Ambitious
Makes and follows long term business plan
•Unambitious
Will ignore long term business plan
•Calm
Will handle times of market volatility and make smart decisions
•Worrying
Will panic when markets are volatile and make stupid decisions
•Cautious
Strictly follows Stop-Loss rules and Protects Trading Capital
•Rash
Will not be diligent with Stop losses and will risk trading capital
•Cheerful
Handles losses and down times in markets (more…)
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.
Germany’s financial-markets regular said it is banning naked short-selling of certain euro-zone debt and credit default swaps as well as some financial stocks effective at midnight local time, saying “excessive price movements” could endanger the stability of the financial system.
The ban will remain in effect through March 31, 2011. (more…)
Many a trading firm looks for a history of athletic participation in the search for trading talent. While athletics, as performance domains, share some characteristics with portfolio management and trading, the overlap is far from perfect. Both athletics and trading are competitive activities, and both require practice and disciplined performance. It is not surprising that the personalities that gravitate to competitive sports are also drawn to market competition.
What differentiate athletics and trading, however, are the requisite cognitive skills. The pattern recognition and deep analyses typical of short-term traders and investors are not necessarily skills required of sprinters, weightlifters, baseball outfielders, or football linemen. Many sports require rapid hand-eye coordination; not necessarily explicit decision-making under conditions of risk or uncertainty. Across many trading firms and types of trading, I have not found a strong correlation between athletic achievement and trading success.
1. You have to have passion for learning to trade; passion is the energy that you need to take you to your goals.
2. You have to have the perseverance to keep going after you want to give up. 90% of new traders quit when they were very frustrated while 100% of successful traders didn’t quit until they reached their goals
3. New traders spend too much time looking for what to trade instead of focusing on who they are as traders. You have to know who you are as trader first then you can start building your trading system.
4. Traders have to be able to manage their stress by trading inside their current comfort zone. Traders have to grow themselves and trade size step by step.
5. The vast majority of new traders fail simply because they did not do their homework before they started trading.
6. A trader has to build a trading system that matches their own personality and risk tolerance levels.
7. A trader that chooses to be master a specific type of trading method or trading vehicles has a much better chance of success than the traders that just dabble in many different things and never make much progress.
8. A trader has to write a good trading plan while the market is closed to guide their trading while the market is open.
9. A trading plan has to be followed with discipline to have a chance at success.
10. A trader has to manage their behavior by acting consistently with their own rules. (more…)
We come to the market from different walks of life and bring with us the mental baggage of our upbringing and prior experiences. Most of us find that when we act in the market the way we do in our everyday life, we lose money.
You success or failure in the market depends on your thoughts and feelings. It depends on your attitudes towards gain and risk, fear and greed, and on how you handle the excitement of trading and risk.
Most of all, your success or failure depends on your ability to use your intellect rather than act out your emotions. A trader who feels overjoyed when he wins and depressed when he loses cannot accumulate equity because he is controlled by his emotions. If you let the market make you feel high or low, you will lose money. (more…)
The day the trader stops blaming the markets, politicians, or ‘They’ and ‘Them’ for losses and starts taking responsibility for their own trading could be the day that they begin to change from losing money to making money. In the end the market is like the ocean and we are the surfer, we choose the surfboard and the waves and the ocean really doesn’t care what we do it’s just there. The quality of our ability to ride a wave is based on our skills, technique, and experience our emotions contain no edge. In the end we win or lose based on our ability to overcome our own weaknesses.
Market price action is neutral to our existence, it is our method that determines our profitability and we choose how we will trade.
Profitability comes from our total trading profits being bigger than our total trading losses, we control our entries and exits.
The size of our draw down in capital is determined by the quality of our risk management and we manage our own risk.
Trading too big for a trading account size almost guarantees failure, we control our own position sizing.
Profitability only comes from trading with an edge, we are responsible for finding and trading with our own edge.
Livingstone lets us look over his views on the type of determination needed to win at this game.
“A man must believe in himself and his judgment if he is to make a living at this game.”
He gives a few great examples of the hard lessons he learned by going with someone else’s opinion or trading advice. Your own opinion based on your own research, by trying it with money, is the only way to have the confidence to go against everyone else’s advice at the correct time.
He walks us through his learning phases, with the benefit of hindsight added like a mystery story, edging the reader to uncover the source of the self-admitted blind-spot in his trading. What general principal was he ignoring that could be so surely fatal?
“I was dead right and – I lost every cent I had!” (more…)
Rule No. 1- Do not venture in markets and products you do not understand. You will be a sitting duck.
Rule No. 2- The large hit you will take next will not resemble the one you took last. Do not listen to the consensus as to where the risks are (that is, risks shown by VAR). What will hurt you is what you expect the least.
Rule No. 3- Believe half of what you read, none of what you hear. Never study a theory before doing your own observation and thinking. Read every piece of theoretical research you can-but stay a trader. An unguarded study of lower quantitative methods will rob you of your insight.
Rule No. 4- Beware of the nonmarket-making traders who make a steady income-they tend to blow up. Traders with frequent losses might hurt you, but they are not likely to blow you up. Long volatility traders lose money most days of the week. (more…)
It’s a helpful book to return to when market conditions get tough. A great place to start is Vic’s “business philosophy,” as encapsulated in three rules:
1. Preservation of Capital
2. Consistent Profitability
3. Superior Returns
Below is Sperandeo in his own words:
Preservation of Capital
Preservation of capital is the cornerstone of my business philosophy. This means that, in considering any potential market involvement, risk is my prime concern. Before asking, “What personal profit can I realize?”, I first ask, “What potential loss can I suffer?”
…There is one, and only one, valid question for an investor to ask: “Have I made money?” The best insurance that the answer will always be “Yes!” is to consistently speculate or invest only when the odds are decidedly in your favor, which means keeping risk at a minimum. (more…)
