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4 Wisdom Thoughts for Traders

  
  Education
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Give up reliving your past trades.

Each trade is a new trade do not hold grudges against stocks and think they ‘owe’ you for past losses. Do not fall in love with a stock and hold it as it falls lower and lower.

Give up letting your trading define your self worth.

Do not let your trading define you. Diversify your life with friends, family, hobbies, and other interests. It is not healthy to become overly obsessed with the markets.

Give up on losing trades quickly when your stop is hit.

Your best trades will be the ones that are profitable from the start, if they immediately go against you be prepared to be stopped out. You can destroy your trading account when you start the “It will come back, I just have to wait” chant in the midst of a death spiral.

Give up on price targets let your winners run as far as they will go.

In the right market conditions trends can go on to unbelievable levels, the big wins during these trends can make your entire year profitable if losses are small on losing trades. If you set a predefined profit target you will miss the opportunity when the big move comes. Let a trailing stop take you out.

Rosie’s Rules to Remember (an Economist’s Dozen)

  
  Education
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1. In order for an economic forecast to be relevant, it must be combined with a market call.
2. Never be a slave to the date – they are no substitute for astute observation of the big picture.
3. The consensus rarely gets it right and almost always errs on the side of optimism – except at the bottom.
4. Fall in love with your partner, not your forecast.
5. No two cycles are ever the same.
6. Never hide behind your model.
7. Always seek out corroborating evidence.
8. Have respect for what the markets are telling you.
9. Be constantly aware with your forecast horizon – many clients live in the short run.
10. Of all the market forecasters, Mr. Bond gets it right most often.
11. Highlight the risks to your forecasts.
12. Get the US consumer right and everything else will take care of itself.
13. Expansions are more fun than recessions (straight from Bob Farrell’s quiver!).

John Paulson's 8 Secrets

  
  Education
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  1. Don’t follow the crowd.
  2. Have an exit strategy before the bubbles burst
  3. Focus on the debt markets for predicting the future.
  4. Take the time to figure out how fancy new investment products like credit default swaps (CDS) work.
  5. Buy insurance. No one wanted out of the money puts on the housing market.
  6. Remember the past. Some of the big winners in the housing crash were those dismissed as out-of-touch dinosaurs.
  7. Remember that no trade lasts forever so don’t fall in love with your investment. After making his $20 billion. Paulson went long banks at the bottom. (The verdict is still out on this trade).
  8. Timing is everything and luck helps.

M. de la Rochefoucauld’s 15 maxims -written 400 years ago

  
Education, Life
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  1. “It is a kind of happiness to know how unhappy we must be.”
  2. “In their first passion, women love their lovers; in all the others, they love love.”
  3. “In jealousy there is more of self-love than love.”
  4. “One is never so happy or so unhappy as one fancies.”
  5. “Neither the sun nor death can be looked at steadily.”
  6.  “Good advice is something a man gives when he is too old to set a bad example.”
  7. “Everyone blames his memory; no one blames his judgment.”
  8. “There are very few people who are not ashamed of having been in love when they no longer love each other.”
  9. “It is almost always a fault of one who loves not to realize when he ceases to be loved.”
  10. “When a man is in love, he doubts, very often, what he most firmly believes.”
  11. “There is only one kind of love, but there are a thousand imitations.”
  12. “If we resist our passions it is more from their weakness than from our strength.”
  13. “We are more interested in making others believe we are happy than in trying to be happy ourselves.”
  14. “Absence diminishes little passions and increases great ones, as the wind extinguishes candles and fans a fire.”
  15. “When a man must force himself to be faithful in his love, this is hardly better than unfaithfulness.”

The Ten Trading Commandments

  
  Education
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1) Trade for success not for money.

2) Strive for discipline.

3) Know yourself and how well you handle risk.

4) Lose your ego.

5) Know your risk level and when you hit your stop point exit the trade.

6) Know when to trade and when to wait.

7) Love your losers like you love your winners.

8) Losing trades will be your best teachers.

9) After three losing trades in a row, take a break.

10) Don’t break any of the above nin rules.

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