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How full is your cup?

  
  Education
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I stumbled across an interesting article recently, about ‘Market Timing’.  We can all relate to spending hours on trying to pick the trough or top of a market cycle, or congratulate ourselves on getting in at the bottom and riding a sp to its peak.

This article goes on to explain that Market Timing is perhaps not that important, it all comes down to the individual’s mind-set around wealth. 

“You have probably seen this phenomenon: there are successful investors that can make money regardless of the market conditions. They make good money during good times, and they make even better money during bad times.

To these successful investors, there is one thing that is constant: they make money regardless of changes in the market. Market Timing seems to have very little effect on them.

You have probably also seen the opposite phenomenon: there are investors that would lose money even when the market was doing great. These investors lose money during good times, and lose even more money during bad times.

To these unsuccessful investors, there is one thing that is constant: they lose money regardless of changes in the market. Market Timing also seems to have very little effect on them. “

Hmm, now there’s something to think about.  Imagine having the good fortune to enter the market at ANY time and still make money. 

The author goes on to get you to think of money as water and it seems that some people have a fixed sized cup to hold money – whenever they get near the cups maximum threshold one of life’s challenges comes along to ensure their cup never overflows.

So what we NEED to do, is to consciously make an effort to increase the size of our cup (the invisible mental capacity for wealth), and then we won’t really need to worry about Market Timing at all!

Sounds like a plan to me – I’ll order a beer stein.

Investment Wisdom

  
  Education
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  • 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.

20 Trading Skills for Traders

  
  Education
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1.      Know the difference between trading and investing.  We are traders, NOT investors.  ••  Disciplineis doing the right thing at the right time…every time! Survival in this business is dependent on the right decisions.

2.      Don’t let losers run!  Always use stops .  Riskmanagement is very, very important in your trading.  Don’t be stubborn in holding a position. Remember, while you may not be wrong often, The Market Is Always Right.  The best traders are the first to admit (to themselves and the market) that they made a mistake.

 3.      Trade only price pattern set-ups.

 4.      Trade for skill, NOT the money.  If you’re focused on the money aspect of trading…you’re not focused on the ‘trade’.  And SCARED MONEY NEVER WINS!

5.      Concentrate on what you are trade.  Each market has personalities, habits and friends…get to know them all.

 6.      Focus on your executions.  Remember, every execution is a trade.  Money is valuable…don’t leave it on the table.

 7.      Model Yourself After Successful and Experienced Traders.  You will be all you can be…but you need to start somewhere. 

 8.      Be Teachable.  Learn something new every day (or at least every week).  The ‘Losing’ and ‘Winning’ trades can teach you a whole lot.

 9.      Remember that even the best of the best traders lose money.  Learn to accept your losses and move on to the next trade.  That’s just part of the business – you will NEVER win 100% of the time.

 10.  Use only 1 contract at the beginning.  Large wins at the beginning generally means large exposure. (more…)

Importance of money management

  
  Education
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In Jack Schwager’s book Market Wizards, Schwager interviewed some of the world’s top traders and investors, nearly all of whom emphasised the importance of money management. Here are a few of my favourite excerpts:

‘Risk management is the most important thing to be well understood. Undertrade, undertrade, undertrade is my second piece of advice.Whatever you think your position ought to be, cut it at least in half. ’-Bruce Kovner

‘Never risk more than 1% of your total equity in any one trade. By risking 1%, I am indifferent to any individual trade. Keeping your risk small and constant is absolutely critical.’ –Larry Hite

‘You have to minimize your losses and try to preserve capital for those very few instances where you can make a lot in a very short period of time. What you can’t afford to do is throw away your capital on suboptimal trades.’ –Richard Dennis

Quotes by Paul Tudor Jones II

  
  Education
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Paul Tudor Jones II is one of the most successful hedge fund managers. He has never suffered a losing year. His fund has returned 23% annualized gain since its inception in 1986. Paul Tudor is a momentum trader, who believes that price move and trend unfold only because of investors’ behavior.

Markets have consistently experienced “100-year events” every five years. While I spend a significant amount of my time on analytics and collecting fundamental information, at the end of the day, I am a slave to the tape and proud of it.

I see the younger generation hampered by the need to understand and rationalize why something should go up or down. Usually, by the time that becomes self-evident, the move is already over.

There is no training — classroom or otherwise — that can prepare for trading the last third of a move, whether it’s the end of a bull market or the end of a bear market. There’s typically no logic to it; irrationality reigns supreme, and no class can teach what to do during that brief, volatile reign. The only way to learn how to trade during that last, exquisite third of a move is to do it, or, more precisely, live it.

Fundamentals might be good for the first third or first 50 or 60 percent of a move, but the last third of a great bull market is typically a blow-off, whereas the mania runs wild and prices go parabolic.

Quotes by Paul Tudor Jones II

  
  Education
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Paul Tudor Jones II is one of the most successful hedge fund managers. He has never suffered a losing year. His fund has returned 23% annualized gain since its inception in 1986. Paul Tudor is a momentum trader, who believes that price move and trend unfold only because of investors’ behavior.

Markets have consistently experienced “100-year events” every five years. While I spend a significant amount of my time on analytics and collecting fundamental information, at the end of the day, I am a slave to the tape and proud of it.

I see the younger generation hampered by the need to understand and rationalize why something should go up or down. Usually, by the time that becomes self-evident, the move is already over.

There is no training — classroom or otherwise — that can prepare for trading the last third of a move, whether it’s the end of a bull market or the end of a bear market. There’s typically no logic to it; irrationality reigns supreme, and no class can teach what to do during that brief, volatile reign. The only way to learn how to trade during that last, exquisite third of a move is to do it, or, more precisely, live it.

Fundamentals might be good for the first third or first 50 or 60 percent of a move, but the last third of a great bull market is typically a blow-off, whereas the mania runs wild and prices go parabolic.

Six Rules of Michael Steinhardt

  
  Education
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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.

JPMorgan Chase :Markets are overbought

  
Analysis, Economy, Education, US Market
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“Although the SEC fraud case does not have direct implications outside Financials, the rise in uncertainty is negative for equities at a time when equity markets are overbought. Technicals have been pointing to overbought equity markets for some time now and Friday’s correction has the potential to drag the S&P 500 down toward 1175 in the near term. But our technical strategists see very little chance of the S&P 500 falling below 1150, i.e., the January high, over the coming weeks.”

Source: JPMorgan Chase & Co. (Public, NYSE:JPM)

Please note that JPMorgan Chase & Co. (Public, NYSE:JPM) has been dead right on their market calls, as the Pragmatic Capitalist points out in his website, “few of the big banks have traded the recovery as well as JP Morgan. They nailed the reflation trade and they have subsequently been dead right about the reflation trade transforming into the recovery trade. They’ve recommended that investors pile into the highest risk names in the market and its been a winning trade since.”

Characteristics of Successful Trader

  
  Education
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SUCESS1From time to time I have been asked to offer my perspectives on things I have found common in successful traders. I have always struggled with my reply to that question because there are only a few traders of which I have gained enough understanding of what they do every day to achieve their results.

However, in Van Tharp’s latest book “Super Trader,” he provides 10 common characteristics frequently found among the best of the best among the hundreds of traders he’s worked with throughout his career. Like me, I think you may find it of interest!

  1. They all have a tested, positive expectancy system that’s proved to make money for the market type for which it was designed.

  2. They all have systems that fit them and their beliefs. They understand that they make money with their systems because their systems fit them.

  3. They totally understand the concepts they are trading and how those concepts generate low-risk ideas. (more…)

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