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Market Poem

  
  Education
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u know the old School chartists
are looking at the daily,
and can’t help but notice
what they believe to be
an inverted complex head and shoulders (bottom/continuation) pattern
replete with upward sloping neckline and a higher right shoulder
and the attendant bullish implications
they have come to expect,
or
perhaps they visualize a diamond pattern (debatable implications, there)

ironically,
if the market does indeed trade higher
and makes new historical highs,
or fails to do so,

it will have nothing to do
with the perceived formations

Nassim Taleb’s Risk Management Rules of Thumb

  
  Education
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Rule No. 1- Do not venture in markets and products you do not understand. You will be a sitting duck.

Rule No. 2- The large hit you will take next will not resemble the one you took last. Do not listen to the consensus as to where the risks are (that is, risks shown by VAR). What will hurt you is what you expect the least.

Rule No. 3- Believe half of what you read, none of what you hear. Never study a theory before doing your own observation and thinking. Read every piece of theoretical research you can-but stay a trader. An unguarded study of lower quantitative methods will rob you of your insight.

Rule No. 4- Beware of the nonmarket-making traders who make a steady income-they tend to blow up. Traders with frequent losses might hurt you, but they are not likely to blow you up. Long volatility traders lose money most days of the week.

Rule No. 5- The markets will follow the path to hurt the highest number of hedgers. The best hedges are those you alone put on. (more…)

Book Review : Jesse Livermore: Boy Plunger

  
  Education
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71bdRlXbWuLThis is a story of triumph and tragedy.  Jesse Livermore is notable as one of the few people who ever made it into the richest tiers of society by speculating — by trading stocks and commodities — betting on price movements.

This is three stories in one.  Story one is the clever trader with an intuitive knack who learned to adapt when conditions changed, until the day came when it got too hard.  Story two is the man who lacked financial risk control, and took big chances, a few of which worked out spectacularly, and a few of ruined him financially.  Story three is how too much success, if not properly handled, can ruin a man, with lust, greed and pride leading to his death.

The author spends most of his time on story one, next most on story two, then the least on story three.  The three stories flow naturally from the narrative that is largely chronological.  By the end of the book, you see Jesse Livermore — a guy who did amazing things, but ultimately failed in money and life.

Let me briefly summarize those three aspects of his life so that you can get a feel for what you will run into in the book:

The Clever Trader

Jesse Livermore came to the stock market in Boston at age 14, and was a very quick study.  He showed intuition on market affairs that impressed the most of the older men who came to trade at the brokerage where he worked.  It wasn’t too long before he wanted to invest for himself, but he didn’t have enough money to open a brokerage account, so he went to a bucket shop.  Bucket shops were gambling parlors where small players gambled on stock prices.  He showed a knack for the game and made a lot of money.  Like someone who beats the casinos in Vegas, the proprietors forced him to leave.

He then had more than enough money to meet his current needs, and set up a brokerage account.  But the stock market did not behave like a bucket shop, and so he lost money while he learned to adapt.  Eventually, he succeeded at speculating on both stocks and commodities, leading to his greatest successes in being short the stock market prior to the panic of 1907, and the crash in 1929.  During the 1920s, he started his own firm to try to institutionalize his gifts, and it worked for much of the era. (more…)

23 One Liner For Traders

  
  Education
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1. All successful traders use methods that suit their
personality; You are neither Waren Buffett nor George Soros nor Jesse Livermore; Don’t assume you can trade like them.

2. What the market does is beyond your control; Your reaction to the market, however, is not beyond your control. Indeed, its the ONLY thing you can control.

3. To be a winner, you have to be willing to
take a loss; 
(The Stop-Loss Breakdown)

4. HOPE is not a word in the winning Trader’s vocabulary;

5. When you are on a
losing streak — and you will eventually find yourself on one — reduce your position size;

6. Don’t underestimate the time it
takes to succeed as a trader — it takes 10 years to become very good at anything;  (There Are No Shortcuts)

7. Trading is a vocation — not a
hobby

8. Have a business/trading plan; 
(Write This Down)

9. Identify your greatest weakness, Be honest — and DEAL with it (more…)

40 One Liners For Traders

  
  Education
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1. Trading is simple, but it is not easy.40 rules

2.  When you get into a trade watch for the signs that you might be wrong.

3.  Trading should be boring.

4.  Amateur traders turn into professional traders once they stop looking for the “next great indicator.”

5.  You are trading other traders, not stocks or futures contracts.

6.  Be very aware of your own emotions.

7.  Watch yourself for too much excitement.

8.  Don’t overtrade.

9.  If you come into trading with the idea of making big money you are doomed.

10.  Don’t focus on the money.

11.  Do not impose your will on the market.

12.  The best way to minimize risk is to not trade when it is not time to trade. 

13.  There is no need to trade five days a week.  

14.  Refuse to damage your capital.

15.  Stay relaxed. (more…)

10 Most Foolish Things a Trader Can Do

  
  Education
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The Ten Most Foolish Things a Trader Can Do

  1. Try to predict the future movement of a stock, and stay in it no matter what.
  2. Risk your entire account on one trade with no stop loss plan.
  3. Have a winning trade but no exit strategy to get out, no trailing stop or exhaustion top signal.
  4. Ask for and follow the advice of others instead of trading with your own trading plan, method, rules, and system.
  5. Trade your emotions instead of signals: buy when you are greedy and sell when you are afraid.
  6. Trade your opinions, not a quantified method.
  7. Do not bother to do your homework on trading, just jump in and trade, you are smart, you will figure it out.
  8. Short the best and most expensive stocks in the stock market and buy the cheapest junk stocks.
  9. Put on trades you are 100% sure are winners so you do not even need a stop loss or risk management.
  10. Buy more of a trade that you are losing money in and sell your winners quickly to lock in small profits.

10-Trading Method Quotes For Traders

  
  Education
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1.    “Trade What’s Happening…Not What You Think Is Gonna Happen.” – Doug Gregory
2.    Go long strength; sell weakness short in your time frame.
3.    Find your edge over other traders.
4.    Your trading system must be built on quantifiable facts not opinions.
5.    Trade the chart not the news.
6.    A robust trading system must either be designed to have a large winning percentage of trades or big wins and small losses.
7.    Only take trades that have a skewed risk reward in your favor.
8.    The answer to the question, “What’s the trend?” is the question, “What’s your timeframe?” – Richard Weissman. Trade primarily in the direction that a market is trending in on your time frame until the end when it bends.
9.    Only take real entries that have an edge, avoid being caught up in the meaningless noise.
10.    Place your stop losses outside the range of noise so you are only stopped out when you are likely wrong.

Jesse Livermore’s Best 10 Quotes & Free Link to His Book

  
  Education
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Here is a list of the ten most powerful quotes from Jesse Livermore’s book “How to Trade in Stocks.” Livermore was one of the greatest stock market operators of our time and his quotes stand the test of time. No one made more money in the markets or came back from more bankruptcies than Jesse Livermore. He successfully shorted the Great Depression crash for one of the biggest trading wins in history. While his weakness was not managing his risk of ruin his strength was he could become a millionaire trading during a trending market over and over starting with a small stake. While in the end he decided to take his own life he lived his life as the world’s greatest trader for half a century.

“Do not anticipate and move without market confirmation—being a little late in your trade is your insurance that you are right or wrong.” -Jesse Livermore

“The good speculators always wait and have patience, waiting for the market to confirm their judgment.” -Jesse Livermore

“{Limit} interest in too many stocks at one time.  It is much easier to watch a few than many.” -Jesse Livermore

“Experience has proved to me that the real money made in speculating has been: “IN COMMITMENTS IN A STOCK OR COMMODITY SHOWING A PROFIT RIGHT FROM THE START. ” -Jesse Livermore

“As long as a stock is acting right, and the market is right, do not be in a hurry to take a profit. You know you are right, because if you were not, you would have no profit at all. Let it ride and ride along with it. It may grow into a very large profit, and as long as the “action of the market does not give you any cause to worry,” have the courage of your convictions and stay with it.” -Jesse Livermore

“It is foolhardy to make a second trade, if your first trade shows you a loss. ” “Never average losses. ” Let that thought be written indelibly upon your mind.” -Jesse Livermore

“One should never sell a stock, because it seems high-priced.” -Jesse Livermore

“Profits always take care of themselves but losses never do. ” The speculator has to insure himself against considerable losses by taking the first small loss. In so doing, he keeps his account in order so that at some future time, when he has a constructive idea, he will be in a position to go into another deal, taking on the same amount of stock as he had when he was wrong.” -Jesse Livermore
“It is significant that a large part of a market movement occurs in the last forty-eight hours of a play, and that is the most important time to be in it.” -Jesse Livermore

“A speculator should make it a rule each time he closes out a successful deal to take one-half of his profits and lock this sum up in a safe deposit box. The only money that is ever taken out of Wall Street by speculators is the money they draw out of their accounts after closing a successful deal.” -Jesse Livermore

Link to Jesse Livermore’s Book “How to Trade in Stocks”

Trading Commandments

  
  Education
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tadingcommandments

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. (more…)

7 Things -Traders Must Accept

  
  Education
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  1. You will have to accept that over the long term at best only 60% of your trades will be winners. It will be much less with some strategies.
  2. Accept that the key to being a successful trader is having big wins and small losses, not big bets paying off. Big bets can lead quickly to you being out of the game after a string of losses.
  3. Accept that the best traders are also the best risk managers, even the best traders do not have crystal balls so they ALWAYS manage their capital at risk on EVERY trade.
  4. If you want to be a better trader then you need to accept that trading smaller and risking less is a key to your success. Risking 1% to 2% of your capital on any single trade is the first step to winning at trading. Use stops and position sizing to limit your losses and get out when your losses grow to these levels.
  5. You must accept that you will have 10 trading losses in a row a few times each year. The question is what your account will look like when they happen.
  6. You have to accept that you will be wrong, a lot.  The sooner you accept you are wrong and change your mind the better off you will be.
  7. If you really want to be a trader then you are going to have to accept the fact that trading is not easy money. It is a profession like any other and requires much work and effort and even years to become proficient. Expect to work for free and pay tuition to the markets through losses until you learn to trade consistently and profitably.

Trading is about math, ego control, risk management, psychology, focus, perseverance, passion, and dedication. If you are missing one, you may not make it. Trade wisely my friends.

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