Archives of “finance” tag

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Commitment

  
  Education
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Becoming a successful investor/trader requires hard work. You must get to know yourself intimately because you are the source of your trading performance. You must develop a business plan to guide your trading. You must develop and test three or four strategies that fit within the big picture (as you see it) and then become part of your business plan. You must do your homework every evening. You must follow certain disciplines during the day that we call the ten tasks of trading. And all of this requires a lot of time and energy. And in my experience, it is only the people who are really committed who will put in the work necessary to become successful.

7 Points For Traders

  
  Education
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1. Hope is not a strategy.TRADING-7
2. Plan your entry and exit before you make a trade.
3. If you are unsure of what to do, get out.
4. Only trade when you have an edge.
5. Track all your trades. If a strategy loses money, abandon it.
6. Do not focus only on potential gains but also on potential losses. Trade only when the risk/reward ratio is favorable.
7. Don’t let a very good profit disappear or turn into a loss because you want an even bigger profit.

Trading Strategies for Success

  
  Education
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A great excerpt from “Trading Rules: Strategies for Success” by William Eng. It’s a great reminder that market prediction is a fool’s errand:

When you buy something, you want it to go up. When you sell something, you want it to go down. The chance of entering the trade correctly is small, but the chance of exiting the trade correctly is smaller. The chance of being right on both entering and exiting is the smallest. With such diminishing odds of coming through with a completely correct and, therefore, profitable trading campaign, the fewer decisions you make in the markets, the more profitable your trading should be. How many people actually get to sell at the top or buy at the bottom? At most, a handful in each reversal area. First, you must be a market follower, once the market has told you want it wants to do. If the market is a raging bull, you have no alternative but to buy. If it is bearish, you have no alternative but to sell every time you get the opportunity. Let the market tell you what to do. To do otherwise is to try to control the markets-something that is only reserved for God and natural disasters. Secondly, selling at the top and buying at the bottom does not guarantee profits. How many times have you heard of traders who managed to sell near the highs or buy near the bottoms, only to miss the ensuing move completely.

1+28 Rules for Trend Following -1 liner

  
  Education
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 1.Price is everything.

2. Ignore the news.

3. Buy a stock when it breaks out of a range.

4. Sell a stock when the trend changes.

5. Buy a stock when it makes a new high.

6. Short a stock when it makes a new low.

7. It’s harder to short stocks than it is to buy stocks.

8. Some stocks trend more than others.

9. Diversify when you can.

10. Ignore the whipsaws.

11. Don’t chase the market.

12. Let your winners run.

13. Cut your losses short.

14. A stock can always go higher and always go lower. (more…)

Truly Successful Traders Are Insanely Focused on the Game

  
  Education
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  • If a trader is motivated by the money, then it is the wrong reason. A truly successful trader has got to be involved and into the trading, the money is the side issue… The principal motivation is not the trappings of success. It’s usually the by-product – simply stated ‘the game’s the thing’.
  • Most of the top traders have a child-like fascination with the game. Whether it’s the psychological elements of the game, the technical elements of the game, whether it’s the nameless, faceless aspect of a market, or them as single individuals against the market, or beating their brains against everyone else’s.
  • There’s a kind of almost insane focus you must have to achieve trading excellence… I think people in our own industry do not understand the importance of this type of focus. You will always get people who will look at a trader and think, “God, he’s up at 5.30am every morning, always working at the weekends. He has no life. I’m outta here. I’m taking my vacation. I’m going to Switzerland for three weeks.” Now I am not saying people should not take vacations, but the thing is, the very best traders don’t take a lot of time off. They don’t want to.
  • The price of phenomenal success is not one many are prepared to pay. For others, a lack of talent means they do not have the currency with which to pay the price in any event. For those with insane focus, there is virtually no price to pay – they love what they are doing.

A Trading Psychology Lesson :Know Who You Are

  
  Education
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A good analyst is someone who can figure out that markets are going from Point A to Point B;

A good trader is someone who can navigate the path from Point A to Point B;
A good investor is someone who can weather the path from Point A to Point B;
Good analysts often are not good traders.
Good traders often are not good investors.
Good investors often are not good traders.
Good traders and investors often need to hire good analysts.
So much of success boils down to knowing who you are and accepting that.Doll-ASR

How to Win the Loser’s Game

  
Education, Video
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Most of what we see and hear about how to invest comes from either the fund industry or the financial media – both of which have their own agendas. This landmark documentary is an attempt to redress the balance.

Nine months in the making, How to Win the Loser’s Game aims to provide ordinary investors with the information they need to achieve their investment goals. It includes contributions from some of the biggest names and brightest minds in the investing world.

It’s being released in ten weekly, stand-alone parts, followed by the full-length, 80-minute film. Please share these videos with family, friends and colleagues, and help us to build a better, fairer and more transparent investment industry for all.

10 Favorite Quotes from Reminiscences of a Stock Operator

  
  Education
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Markets, trading methodologies and products may change, but timeless investing advice does not. That’s why my favorite trading book remains Reminiscences of a Stock Operator by Edwin Lefevre with Jessie Livermore—it is chocked full of great advice for any investor. First appearing as a series of articles in the Sunday Evening Post during the 1920s, the book is largely a biographical account of Livermore’s professional life. He is remembered as one of the world’s greatest traders who won and lost tremendous fortunes before tragically taking his own life in 1940.

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.

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!

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Advantages & Disadvantages of EBITDA

  
Analysis, Education
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The Advantages of EBITDA

Although there is no silver bullet metric in financial statement analysis, nevertheless there are numerous benefits to using EBITDA. Here are a few:

  • Operational Comparability:  As implied above, EBITDA allows comparability across a wide swath of companies. Accounting standards provide leniency in the application of financial statements, therefore using EBITDA allows apples-to-apples comparisons and relieves accounting discrepancies on items such as depreciation, tax rates, and financing choice.
  • Cash Flow Proxy:Since the income statement traditionally is the financial statement of choice, EBITDA can be easily derived from this statement and provides a simple proxy for cash generation in the absence of other data.
  • Debt Coverage Ratios:In many lender contracts, certain debt provisions require specific levels of income cushion above the required interest expense payments. Evaluating EBITDA coverage ratios across companies assists analysts in determining which businesses are more likely to default on their debt obligations.

The Disadvantages of EBITDA (more…)

Why Traders Have Problems

  
  Education
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Today I read another article that went along these lines- here are some excerpts:

On why traders have problems:

No, it is not your fear of losing, it isn’t your inability to read the market correctly, nor is it your lack of charting knowledge that causes your trading difficulties.

In a nutshell: The number one reason for all your problems revolves around the fact that you have reality back to front.”

The author then goes on to explain what they mean – that our mind is focused on the wrong things- that we are weighed down by preconditioning.

 The presented solution:

“First of all you must let go of the idea that you need to fix your trading. No, you don’t need to fix your trading, in fact, you don’t really need to fix anything. How can you? You are looking at old stuff that was created yesterday. However, you do need to fix the way you look at your life in general. This requires that you learn a thing or two about how you generate reality, learn a few basic things about quantum physics and understand how this applies to your trading and indeed to your life.

Your refusal to do this and instead carry on with the same old tried and tested paradigms, expecting different results in your trading account, is akin to placing a plaster on a festering wound.”

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