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Sun Tzu and Trading -Anirudh Sethi

  
Analysis, Education
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Image result for Sun Tzu and TradingThe money market is a considered to be a wrangle amongst purchasers and vendors on the estimations of organizations. That is the pleasant clarification. To outline it in another light – the share trading system is a war amongst purchasers and vendors, who each need to take the others cash. Money markets are harsh, and in the event that you don’t approach it with the manner of a disturbed general, you will lose. In the share trading system, pleasant folks complete last. Sun Tzu’s, The Art of War serves to highlight numerous parts of trading since trading the market is much similar to fighting. Sun Tzu’s Art of War is an exemplary bit of work that is broadly perused and connected to many fields, because of its major nature that is exceptionally versatile to numerous parts of our lives. In this post, I separated parts of the work and connected to trading and in doing as such plan to acquaint the critical trading ideas with you. I have likewise assembled and classified them for simple comprehension.

War as Art and So as Trade

The first Art of War is an assemblage of lessons composed and instructed by Sun Tzu, a 6th century B.C. Chinese General/Philosopher. Its insight is immortal and has developed in prominence. It is, truth be told, required perusing at each military foundation on the planet and can be found in most corporate meeting rooms. In this adjustment of the ace’s work of art, super trader Dean Lundell applies Sun Tzu’s lessons to the specialty of contributing – from outlining an individual trading plan to timing market moves, to gathering information from a worldwide data organize. Each wonderfully composed spread opens with a section from Sun Tzu and is then translated and clarified for its vital pertinence to trading stocks, bonds, fates, and items. Guided by Sun Tzu’s old shrewdness, tenderfoot, and expert traders can utilize these great military methodologies to overcome the market! Understudies of the market are continually fighting the feelings of dread and avarice. The Art of War can enable you to cut a way between these two feelings and lead you to a mental place that will always enable you to put your best foot forward. In this arrangement, I will address different poor trading propensities by excerpting and deciphering different sections. While my understandings are not intended to be authoritative by any extent of the creative energy I will likely make them think. They say the round of golf is not played on the green. It’s played between your two ears. Trading fates, Forex, alternatives, or stocks are similarly. Your psychological distraction must be adequate. If not, disappointment is unavoidable. At last, I trust you observe the teaching to be a theorist and not only your standard speculator.

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CheckList for Pre-Market -After Market Close

  
Analysis, Education
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Pre-market

  • Am I prepared to trade?
  • Have I cleared my mind or meditated prior to trading?
  • Have I reviewed my market feeds for any overnight news?
  • Have I run my stock selection scans?
  • Have I updated my watchlists?
  • Have I updated my risk per trade calculations, along with 2ATR measurements and position sizes?

After market close 

  • Have I carried out my daily review of my trading?
  • Have I updated my stops as per my rules?
  • Have I logged my results?
  • Did I only make logical, rational decisions throughout the market session?

Obviously, any questions that are repeatedly marked with a ‘No’ or an ‘X’ over a period of time will clearly highlight what you need to work on.
Finally, note how these questions make no reference to whether you made a profit or a loss. You can break every trading rule on a given day and make money. You can also trade perfectly on a given day in accordance with your rules and lose money.
The thing is, the more faithful you are to your process, you increase the probabilities of being successful over the long-term. Creating good habits will help you achieve this.

Mark Douglas: 7 Keys to Trading in the Zone

  
Analysis, Education
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Trading in the Zone by Mark Douglas book cover“I am a consistent winner because:

1. I objectively define my edges.
2. I predefine the risk of every trade.
3. I completely accept the risk or I am willing to let go of the trade.
4. I act on my edges without reservation or hesitation.
5. I pay myself as the market makes money available to me.
6. I continually monitor my susceptibility for making errors.
7. I understand the absolute necessity of these principles of consistent success and, therefore, I never violate them.”

Universal Lessons

  
  Education
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What follows are some of the most well-known investment disciplines along with a lesson or two from each that every investor should be able to use in their own strategy.

Focused Value Investing: Buying stocks that are underpriced in relation to their intrinsic value.
Lesson(s): It’s important to invest from the perspective that stocks represent an ownership interest in a business. You get your share of corporate profits from the stocks you own and over the long-term the value of the business should be reflected in the stock price.

Quantitative Investing: Using a systematic, mathematical approach to make buy and sell decisions within a portfolio.
Lesson(s): A rules-based, objective approach to investing is a great way to take out the emotions which can trip up so many investors and introduce biases into the investment process. Automating good decisions can reduce costly mistakes.

Technical Analysis: Studying charts, past prices and volume for security and market analysis by using patterns.
Lesson(s): An understanding of the history of the financial markets is extremely important to be able to define your tolerance for risk and gain the correct perspective on what couldhappen in terms of gains and losses. And at the end of the day markets rise and fall because of supply and demand.

Index Investing: Owning the entire market/index at a low cost.
Lesson(s): Beating the market is hard. Keeping your expenses, activity and turnover to a minimum is a prudent way to earn your fair share of the market’s return over time. (more…)

Focus On What You Can Control

  
  Education
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  • You can control what stock to buy.Focus on Money
  • You can control how much money you put behind the idea.
  • You can control which markets you trade in.
  • You can control how much you are willing to risk per trade.
  • You can control what type of stocks you buy, big caps, only small caps, only over Rs 50 only under Rs 10, etc.,
  • You can control what kind of set ups you buy.
  • You can control when you get in or out, barring a halt.
  • You can control when to trade or when not to trade.
  • You can’t control the outcome of the trade.
  • You can’t control how the market will react to the news.

Don’t fret over what you can’t control, shake it off, once you put the trade in what the market decides to do is out of your control.

Trader’s Emotions

  
  Education
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The hardest thing about trading is not the math, the method, or the stock picking. It is dealing with the emotions that arise with trading itself. From the stress of actually entering a trade, to the fear of losing the paper profits that you are holding in a winning trade, how you deal with those emotions will determine your success more than any one thing.

To manage your emotions first of all you must trade a system and method you truly believe will be a winner in the long term.

You must understand that every trade is not a winner and not blame yourself for equity draw downs if you are trading with discipline.

Do not bet your entire account on any one trade, in fact risking only 1% of your total capital on any one trade is the best thing you can do for your stress levels and risk of ruin odds.

With that in place here are some examples of emotional equations to better understand why you feel certain emotions strongly in your trading:

Despair = Losing Money – Trading Better

Do not despair look at your losses as part of doing business and as paying tuition fees to the markets. (more…)

The Equation That Explains It All

  
Analysis, Education
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If you were just woken from some form of suspended animation from let’s say 2010 (ancient economic history in today’s terms) then informed of the current state of global political affairs and upheavals, U.S. employment (95+million not,) global currency gyrations, interest rates at not only 0% but some -0%, threats of escalating wars, threats of major confrontational war, GDP of the major global economies not only contracting, but below statistical stagnant, governments, as well as central banks with balance sheets of debt calculated in $TRILLIONS, some in the 10’s of, all financed at near or below 0%, and the Fed is only about a week away from raising rates into the teeth of what can only be called “uncertainty,” and much, much more. (There isn’t enough time, or digital ink to list them all.)

Nobody would be surprised if your first reaction based on your prior acumen (the ancient history of 7 years ago whether it be in stocks, business, or both) would to become immediately concerned that whatever portfolio, or wealth you may have had in the markets, may be worth far less today than when you were first put to sleep. And probably becoming ever smaller as you thought about what you might need to do next in order to preserve any that may be left.

That is, till someone explained to you the markets you went to sleep knowing of – are no longer – and the reality of the markets today you could never have dreamed up. Even if they let you sleep another decade or longer.

Today, the markets you once knew of are better described as the “markets.”

To clear up any confusion as to how, or why, the “markets” can now be at “never before seen in the history of mankind highs” once again after the resounding “NO” vote in Italy, where the entire E.U. experiment is now seriously undermined, and falling apart in real-time (Brexit first, Italy will surely now vote next, etc., etc,) below is the calculation that explains it all.

For under the rules of: If A = B and B = C, then A = C, you now have the magical formula to understand with Einstein like surety today’s ‘markets.”

If you have any doubt to the soundness of this expression, consider the following: 

If a financial crisis appears (A) The central banks will intervene (B)
If the central banks intervene (B) The “markets” go up (C)
Thus, we need more financial chaos (A) To make even more all time “market” highs (C)

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10 Behavioral Economics/Psychology Books for Investors

  
Analysis, Education
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As a species, we are notoriously bad at understanding our own thinking and emotions. We are even worse at predicting our own behavior. Understanding your own mind and those of your fellow investors is crucial to successful investing.
These books will go a long way to helping you understand your hardwired weaknesses and blind spots.
 
1. How We Know What Isn’t So by Thomas Gilovich
Thomas Gilovich: How We Know What Isn't So
Published in 1991, this was the very first behavioral finance book I ever read — it is also one of the most influential investing books you will ever read. So many of our own foibles are detailed here that it is almost embarrassing. Everything from unsuspected biases to how we engage in critical reasoning comes under scrutiny. What it reveals isn’t pretty. Despite the genius that is human achievement, it turns out that we are all very poor at comprehending complex data and analyzing risk.
This book will help you understand how your brain processes randomness; overlooks evidence that is inapposite to prior beliefs; selectively perceives and reinterprets data; and engages in selective recall. It’s how we all create an artificial story line to help make sense of otherwise incomprehensible data.
Once you finish this book, you will never look at investing the same way.
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2.  Thinking, Fast and Slow (Daniel Kahneman)

Daniel Kahneman, a Psychologist, won the 2002 Nobel Prize in Economic Sciences with Amos Tversky for their seminal work in behavioral finance. The two challenged the idea of Homo Economicus and the rational model of judgment and decision making.
Thinking, Fast and Slow  looks at the two systems of Human Cognition: System 1 is fast, intuitive, and emotional; System 2 is slower, more deliberative, and more logical. The book exposes the extraordinary capabilities along with the faults and biases of our wetware. This book will transform the way you think about thinking.
The most recent and comprehensive book from a giant in the field.

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15 Biggest Insurance Claims in Modern History

  
Analysis, Education
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Biggest Insurance Claims

15. Most-Expensive Pet

The most-expensive claim stood at $22,000 and it was in 2010 for feline renal surgery. Apparently, the pet as not a pedigree feline, but just a good-old gutter cat that somebody had decided to insure.

14. Rowan Atkinson

The British actor that is famous for his role as Mr. Bean had the most expensive automobile-insurance claim in history. The actor crashed his £640,000 McLaren F1, resulting in a payout by his insurance company for £900,000 in repairs. The insurance company had agreed to pay out that much since the price of that car had risen to in the region of £3.5 million when the accident happened in 2011. Prior to this, the highest payout by an insurance company for a car had stood at just over £300,000.

13. Bugatti Veyron

In 2007, engineers crashed 2 Bugatti Veyrons while running tests for a prototype. Each of the vehicles was worth over $800,000.

12. Ice Slip 

In 2012 in Virginia one winter a resident of an apartment building went outside and slipped on the ice and the snow. A few bones were broken in the resident’s legs and complications led to the person being amputated of their lower legs. The claim was settled for a payout in compensation of $7.75 million because the landlord of the building had failed to clear the ice and snow in front of the building. He was therefore held responsible and it stands as the highest payout. (more…)

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