Money is a symbol of energy and sometimes power. As such it has no real intrinsic value. It is neither good nor bad, positive nor negative … (more…)
Archives of “ethics” tag
rssDon’t Let Negative Emotions Control You
Successful traders do not allow negative emotions to affect their decision-making. Trading is a stressful process, and you will experience many setbacks. Expect them, however, and don’t see losses as indications that you will never succeed. Instead, be prepared to identify your negative reactions and act on them in positive ways.
Successful traders turn fear into gain. They realize that losses are a part of their business, and they expect them. But while they know that some trades will cost them money, they let those same trades become a gain in knowledge. Remember that each time you have a loss, this gives you some guidelines on how to alter your strategy. Perhaps your stop loss needs to be set higher, perhaps you need to alter how you identify trends, or perhaps you need to use new indicators. (more…)
10 Wall Street Pick-up Lines to Avoid
“If your proposed marriage contract has 47 pages, I suggest you not enter.”
This quote by Charles Munger hammers home the role of trust in an investment relationship.Michael Kitces of Nerds Eye View wrote a post entitled “What is the philosophy of your financial planning firm? It deals with what an advisor doesn’t believe in and what he/she wouldn’t recommend to clients. Engaging an advisor whose philosophy is based on trust, and who chooses to be a fiduciary for clients has many benefits for the average investor. Unfortunately, most financial advisors are not fee-only RIAs. Those who are only looking to have a “suitable relationship” with their customers may structure their business philosophy in a different manner. Many advisory firms have embraced a culture of sales and monthly quotas. Clearly that is a philosophy, but it is not necessarily a good one for the end user. If you find yourself surrounded by financial types using any of these types of pitches, be very afraid.
1. “Its like a CD.”
2. “Buying on margin will greatly increase your returns.”
3. “This fund did really well last year.”
4. “As long as the music is playing, you have to get up and dance.”
5. “Do you want the confirmation sent to your office or your mansion?”
6. “I have a very strong work ethic. The problem was my ethics in work.”
7. “I’ve got the guts to die. What I want to know is have you got the guts to live?”
8. “Greed is good.”
9. “Don’t pitch the b*tch.”
10. “Screw the credit derivative desk, I don’t understand half the sh*t they do anyway.” (more…)
Google Chairman Predicts the End of Internet
Speaking at the World Economic Forum in Davos, Switzerland on Thursday, Google Executive Chairman Eric Schmidt said that the internet will become so ubiquitous that it will “disappear,” CNET reports.
When asked about his views on the future evolution of the web, the Google Chairman stated that he would “answer very simply that the internet will disappear.” Schmidt explained “there will be so many IP addresses…so many devices, sensors, things you are wearing, things that you are interacting with that you won’t even sense it; it will be part of your presence all the time.”
“Imagine you walk into a room, and the room is dynamic. And with your permission and all of that, you are interacting with the things going on in the room. A highly personalized, highly interactive and very, very interesting world emerges,” he noted.
Schmidt was speaking at a panel dubbed “The Future of the Digital Economy,” along with top executives from Vodafone, Facebook, and Microsoft.
Privacy Concerns (more…)
THE TWELVE HABITUDES
A successful trader:
- Has a commitment to trading and comes prepared to trade.
- Is detached from the results. He thinks in terms of process and believes in the validity of the process.
- Is willing to accept loss.
- Is at ease with controlled risk.
- Thinks in terms of probabilities.
- Is comfortable with uncertainty.
- Takes the long term view.
- Has an attitude of abundance.
- Is optimistic.
- Has an attitude of open-mindedness and clarity of thought and perception.
- Has an attitude of courage. She is willing to act in the face of uncertainty and possible loss.
- Is disciplined. Discipline is putting into action those behaviors which need to be done to get you to your goals.
Habitude 1: Preparedness
- A successful trader trains his mind for high power trading. If he needs a coach or mentor, he gets one. He takes the time for meditation, self-suggestion and positive visualization. He learns helpful questions to ask himself. He does whatever it takes to prepare himself mentally to trade.
- Set goals
- Put your goal into words. Form a sentence that is specific, simple, short, positive, in the present tense, and achievable.
- Make a mental movie of yourself with the goal achieved.
- Step into the movie and live it and feel it as if it is already true.
- Design the steps necessary to take to get to the goal.
- Commit yourself to doing the steps and make a timetable to do them. (more…)
Ten Tasks of Top Traders
- Daily self analysis: Successful trading is 40% risk control and 60% self-control.
- Daily mental rehearsal: Practice being disciplined in your mind before you trade daily.
- Developing a low risk idea: Trade with the odds on your side with a defined risk.
- Stalking: Wait for the entry. Utilize patience and don’t pull the trigger to soon.
- Action: Take the entry when the signal is hit. Do not freeze up. Be definitive.
- Monitoring: Keep an eye on what is happening with your position.
- Abort: Be ready to cut your losses, when you are wrong and hit your stop loss.
- Take profits: Use trailing stop or profit target when one is hit. Allow the market to take you out.
- Daily briefing: Think through your trading & what you did right/wrong based on your trading plan.
- Periodic review: Is your trading working? Do adjustments need to be made?
Where Are You Placing Your Bet?
Some love risk. Others avoid it till the grave. Whether you take it head on or run in the other direction it will always catch you. Risk cannot be avoided so you better know how to put the odds in your favor. Consider the following:
You want to see life as a continuum running on a loop back and forth from risk to reward. If you want a big reward, take a big risk. If you want an average reward and an average life, take an average risk. Easier said than done, however, if you want the big reward. Our system is notorious for playing Whac-A-Mole with achievers.
From an early age, people are conditioned by families, schools, and virtually every other shaping force in society to avoid risk. To take risks is inadvisable; to play it safe is the message. Risk can only be bad. However, winners understand risk is highly productive, and not something to avoid. Taking calculated risks is different from acting rashly. Playing it safe is the true danger. Far more often than you might realize, the real risk in life turns out to be the refusal to take a risk.2 If life is a game of risk, then to one degree or another, being comfortable with assessing odds is the only option for a fulfilling life.
Consider trading from a “startup” business perspective. Every business is ultimately involved in assessing risk. Putting capital to work to make it grow is the goal. In that sense, all business is the same. The right decisions lead to success, and wrong ones lead to insolvency. Blunt, but true. There are ways to go in the right direction, however. Ask yourself these questions:
- What is the market opportunity in the market niche?
- What is your solution to the market need?
- How big is the opportunity?
- How do you make money?
- How do you reach the market and sell?
- What is the competition?
- How are you better?
- How will you execute and manage your business?
- What are your risks?
- Why will you succeed? (more…)
WHAT WALL STREET CAN LEARN FROM COWBOYS
James P. Owen, a 40 year veteran on Wall Street, has written a interesting book entitled Cowboy Ethics: What Wall Street Can Learn From the Code of the West. In it he lists the 10 codes of the working cowboy, explaining how each code can be a source of inspiration for all those involved in Wall Street, from traders to institutions. Along with the message are beautiful photographs throughout by David Stoecklein. You could actually classify this as a trader’s coffee table book. Here are the codes:
1. Live Each Day With Courage. Real courage is being scared to death and saddling up anyway, setting aside the fear of the unknown knowing there is work to be done.
2. Take Pride in Your Work. Cowboying doesn’t build character, it reveals it. Stock trading brings out what is already there: pride in the preparation.
3. Always Finish What You Start. When you’re riding through hell…keep riding. Good stock traders, like cowboys, never quit in the face of uncertainty.
4. Do What Has to be Done. The true test of a man’s honor was how much he would risk to keep it intact. Stock trading is about taking responsibility for decisions and results, just like the cowboys.
5. Be Tough, But Fair. The Golden Rule was nothing less than a key to survival. Cowboys always treated others with respect, especially those who differed. Should we not do the same, whether bull or bear?
6. When You Make a Promise Keep It. A man is only as good as his word. You have no one to trust but yourself and when you have rules they are there for you to follow. If you do not, then you have broken a promise to yourself. Same with traders as with cowboys.
7. Ride For The Brand. The cowboy’s greatest devotion was to his calling and his way of life. If you have clients, the clients come first; if you have family depending on your discipline, then they come first. Period.
8. Talk Less and Say More. When there’s nothing more to say, don’t be saying it. No room for bragging or boasting out on the range or in the market. Your work, devotion, and steadfastness speaks for itself. Enough said.
9. Remember That Some Things Are Not For Sale. To the cowboy, the best things in life aren’t “things.” What matters most on the range and in the trading room is not what money can buy but what can’t be bought. Reputation is all that really matters.
10. Know Where to Draw the Line. There is right and there is wrong, and nothing in between. Insider trading, whispers, rumors, secret deals behind close doors, and all manner of questionable activities may be all around us but we do not have to embrace them as our own.
Of all the places to learn a few lessons about investing and ourselves, is it not refreshing to find a few on the open range from a time not so long ago?
Sviokla & Cohen, The Self-Made Billionaire Effect- Book Review
Becoming a millionaire, even a multimillionaire is not all that extraordinary, becoming a billionaire is. What do self-made billionaires (and there are about 800 of them in the world) have that the rest of us don’t? John Sviokla and Mitch Cohen tackle this question in The Self-Made Billionaire Effect: How Extreme Producers Create Massive Value (Portfolio / Penguin, 2014).
These billionaires (or Producers, as the authors call them) may be wired differently. They certainly think differently. They balance judgment and imaginative vision, a daunting mental task since “for most people, judgment and imagination sit on opposite ends of a mental spectrum. The more skilled one is at seeing things as they are (judgment) the harder it is to see things as they might be (imagination).“ (p. 4) Not only do they “revel in bringing clashing elements together,” “they seamlessly hold on to multiple ideas, multiple perspectives, and multiple scales.” (pp. 16, 15)
Since they “cannot predict the exact time to make an investment, … they are willing to operate simultaneously at multiple speeds and time frames. They accept that timing is not under their control, and so they work fast, slow, super slow, or in all these modes at the same time. They urgently prepare to seize an opportunity but patiently wait for that opportunity to fully emerge.” (p. 19)
“The goal of a successful trader is to make the best trades. Money is secondary.”
==== Money is secondary? What the hell? Is Alexander joking?
Well, if we take some time and analyse this quote, Mr Elder has a very important point to make. How can good trades be better than money ? Why are we indoctrinated to think that money is the primary goal?
Don’t worry I was subject to this way of thinking for a long time but realized it has huge fundamental issues. The problem is that anyone can have a great trade, a lucky trade, a momentum trade, but the question is, can you replicate this performance in the future in the long term?
I repeat, can you replicate this trade in 10 years time?
Lets think soccer, is it more important to score a goal every match or to have a system of playing the game to have high probability of scoring opportunities?
Do you prefer to have one perfect trade or many high probability trades?
If you are in this for the long term, focusing on making the highest probability trades possible is a more sustainable way for a future success. If you spend time in analyzing your entries, exits, risk management on a consistent level, you have a higher probability of achieving your goal.