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Do Not Search for Happiness in Markets

  
  Education
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The search for happiness has a Heisenbergian aspect: the more certain you are about what you want, the less happy you will be attaining it. It seems to happen unexpectedly, and often only in hindsight.

There is also an “aspergian” aspect: like Viktor Frankl’s “The doors of happiness open outward”. I take this to mean searching and engaging with the world (rather than perpetual introspection), but it could also be the joy in helping others (as risky as it may be).

In markets it is very hard to find happiness, and it is probably foolish to look there. A good source of unhappiness, however, is limit orders. You place them with great hope and the market runs away and leaves you behind. Or you get filled and then it takes you way down. Or you’re overjoyed to finally get out with a modest profit, only to find you sold too soon and missed the big one*.

*Holding losers long and selling winners short: the hardest thing not to do.

10 Favorite Quotes from Reminiscences of a Stock Operator

  
Analysis, Education
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Although Jessie’s life ended too early, his words of wisdom live on for discovery. The book is filled with obscure references and colorful characters long forgotten by the general public, but the key themes of the text remain as relevant as ever. Therefore, I’ve pulled out my favorite quotes, below, though I highly recommend reading the entire text.

  1. There is nothing new in Wall Street. There can’t be because speculation is as old as the hills. Whatever happens in the stock market today has happened before and will happen again.
  2. The desire for constant action irrespective of underlying conditions is responsible for many losses in Wall Street even among professionals.
  3. I never lose my temper over the stock market. I never argue the tape. Getting sore at the market doesn’t get you anywhere.
  4. They say you can never go poor taking profits. No, you don’t. But neither do you grow rich taking a four-point profit in a bull market. Where I should have made twenty thousand I made two thousand. That was what my conservatism did for me.
  5. Remember that stocks are never too high for you to begin buying or too low to begin selling.
  6. A man may see straight and clearly and yet become impatient or doubtful when the market takes its time about doing as he figured it must do. That is why so many men in Wall Street…nevertheless lose money. The market does not beat them. They beat themselves, because though they have brains they cannot sit tight.
  7. After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It never was my thinking that made the big money for me. It always was the sitting. Got that? My sitting tight!
  8. Losing money is the least of my troubles. A loss never bothers me after I take it…But being wrong—not taking the loss—that is what does the damage to the pocketbook and to the soul.
  9. Prices, like everything else, move along the line of least resistance. They will do whatever comes easiest.
  10. The speculator’s chief enemies are always boring from within. It is inseparable from human nature to hope and to fear. In speculation when the market goes against you hope that every day will be the last day—and you lose more than you should had you not listened to hope—the same ally that is so potent a success-bringer to empire builders and pioneers, big and little. And when the market goes your way you become fearful that the next day will take away your profit, and you get out—too soon. Fear keeps you from making as much money as you ought to. The successful trader has to fight these two deep-seated instincts…Instead of hoping he must fear; instead of fearing he must hope.

Blind and Calculated Risk

  
  Education
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An excerpt from Trend Commandments:

There are two kinds of risk: blind and calculated. The first one, blind risk, is always suspect. Blind risk is the calling card of laziness: the irrational hope, something for nothing, the cold twist of fate, winning the lottery, etc. Blind risk is the pointless gamble, the emotional decision, or the sucker play. The man who embraces blind risk never wins in the long run. However, calculated risk can build fortunes, nations, and empires. Calculated risk and bold vision go hand in hand. To see the possibilities, work things out logically, and to move forward in strength and confidence is how you win. Calculated risk lies at the heart of every great achievement and achiever since the dawn of time. Trend followers thrive on taking calculated risks. Like the original Karate Kid movie: Wax on, wax off. Risk on, risk off.

10 Favorite Quotes from Reminiscences of a Stock Operator

  
  Education
#  #  #  #  #  #  #  #
  • There is nothing new in Wall Street. There can’t be because speculation is as old as the hills. Whatever happens in the stock market today has happened before and will happen again.
  • The desire for constant action irrespective of underlying conditions is responsible for many losses in Wall Street even among professionals.
  • I never lose my temper over the stock market. I never argue the tape. Getting sore at the market doesn’t get you anywhere.
  • They say you can never go poor taking profits. No, you don’t. But neither do you grow rich taking a four-point profit in a bull market. Where I should have made twenty thousand I made two thousand. That was what my conservatism did for me.
  • Remember that stocks are never too high for you to begin buying or too low to begin selling.
  • A man may see straight and clearly and yet become impatient or doubtful when the market takes its time about doing as he figured it must do. That is why so many men in Wall Street…nevertheless lose money. The market does not beat them. They beat themselves, because though they have brains they cannot sit tight.
  • After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It never was my thinking that made the big money for me. It always was the sitting. Got that? My sitting tight!
  • Losing money is the least of my troubles. A loss never bothers me after I take it…But being wrong—not taking the loss—that is what does the damage to the pocketbook and to the soul.
  • Prices, like everything else, move along the line of least resistance. They will do whatever comes easiest.
  • The speculator’s chief enemies are always boring from within. It is inseparable from human nature to hope and to fear. In speculation when the market goes against you hope that every day will be the last day—and you lose more than you should had you not listened to hope—the same ally that is so potent a success-bringer to empire builders and pioneers, big and little. And when the market goes your way you become fearful that the next day will take away your profit, and you get out—too soon. Fear keeps you from making as much money as you ought to. The successful trader has to fight these two deep-seated instincts…Instead of hoping he must fear; instead of fearing he must hope.

Murphy's Laws

  
Analysis, Education
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  • If there is a possibility of several things going wrong, the one that will cause the most damage will be the one to go wrong.
  • If there is a worse time for something to go wrong, it will happen then.
  • If you perceive that there are four possible ways in which a procedure can go wrong, and circumvent these, then a fifth way, unprepared for, will promptly develop.
  • If everything seems to be going well, you have obviously overlooked something.
  • Nature always sides with the hidden flaw.
  • Whenever you set out to do something, something else must be done first.
  • Every solution breeds new problems.
  • Enough research will tend to support your theory.
  • When there is a very long road upon which there is a one-way bridge placed  at random, and there are only two cars on that road, it follows that: (1) the two cars are going in opposite directions, and (2) they will always meet at the bridge.

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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.

Trading Wisdom – Paul Tudor Jones

  
  Education
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Paul Tudor Jones
Turned $1.5 million into $300 million in five years
“That cotton trade was almost the deal breaker for me. It was at that point that I said, “Mr. Stupid, why risk everything on one trade? Why not make your life a pursuit of happiness rather than pain?”
I had to learn discipline and money management. I decided that I was going to become very disciplined and businesslike about my trading. I spend my day trying to make myself as happy and relaxed as I can be.
If I have positions going against me, I get right out; if they are going for me, I keep them. I am always thinking about losing money as opposed to making money. Risk control is the most important thing in trading. I keep cutting my position size down as I have losing trades.

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Challenges/Rewards

  
Analysis, Education
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CHALLENGE

Getting attention.

REWARD

Barrier to entry nonexistent.

CHALLENGE

Getting publicity.

REWARD

Publicity is nearly irrelevant and the means of spreading the word are at your fingertips.

CHALLENGE

Making money.

REWARD

Successful artists are making more money in adjusted dollars than they ever were, just not as much as bankers or techies. Furthermore, there are many avenues of revenue. Endorsements, merch, privates…and live pays better than ever before.

CHALLENGE

Only Top Forty counts/can make you go nuclear. (more…)

3 things that will kill your trading success

  
  Education
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Not having a plan. Get a plan, who cares if it is bad, start with something. You can build off of it and refine it. You have to be willing to spend the time to make the plan yours. You do not start anything without some level of planning. Trading is hard; your brain spends a lot of time in fast forward, affecting your memory. You can slow it down by having a plan and increase your brains ability to remember.

Thinking trading is easy. It is not, there are times when it can be slightly less difficult after a lot of time, patience, and hard work. When I think to myself “this is easy” I lose my sharpness. My focus is adverted from my goal. I will lose. It may not be on that trade but maybe the next.

Thinking you have finished. There is only one thing that every trade is guaranteed to give me: a chance to learn about myself, the market, and the interaction between the two. You have to be willing to be relentless in your learning. It will enable you to learn the cheapest.

Discipline Is Number One

  
  Education
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Discipline

Creating a system and sticking with it is one of the hardest lessons. The struggle is shared across the trading world. An excerpt from “The Little Book of Trading”:

If you learn anything from this book, let it be the simple lesson: Stick with it. There will always be distractions: Breaking news banners, surprises, and unpredictable chaotic events are everywhere, but you can’t let yourself be fazed. Here is one big secret: Top traders don’t pay attention to that stuff. They have found, through hard work, diligent study, and perhaps a little luck— that their ability to stick with a trading plan is far more important than knowing or worrying about what their neighbor is doing.

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