares with us some very valuable trend trading wisdom.

  1. Beware of acting immediately on a widespread public opinion. Even if correct, it will usually delay the move.
  2. From a period of dullness and inactivity, watch for and prepare to follow a move in the direction in which volume increases.
  3. Limit losses and ride profits, irrespective of all other rules.
  4. Light commitments are advisable when market position is not certain. Clearly defined moves are signaled frequently enough to make life interesting and concentration on these moves will prevent unprofitable whip-sawing. (more…)

11 Rules for Better Trading

  
  Education
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11rulesbettertrading

Trading in the markets is a process, and there is always room for self improvement. So as we start the new year, here are my 11 rules that help me navigate the markets. By no means is this list exhaustive or exclusive.

Rule #1 Be data centric in your approach : Take the time and make the effort to understand what works and what doesn’t. Trading decisions should be objective and based upon the data.
Rule #2 Be disciplined : The data should guide you in your decisions. This is the only way to navigate a potentially hostile and fearful environment. (more…)

Manage Your Ego

  
  Education
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ego

“Everyone wants to feel like a winner. It’s tempting to pat ourselves on the back for making a winning trade, but it’s essential to face the facts: Many times a winning trade is a combination of an astute insight AND being at the right place at the right time. In other words, external circumstances such as plain good luck make you a winner. (more…)

A word from Bruce Kovner

  
  Education
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Bruce Kovner is one of the world’s most successful traders. The following below is extracted from his Market Wizardsinterview:

“A greedy trader always blows out. I know some really inspired traders who never managed to keep the money they made. One trader at Commodities Corporation – I don’t want to mention his name – always struck me as a brilliant trader. The ideas he came up with were wonderful; the markets he picked were often the right markets. Intellectually, he knew markets much better than I did, yet I was keeping money, and he was not.”

Q: So where was he going wrong?

“Position size. He traded much too big. For every one contract I traded, he traded ten. He would double his money on two different occasions each year, but still ended up flat”.

And, from further on in the interview:

“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 in half. My experience with novice traders is that they risk three to five times too big. They are taking 5 to 10 percent risks on a trade when they should be taking 1 to 2 percent risks.”

Prudent risk control, combined with the power of compounding, can lead you a long way in this game.

Are Great Traders Born or Bred?

  
  Education
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In a recent speech to a class at Harvard Business School Mark Sellers, founder of Chicago-based hedge fund Sellers Capital, argues that great traders are born and not bred. He believes that there are seven “structural assets” that cannot be taught, adding, ” They have to do with psychology. You can’t do much about that.”

The traits:

1) The ability to buy when others are panicking, and vice versa

2) An obsession with the trading game

3) A willingness to learn from past mistakes

4) An inherent sense of risk based on common sense

5) A confidence in your convictions and a willingness to stick with them

6) An ability to have “both sides of your brain working” (i.e. to go beyond the math)

7) The ability to live through volatility without changing your investment thought process

I  think that some of the concepts discussed here are spot on (and I spend a great deal of time hammering home the importance of #7) , but I disagree with the overall idea that great traders are born, not made. I believe success in trading is not about a specific style, but rather about understanding your personality traits and then developing a trading style (and which product – i.e. stocks, commodities, fx) that fits you best.

We are who we are. That does not change throughout our life, but we can learn to wait for times when the market is paying our personality type and then generate successful returns when that window of opportunity appears.

Controlling your Emotions

  
  Education
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Emotions-controlThe fact is, the majority of traders lose because they cannot control their emotions – and their emotions cause them to make irrational trades and lose.

Trading psychology is one of the keys to investment success, but its impact is not understood by many investors, who simply think they need a good trading method, but this is only part of the equation for winning at Stock market  trading.

The influence Of Hope and Fear

In trading psychology, two emotions that are constantly present are:

Hope and fear. One of the traders who recognized this was the legendary trader W D Gann. (more…)

Richard Donchian's 20 trading guides

  
  Education
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General Guides:

  1. Beware of acting immediately on a widespread public opinion. Even if correct, it will usually delay the move.
  2. From a period of dullness and inactivity, watch for and prepare to follow a move in the direction in which volume increases.
  3. Limit losses and ride profits, irrespective of all other rules.
  4. Light commitments are advisable when market position is not certain. Clearly defined moves are signaled frequently enough to make life interesting and concentration on these moves will prevent unprofitable whip-sawing.
  5. Seldom take a position in the direction of an immediately preceding three-day move. Wait for a one-day reversal.
  6. Judicious use of stop orders is a valuable aid to profitable trading. Stops may be used to protect profits, to limit losses, and from certain formations such as triangular foci to take positions. Stop orders are apt to be more valuable and less treacherous if used in proper relation the the chart formation.
  7. In a market in which upswings are likely to equal or exceed downswings, heavier position should be taken for the upswings for percentage reasons – a decline from 50 to 25 will net only 50% profit, whereas an advance from 25 to 50 will net 100%.
  8. In taking a position, price orders are allowable. In closing a position, use market orders.
  9. Buy strong-acting, strong-background commodities and sell weak ones, subject to all other rules.
  10. Moves in which rails lead or participate strongly are usually more worth following than moves in which rails lag.
  11. A study of the capitalization of a company, the degree of activity of an issue, and whether an issue is a lethargic truck horse or a spirited race horse is fully as important as a study of statistical reports.

Technical Guides:

  1. A move followed by a sideways range often precedes another move of almost equal extent in the same direction as the original move. Generally, when the second move from the sideways range has run its course, a counter move approaching the sideways range may be expected. (more…)

2009…Heads or Tails?

  
  Education
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headsortails

Adam Smith (1723 – 1790) in “The Money Game” wrote:
“Prices have no memory and yesterday has nothing to do with tomorrow. Every day starts out fifty-fifty!”
If the above statement is to be trusted, then you could just take the 50 – 50 odds, expand their daily time horizon to a yearly one, and decide whether or not to “stay in the stock market game” in 2009!
Decide on just a flip of a coin?
Given the past year’s negative returns, what does this “flip” imply for the investors’ chances this coming year?
Well, that is a matter of asking the question the right way!
If you assume that the years are flipping randomly, and that there is no bias for any year, then you could ask if it is fair enough to assume that flipping through a calendar is otherwise the same as just flipping a coin?
Let’s assume that you were just flipping a coin. Then, YES …
The odds of one flip would always be 50 – 50!
Indeed, you might be led to start questioning about how fair the coin actually would be! In this case, you really should look back and base your expectations on historical econometric analysis and try to establish how fair the coin would be!
But if you are guessing that some things do look like a flip of a coin, shouldn’t you also assume that just because we had a negative year, we’re now going to get a positive one?
Who knows … Investments based on that kind of speculation might actually end up yielding a positive result!
But the odds are still only 50 – 50!
On the other hand …
I do know that …
I will get a much better than 50 -50 chance!

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