Respect the price action but never defer to it.
The action (or “eyes”) is a valuable tool when trading but if you defer to the flickering ticks, stocks would be “better” up and “worse” down—and that’s a losing proposition. This is a particularly pertinent point as headlines of new highs serve as sexy sirens for those on the sidelines.
Discipline trumps conviction.
No matter how strongly you feel on a given position, you must defer to the principles of discipline when trading. Always try to define your risk and, above all, never believe that you’re smarter than the market.
Opportunities are made up easier than losses.
It’s not necessary to play every move, it’s only necessary to have a high winning percentage on the trades you choose to make. Sometimes the ability not to trade is as important as trading ability.
Emotion is the enemy when trading.
Emotional decisions always have a way of coming back to haunt you. If you’re personally attached to a position, your decision making process will be flawed. It’s that simple. (more…)
Archives of “herd” tag
rssThe Timeless Wisdom Of Jesse Livermore
Why is stock investing hard?
Take a step back to think, and you realize that stock trading is the intersection of many realms of knowledge. Business. The economy. Finance. Innovation and technology. Government policy. The market. And don’t forget psychology.
The more an investor knows about each of these fields, the more likely he or she will excel in the task of buying and selling stocks properly.
In the field of psychology alone, you have multiple topics to ponder. The psychology of the herd is important. So is the psychology of the self.
Jesse Livermore, whose life spanned the 19th and 20th centuries, didn’t get a master’s degree in macroeconomics or a Ph.D. in cognitive behavior. But his experience, hard work, failures and successes across many bull and bear cycles make him one of the most respected stock and futures traders of all time. (more…)
Good Luck-Advice for Traders
Always seek out differing opinions and challenge your beliefs. Except when you know you’re right, then that other bullshit just becomes a distraction. Good luck with that.
It is very important to be flexible and open-minded. But invest with set rules and an iron discipline. Good luck with that.
Technical analysis and charts only tell you about what has already happened in the past. It’s much better to use the information from the future that we have when making decisions. Good luck with that.
Never run with the herd. It’s much better to be all alone on open ground, running in the wrong direction and wholly conspicuous to predators. Good luck with that. (more…)
The Definition of an Asymmetric Bet: Trend Following
Not the exact trend following mindset, but pretty damn close. Close enough that I hope you see the obvious parallels. If you don’t see ‘em, well the flock always needs another member to run in the herd…
The Ten Trading Commandments
Respect the price action but never defer to it.
The action (or “eyes”) is a valuable tool when trading but if you defer to the flickering ticks, stocks would be “better” up and “worse” down—and that’s a losing proposition. This is a particularly pertinent point as headlines of new highs serve as sexy sirens for those on the sidelines.
Discipline trumps conviction.
No matter how strongly you feel on a given position, you must defer to the principles of discipline when trading. Always try to define your risk and, above all, never believe that you’re smarter than the market.
Opportunities are made up easier than losses.
It’s not necessary to play every move, it’s only necessary to have a high winning percentage on the trades you choose to make. Sometimes the ability not to trade is as important as trading ability.
Emotion is the enemy when trading.
Emotional decisions always have a way of coming back to haunt you. If you’re personally attached to a position, your decision making process will be flawed. It’s that simple.
Zig when others Zag.
Sell hope, buy despair and take the other side of emotional disconnects in the context of controlled risk. If you can’t find the sheep in the herd, chances are that you’re it.
Adapt your style to the market. (more…)
10 Secrets To Success
These 10 secrets could be applied to your success as a trader, but more importantly they could be applied to ensure success in your personal life. I thought I would share these 10 tips with you as they made me stop and think about my own life.
1) How You Think Is Everything – Always be positive. Think success, not failure. Beware of a negative environment.
2) Decide Upon Your True Dreams & Goals – Write down your specific goals and develop a plan to reach them.
3) Take Action – Goals are nothing without action. Don’t be afraid to get started. Just do it.
4) Never Stop Learning – Go back to school or read books. Get training and acquire skills.
5) Be Persistent & Work Hard – Success is a marathon, not a sprint. Never give up. (more…)
Run against the crowd, not with it
This is one of the hardest things to do. It goes against every fiber of your being. We are wired as humans to look to the crowd for our cues just like an animal runs with the herd. In the animal kingdom, Penguins will run to the edge of an iceberg and stop to see if one of them actually jumps in and swims to safety without being eaten by predators. When they feel it is safe, the rest of them will make the swim with confidence.In trading, you cannot wait for a trade to “feel safe” before you take a chance with your hard earned money. You have to anticipate, listen to your gut and be willing to buy when others have lost patience or composure hitting the sell button into your waiting hands. Likewise you have to become a seller when the rest of the crowd feels safe and starts buying, only to repeat the process over and over. Going against your natural instincts will keep you safe by having better entries and exits. The rest pays for itself
The Five Investing Essential Truths
Markets are notoriously hard to read and people see only what they themselves want to see.
Bulls will find reasons why certain stocks will go higher, while at the same time, Bears will find many reasons for the same stocks to go lower.
The seldom-admitted truth is that most of the time, markets exist in some indeterminate state!
The main thing is that you cannot trust consensus and you cannot rely on the “Establishment.”
You can’t find refuge in the herd and you must resist the urge to join the crowd.
Your passion of the moment will most certainly create a disaster over the years!
On the other hand, if you do stick with the following five essential truths, you do stand a better than average chance to invest profitably:
1. Markets are unpredictable and ill-suited to forecasts.
2. Long-term fundamentals are key.
3. Investor emotion leads to volatility.
4. Valuation discipline should guide investment selection.
5. Perspective and patience are always well rewarded.