I’ve just finnished reading a book of Richard Smitten “Jesse Livermore World’s Greatest Stock Trader”. Amazing read. For those who want to know how important psycholigal influence on trading, this is a book to read. I’d like to say a few things about greatest trader. He failed in the market when he started going to other women, he stopped being focused on the market, his 3-d wife (who brought him 2 beautiful boys Jesse Jr and Paul) Dorothy was his soul companion as later his son Jesse Jr will say. Jesse Livermore made 100 millions during October 1929 crash, at that time he was one of the richest men in the world, in 1932 his wife filed for divorce and took away their 2 boys from him, he was empty, depressed, sitting on his cash, understanding that he’s life is actually a failure(its why he later commited a suicide). Its when he started losing it all. No one knows his trades after 1932, but the majority were losses and then he finally filed bankruptsy. He still had 1 million untouchable fun for his kids and about 3 million dollars in cash(in his apartment in New York), his 4-th wife took it 3 million in cash in the bags out of house after he commited suicide( his son Paul tells about it). (more…)
Archives of “crash” tag
rssECB Purchases Of Sovereign Bonds Surge Tenfold Compared To Prior Week, Hit €1.4 Billion
After dropping to a modest €134 million last week, ECB purchases of sovereign debt exploded tenfold in the last ended week to €1.384 billion, confirming that the ECB continues to bid up all Portuguese and Irish bonds available for sale, so the market does not crash. As Reuters notes, this is the highest weekly amount purchase since early July. Once again it is up to the European Fed-equivalent to be the buyer of only resort. And Europe’s continued central bank facilitated life support comes on the heels of the latest joke in recession timing: per Dow Jones, the Center for Economic Policy Research Monday said its Euro Area Business Cycle Dating Committee had determined that the currency area’s recession began in January 2008 and ended in April 2009, lasting a total of 15 months and reducing gross domestic product by 5.5%. Some recovery there, when half the PIIGS have no access to capital markets, have their Prime Ministers mocked during conference calls, and are fighting with an exchange rate last seen long before Greece, Portugal, Spain and Ireland had to be rescued. We wonder what the CEPR’s timing on the end of the European depression will end up being?
If Trading is War, Is All Fair?
An article in today’s New York Times focuses on high-frequency traders and the efforts that they are making to avoid regulations that may limit their growing power in the markets.
According to the article, “Critics say traders with access to the fastest machines win at the expense of ordinary investors by seizing on the best deals and turning fast profits before other traders.”
Many attribute last May’s “Flash Crash” to high-frequency trading, although according the article, “Regulators did not blame high-frequency traders for causing the sell-off.”
High-frequency trading firms defend that the technology they utilize to build their business is part of “stock-exchange modernization” and helping to create “a level playing field.”
How do you feel about high-frequency trading? Has its rise affected your own trading? How have you had to change the way you trade to remain competitive?
As one of the comments on the article suggested, would it be foolish to think an average trader can beat an automatic trading professional?
Here's The Legendary Interview Where Martin Zweig Calls The 1987 Crash 3 Days Before It Happened
According to Bloomberg, famous stock market pundit Martin Zweig has passed away.
Zweig (who was either 70 or 71) was a technical analyst, newsletter writer, and money manager, who famously called the crash of 1987 3 days before it happened.
In an interview on Louis Rukeyser’s Wall Street Week on October 16, 1987, Zweig predicted a short violent drop in the market that would be reminiscent of 1929.
Here’s the video. The whole thing is worth watching, but Zweig starts his call at the 6:44 mark.
Emotion, Stress & Trading
I was recently asked by a member to share my thoughts on how I manage the high stress levels and how you keep emotion out of the mix. I will get to the the stress handling in a second, but let me start by addressing “keeping emotion” out of it.
While many traders say they can keep emotion out of their trading, I believe when it comes right down to it they’re being disingenuous. Unless those same traders really employ a completely robotic trading system which requires absolutely no supervision or control, that simply cannot be true. This is one of those things that I’ve seen many traders say to impress others, but in reality it just isn’t possible or even realistic.
When you have real money on the line and have also invested your own time and energy beyond that, emotion will play a significant role in every decision. After all, none of us are trading robots! We all have feelings and egos and therefore our trading and investment decisions will be impacted from those even in subtle ways that you may not even realize. The key is to learn how to use those emotions to your advantage. For some of you, trading completely contrary to your logical fears is an excellent way to make big money in the markets. Just look at all of the people who went short hoping for Hindenberg Omen type crash in August and who’ve been fighting it every step of the way!
As far as coping with stress, we all have to develop our own methods. But, this is what I’ve learned over time. For me, stress comes primarily from three things:
Not having a plan and being out of position in a challenging market
From not staying on top of my work and not sticking to my rigorous routine (usually from unforeseen events like technology issues or personal issues that all of us experience from time to time)
Stress and pressure I place on myself in hitting my daily, weekly, and monthly goals especially when I’m not performing up to my expectations
So, how do I cope with these? Here are a few thoughts… (more…)
Marty Zweig, Ned Davis, and Humility
It is perhaps poignant that with many people looking for a market correction and much talk of elevated sentiment measures bringing back memories of 1987, that we learned today of the death of Marty Zweig, widely known not only for the put-call ratio, and ‘Don’t fight the Fed’, but also his prescient call in October 1987 just before the crash.
Marty Zweig calls the Crash of ’87 (The whole thing is worth watching but Marty comes in around the 6:40 mark)
Watching that piece of history again there’s much that modern business networks could learn from it. Notice the easy-going style of Louis Rukeyser, the complete lack of confrontation with his panelists, no raised voices, no sound effects, no gotchas. This is after one of the most wretched weeks in Wall St, (worse was to come obviously), but you would barely know it from the calm civility which permeates their discussion.
What I particularly like and admire however, is in making his observations Marty Zweig is almost apologetic about it. He fears we’re on the verge of something severe but rather than take the opportunity for grandstanding as many of today’s pundits would, he’s almost scared to tell everyone. He says: (more…)
9 Lessons From The Greatest Trader Who Ever Lived
One of the good guys (for me, at least) has always been Jesse L. Livermore. He’s considered by many of today’s top Wall Street traders to be the greatest trader who ever lived.
Leaving home at age 14 with no more than five bucks in his pocket, Livermore went on to earn millions on Wall Street back in the days when they still literally read the tape.
Long or short, it didn’t matter to Jesse.
Instead, he was happy to take whatever the markets gave him because he knew what every good trader knows: Markets never go straight up or straight down.
In one of Livermore’s more famous moves, he made a massive fortune betting against the markets in 1929, earning $100 million in short-selling profits during the crash. In today’s dollars, that would be a cool $12.6 billion.
That’s part of the reason why an earlier biography of his life, entitled Reminiscences of a Stock Operator, has been a must-read for experienced traders and beginners alike.
A gambler and speculator to the core, his insights into human nature and the markets have been widely quoted ever since.
Here are just a few of his market beating lessons:
On the school of hard knocks:
The game taught me the game. And it didn’t spare me rod while teaching. It took me five years to learn to play the game intelligently enough to make big money when I was right.
On losing trades:
Losing money is the least of my troubles. A loss never troubles me after I take it. I forget it overnight. But being wrong – not taking the loss – that is what does the damage to the pocket book and to the soul.
On trading the trends:
Disregarding the big swing and trying to jump in and out was fatal to me. Nobody can catch all the fluctuations. In a bull market the game is to buy and hold until you believe the bull market is near its end. (more…)
On Flexibility
#1 Rule of Investing: Be Flexible – Roy Nueberger
Never adopt permanently any type of asset or any selection method. Try to stay flexible, open-minded, and skeptical. – John Templeton
Pliability: Consider and reconsider the facts, and your opinions. Stubbornness as to opinions-“cockiness”-must be entirely eliminated. – Bernard Baruch
Ignore mechanical formulas – Phil Carret
If there is anything I detest, it’s a mechanistic formula for anything. People should use their heads and go by logic and reason, not by hard and fast rules. – Gerald Loeb
Empty your mind, be formless, shapeless–like water. Now you put water into a cup, it becomes the cup, You put water into a bottle, it becomes the bottle, You put it in a teapot, it becomes the teapot. Now water can flow or it can crash! Be water my friend. – Bruce Lee. Ok, this quote comes from the world of martial arts, but the lesson transcends mere combat.
John Paulson's 8 Secrets
- Don’t follow the crowd.
- Have an exit strategy before the bubbles burst
- Focus on the debt markets for predicting the future.
- Take the time to figure out how fancy new investment products like credit default swaps (CDS) work.
- Buy insurance. No one wanted out of the money puts on the housing market.
- Remember the past. Some of the big winners in the housing crash were those dismissed as out-of-touch dinosaurs.
- Remember that no trade lasts forever so don’t fall in love with your investment. After making his $20 billion. Paulson went long banks at the bottom. (The verdict is still out on this trade).
- Timing is everything and luck helps.
