Make all your mistakes early in life. He says the more tough lessons you learn early on, the fewer errors you make later. A common mistake of all young investors is to be too trusting with brokers, analysts, and newsletters who are trying to sell you bad stocks.Always make your living doing something you enjoy. This way, you devote your full intensity to it which is required for success over the long-term.
Be intellectually competitive. This involves doing constant research on subjects that make you money. The trick, he says, in plowing through such data is to be able to sense a major change coming in a situation before anyone else.
Make good decisions even with incomplete information. In the real world, he argues, investors never have all the data they need before they put their money at risk. You will never have all the information you need. What matters is what you do with the information you have. Do your homework and focus on the facts that matter most in any investing situation.
Always trust your intuition. For him, intuition is more than just a hunch. He says intuition resembles a hidden supercomputer in the mind that you’re not even aware is there. It can help you do the right thing at the right time if you give it a chance. In fact, over time your own trading experience will help develop your intuition so that major pitfalls can be avoided.
Don’t make small investments. You only have so much time and energy so when you put your money in play. So, if you’re going to put money at risk, make sure the reward is high enough to justify it.
Archives of “hunch” tag
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Make all your mistakes early in life. He says the more tough lessons you learn early on, the fewer errors you make later. A common mistake of all young investors is to be too trusting with brokers, analysts, and newsletters who are trying to sell you bad stocks.10 Mistakes
- Never, NEVER cancel a stop loss. I know, I know, every time you have a stop loss in the market, the market moves just enough to stop you out, right? Well it might mean that you should evaluate where you place your stops (this is where good trading journals come in handy), but once you’ve done your analysis and placed the trade, you need to be committed to the trade and your plan. The only adjusting you should do is to lock in your profits.
. - Always have your broker or your trading desk number handy, even if you trade electronically. This is really important for the day trader who is trading leveraged markets. It is easy to get a little too comfortable when your trading platform and internet connection are running smoothly, but once you drop your guard that inevitable lost connection will happen…a lost minute, even seconds could be an expensive lesson!
. - Always check your open orders. This can be done a few different ways depending on your trading platform, but if your intention is to be flat in the market, always double check! (more…)
The 14 Stages Of Trader
1. OPTIMISM – It all starts with a hunch or a positive outlook leading us to buy a stock.
2. EXCITEMENT – Things start moving our way and we get giddy inside. We start to anticipate and hope that a possible success story is in the making.
3. THRILL – The market continues to be favorable and we just can’t help but start to feel a little “Smart.” At this point we have complete confidence in our trading system.
4. EUPHORIA – This marks the point of maximum financial risk but also maximum financial gain. Our investments turn into quick and easy profits, so we begin to ignore the basic concept of risk. We now start trading anything that we can get our hands on to make a buck.
5. ANXIETY – Oh no – it’s turning around! The markets start to show their first signs of taking your “hard earned” gains back. But having never seen this happen, we still remain ultra greedy and think the long-term trend is higher.
6. DENIAL – The markets don’t turn as quickly as we had hoped. There must be something wrong we think to ourselves. Our “long-term” view now shortens to a near-term hope of an improvement.
7. FEAR – Reality sets in that we are not as smart as we once thought. Instead of being confident in our trading we become confused. At this point we should get out with a small profit and move on but we don’t for some stupid reason.
8. DESPERATION – All gains have been lost at this point. We had our chance to profit and missed it. Not knowing how to act, we attempt to do anything that will bring our positions back into the black.
9. PANIC – The most emotional period by far. We are clueless and helpless. At this stage we feel like we are at the mercy of the market and have absolutely no control.
10. CAPITULATION – We have reached our breaking point and sell our positions at any price. So long as we can get out of the market to avoid bigger losses we are content.
11. DESPONDENCY – After exiting the markets we do not want to buy stocks ever again. The markets are not for us and should be avoided like the plague. However, this rare point marks thepoint of maximum financial opportunity.
12. DEPRESSION – We drink, cry and/or pray. How could we have been so dumb we think to ourselves. Some start to correctly look back and analyze what went wrong. Real traders are born here, learning from past mistakes.
13. HOPE – We can still do this! Eventually we return come to the realization the market actually does have cycles (shocking). We begin to start analyzing new opportunities.
14. RELIEF – The markets are turning positive again and we see our prior investment come back around. We regain our faith (although small) in our ability to invest our money. The cycle start all over again!
G. C. Selden Trading Psychology – Hunches And Gut Feelings
Recently most traders probably have spent a great deal of time managing risk and emotions. I know I have. When it comes to correctly gauging and dealing with emotions it is paramount to analyze your reactions in a detached way. The best way to get objective insight is to imagine taking a step back and then ‘watching yourself.’ It’s as if you were your own mentor or trading coach. This is not an easy task. Good results require emotional detachment, a lot of experience and the ability to honestly assess the degree of trading proficiency you have attained. Ultimately it will tell you what those gut feelings you are occasionally experiencing really are worth. That’s exactly what G.C. Selden addresses at the end of his classic trading book : ‘Psychology of the Stock Market’ which was first published in 1912. Here’s an excerpt dealing with ‘hunches and gut feelings.’ Lots of additional and valuable insight for traders is provided. Enjoy!
An exaggerated example of “getting a notion” is seen in the so-called “hunch.” This term appears to mean, when it means anything, a sort of sudden welling up of instinct so strong as to induce the trader to follow it regardless of reason. In many cases, the “hunch” is nothing more than a strong impulse.
Almost any business man will say at times, “I have a feeling that we ought not to do this,” or “Somehow I don’t like that proposition,” without being able to explain clearly the grounds for his opposition. Likewise the “hunch” of a man who has watched the stock market for half a lifetime may not be without value. In such a case it doubtless represents an accumulation of small indications, each so trifling or so evasive that the trader cannot clearly marshal and review them even in his own mind. (more…)
Wisdom Thoughts for Traders & Investors
1. Make all your mistakes early in life: The more tough lessons you learn early on, the fewer (bigger) errors you make later. A common mistake of all young investors is to be too trusting with brokers, analysts, and newsletters who are trying to sell you something.
2. Always make your living doing something you enjoy: Devote your full intensity for success over the long-term.
3. Be intellectually competitive: Do constant research on subjects that make you money. Plow through the data so as to be able to sense a major change coming in the macro situation.
4. Make good decisions even with incomplete information: Investors never have all the data they need before they put their money at risk. Investing is all about decision-making with imperfect information. You will never have all the info you need. What matters is what you do with the information you have. Do your homework and focus on the facts that matter most in any investing situation.
5. Always trust your intuition: Intuition is more than just a hunch — it resembles a hidden supercomputer in the mind that you’re not even aware is there. It can help you do the right thing at the right time if you give it a chance. Over time, your own trading experience will help develop your intuition so that major pitfalls can be avoided.
6. Don’t make small investments: You only have so much time and energy so when you put your money in play. So, if you’re going to put money at risk, make sure the reward is high enough to justify it.
1. Make all your mistakes early in life: The more tough lessons you learn early on, the fewer (bigger) errors you make later. A common mistake of all young investors is to be too trusting with brokers, analysts, and newsletters who are trying to sell you something.Six Rules of Michael Steinhardt
Michael Steinhardt was one of the most successful hedge fund managers of all time. A dollar invested with Steinhardt Partners LP in 1967 was worth $481 when Steinhardt retired in 1995. The following six rules were pulled out from a speech he gave:
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Intuition
A hunch can be trusted if it can be explained.
Though intuition is not infallible, it can be a useful speculative tool, if handled with care and skepticism.
If you are hit by strong hunch – put it to the test. Trust it only if you can explained it. That is only if you can identify within your mind a stored body of information out of which that hunch must reasonably be supposed to have arisen.
Be wary of any intuition that seems to promise some outcome you want badly.
40 Gems for Traders and Investors
- There are only three kinds of investors – those who think they are geniuses, those who think they are idiots, and those who aren’t sure.
- One of the clearest signals that you are wrong about an investment is having the hunch that you are right about it.
- Investors who focus on price levels earn between five and ten times higher profits than those who pay attention to price changes.
- The only way to be more certain it’s true is to search harder for proof that it is false.
- Business value changes over time, not all the time. Stocks are like weather, altering almost continually and without warning; businesses are like the climate, changing much more gradually and predictably.
- When rewards are near, the brain hates to wait.
- The market isn’t always right, but it’s right more often than it is wrong.
- Often, when we are asked to judge how likely things are, we instead judge how alike they are.
- Most of what seem to be patterns in stock prices are just random variations.
- In a rising market, enough of your bad ideas will pay off so that you’ll never learn that you should have fewer ideas. (more…)
Intuition
A hunch can be trusted if it can be explained.
Though intuition is not infallible, it can be a useful speculative tool, if handled with care and skepticism.
If you are hit by strong hunch – put it to the test. Trust it only if you can explained it. That is only if you can identify within your mind a stored body of information out of which that hunch must reasonably be supposed to have arisen.
Be wary of any intuition that seems to promise some outcome you want badly.
Never confuse a hunch with a hope.
Magical thinking
Magical thinking describes subjective speculation about how markets will act. It is difficult to know for sure how significant a role intuition about the likelihood that investments will do well or poorly plays in peoples? decisions to invest. We are trying to assess innermost thoughts about money and self worth which most people feel they do not have to explain or justify to anyone. However, we can label these patterns of thought as magical thinking. Most investors have occasional feelings or intuitions that certain trading actions will bring them luck even if they know logically the actions can have no effect on their fortunes. Playing a hunch just because it feels right seldom makes traders rich. Yet proof that it’s human nature to indulge in magical thinking abounds:
It has been shown that people will place larger bets on a coin that has not yet been tossed than on a coin that has already been tossed, but the outcome of the toss has yet to be revealed.
If asked how much money they would demand to part with a lottery ticket they already hold, most ticket holders give a figure over four times greater than if they themselves chose the lottery number on the ticket. Apparently, at some magical level people think that they can influence a coin that has not yet been tossed and influence the likelihood of winning the lottery by choosing the number.
People are capable of thinking, at least on some intuitive level, If I buy a stock, then it will go up afterwards or If I buy a stock, then others will probably want to buy the stock, too, because they are like me or I have a hot hand lately; my luck is with me. Such magical thinking is likely, in a subtle way, to contribute to the overconfidence that may help the propagation of speculative bubbles.