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Super Rich: The Greed Game

  
Education, Video
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The luxurious lifestyle of those at the top of the world of finance inspires awe, disgust, and ambition. With the mind boggling salaries of the hedge fund traders in the millions and even hundreds of millions of dollars, it’s no wonder people are growing curious about how they made their money.

Robert Peston, the BBC’s Business Editor, talks with investment bankers, hedge fund managers, and top managers from private equity firms on how the super rich have made their money. It offers an eye opening look into how the big earners operate, and some of the potential consequences of their greed driven pursuit of more and more money and success. 

Patience

  
  Education
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PATIENCE FOR U1) If you insist on trading during unstable or volatile markets, keep your positions small.

2) If you go into cash, don’t get upset on days when we rally, it’s simply part of the game.

3) Don’t buy or sell stocks because someone else is doing it. Have your OWN plan, find a philosophy that works for YOU, and don’t blindly follow anyone!

4) Wait for the wind to be at your back. Right now, it’s swirling. No sense in forcing trades to make a few pennies when there are dollars to be made in better environments.

5) Let the market correct, let the dust settle, don’t be in such a rush to trade. I see too many people trying to bottom-fish this market and I feel like screaming: “You don’t have to trade!”

I am not saying all this to be an ass. I simply want traders to learn from my mistakes. I have lost too much money in the past by forcing trades in unfavorable environments. You are better off protecting your capital and more importantly, protecting your confidence. Wait for proper bases to form, wait for some institutional accumulation, and wait for sentiment to be “less bullish.” In other words, wait for a healthier environment…it might not be that far away. The key right now is discipline and patience.

Believe you can win

  
  Education
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If other traders can do well in the market, so can you. However, if you don’t have enough courage and confidence in yourself, you will never achieve success. The events over the past few years have tested many people in this way and many now believe the game is rigged against them and, even worse, that no matter what they do, in the end they will ultimately fail in the markets. In my experience, nothing could be farther from the truth and those who will win in the markets first start by believing they can do it. Of course, those who do create success also must back up that belief in themselves by working hard and show consistent determination to find, develop and exploit their trading edge.

The 15 Truths about Great Trading

  
  Education
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 1) 45-55% (Average winning % of any given trader)

 2) Traders do not mind losing money, they mind losing money doing stupid things

 3) You can lose money on a Great trade  

4) Focus on the Trade, Not the Money  

5) Trading is a game of Probabilities, not Perfection  

6) Trade to make money, not to be right  

7) Nicht Spielen Zum Spass (if it doesn’t make sense, don’t do it)  

The market does not know how much you are up or down, so don’t trade that way (Think: “If I had no trade on right now, what would I do”)  

9) Learn to endure the pain of your gains  

10) There is no ideal trader personality type  

11) Fear and Fear drive the markets, not fear and greed  

12) Keep it simple: Up-Down-Sideways  

13) Make sure the size of your bet matches the level conviction you have in it (No Edge, No Trade; Small Edge, Small Trade; Big Edge, Big Trade)  

14) Making money is easy, keeping it is hard  

15) H + W + P = E

 a. (Hoping + Wishing + Praying = Exit the Trade!) 

Trading – Speculating – Gambling

  
  Education
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In the eyes of the vast majority, these things are blurred together, and very many things that the herd get up to in the name of “trading” is really either speculating or gambling. To that end, much of the advice published on the subject of trading can equally be as confused.

 
But not to real traders; real traders know the difference and are very clear that what they are doing is neither speculating or gambling. Just because you can know your risk per trade when speculating or gambling does NOT mean you are trading. Every game at the roulette table you can know your risk. Think about that…

15 Truths about Trading

  
  Education
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1) 45-55% (Average winning % of any given trader)

 2) Traders do not mind losing money, they mind losing money doing stupid things

 3) You can lose money on a Great trade

 4) Focus on the Trade, Not the Money

 5) Trading is a game of Probabilities, not Perfection

 6) Trade to make money, not to be right

 7) Nicht Spielen Zum Spass (if it doesn’t make sense, don’t do it)

 The market does not know how much you are up or down, so don’t trade that way (Think: “If I had no trade on right now, what would I do”)

 9) Learn to endure the pain of your gains

 10) There is no ideal trader personality type

 11) Fear and Fear drive the markets, not fear and greed

 12) Keep it simple: Up-Down-Sideways

 13) Make sure the size of your bet matches the level conviction you have in it (No Edge, No Trade; Small Edge, Small Trade; Big Edge, Big Trade)

 14) Making money is easy, keeping it is hard

 15) H + W + P = E

a. (Hoping + Wishing + Praying = Exit the Trade!)

Practice

  
  Education
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One of the most important keys is to take action. You cannot be on the sidelines and expect to become an expert.

You can learn the basics of reading the tapes, reading of the charts, and deciphering the news. However, to be really good at it, it becomes an art. It is a skill that you can develop.

The things you need to keep in mind are:

    • Be in the game.
    • Keep track of your actions.
    • Examine you actions and see if they serve you or if they need any adjustments.
    • Have an expectation of winning, instead of not losing.

“To think is easy. To act is difficult. To act as one thinks is the most difficult of all.”

It's not the trade, it's the battle

  
  Education
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Too many traders believe that their last trade is a reflection of just how good of a trader they are (but they are the only ones who feel that way about themselves). This boils down to one word – expectation. If you expect to win all the time, or even the vast majority of the time, you’re setting yourself up for a lot of heartache. That frustration, though, is the very same force that will truly make your negative perception of yourself a reality. And even a good trade can be damaging if you let it warp your disciplined approach. The fact of the matter is that this is a game of odds, and should be played over a long period of time. Focus on the war – not the battle.

How good is your WHY?

  
  Education
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I’ve been taking a minor natural break in trading over recent weeks, and in the meantime I’ve been pondering the power of the “WHY” I have when entering trades. You need a good why, no matter what you are doing in life, but especially when you walk into one of the toughest and most volatile markets in the world and put your money on the line.

What’s your WHY?

I can see looking back that the vast majority of my trading had a feeble why behind them; no wonder I lost cash hand over fist. Really my reason for entering was that I just wanted to enter, thats all. The second problem most likely is that even when I THOUGHT I had a good reason, the idea behind it was faulty.

So you can have no reason to enter, or you can have a wrong reason to enter.

Also I notice on the forums that the VAST MAJORITY of newbie / semi newbie traders there are trying to formulate their own personal why. Their own UNIQUE system, inventing unique indicators.

They think that the idea of the game is to outsmart everyone else in the market; to be unique. The obsession with system creation or inventing new indicators has being unique and outsmarting everyone else behind it as a hidden motivation. The thing with markets though is that its not about you, its about consensus. If you invent your own amazing oscillator and you are the only person in the world looking at it, then how good a reason is this to enter the market? How much consensus do you have behind you? Who supports your decision? Who agrees with you?

Probably nobody, except a handful by pure chance.

There’s more to say on this, but ponder your WHY when you pull the trigger. How good is that why?

Three Essential Components

  
  Education
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Every winner needs to master three essential components of trading; a sound individual psychology, a logical trading system and good money management. These essentials are like three legs of a stool – remove one and the stool will fall, together with the person who sits on it. Losers try to build a stool with only one leg, or two at the most. They usually focus exclusively on trading systems. Your trades must be based on clearly defined rules. You have to analyze your feelings as you trade, to make sure that your decisions are intellectually sound. You have to structure your money management so that no string of losses can kick you out of the game.”

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