Archives of “easy money” tag

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Five surprising lessons from a career on Stock Market

  
  Education
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1) Deep thought: Surprisingly few people rolled up their sleeves and thought deeply about why things in market are the way the are. What causes markets to go up and down? Why do things blow up? Why do most investors under-perform markets? Lots of myths and urban legends, not nearly as much quantitative evidence.

If you get really deep about it and study the data, there are some rules to learn. To succeed in markets, one needs to become a philosopher-mathematician.

2) Long-Term Greedy: Too many people went for the easy money, but that was never what motivated me. It was more about intellectual curiosity and honing ones craft, and less about the quick hit. I made less money compared to many of my peers, but I kept more of it and never blew up.

The phrase “long-term greedy” was coined by former Goldman Sachs director Gus Levy many years ago. You can make (lots of) money over time, but only by serving clients’ interests. Its amazing to me that view is so far out of fashion today.

3) Hard Work: There is no other field where a person of average skills and intelligence who is willing to put their head down and work hard can makes 100s of thousands or even millions of dollars a year — but only if they are diligent and patient and willing to put in the hours. (more…)

The trading curve.

  
  Education
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Initiation-  Every trader comes in thinking they will make money, in fact if they have never traded, they probably have convinced themselves fully. They spend time looking for all the answers in charts but it is in the process. It seems like easy money.  It is not easy but it is probably the best way to make money.  The best of anything takes more work.

Wearing off of novelty– This is a critical time for any trader.  This is where the hole gets deeper or ideally the trader stops and starts to work more efficient.  Process and not charts. This is the motivation to understand what trading really is and who they really are. (more…)

Trading Strategy for Nifty Future -11th March’10

  
Analysis, Education
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There are typically three stages an investor goes through before they become successful. Building discipline starts with an understanding of these points:

  1. Easy Money: The first stage involves thinking there is easy money to be made. This is the thinking of a newbie. Often, after a big stock tip gone wrong or a couple great broker recommendations that lose serious money, you enter the second stage.
  2. I need a plan: The second stage begins when an investor or trader decides a plan is needed to win. The problems begin when the search for a plan becomes a search for the Holy Grail. And we all know there is no Holy Grail. What is needed is more than just a “system”. What is needed is you following the system. This leads to stage three.
  3. I’m responsible for my success: Stage three comes when the investor or trader realizes that success comes from inside the person, not outside. To achieve true success you must understand the market is not responsible, you are. There is no one to blame or compliment but yourself when it comes to trading. So find a solid plan and follow it.

5144 & 5184 are Hurdles.

From last two days if u had seen (Iam writing not in Braille )3&7 DEMA will act as support levels.

*From last two days kissing 3 DEMA and taking sharp U-turn.

Now crucial support at 5106 ,5090 level.If breaks 5090 with volumes will take to 5058-5036 level.

*Hurdle at 5148-5161.Crossover will take to 5190-5200 in Intraday trade.

*Higher it is moving…More Dangerous sign.

-Trade with eye open

-Always read twice the levels mentioned.

I will update more During trading hrs to our SUBSCIBERS.

Updated at 7:57/11th March/Baroda

Crises and Panics

  
  Education
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Came across an interesting pamphlet on Crises and Panics by James L. Fraser. It’s an interesting if brief history up through the early 60s. I thought I would share his comments on identifying traits and causes of panics/crises. I am paraphrasing a bit and not completely quoting him on each bullet point here. Bear in mind, this was written in 1965.

Traits:
1) Extravagance of living, first by a few, and then by many…
2) General belief in impregnable prosperity…
3) Lavish private expenditures, which appear to be natural offshoots of immense federal projects…
4) An appetite for speculation
5) Easy money and availability of credit

Indications of impending crises:
1) Rising prices
2) Increased activity of established businesses seeking more production, more sales…
3) Active loan demand
4) Strong increase in labor employment
5) Extravagant public and private expenditures
6) Speculative mania, together with dishonest methods, fraud
7) Labor strikes and increased general violence / social instability
8) Excessive pride of opinion, especially an “American First” attitude (more…)

10 Mistakes

  
  Education
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Don’t miss to Read …..

1.  Failing to follow your own rules. Here we go again with the rules!  Always rules!  The reason we have rules is because the market has none of its own.   Rules keep us focused and keep our emotions in check.  Thomsett describes the market as a “dangerous place” that is “full of temptations, promises of easy money, and artificial excitement.”  Sounds like the perfect place to have a set of rules!

2.  Forgetting your risk tolerance limits.  Risk tolerance refers to the amount of risk we can afford to take and are willing to take.  As traders, we should expose themselves only to the amount of money we can afford to lose.  What does that mean?  For me, it means if losing X amount of money in a trade can affect how I eat this week then I am overexposed.  It is the same with buying a house or a car:  will these payments negatively affect my basic lifestyle?  If the answer is yes then it may be best to suspend the pleasure of something new.

3.  Trying to make up for past losses with aggressive market decisions. If we have a string of losers or one big loser then we can be tempted to make up the loss by doubling up or going all in on a “sure thing”, exposing ourselves to much greater losses.  Keep in mind that in the market anything can happen, including losing all your money!  Losses are best made up not with home runs and grand slams but with singles, doubles, and an occasional triple.

4.  Investing on the basis of rumor or questionable advise.  Chat rooms, mail solicitations, or pop-up ads that promise sure and fast profits are for fools and are not going to make anyone rich.  “Making smart investment decisions invariably requires that you perform your own research, apply your own standards based on clearly identified risk standards, and do your homework directly.”

5.  Trusting the wrong people with your money. “As a group, analysts’ advice has led to net losses for their clients.”   Bottom line here is “anyone buying stocks and trading options should be making their own decisions and not relying on expensive advice.”

6.  Adopting beliefs that simply are not true about the markets.  “The market thrives on beliefs that, although strongly held, are simply not true.”  When we believe that the market is there to make us rich if only we can find the secret to do so then we harbor false beliefs.  When we believe that the market will always come back to make us whole, then we are working under the assumption of a faulty belief system.  When we believe that the market makes the same logical sense as the world we are used to living and working  in, then our beliefs are in direct opposition to the markets.  The list can go on and on.  Keep in mind here that the market is specifically designed to take advantage of human nature and those who trade by their emotions… human nature and emotions based on assumptions.

7.  Becoming inflexible even when conditions have changed.   We may have a great trading strategy that works in a trending market but when the market turns volatile our strategy can lose money.  The same goes with a strategy that works best in a volatile market but not in a trending one.  It is the ole’ square peg in a round hole experiment.  It just won’t fit so we should not waste our energy trying to make it work.  Know your strategy and know your market and you will know when to get in and when to stay out.

8.  Taking profits at the wrong time. When the market starts working in our favor we tend to be very quick in taking profits but when not very slow in removing losses.  On the one hand, we are afraid the market will take what little profit we have if we do not exit immediately with at least a small profit; on the other hand, we feel the market owes us something when it goes against us, therefore we hold on until it comes back.  As hard as it may be the only way we can ever make money in the stock market is to let the winners run.  Think about it this way:  reverse what has become common practice so that the winners are allowed to do what the losers have been allowed to do and let the losers get knocked out quickly just like our winners have been.  See if this makes a difference in the bottom line.

9.  Selling low and buying high. “A worthwhile piece of market wisdom states that bulls and bears are often overruled by pigs and chickens.”   In other words, we will never get anywhere in our trading is we are ruled by fear (at the bottom) and greed (at the top).  Selling low and buying high is where the emotions step back in and where the market takes advantage of our human nature.  Unfortunately, retail investors get the short end of the stick here as they are the last to get in (at the top) and the first to get out (at the bottom).

10.  Following the trend instead of thinking independently. “Crowd mentality is most likely to be wrong. Crowds don’t think. They react.”   This takes us all the way back to rule number one: have rules.  One of the rules should be to follow our own thinking and not that of the crowd.  By the time the crowd jumps on board, the move is usually over anyway!  Hence, reaction instead of action.

Some really good lessons here as an old adage continues the provide the best lesson of all: learn from your mistakes!

Fast Easy Money

  
  Education
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You know, it never stop puzzling me, why people think the stock market is a place for fast easy money.
J-LIf you had read Livermore, the guy’s puzzled too.
Let me quote an excerpt from Richard Smitten’s How to Trade Like Jesse Livermore
Livermore believed that the game of speculation is the most uniformly fascinating
game in the world. But it is not a game for the stupid, the mentally lazy, or the person of inferior emotional balance, or for the get-rich-quick adventurer. They will die poor.
dinner-party-

Over a long period of years, he rarely attended a dinner party including strangers when someone did not sit down beside him and inquire after the usual pleasantries:
“How can I make some money in the market?”
In his younger days, he went to considerable pains to explain all the difficulties faced by the trader who simply wishes to take quick and easy money out of the market; or through courteous evasiveness, he would work his way out of the snare.
In later years, his answer became a blunt “I don’t know.” (more…)

You Are A Bad Trader ….If

  
  Education
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…You are 100% sure about a trade being a winner so you have no need to manage risk.

…You go all in on one trade and  it will make you are break you.

…You like to buy deep out of the money stock options not understanding how bad the odds are on them.

…You love directly giving unsolicited advice to other traders due to not understanding they have different trading plans and time frames.

…You are so new to trading you think it is a place of easy money.

…You think traders that talk about risk management and trader psychology are silly and that you are above that.

…You brag to much about your account size and last trade, it indicates to me you do not understand the long term in the markets.

…You are very loud about your winners but never discuss your losing trades.

…You brag to much.

And You Might really be a bad trader if: If you attack trading principles that you do not even fully understand due to lack of real trading.

10 Things I’ve Learned About Markets

  
Analysis, Education
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1. “There is no such thing as easy money”

2. Events that you think are affected by cardinal announcements like the employment numbers at 8:30 am on Friday are often known to many participants before the announcement

3. Markets that have little liquidity are almost impossible to profit from.

4. When the stock market is way down, policy makers take notice and do what they can to remedy the situation.

5. The market puts infinitely more emphasis on ephemeral announcements that it should.

6. It is good to go against the trend followers after they have become committed.

7. The one constant, is that the less you pay in commissions, and bid asked spread, the more money you’ll end up with at end of day. Too often, a trader makes a fortune on the prices showing when he makes a trade, and ends up losing everything in the rake and grind above.

8. It is good to take out the canes and hobble down to wall street at the close of days when there is a panic.

9. A meme about the relation between today’s events and those of x years ago is totally random but it is best not to stand in the way of it until it is realized by the majorit of susceptibles

10. All higher forms of math and statistics are useless in uncovering regularities.

Jesse Livermore's Trading Rules (circa 1940)

  
  Education
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1. Nothing new ever occurs in the business of speculating in stock and commodities.
2. Money cannot be consistently made trading every day or every week during the year.
3. Don’t trust your own opinion or back your judgment until the action of the market itself confirms your opinion.
4. Markets are never wrong – opinions often are.
5. The real money made in speculating has been in commitments showing a profit right from the start.
6. As long as a stock is acting right, and the market is right, do not be in a hurry to take profits.
7. One should never permit speculative ventures to run into investments.
8. The money lost by speculation alone is small compared with the gigantic sums lost by so-called investors who have let their investments ride.
9. Never buy a stock because it has a big decline from its previous high.
10. Never sell a stock because it seems high-priced.
11. I become a buyer as a stock makes a new high on its movement after having had a normal reaction.
12. Never average losses.
13. The human side of every person is the greatest enemy of the average speculator.
14. Wishful thinking must be banished.
15. Big movements take time to develop.
16. It is not good to be too curious about all the reason behind price movements.
17. It is much easier to watch a few than many.
18. If you cannot make money out of the leading active issues, you are not going to make money out of the market as a whole.
19. The leaders of today may not be the leaders of two years from now.
20. Do not become completely bearish or bullish on the whole market because one stock in some particular group has plainly reversed its course from the general trend.
21. Few people ever make money on tips. Beware of inside information. If there was easy money lying around, no one would be forcing it into your pocket.

11 Things I’ve Learned About Markets

  
  Education
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1. “There is no such thing as easy money”

2. Events that you think are affected by cardinal announcements like the employment numbers at 8:30 am on Friday are often known to many participants before the announcement

3. It’s bad to try to make money the same way several days in a row

4. Markets that have little liquidity are almost impossible to profit from.

5. When the stock market is way down, policy makers take notice and do what they can to remedy the situation.

6. The market puts infinitely more emphasis on ephemeral announcements that it should.

7. It is good to go against the trend followers after they have become committed.

8. The one constant, is that the less you pay in commissions, and bid asked spread, the more money you’ll end up with at end of day. Too often, a trader makes a fortune on the prices showing when he makes a trade, and ends up losing everything in the rake and grind above.

9. It is good to take out the canes and hobble down to wall street at the close of days when there is a panic.

10. A meme about the relation between today’s events and those of x years ago is totally random but it is best not to stand in the way of it until it is realized by the majorit of susceptibles

11. All higher forms of math and statistics are useless in uncovering regularities.

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