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More Sellers than Buyers

“The real story of the rescue. Save the euro, must save the euro. All the world’s central banks rush to save a fiat currency. If the euro should collapse, it would demonstrate the inherent vulnerability of a leading fiat currency. The central banks and the IMF have put up nearly one trillion dollars to bail out Greece, but more important, to show the world that fiat currencies are “safe” and here to stay. Remember, the business and power of central banks lies in their fiat, non-intrinsic money – money they can create at will). To hell with Greece, the euro, therefore, at all costs, MUST be saved. In all my market years, I’ve never seen such consternation and disbelief in market action, and I’m referring to last week’s crash. Headlined the Los Angeles Times on Saturday, “Stocks’ Plunge a Troubling Mystery.” From the NY Times on Saturday, “Origin of Scare on Wall Street Eludes Officials.” Front page of Barron’s — “Don’t Let Europe’s Problems Fool You. The Bull Market Will Regain His Footing.” The Saturday Wall Street Journal even viewed the crash as a God-given opportunity with a big black-letter headline, “Playing the Market Plunge.” Wall Street and the public are so all-fired bullish that they are calling the crash a mistake, a computer error, or even the stock market losing its mind. Nobody, it appears, accepted the crash at face value. I find the cynical reaction to the crash rather ominous. I’d call it total disbelief in the market. Behind the disbelief are the unspoken words, “The economy is good, Corporate earnings are improving dramatically. Therefore, the stock market must be advancing. The crash was a terrible mistake. The stock market has lost its mind. Buy the mistake, it’s a great opportunity.” A radio station called me and asked what caused the crash. I answered, “Four words — More sellers than buyers.” The interviewer seemed stunned. He paused for about 10 seconds and asked, “You mean that’s it?” I answered, “Right, when sellers overwhelm buyers in a big way, guess what? The market goes down in a big

Alexander Elder's 7 Rules for Traders

1. Decide that you want to trade for the long haul. i.e decide that you want to trade 20 years from now.
2. Learn as much as you can. Read, and listen to the experts, but keep a healthy disbelief about everything.
3. Do not be greedy and rush to trade – take your time to learn. The market will be there with many good opportunities in the months and years ahead. 
4. Develop a method for analyzing the market, that is, if A happens, B is likely to happen. Markets have many dimensions – use several analytics methods to confirm trades.
5. Develop a money management plan. Your first goal should be of long term survival, second goal, a steady growth of capital and third goal, making high profits.
6. Be aware the trader is the weakest link in the system. Learn how to avoid losses and develop your method of cutting out impulsive trades.
7. Winners think, feel and act differently than loosers. You must look within yourself and strip away the illusions and change your old way of thinking, acting and being. Change is hard, but if you want to be a successful trader, you have to work on changing your personality.

10 Obstacles to Success for Traders

1        Greed, the urge to make as much money as possible, and fear that he will lose it all.

2        Low confidence in himself or his strategy, which makes him enter or exit trades at the wrong time. Low self esteem is also a problem; lots of people are natural victims and believe that they will probably fail, and of course this is what they do.

3        Middle class guilt that makes the trader believe that he should not make super profits because it is morally wrong.

4        Overconfidence. Feeling that after so many winning trades he is invincible.

5        Disbelief. He believes that high rewards cannot possibly be true, and “If trading is that easy, then everyone would be doing it.” He then looks for complicated strategies in the belief that it cannot be easy.

6        Paranoia, believing that the market is conspiring against him.

7        Reward for effort, where he feels that people should be rewarded fairly for the effort that they put in. FX trading does not operate with these rules and that is confusing. The reward can be disproportionately high or can result in punishing losses, and is not dependent on just the work put in.

8        Insecurity, resulting in changing a strategy that is actually winning. All strategies must be tested and then consistently applied in order to engender confidence.

9        The urge to trade simply because he is a trader. This impatience results in entering trades when no real opportunity exists.

10   Low expectation; people with a low expectation of life tend to be less successful. Even though they may be highly intelligent, they aim for less and settle for less. (more…)

Life Wisdom

There is a Zen story about a poor man walking through the woods reflecting upon his many troubles.

He stopped to rest against a tree, a magical tree that would instantly grant the wishes of anyone who came in contact with it. He realized he was thirsty and wished for a drink. Instantly a cup of cool water was in his hand. Shocked, he looked at the water, he decided it was safe and drank it.

He then realized he was hungry and wished he had something to eat. A meal appeared before him. “My wishes are being granted,” he thought in disbelief.

“Well, then I wish for a beautiful home of my own,” he said out loud. The home appeared in the meadow before him. A huge smile crossed his face as he wished for servants to take care of the house. When they appeared he realized he had somehow been blessed with an incredible power and he wished for a beautiful, loving, intelligent woman to share his good fortune. “Wait a minute, this is ridiculous,” said the man to the woman. “I’m not this lucky. This can’t happen to me.” As he spoke…everything disappeared. He shook his head and said, “I knew it,” then walked away thinking about his many troubles.

There is a great truth hidden behind this simple Zen story. Our mind is like this magical tree. “Whatever the mind conceives and believes, it achieves.”

Does Your Financial Guru or Doomster Resemble A Cult?

Does your financial Guru or Doomster resemble a cult? To satisfy your curiosity, it might be worth taking  simple test that will give you an idea whether what you thought was innocent objective altruistic financial advice and unbiased analysis is actually something more nefarious that wants to control your mind, your trades, and empty your bank account.

 1. Does your Guru always make out like he’s right?

2. Does you Guru paint a picture that the other [non-disciples] are always wrong?

3. Is there any exit from the Guru’s philosophy without following the philosophy?

4. Does the Guru’s group use its own “Cult-speak”?

5. Does “group-think” dominate, suppressing dissent and enforcing conformity of thinking?

6. Is Guru’s advice irrational at times, contradicting previous or other tenets of Guru advice?

7. Does Guru’s philosophy suppress disbelief?

8. Does Guru’s philosophy denigrate competing ideas, schools of thought, and other Guru’s?

9. Does Guru make personal attacks upon critics?

10. Does Guru believe non-followers need “fixing”?

11. Does Guru insist that his interpretation is the only correct way? (more…)

Zen Story

enlightenmentThere is a Zen story about a poor man walking through the woods reflecting upon his many troubles.
He stopped to rest against a tree, a magical tree that would instantly grant the wishes of anyone who came in contact with it. He realized he was thirsty and wished for a drink. Instantly a cup of cool water was in his hand. Shocked, he looked at the water, he decided it was safe and drank it.
He then realized he was hungry and wished he had something to eat. A meal appeared before him. “My wishes are being granted,” he thought in disbelief.
“Well, then I wish for a beautiful home of my own,” he said out loud. The home appeared in the meadow before him. A huge smile crossed his face as he wished for servants to take care of the house. (more…)

Trade what you Observe – Not what you Believe

One of the hardest lessons to learn in your quest to become a true trader is to susobservationpend your beliefs and to trade that which you have learned through hours of observation.

How many times have you stated that company x is overvalued only to watch it go higher? Or undervalued only to watch it continue lower? How many times have you thought that the “market” can’t go any higher and yet it did day after day? Or lower? How many times have you been scratching your head because the “market” is rising on such low volume? When is the last time you were in disbelief because company y has closed higher for 10 days in a row (after shorting it on the third day)? And have you ever acted on a recommendation from Jim Cramer only to watch in disbelief because as soon as you entered it reversed course?

Bottom line – trading what “you” believe is a recipe for disaster.

Eventually most folks figure out that the market is so chaotic that they are lost and admit they don’t know how to trade. Many quit in disgust. A few of you press on and begin a journey of real study. (more…)