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7 Things Every Trader must have

  
  Education
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1) Strategy – There are so many different strategies: value, growth, momentum, short selling, etc. Find one that fits your personality and do your best to master it. The fastest way to learn is to study success. In other words, find someone who is successful at the strategy you like, and then mimic them with your own style. Another key is to recognize when the market environment is not conducive to your strategy, and make the proper adjustments.

2) Confidence – If you don’t have confidence, you have very little chance of succeeding. This doesn’t just apply to trading, it applies to EVERYTHING in life (business, athletics, relationships, etc.). With regards to trading, you have to believe in what you are doing and not be afraid to make mistakes. The key is to learn from them, make adjustments, and constantly reevaluate your progress.

3) Product Focus – There are so many different trading vehicles: futures, commodities, currencies, stocks, bonds, options, etc. It’s ok to dabble in a few things at first, but eventually you need to find out what product works best for you, focus on it, and MASTER it. As they say, don’t be a “jack of all trades and master of none.”

4) Know Your Time Frame – You must find a time frame that fits your personality. If you are too nervous, maybe short-term trading isn’t for you. Everyone wants to make tons of money in the market really fast, but keep in mind that is not a healthy approach. Most people with this mindset tend to be “boom and bust” traders. They make a bunch of money and eventually blow up. If you are truly passionate about trading and hope to be in the game for a long time, I recommend focusing on a slow and steady approach. (more…)

Top 17 Quotes from Buffett's Letter

  
  Education
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  1. “I needed no unusual knowledge or intelligence to conclude that the investment had no downside and potentially had substantial upside.”
  2. “You don’t need to be an expert in order to achieve satisfactory investment returns. But if you aren’t, you must recognize your limitations and follow a course certain to work reasonably well.”
  3. “Keep things simple and don’t swing for the fences.”
  4. “When promised quick profits, respond with a quick ‘no.'”
  5. “If you don’t feel comfortable making a rough estimate of the asset’s future earnings, just forget it and move on. No one has the ability to evaluate every investment possibility.” 
  6. “Games are won by players who focus on the playing field — not by those whose eyes are glued to the scoreboard.”
  7. “Forming macro opinions or listening to the macro or market predictions of others is a waste of time.” 
  8. “It should be an enormous advantage for investors in stocks to have those wildly fluctuating valuations placed on their holdings — and for some investors, it is.”
  9. “Owners of stocks…too often let the capricious and irrational behavior of their fellow owners cause them to behave irrationally as well.” 
  10. “In the 54 years (Charlie Munger and I) have worked together, we have never forgone an attractive purchase because of the macro or political environment, or the views of other people. In fact, these subjects never come up when we make decisions.” (more…)

Traders Should Control These 14 Emotions

  
  Education
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14-POINTS
 

Anger- Revenge trading

Fear- Inability to take an entry or hold a winner in a trend.

Disgust- Can lead to loss of a traders confidence.

Happiness- Surprisingly can lead to trading too big and taking on too many positions.

Sadness- Can lead to having difficulty taking the next trade entry or cutting a loss.

Surprise- Can many times lead to making decisions based on emotions and abandoning a trading plan. (more…)

Lessons From Dorsey Wright’s Thomas Dorsey

  
  Education
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“Investment philosophy is really about temperament, not raw intellect. In fact, proper temperament will beat high IQ all day.” – Michael Mauboussin

Last week the Wall Street Journal ran a profile of Thomas Dorsey, the president of Dorsey Wright & Associates, an investment firm that focuses on momentum and trend following strategies.

I had a few people send me this story asking for my thoughts.

Early in my career, when I thought I knew everything, it was easy to dismiss an investment philosophy that differed from my own because I thought I had it all figured out. (more…)

10 Wall Street Pick-up Lines to Avoid

  
  Education
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“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…)

Traders , keep notes on the following

  
  Education
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*  How you prepared for the day/week:  What was your market preparation?  What research did you conduct or consume?  What did you read?  What conversations did you have, and with whom?  How did you eat?  Sleep?  Exercise?  Prepare yourself mentally?

*  How you generated your trading ideas:  Where did the ideas come from?  What was the process that led to the ideas?  What made them good ideas?  What gave you “edges” in your trades?
*  How you expressed your ideas:  What market(s) did you use to express your views?  What instruments?  How did your expressions provide you with superior risk/reward?  If you held multiple positions, how did you size them relative to each other and gauge their correlations?
*  How you managed your positions:  What kind of trade planning did you do?  How did you size positions and gauge your risk taking?  How did you manage your risk?  What led you to scale into or out of your positions?
*  How you managed your performance:  How did you review your performance?  What did you learn?  How did you use your learning to improve your future performance?   (more…)

A common trait you'll see among the world's best investors

  
  Education
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In 1968, a self-described “gun-slinging nitwit,” fresh out of Harvard Business School, Grantham played the go-go market at its peak. By 1970, he had lost all of his money. “I like to say I got wiped out before anyone else knew the bear market started,” Grantham recalled years later.

Think about that. The man who today relentlessly warns of risk began his investing career by losing all of his money and then sitting through a 12-year bear market.

What lasting impact did this have on his outlook? How did this experience influence his opinion of markets today?

Likely, a lot.

People like to assume they can think objectively. But you and I are just a product of the experiences we’ve had in life. And most of those experiences were random and out of our control. Would Grantham hold his bearish stance if, by luck, he began his investing career at the start of a bull market? Or doubled his money his first year out of college, rather than losing it all?

There’s evidence to suggest the answer is “no.” (more…)

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.

Taleb reveals unsettling truths

  
Analysis, Education
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How fragile we are. Five years on from the Lehman Brothers collapse, political and regulatory errors have made the world’s financial system even more fragile.

This alarming line of thought comes from Nassim Nicholas Taleb, best known for The Black Swan, which explained markets’ difficulties in pricing extreme events for which they had no precedent.

 Mr Taleb, who spoke to me in London last week, divides opinion. For some he is a genius, for others a charlatan. What seems clear, however, is that his gloriously charismatic act and polymath choice of imagery, drawn from philosophy, mathematics and the Classics, can get in the way of underlying ideas which are not in fact far-fetched. Indeed they contain a hard kernel of commonsense truth.

Here, then, is an attempt to render Mr Taleb’s poetic arguments in prose.  (more…)

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