Archives of “judgment” tag

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20 Trading Wisdom Lines

  
  Education
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(1)  Those who work their plan will prosper, but those who chase fantasies lack judgment.

(2)  Those who want to do right will get a rich reward. But those who want to “get rich quick” will quickly  fail“.

(3)  Trying to “get rich quick” is wrong & leads to poverty.

(4)  Wealth taken from gambling quickly disappears; wealth from diligent effort & hard work grows“.

(5)  Follow the rules & keep your financial life intact; ignoring them means financial ruin.

(6)  A person without self-control is as defenseless as a city with broken-down walls.

(7)  The wise control their temper.  They know that anger causes mistakes.

(8)  The intelligent are always open to new ideas, in fact they look for them.

(9)  Get all the advice that you can & be wise all the rest of your life.

(10)  Fools despise advice; ‘the wise’ consider each suggestion.

(11)  Fools think they need no advice, but ‘the wise’ listen to others.

(12)  To learn, you must want to be taught.  To refuse correction is stupid.

(13)  Anyone willing to be corrected is on the path to success. Those who refuse correction have lost their chance.

(14)  Hard work brings prosperity; playing around brings poverty.

(15) If you love sleep, you will end up in poverty.  Stay awake, work hard, & there will be plenty to eat.

(16)  The foolish will lose in the end, ‘the wise’ will end up with the winnings.

(17)  The wise save up for the future, but the foolish spend whatever they get”.

(18)  Truth stands the test of time; lies are soon exposed.

(19 Be faithful & honest with yourself in your trading, bediligent & consistent & it will bring you Prosperity.
(20) Steady plodding brings prosperity; hasty speculation brings poverty.

Think carefully about each one of these quotes.  I think you’ll find out a little something about yourself you didn’t already know.  For example, your “strengths” and “weaknesses” in your trading should be clearly pointed out be analyzing each one of these phrases.  These simple and short phrases should help you become a better trader — and hopefully a better person in general!

Optimism & Pessimism

  
  Education
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Optimism means expecting the best, but confidence means knowing how you will handle the worst. Never make a move if you are merely optimistic.

Optimism can be a speculator’s enemy. It feels good and is dangerous for that reason. It produces a clouding of judgment. It can lead you into a venture with no exits. Even when there is an exit, optimism can persuade you not to use it.
You should never make a move if you are merely optimistic. Before committing your money to a venture, ask how you will save yourself if things go wrong. Once you have that worked out, you’ve got something better than optimism. You’ve got confidence.

20 Wisdom Points for Traders

  
  Education
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(1)  Be faithful & honest with yourself in your trading, be diligent & consistent & it will bring you Prosperity.
(2)  Those who work their plan will prosper, but those who chase fantasies lack judgment.
(3)  Steady plodding brings prosperity; hasty speculation brings poverty.
(4)  Those who want to do right will get a rich reward. But those who want to “get rich quick” will quickly  fail“.
(5)  Trying to “get rich quick” is wrong & leads to poverty.
(6)  Wealth taken from gambling quickly disappears; wealth from diligent effort & hard work grows“.
(7)  Follow the rules & keep your financial life intact; ignoring them means financial ruin.
(8)  A person without self-control is as defenseless as a city with broken-down walls.
(9)  The wise control their temper.  They know that anger causes mistakes.
(10)  The intelligent are always open to new ideas, in fact they look for them. (more…)

Focus on Being

  
  Education
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The one thing that is at the core of every person’s trading, no matter what tools are utilized, is a human being. The Professional Traders recognize that being is the start of the entire process, who they are as people, as traders. By focusing on yourself first and then on the rest, you address the core of your trading business. Just like every sports team looks up to its coach for direction or like a company looking up to its CEO for direction the results of your trading all begin and end with you as you are the captain of your own ship. It is you, the human being, making all the decisions about trading like what to trade, when to trade, what resources to use, what strategy to use, the knowledge you will acquire, who to listen to and so on. Professional Traders develop and maintain a very high quality of being. Being is more important than doing. If you are fatigued or stressed, your judgment can be impaired. If you are naive or ignorant you are more likely going to make mistakes. If you are anxious or scared you will not be able to think clearly as you would when relaxed. If you are emotional in trading you will see losses in your account. No matter what you do if you are not at 100% of what you should be you will not the results you wish for. (more…)

Trading Wisdom From Legend Bruce Kovner

  
  Education
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On protecting emotional equilibrium:
To this day, when something happens to disturb my emotional equilibrium and my sense of what the world is like, I close out all positions related to that event.
On the first rule of trading:
The first rule of trading — there are probably many first rules — is don’t get caught in a situation in which you can lose a great deal of money for reasons you don’t understand.
On making a million:
Michael [Marcus] taught me one thing that was incredibly important… He taught me that you could make a million dollars. He showed me that if you applied yourself, great things could happen. It is very easy to miss the point that you really can do it. He showed me that if you take a position and use discipline, you can actually make it.”
On allowing for mistakes:
He also taught me one other thing that is absolutely critical: You have to be willing to make mistakes regularly; there is nothing wrong with it. Michael taught me about making your best judgment, being wrong, making your next best judgment, being wrong, making your third best judgment, and then doubling your money.
On elements of a successful trading:
I’m not sure one can really define why some traders make it, while others do not. For myself, I can think of two important elements. First, I have the ability to imagine configurations of the world different from today and really believe it can happen. I can imagine that soybean prices can double or that the dollar can fall to 100 yen. Second, I stay rational and disciplined under pressure.
[Successful traders are] strong, independent, and contrary in the extreme. They are able to take positions others are unwilling to take. They are disciplined enough to take the right size positions. A greedy trader always blows out.
On having a market view:
I almost always trade on a market view; I don’t trade simply on technical information. I use technical analysis a great deal and it is terrific, but I can’t hold a position unless I understand why the market should move.
…there are well-informed traders who know much more than I do. I simply put things together… The market usually leads because there are people who know more than you do.
On technical analysis:
Technical analysis, I think, has a great deal that is right and a great deal that is mumbo jumbo… There is a great deal of hype attached to technical analysis by some technicians who claim that it predicts the future. Technical analysis tracks the past; it does not predict the future. You have to use your own intelligence to draw conclusions about what the past activity of some traders may say about the future activity of other traders.
…For me, technical analysis is like a thermometer. Fundamentalists who say they are not going to pay any attention to the charts are like a doctor who says he’s not going to take a patient’s temperature. But, of course, that would be sheer folly. If you are a responsible participant in the market, you always want to know where the market is — whether it is hot and excitable, or cold and stagnant. You want to know everything you can about the market to give you an edge.
…Technical analysis reflects the voice of the entire marketplace and, therefore, does pick up unusual behavior. By definition, anything that creates a new chart pattern is something unusual. It is very important for me to study the details of price action to see if I can observe something about how everybody is voting. Studying the charts is absolutely critical and alerts me to existing disequilibria and potential changes.
On trading ranges and price patterns: (more…)

The Wisdom of Jesse Livermore

  
  Education
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Here are seven lessons from Jesse Livermore who is considered by many as one of the greatest traders who ever lived.

Lesson Number One: Cut your losses quickly.

As soon as a trade is contemplated, a trader must know at what point in time he’ll be proven wrong and exit a position. Risk management should dictate the size of the trade and how much you can lose. Deciding where to exit when a position is going against you is not a winning strategy.

Lesson Number Two: Confirm your judgment before trading a larger than average position.

Livermore was famous for throwing out a small position and waiting for his thesis to be confirmed by it going in his favor. Once the stock was traveling in the direction he desired, Livermore would maximize his trading size for out sized wins.

There are many ways to add to a winning position — pyramiding up at key pivot points, building a position as the trade goes in your favor, being 100% in no more than 5% above the initial entry — but the take home is to buy in the direction of your winning trade –  never when it goes against you. Never add to a losing position.

Lesson Number Three: Watch leading stocks for the best action.

Livermore knew that trending issues were where the big money would be made, and to fight this reality was a loser’s game. Shorting monster stocks is a very dangerous undertaking when they are under accumulation by large funds. (more…)

Lessons Learned

  
  Education
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Lessons learned from the past few years… Taking smart risks means cutting back when necessary and getting back in the game when the opportunity arises. To borrow an example from sports psychology, the fear of re-injury is a feeling experienced by athletes long after they have been hurt and are on the road to recovery. The same holds true for investors who saw their holdings collapse in 2008.

 

True top performers train themselves to rely on their short-term memories, avoiding a mindset of fear that leads to missed opportunities to grow and prosper. The average person can learn from the example of elite investors and traders — never take winning or losing personally – especially when it comes to money. View each situation on its own merits. If there is a great opportunity for success, then take the risk. If not, then don’t. The formula sounds simple enough, but emotions continually cloud our better judgment.

Five Things to Avoid In Trading

  
  Education
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What Not To Do

 
1.  Have an opinion.  One sure way to find yourself trading against the market is to have a
market bias.  Trading with an opinion about what the market will do next can limit your
ability to see what the market is actually telling you.  
2.  Have worse than having your own.  Market gurus are notoriously inaccurate in their predictions.   s market judgment prevents you from learning to read the market on
your own.opinion has changed.
3.  Make your opinion public.  Putting your bias into a chat room or forum thread makes it
off an opinion once you have announced it to others.
4.  Let your ego get involved.  Everyone wants to be right.  In trading, you have to ask
yourself 
5.  Ride a loser.  Still wanting to be right?  Having a bias, making it public and getting your ego involved will cause you to hold losers far longer than you should. 

What to Do


1.  Anticipate.  Avoid having a bias.  Identify areas where the market might turn or continue
and think through what that would look like.  Anticipate the alternative ways the market may
trade.
2.  Keep your own counsel.  Avoid gurus.  Learn to read the market and make your own
decisions.
3.  Avoid the forums while trading.  Use the good ones as a source of education, but refrain
from making your trades public.
4.  Check your ego.  Be aware of when you want   make the correct decision.
5.  Cut losses short.  Use hard stops.  When the market turns against you, exit. 

For many traders, promising to follow rules doesn’t work for long

  
  Education
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How many times have you broken the rules?

For many traders, promising to follow rules doesn’t work for long. One reason is willpower fatigue, a well-documented phenomenon.  I regularly receive emails from traders who are very bright and hard working – often with a degree from a top school or a successful prior career– and they are so frustrated with themselves about ‘breaking rules’ in trading.

For most traders, the work required to succeed is not what was expected. Trading discipline is not about willpower to follow rules. It seems like that on the surface, and it sort of is in the beginning of one’s trading career, but there are three reasons why simple willpower is not the answer for long-term success:

First, discretionary trading means by its very definition that we must use our judgment to make a decision – not simply use willpower to follow a rule. (more…)

Jesse Livermore's Trading Rules (circa 1940)

  
  Education
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1. Nothing new ever occurs in the business of speculating in stock and commodities.
2. Money cannot be consistently made trading every day or every week during the year.
3. Don’t trust your own opinion or back your judgment until the action of the market itself confirms your opinion.
4. Markets are never wrong – opinions often are.
5. The real money made in speculating has been in commitments showing a profit right from the start.
6. As long as a stock is acting right, and the market is right, do not be in a hurry to take profits.
7. One should never permit speculative ventures to run into investments.
8. The money lost by speculation alone is small compared with the gigantic sums lost by so-called investors who have let their investments ride.
9. Never buy a stock because it has a big decline from its previous high.
10. Never sell a stock because it seems high-priced.
11. I become a buyer as a stock makes a new high on its movement after having had a normal reaction.
12. Never average losses.
13. The human side of every person is the greatest enemy of the average speculator.
14. Wishful thinking must be banished.
15. Big movements take time to develop.
16. It is not good to be too curious about all the reason behind price movements.
17. It is much easier to watch a few than many.
18. If you cannot make money out of the leading active issues, you are not going to make money out of the market as a whole.
19. The leaders of today may not be the leaders of two years from now.
20. Do not become completely bearish or bullish on the whole market because one stock in some particular group has plainly reversed its course from the general trend.
21. Few people ever make money on tips. Beware of inside information. If there was easy money lying around, no one would be forcing it into your pocket.
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