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The 14 Stages Of Trader

  
  Education
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1. OPTIMISM – It all starts with a hunch or a positive outlook leading us to buy a stock.

2. EXCITEMENT – Things start moving our way and we get giddy inside. We start to anticipate and hope that a possible success story is in the making.

3. THRILL – The market continues to be favorable and we just can’t help but start to feel a little “Smart.” At this point we have complete confidence in our trading system.

4. EUPHORIA – This marks the point of maximum financial risk but also maximum financial gain. Our investments turn into quick and easy profits, so we begin to ignore the basic concept of risk. We now start trading anything that we can get our hands on to make a buck.

5. ANXIETY – Oh no – it’s turning around! The markets start to show their first signs of taking your “hard earned” gains back. But having never seen this happen, we still remain ultra greedy and think the long-term trend is higher.

6. DENIAL – The markets don’t turn as quickly as we had hoped. There must be something wrong we think to ourselves. Our “long-term” view now shortens to a near-term hope of an improvement.

7. FEAR – Reality sets in that we are not as smart as we once thought. Instead of being confident in our trading we become confused. At this point we should get out with a small profit and move on but we don’t for some stupid reason.

8. DESPERATION – All gains have been lost at this point. We had our chance to profit and missed it. Not knowing how to act, we attempt to do anything that will bring our positions back into the black.

9. PANIC – The most emotional period by far. We are clueless and helpless. At this stage we feel like we are at the mercy of the market and have absolutely no control.

10. CAPITULATION – We have reached our breaking point and sell our positions at any price. So long as we can get out of the market to avoid bigger losses we are content.

11. DESPONDENCY – After exiting the markets we do not want to buy stocks ever again. The markets are not for us and should be avoided like the plague. However, this rare point marks thepoint of maximum financial opportunity.

12. DEPRESSION – We drink, cry and/or pray. How could we have been so dumb we think to ourselves. Some start to correctly look back and analyze what went wrong. Real traders are born here, learning from past mistakes.

13. HOPE – We can still do this! Eventually we return come to the realization the market actually does have cycles (shocking). We begin to start analyzing new opportunities.

14. RELIEF – The markets are turning positive again and we see our prior investment come back around. We regain our faith (although small) in our ability to invest our money. The cycle start all over again!

Must-Read Interview with Howard Marks

  
  Education
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Barron’s had an awesome interview over the weekend with Howard Marks.  They made it the cover story for a reason.  If you missed it, you must immediately read it here.

For those that don’t know, Howard Marks is the chairman of Oaktree Capital Management ($77 billion under investment).  They focus on distressed debt and Warren Buffett is one of his biggest fans.  What I found very appealing was his use of sentiment in his overall market thesis.

He’s been in this game longer than I’ve been alive and whenever I see someone willing to share what they’ve learned, it is like Christmas.

Here are a few of my favorite quotes from the story and my take. (more…)

Fear & Euphoria

  
  Education
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fear-euphoria

It is inordinate “fear” and “euphoria” that prevent us from achieving our investment goals. And, the impact of these excessive emotions can be seen across the spectrum of traders.

  • The beginner who won’t put on a trade until he is certain the next trade will be a winner.
  • The trader who “knows” what the market will do and as a result refuses to exit a losing position.
  • The same trader who ignores market information that is contradictory to his position.
  • The same trader who becomes paralysed with fear – “Dear God, just let me break even! I promise I won’t do it again!”
  • The student who refuses to send in work because he doesn’t want to be told that his hours of work are “wrong”
  • The trader who after a series of wins feels “he’s made it!” …and becomes reckless.

The 14 Stages Of Trading Psychology

  
  Education
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1. OPTIMISM – It all starts with a hunch or a positive outlook leading us to buy a stock.
2. EXCITEMENT – Things start moving our way and we get giddy inside. We start to anticipate and hope that a possible success story is in the making.
3. THRILL – The market continues to be favorable and we just can’t help but start to feel a little “Smart.” At this point we have complete confidence in our trading system.
4. EUPHORIA – This marks the point of maximum financial risk but also maximum financial gain. Our investments turn into quick and easy profits, so we begin to ignore the basic concept of risk. We now start trading anything that we can get our hands on to make a buck.
5. ANXIETY – Oh no – it’s turning around! The markets start to show their first signs of taking your “hard earned” gains back. But having never seen this happen, we still remain ultra greedy and think the long-term trend is higher.
6. DENIAL – The markets don’t turn as quickly as we had hoped. There must be something wrong we think to ourselves. Our “long-term” view now shortens to a near-term hope of an improvement.
7. FEAR – Reality sets in that we are not as smart as we once thought. Instead of being confident in our trading we become confused. At this point we should get out with a small profit and move on but we don’t for some stupid reason. (more…)

fun with words

  
Education, Humour
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FunwithwordsThe Washington Post’s Mensa Invitational once again invited readers to take any word from the dictionary, alter it by adding,  subtracting, or changing one letter, and supply a new definition.   Here are the winners:

1. Cashtration (n.): The act of buying a house, which renders the  subject financially impotent for an indefinite period of time.

2. Ignoranus : A person who’s both stupid and an asshole.

3. Intaxicaton : Euphoria at getting a tax refund, which lasts until you  realize it was your money to start with.

4. Reintarnation : Coming back to life as a  hillbilly.

5. Bozone ( n.): The substance surrounding stupid people that stops bright ideas from penetrating. The bozone layer, unfortunately, shows little sign of breaking down in the near future.

6. Foreploy : Any misrepresentation about  yourself for the purpose of getting laid. (more…)

These are always great

  
Analysis, Education, Life
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Washington Post’s Mensa Invitational which once again asked readers to take any word from the dictionary, alter it by adding, subtracting, or changing one letter, and supply a new definition.
the winners were:

  • Cashtration (n.): The act of buying a house, which renders the subject financially impotent for an indefinite period of time.
  • Intaxication: Euphoria at getting a tax refund, which lasts until you realize it was your money to start with.
  • Reintarnation: Coming back to life as a hillbilly.
  • Bozone (n.): The substance surrounding stupid people that stops bright ideas from penetrating. The bozone layer, unfortunately, shows little sign of breaking down in the near future.
  • Giraffiti: Vandalism spray-painted very, very high.
  • Sarchasm: The gulf between the author of sarcastic wit and the person who doesn’t get it.
  • Inoculatte: To take coffee intravenously when you are running late.
  • Hipatitis: Terminal coolness.
  • Osteopornosis: A degenerate disease. (This one got extra credit.)
  • Karmageddon: It’s when everybody is sending off all these really bad vibes, and then the Earth 
    explodes and it’s a serious bummer.
  • Decafalon (n.): The grueling event of getting through the day consuming only things that are good for you.
  • Glibido: All talk and no action.
  • Dopeler effect: The tendency of stupid ideas to seem smarter when they come at you rapidly.
  • Arachnoleptic fit (n.): The frantic dance performed just after you’ve accidentally walked through a spider web.
  • Beelzebug (n.): Satan in the form of a mosquito, that gets into your bedroom at three in the morning and cannot be cast out.
  • Caterpallor (n.): The color you turn after finding half a worm in the fruit you’re eating
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