Archives of “conclusion” tag

rss

The Power of Elimination

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

One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity.” – Bruce lee

So what do Bruce Lee and Leonardo Da Vinci have in common?  They both understood, as any good trader should, the essentials of making an impact…the power of subtracting noise.

As a trader you should do the same:

1) Subtract your emotional baggage

In close to twenty years of trading, I have yet to meet ONE successful trader that is emotionally unbalanced. Bring your emotional baggage, your demons, your insecurities to your trading terminal, and you likely to make wrong decisions.

2) Subtract financial entertainment

Blue Channels  and other financial media are a great source of info-tainment and you can surely learn a lot. But if you sit in front of the TV all day without having a solid plan thinking that’s what professional traders suppose to do, you virtually guarantee to trade yourself out of capital very shortly. Understand that the delivery of TV news is designed to hit the emotional part of your brain. You might benefit from shutting it off in the short run.

3) Subtract noise

Good trading is not about having 8 screens, 1500 indicators, live steaming news, Twitter feeds, and a phone line with direct connection to god. Clean up your charts to the essence, price, volume and maybe one or two indicators. Clean up your screens and eliminate as much noise as possible, go over your trading diary and identify which inputs produced the most output, then go back and close the applications that add nothing but flicking lights and funny sounds, subtract until you are left with the essence of your system. (more…)

Book Review: No One Would Listen

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

This is a book about Harry Markopolos, who is the author of this book.  He talks about how he attempted  for years to expose the fraud that was Bernie Madoff.

The book takes the following form (from my view of how the author sees it):

  • How he came to a quick conclusion that Bernie Madoff was a fraud.
  • How he tried to convince others of that view, especially those that were feeding more money to Madoff.
  • Two journalists took his side and wrote about Madoff in 2001 or so, but to no avail.
  • Trying to come up with a similar strategy that would work, though it would return much less than Madoff’s supposed returns, and finding few would invest in it.
  • Fruitless wranglings with the clueless SEC.
  • Finally, in 2009, Madoff blows up.
  • Vindicated, he talks to the media, Congress, and anyone who will listen.
  • He excoriates the toothless SEC, and proposes better ways to root out financial fraud.

That’s the book in a nutshell.  But stylistically, the book harps on how no one would listen.  Well, duh.  No one did listen, or the book would have been over sooner.

People are not Vulcans.  They aren’t logical.  Most don’t think; instead, they mimic.  “If it works for him, it will work for me also.”

That was the case with Madoff.  He maneuvered many sheep into position to be fleeced, and worse, they begged for the privilege to be his clients.

There were many red flags flying:

  • No independent custodian
  • No independent Trustee
  • Small Auditor, incapable of auditing such an enterprise.
  • Returns were too smooth for being so high.
  • The asset size was to large for the markets supposedly employed.
  • Even front-running profits would not be enough, were Madoff to do that.
  • No profit motive.  Other managers with lesser track records charged more.
  • Marketing was by invitation.
  • Investors were sworn to secrecy.
  • And more, read the book. (more…)

Characteristic of losing trader

  
Analysis, Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #

Losing traders spend a great deal of time forecasting where the market will be tomorrow. Winning traders spend most of their time thinking about how traders will react to what the market is doing now, and they plan their strategy accordingly.

CONCLUSION:

Success of a trade is much more likely to occur if a trader can predict what type of crowd reaction a particular market event will incur. Being able to respond to irrational buying or selling with a rational and well thought out plan of attack will always increase your probability of success. It can also be concluded that being a successful trader is easier than being a successful analyst since analysts must in effect forecast ultimate outcome and project ultimate profit. If one were to ask a successful trader where he thought a particular market was going to be tomorrow, the most likely response would be a shrug of the shoulders and a simple comment that he would follow the market wherever it wanted to go. By the time we have reached the end of our observations and conclusions, what may have seemed like a rather inane response may be reconsidered as a very prescient view of the market.

Losing traders focus on winning trades and high percentages of winners. Winning traders focus on losing trades, solid returns and good risk to reward ratios.

CONCLUSION:

The observation implies that it is much more important to focus on overall risk versus overall profit, rather than “wins” or “losses”. The successful trader focuses on possible money gained versus possible money lost, and cares little about the mental highs and lows associated with being “right” or “wrong”.

Livermore quotes

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

Jesse_Livermore_quotesLivermore on irationality

Trying to figure out the “why” of amarket move can often cause great emotional strife. The simple fact is, the market always precedes economic news, it does not react to economic news. The market lives and operates in future time.

 
Livermore on knowing yourself

It is my conclusion that playing the market is partly an art form, it is not just pure reason. If it were pure reason, then somebody would have figured it out long ago. That’s why I believe every speculator must analyze his own emotions to find out just what stress level he can endure. Every speculator is different, every human psyche is unique, every personality exclusive to an individual. Learn your own emotional limits before attempting to speculate, that is my advice to any one who has ever asked me what makes a successful speculator. If you can’t sleep at night, because of your stock market position than you have gone too far, if this is the case then sell your position down to the sleeping level. (more…)

The Need To Be Right – Common Psychological Traps For Stock Traders

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

Some thoughts on what characterizes great and successful traders:

  • Great traders graciously accept losses. They don’t need to be right all the time.
  • Great traders focus on proper execution not on the outcome of a single trade.
  • Great traders concentrate on good risk management. They constantly manage their open positions.
  • Great traders are emotionally detached. Single trades do not affect their mood.
  • Great traders don’t compare themselves to others. They isolate themselves from the opinions of others. 
  • Great traders are not afraid to buy high and sell low. 

As you probably know by now the single biggest mistake a trader can make is to hold on to a losing position. Failing to cut losses quickly and letting them develop into huge losses is mentally and financially devastating. The underlying psychology which is responsible for this behavior is the ‘need to be right’ and the fear to sell at a loss. What aggravates the situation is adding to a losing position.Dennis Gartman says: “Do more of the things that work and less of the things that don’t.“

Conclusion:
Isolate yourself from the opinions of other people. Make trading decisions your own. Focus on proper execution. Have the courage to do the right thing because it is right.

Trading Strategy for Nifty Future-04th October’10

  
  Education
#  #  #  #  #  #  #  #

Losing traders often take themselves quite seriously and seldom find humor in market analysis or the trading environment. Successful traders are often the funniest and most imaginative people you will ever meet. They take joy in trading and are the first to laugh or relate a funny story. They take trading seriously, but they are always the first to laugh at themselves.

CONCLUSION:Its no wonder that one of the first things psychiatrists test for when treating a patient is whether or not the patient has any sense of humor about his affliction. The more serious the tone of the individual, the more likely that insanity has set in.

Above 5566….Target intact of 6336-6593 level !!

On Going is 34th Month from High of 6336 & This week will complete 144 weeks from High of 6336.

(Major Turning …Not ruled out )

I know u all missed rally from 5356 (Low level )…Kissed Trendline and Taken U Turn.No worry @ all.

But…..Why u all missed EXPLOSIVE rally of life …Once it closed above 5566 for 3 days and then Weekly close was also given.

-In Just 15 sessions it flared to 6184 level-

Jump of 618 points !!

On Friday it was Boldly written :Small Triangle formation had occured !Today or by Monday……..Exactly will come to Know :Nifty Future will zoom to kiss 6200 or will crash to 5800 level.

-On Friday itself……zoomed by 154 points !!!

-Again ,Iam writing here…Not interested to Impress anybody…that this happened that happened….(It’s by God Grace and Hard work only ).Levels ,Time will not give u money :U should have Strategy and Trading is an art (90% will never earn …it’s my challenge )

 New High this week ?

Can Happen……Once NF crosses & closes above 6253 level…..will zoom to kiss 6291-6336+ level.

Today ,Just watch :6189-6197

Crossover above these levels…….More Firework upto 6221-6229 level.

& there after :6253 level.

Suppose not crosses Friday’s High ( 6184 ) and Remains below 6170……then Intraday slide upto 6129————–6115 not ruled out !

Major Support at 3DEMA :6100 & 7DEMA :6048

(Untill and Unless ……Powerful Intraday Reversal …not occuring …No need to go short in Big Qty !! )

Writing/Barking…Since NF closed above 5566 level….it will kiss 6336-6592 level.

Daily Chart may Look……..Overbought

But Weekly chart………Still Hot !

& Monthly chart indicates………more Fiery move on card !

I will Update more to our Subscribers …During Trading hrs.

Updated at 6:57/04th Oct/Baroda/India

What is real?

  
Analysis, Education
#  #  #  #  #  #  #  #  #  #  #

This is a question I find is increasingly important to me in my continuous process of learning this subject. In fact there are two, what is real and what is common?

Its like this. You read everything, look at a million systems, read books, try things. Its a total mess. However you start to pick out singular bits and pieces that you can definitely say are real.

For instance, I eventually came to the conclusion that support and resistance was real. Sound ridiculous I know, you’d say “of course its real!” – yes its true, but it depends on how you are determining what is support and resistance, because there are a million ways.

However after much experimentation and thought, I finally arrived at my way of determining these levels and I know its real. It works. It is one tool that I am totally sure of and I do not have to really spend time on that subject anymore. Its in the bag. I will probably use this method for the rest of my life.

There are others also, but this is how (I think) you begin to construct your trading method and style. Also, you may read about a hundred other peoples systems and then recognise that they have one core common theme. It may be (for instance) pull backs to an EMA. Despite the infinite variations, all of these systems you can group together and call them EMA pullback systems. You can then determine that there is something in it, but what? It then becomes a process of experimentation with the idea until you arrive at the method that works for you in this regard.

So out of the mess, you pick out core ideas to test and examine. Due to my increasing interest in news trading I have been reading as much as I can from other traders about this on the forums, books and ebooks etc. Even though they bitch and argue and debate, you can see one or two core similarities that are probably the key to what ever successful results they have, and its these that you want to zero in on.

The importance of emotion in trading.

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

Anxious:  Am I prepared?  Can I afford to lose what I am risking?  Am I breaking my rules?  Did I drink too much caffeine?

Anger:  Have I not moved from the last trade?  Am I tired?  Is there conflict in my personal life?

Happiness:  Are psychological gains more important than monetary gain?  Am I overconfident?

Indifference:  Do I care?  Is something more important?

It is natural to feel emotion but in an appropriate and proportional way.

Anxious:

To this day, the first trade always produces a little anxiety.  That little tingle in your stomach and shallow breathing.  The same is true when I a trade I have been waiting for sets up.  Above that, I know there is something wrong.

Anger and Happiness:

I am angry after a negative outcome and happy after a positive outcome but in order to adapt more quickly I have to remove emotion from the outcome as soon as possible.  It is more important to focus on what happened and less how I feel about it. Prolonged feelings of anger or happiness causes risk blindness and impedes my learning.  Misjudging risk will prevent me from taking a trade or taking too much risk. (more…)

What characterizes great and successful traders

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #
  • Great traders graciously accept mistakes. They don’t need to be right all the time. Thoughts-Trading
  • Great traders focus on proper execution not on the outcome of a single trade.
  • Great traders concentrate on good risk management. They constantly manage their open positions.
  • Great traders are emotionally detached. Single trades do not affect their mood.
  • Great traders don’t compare themselves to others. They isolate themselves from the opinions of others.
  • Great traders are not afraid to buy high and sell low.  As you probably know by now the single biggest mistake a trader can make is to hold on to a losing position. Failing to cut losses quickly and letting them develop into huge losses is mentally and financially devastating. The underlying psychology which is responsible for this behavior is the ‘need to be right’ and the fear to sell at a loss. What aggravates the situation is adding to a losing position.  “Do more of the things that work and less of the things that don’t.“

  • Conclusion:Isolate yourself from the opinions of other people. Make trading decisions your own. Focus on proper execution. Have the courage to do the right thing because it is right.

    • Value of human capital

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

     

    Engineers and scientists will never make as much money as business executives. Now a rigorous mathematical proof that explains why this is true:

    Postulate 1: Knowledge is Power.
    Postulate 2: Time is Money.

    As every engineer knows,

    Work

    ———- = Power
    Time

    Since Knowledge = Power, and Time =Money, we have

    Work

    ——— = Knowledge
    Money

    Solving for Money, we get:

    Work

    ———– = Money
    Knowledge

    Thus, as Knowledge approaches zero, Money approaches infinity regardless of the Work done.
    Conclusion: The Less you Know, the more money you Make. 

    Go to top