Archives of “good friend” tag

rss

Dennis Gartman’s Trading Rules List

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #

Some food for thought for the weekend. Trading rules from great traders are always worth reading. If you spend some time to understand the concept behind each trading rule this will improve your trading skills and take you to the next level. Also check this video where Dennis Gartman talks about the concept of keeping it simple.

1. Never, under any circumstance add to a losing position…. ever! Nothing more need be said; to do otherwise will eventually and absolutely lead to ruin!

2. Trade like a mercenary guerrilla. We must fight on the winning side and be willing to change sides readily when one side has gained the upper hand.

3. Capital comes in two varieties: Mental and that which is in your pocket or account. Of the two types of capital, the mental is the more important and expensive of the two. Holding to losing positions costs measurable sums of actual capital, but it costs immeasurable sums of mental capital.

4. The objective is not to buy low and sell high, but to buy high and to sell higher. We can never know what price is “low.” Nor can we know what price is “high.” Always remember that sugar once fell from $1.25/lb to 2 cent/lb and seemed “cheap” many times along the way.

5. In bull markets we can only be long or neutral, and in bear markets we can only be short or neutral. That may seem self-evident; it is not, and it is a lesson learned too late by far too many.

6. “Markets can remain illogical longer than you or I can remain solvent,” according to our good friend, Dr. A. Gary Shilling. Illogic often reigns and markets are enormously inefficient despite what the academics believe.

7. Sell markets that show the greatest weakness, and buy those that show the greatest strength. Metaphorically, when bearish, throw your rocks into the wettest paper sack, for they break most readily. In bull markets, we need to ride upon the strongest winds… they shall carry us higher than shall lesser ones.

8. Try to trade the first day of a gap, for gaps usually indicate violent new action. We have come to respect “gaps” in our nearly thirty years of watching markets; when they happen (especially in stocks) they are usually very important.

9. Trading runs in cycles: some good; most bad. Trade large and aggressively when trading well; trade small and modestly when trading poorly. In “good times,” even errors are profitable; in “bad times” even the most well researched trades go awry. This is the nature of trading; accept it.

10. To trade successfully, think like a fundamentalist; trade like a technician. It is imperative that we understand the fundamentals driving a trade, but also that we understand the market’s technicals. When we do, then, and only then, can we or should we, trade.

11. Respect “outside reversals” after extended bull or bear runs. Reversal days on the charts signal the final exhaustion of the bullish or bearish forces that drove the market previously. Respect them, and respect even more “weekly” and “monthly,” reversals.

12. Keep your technical systems simple. Complicated systems breed confusion; simplicity breeds elegance. (more…)

DENNIS GARTMAN’S -Trading Rules

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #

1. Never, under any circumstance add to a losing position! Ever! Nothing more need be said; to do otherwise will eventually and absolutely lead to ruin!
2. Trade like a mercenary guerrilla. We must fight on the winning side and be willing to change sides readily when one side has gained the upper hand.
3. Capital comes in two varieties: Mental and that which is in your pocket or account. Of the two types of capital, the mental is the more important and expensive of the two. Holding to losing positions costs measurable sums of actual capital, but it costs immeasurable sums of mental capital.
4. The objective is not to buy low and sell high, but to buy high and to sell higher. We can never know what price is too low. Nor can we know what price is too high.  Always remember that sugar once fell from $1.25/lb to 2 cent/lb and seemed cheap many times along the way.
5. In bull markets we can only be long or neutral, and in bear markets we can only be short or neutral. That may seem self-evident; it is not, and it is a lesson learned too late by far too many.
6. Markets can remain illogical longer than you or I can remain solvent according to our good friend, Dr. A. Gary Shilling. Illogic often reigns and markets are enormously inefficient despite what the academics believe.
7. Sell markets that show the greatest weakness, and buy those that show the greatest strength. Metaphorically, when bearish, throw your rocks into the wettest paper sack, for they break most readily. In bull markets, we need to ride upon the strongest winds as they shall carry us higher than shall lesser ones.
8. Try to trade the first day of a gap, for gaps usually indicate violent new action. We have come to respect gaps in our nearly thirty years of watching markets; when they happen (especially in stocks) they are usually very important.
9. Trading runs in cycles: some good; most bad. Trade large and aggressively when trading well; trade small and modestly when trading poorly. In good times even errors are profitable; in bad times even the most well researched trades go awry. This is the nature of trading; accept it.
10. To trade successfully, think like a fundamentalist; trade like a technician. It is imperative that we understand the fundamentals driving a trade, but also that we understand the market’s technicals. When we do, then, and only then, can we or should we, trade. (more…)

Better to be Profitable Than Right

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #

The ultimate goal of a futures trader should be to have overall trading success by being profitable. There is no single-best path one can take on the destination to trading success and profitability. However, there are a few general trading tenets to which all successful traders have subscribed. One such trading tenet is “losing your ego” when trading futures.

Mark Cook, a well-respected trader and trading educator from rural Ohio, for many years has stressed that traders need to lose their egos before getting into trading futures markets. He is also an advocate of survival in futures trading. One must survive in this challenging arena before one can succeed. I enjoyed listening to Mark at a trading seminar a few years ago. He even used to wear bib-overalls (with no shirt) at some of his trading seminars – just to drive home the point that trading futures is not easy and that ultimate success takes a lot of hard work.

My good friend and respected trader and educator Glen Ring also espouses the notion, and may have even coined the phrase, “it’s better to be profitable than right in futures trading.” Those who know or have talked to Glen know he, too, is a no-nonsense, no-hype trader who takes a yeoman’s approach to the business. When asked what direction a specific market “will” go in the future, Glen is never afraid to say, “I don’t know,” before he adds that, “successful trading is not a business of predictions but one of probabilities based on past price history.” (more…)

Better to Be Profitable Than Right

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #

ego” when trading futures.Mark Cook, a well-respected trader and trading educator from rural Ohio, for many years has stressed that traders need to lose their egos before getting into trading futures markets. He is also an advocate of survival in futures trading. 
One must survive in this challenging arena before one can succeed. I enjoyed listening to Mark at a trading seminar a few years ago. He even used to wear bib-overalls (with no shirt) at some of his trading seminars—just to drive home the point that trading futures is not easy and that ultimate success takes a lot of hard work. 
My good friend and respected trader and educator Glen Ring also espouses the notion, and may have even coined the phrase, “it’s better to be profitable than right in futures trading.” Those who know or have talked to Glen know he, too, is a no-nonsense, no-hype trader who takes a yeoman’s approach to the business. When asked what direction a specific market “will” go in the future, Glen is never afraid to say, “I don’t know,” before he adds that, “successful trading is nota business of predictions but one of probabilities based on past price history.”  (more…)

22 Trading Rules

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #

1. Never, under any circumstance add to a losing position…. ever! Nothing more need be said; to do otherwise will eventually and absolutely lead to ruin!
2. Trade like a mercenary guerrilla. We must fight on the winning side and be willing to change sides readily when one side has gained the upper hand.
3. Capital comes in two varieties: Mental and that which is in your pocket or account. Of the two types of capital, the mental is the more important and expensive of the two. Holding to losing positions costs measurable sums of actual capital, but it costs immeasurable sums of mental capital.
4. The objective is not to buy low and sell high, but to buy high and to sell higher. We can never know what price is “low.” Nor can we know what price is “high.” Always remember that sugar once fell from $1.25/lb to 2 cent/lb and seemed “cheap” many times along the way.
5. In bull markets we can only be long or neutral, and in bear markets we can only be short or neutral. That may seem self-evident; it is not, and it is a lesson learned too late by far too many.
6. “Markets can remain illogical longer than you or I can remain solvent,” according to our good friend, Dr. A. Gary Shilling. Illogic often reigns and markets are enormously inefficient despite what the academics believe.
7. Sell markets that show the greatest weakness, and buy those that show the greatest strength. Metaphorically, when bearish, throw your rocks into the wettest paper sack, for they break most readily. In bull markets, we need to ride upon the strongest winds… they shall carry us higher than shall lesser ones.
8. Try to trade the first day of a gap, for gaps usually indicate violent new action. We have come to respect “gaps” in our nearly thirty years of watching markets; when they happen (especially in stocks) they are usually very important.
9. Trading runs in cycles: some good; most bad. Trade large and aggressively when trading well; trade small and modestly when trading poorly. In “good times,” even errors are profitable; in “bad times” even the most well researched trades go awry. This is the nature of trading; accept it.
10. To trade successfully, think like a fundamentalist; trade like a technician. It is imperative that we understand the fundamentals driving a trade, but also that we understand the market’s technicals. When we do, then, and only then, can we or should we, trade. (more…)

The Graham Number

  
  Education
#  #  #  #  #  #  #

Ever heard of the Graham Number? This was a formula developed by Ben Graham, the father of securities analysis, to determine the fair value for a stock.
The Graham Number is:

The square root of [earnings-per-share * book-value-per-share * 22.5]

(Take note that earning-per-share divided by book-value-per-share is our good friend return on equity.)

SIMPLIFY

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #

simplifyWhen we follow a standardized process for trade execution, we help negate the impact that emotions can have on that process.  And when we create a set of rules within which is a subset of rules that allow for less mechanical, more intuitive management of our trades, we can potentially realize additional profits from those intangible insights into market direction without over-exposing our account to risk.  Here is how it works:

  S – Scan your charts .  Create a “Watch List” to help manage your inventory of trading opportunities.

I – Identify a high probability set up.    

 M – Map out the trade’s entry point, stop-loss exit point, and profit exit point. 

P – Pull the trigger.  By systematizing the process as we are talking about here, the anxiety associated with executing a trade is greatly reduced.  Instead of focusing on whatever issues keep you from pulling the trigger, your focus is on following a procedure, a set of instructions.  Mapping out and understanding exactly what our risk is also reduces the anxiety of entering a trade.    

 L – Let the market do its thing.  It’s not very often that you won’t have to take some heat on a trade.  It’s a great feeling when a trade goes in your favor immediately and stays that way.  But that’s the exception and not the rule.  As a good friend of mine would say, “Let it breathe!”  (more…)

Key Lessons For All Traders

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #

Find a Trading Method That Fits Your Personality

Traders must find a methodology that fits their own beliefs and talents. A sound methodology that is very successful for one trader can be a poor fit and a losing strategy for another trader. Colm O’Shea, one of the global macro managers I interviewed, lucidly expressed this concept in answer to the question of whether trading skill could be taught:

If I try to teach you what I do, you will fail because you are not me. If you hang around me, you will observe what I do, and you may pick up some good habits. But there are a lot of things you will want to do differently. A good friend of mine, who sat next to me for several years, is now managing lots of money at another hedge fund and doing very well. But he is not the same as me. What he learned was not to become me. He became something else. He became him.

Trade Within Your Comfort Zone

If a position is too large, the trader will be prone to exit good trades on inconsequential corrections because fear will dominate the decision process. Steve Clark, an event driven manager, advises, you have to “trade within your emotional capacity.” Similarly, Joe Vidich, a long/short equity manager warns, “Limit your size in any position so that fear does not become the prevailing instinct guiding your judgment.”

In this sense, a smaller net exposure may actually yield better returns, even if the market ultimately moves in the favorable direction. For example, Martin Taylor, an emerging markets equities manager, came into 2008 with a very large net long exposure in high beta stocks in an increasingly risky market. Uncomfortable with the level of his exposure, Taylor sharply reduced his positions in early January. When the market subsequently plunged later in the month, he was well positioned to increase his long exposure.

Had Taylor remained heavily net long, he might instead have been forced to sell into the market weakness to reduce risk, thereby missing out in fully participating in the subsequent rebound.  (more…)

15 Points for Trading System & Money Management

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #

1. Capital comes in two varieties: Mental and that which is in your pocket or account.
Of the two types of capital, the mental is the more important and expensive of the two. Holding to losing positions costs measurable sums of actual capital, but it costs immeasurable sums of mental capital.

2. “Markets can remain illogical longer than you or I can remain solvent”, according to our good friend, Dr. A. Gary Shilling.
Illogic often reigns and markets are enormously inefficient despite what the academics believe.

3. An understanding of mass psychology is often more important than an understanding of economics.
Markets are driven by human beings making human errors and also making super-human insights.

4. The market is the sum total of the wisdom … and the ignorance…of all of those who deal in it; and we dare not argue with the market’s wisdom.
If we learn nothing more than this we’ve learned much indeed.

5. The hard trade is the right trade: If it is easy to sell, don’t; and if it is easy to buy, don’t.
Do the trade that is hard to do and that which the crowd finds objectionable.
Peter Steidelmeyer taught us this twenty five years ago and it holds truer now than then.

6. There is never one cockroach: Bad news begets bad news, which begets even worse news. (more…)

DENNIS GARTMAN'S RULES FOR TRADERS

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #

1. Never, under any circumstance add to a losing position! Ever! Nothing more need be said; to do otherwise will eventually and absolutely lead to ruin!
2. Trade like a mercenary guerrilla. We must fight on the winning side and be willing to change sides readily when one side has gained the upper hand.
3. Capital comes in two varieties: Mental and that which is in your pocket or account. Of the two types of capital, the mental is the more important and expensive of the two. Holding to losing positions costs measurable sums of actual capital, but it costs immeasurable sums of mental capital.
4. The objective is not to buy low and sell high, but to buy high and to sell higher. We can never know what price is too low. Nor can we know what price is too high.  Always remember that sugar once fell from $1.25/lb to 2 cent/lb and seemed cheap many times along the way.
5. In bull markets we can only be long or neutral, and in bear markets we can only be short or neutral. That may seem self-evident; it is not, and it is a lesson learned too late by far too many.
6. Markets can remain illogical longer than you or I can remain solvent according to our good friend, Dr. A. Gary Shilling. Illogic often reigns and markets are enormously inefficient despite what the academics believe.
7. Sell markets that show the greatest weakness, and buy those that show the greatest strength. Metaphorically, when bearish, throw your rocks into the wettest paper sack, for they break most readily. In bull markets, we need to ride upon the strongest winds as they shall carry us higher than shall lesser ones.
8. Try to trade the first day of a gap, for gaps usually indicate violent new action. We have come to respect gaps in our nearly thirty years of watching markets; when they happen (especially in stocks) they are usually very important.
9. Trading runs in cycles: some good; most bad. Trade large and aggressively when trading well; trade small and modestly when trading poorly. In good times even errors are profitable; in bad times even the most well researched trades go awry. This is the nature of trading; accept it.
10. To trade successfully, think like a fundamentalist; trade like a technician. It is imperative that we understand the fundamentals driving a trade, but also that we understand the market’s technicals. When we do, then, and only then, can we or should we, trade.
11. Respect outside reversals after extended bull or bear runs. Reversal days on the charts signal the final exhaustion of the bullish or bearish forces that drove the market previously. Respect them, and respect even more weekly and monthly, reversals.
12. Keep your technical systems simple. Complicated systems breed confusion; simplicity breeds elegance.
13. Respect and embrace the very normal 50-62% retracements that take prices back to major trends. If a trade is missed, wait patiently for the market to retrace. Far more often than not, retracements happen just as we are about to give up hope that they shall not.
14. An understanding of mass psychology is often more important than an understanding of economics. Markets are driven by human beings making human errors and also making super-human insights.
15. Establish initial positions on strength in bull markets and on weakness in bear markets. The first addition should also be added on strength as the market shows the trend to be working. Henceforth, subsequent additions are to be added on retracements.
16. Bear markets are more violent than are bull markets and so also are their retracements.
17. Be patient with winning trades; be enormously impatient with losing trades. Remember it is quite possible to make large sums trading/investing if we are right only 30% of the time, as long as our losses are small and our profits are large.
18. The market is the sum total of the wisdom and the ignorance of all of those who deal in it; and we dare not argue with the market’s wisdom. If we learn nothing more than this we’ve learned much indeed.
19. Do more of that which is working and less of that which is not: If a market is strong, buy more; if a market is weak, sell more. New highs are to be bought; new lows sold.
20. The hard trade is the right trade: If it is easy to sell, don’t; and if it is easy to buy, don’t. Do the trade that is hard to do and that which the crowd finds objectionable. Peter Steidlmayer taught us this twenty five years ago and it holds truer now than then.
21. There is never one cockroach! This is the winning new rule submitted by our friend, Tom Powell.
22. All rules are meant to be broken: The trick is knowing when and how infrequently this rule may be invoked!

Go to top