Archives of “Human Interest” tag

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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…)

Jim Chanos on Taking Risks Early

  
  Education
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I took the biggest risk of my life at age 33 and I was terrified.

With a wife and two kids, a mortgage and almost nothing in the bank, I left my management position at a broker-dealer and dropped my Series 7. I essentially bolted from the business I had been in for a decade, giving up my license and my livelihood on a bet that I could be doing better for my clients as their advisor and make a lot more money once I was happy and the pit in my stomach dissolved.

And thank god it worked. I’m not sure what I would have done if it hadn’t.

In hindsight, I wouldn’t change much about my timing and all of what I had gone through to get things things right in the end – it was the real-world education of a lifetime. However, if I could change one thing, maybe it would be not waiting so long and staying with a profession that I truly hated. It probably would have been a lot less stressful had I pulled the ripcord in my twenties, before the babies and the bills.

Oh well.

Jim Chanos, one of the most successful investors of all time, began his career on The Street as a banker and then a brokerage firm analyst. The conflicts inherent in those roles drove him to seek out something more and that’s when he became a hedge fund manager. You see, Chanos was interested in the pursuit of truth and, what’s more, a way to make money from the discovery of truth before others could find it. The name of his firm, Kynikos Associates comes from the Greek word for cynic (and it can also mean ‘dog-like’, another apt metaphor for a fund that relentlessly hunts down meaning in the public information that others cannot see).

Here the legendary manager offers some advice to young professionals about timing their risk-taking: (more…)

What does NOT being a hero look like in trading? Some possibilities

  
  Education
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  • Not trying to catch the absolute top or bottom
  • Not “fighting the tide” because you are “right”
  • Being agnostic and opportunistic deep in your bones
  • Changing your stance immediately if price action fails to confirm
  • Never entering without price confirmation in the first place
  • Looking for max risk-adjusted odds of profit, not max glory

Not being a hero means less glory, but ultimate far more profit, because if you have the patience to wait for the (non-heroic) optimal moment — which is almost never the initial turning point, which heroes love to call out — you can more effectively scale up and put leverage to work in your favor.

Not being a hero in respect to adverse price action — dumping positions quickly that aren’t working out as planned — also lets you safely deploy more size in general, which in turn allows for more effective pyramiding and greater profits from the very same move the hero took with less size (because he got chewed up so many times trying to catch the damn turn). (more…)

42 Wisdom Points For Traders

  
  Education
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  1. First Things First
    You sure you really want to trade ? It is common for people who think they want to trade to discover that they really don’t.
  2. Examine Your Motives
    Why do you really want to trade ? Did you say excitement ? Then don’t waste your money in market, you might be better off riding a roller coaster or taking up hand gliding.
    The market is a stern master. You need to do almost everything right to win. If parts of you are pulling in opposite directions, the game is lost before you start.
  3. Match The Trading Method To Your Personality
    It is critical to choose a method that is consistent with your your own personality and conflict level.
  4. It Is Absolutely Necessary To Have An Edge
    You cant win without an edge, even with the world’s greatest discipline and money management skills. If you don’t have an edge, all that money management and discipline will do for you is to guarantee that you will gradually bleed to death. Incidentally, if you don’t know what your edge is, you don’t have one.
  5. Derive A Method
    To have an edge, you must have a method. The type of method is not important, but having one is critical-and, of course, the method must have an edge.
  6. Developing A Method Is Hard Work
    Shortcuts rarely lead to trading success. Developing your own approach requires research, observation, and thought. Expect the process to take lots of time and hard work. Expect many dead ends and multiple failures before you find a successful trading approach that is right for you. Remember that you are playing against tens of thousands of professionals. Why should you be any better ? If it were that easy, there would be a lot more millionaire traders.
  7. Skill Versus Hard Work
    The general rule is that exceptional performance requires both natural talent and hard work to realize its potential. If the innate skill is lacking, hard work may provide proficiency, but not excellence.
    Virtually anyone can become a net profitable trader, but only a few have the inborn talent to become supertraders ! For this reason, it may be possible to teach trading success, but only upto a point. Be realistic in your goals.
  8. Good Trading Should Be Effortless
    Hard work refers to the preparatory process – the research and observation necessary to become a good trader – not to the trading itself.
    “In trading, just as in archery, whenever there is effort, force, straining, struggling, or trying, it’s wrong. You’re out of sync; you’re out of harmony with the market. The perfect trade is one that requires no effort.”
  9. Money Management and Risk Control
    Money management is even more important than the trading method. 

(more…)

20 Things You Must Do

  
  Education
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1)      Wake up 30 minutes earlier each day. Enjoy the fresh air & avoid the mad rush.

2)      After you open your eyes, tell yourself today is going to be another wonderful day.

3)      Sit on the bed and feel the ground. Then, think about your future/ long term goal. Tell yourself that today you are going to be one step closer to your dream.

4)      Check today’s schedule

5)      Have your yummy breakfast

6)      Before you leave the house, look into the mirror once more and tell yourself you look awesome (more…)

Preparation -Purpose-Protection

  
  Education
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  • Preparation:  If you put yourself in the best possible position and you lose money at least you spent that money wisely.  Good things happen to those that are prepared because 90% of people do not know how to do it or are unwilling.  
  • Purpose: Acting with purpose.  You prepared, you knew the risks, you executed the way you wanted to execute.  In cold blooded evaluation you would do it the same with the information you had at the time.
  • Protection:  Losing the invisible money is how I have seen many people blow up.  Invisible money is not locking in profits or losing more than your plan allowed.  If you lose what you intended to risk you own the trade, if you lose more the trade owns you.

Difference between trading and gambling?

  
  Education
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Gambling is, usually, an event with:

  • Limited duration
  • Finite upside
  • Finite downside
  • Binary outcome

When you gamble you either win or lose. That event usually takes only a small amount of time.

For example, you can bet on a horserace 10 minutes before it starts and 5 minutes later you have a result. For anyone who plays poker, you know it may take a little bit more time as the stakes are raised. So poker is a little bit closer to trading.

In gambling your risk on any event is usually what you outlay. And your potential return is what the house is offering at the time you agree to the bet.

I love to play blackjack (and for some reason, while I don’t play often, I have been profitable almost every time I’ve played in the last 3 years) like one of my trading mentors who was an original Turtle Trader.

A bet on a Blackjack table can take a minute or two until it’s over. Whereas in trading, a trade has the following characteristics: (more…)

Defination -RUMOR

  
  Education
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Rumors have always been the fuel of financial markets. The modern Wall Street saying “Buy on the rumor, sell on the news” would not have been surprising to any Dutch trader in the 17th century. As Joseph de la Vega wrote in Confusion de Confusiones, his book about the Amsterdam Stock Exchange, in 1688:

The expectation of an event creates a much deeper impression upon the exchange than the event itself. When large dividends or rich imports are expected, shares will rise in price; but if the expectation becomes a reality, the shares often fall; for the joy over the favorable development and the jubilation over a lucky chance have abated in the meantime.

The figures shown at the right in this painting of the Amsterdam exchange, painted around the time of de la Vega’s book, appear to trading the latest hot rumor:

The Courtyard of the Stock Exchange, by Job Andriaenszoon Berckheyde (ca. 1670-1690), http://www.amsterdammuseum.nl/

 Deliberately spreading false rumors was one of the most effective tactics for profiting on stocks in the 18th century. In his pamphlet “The anatomy of Exchange-Alley,” published in 1719, Daniel Defoe wrote: (more…)

How to stop overthinking everything

  
  Education
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What is holding people back from the life that they truly want to live?

I’d say that one very common and destructive thing is that they think too much.

They overthink every little problem until it becomes bigger and scarier and it actually is. Overthink positive things until they don’t look so positive anymore.

Or overanalyze and deconstruct things and so the happiness that comes from just enjoying something in the moment disappears.

Now, thinking things through can be a great thing of course. But being an overthinker can result in becoming someone who stands still in life. In becoming someone who self-sabotages the good things that happen in life.

 I know. I used to overthink things a lot and it held me back in ways that weren’t fun at all.

But in the past 8 years or so I have learned how to make this issue so small that it very rarely pops up anymore. And if it does then I know what to do then to overcome it.

In this article I would like to share 9 habits that have helped me in a big, big way to become a simpler and smarter thinker and to live a happier and less fearful life.

1. Put things into a wider perspective.

It is very easy to fall into the trap of overthinking minor things in life.

So when you are thinking and thinking about something ask yourself:

Will this matter in 5 years? Or even in 5 weeks? (more…)

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