rss

Trading Truths

  1. It’s all about risk management … never risk what you can’t comfortably lose.
  2. Never fall in love with a stock.
  3. To be succesfull in trading; study, understand and practice. The rest is easier.
  4. Always start by assuming your analysis is WRONG and that people much smarter and with more recent information are already positioned opposite you.
  5. Never take on a position larger than your comfort zone. (Don’t overtrade)
  6. Patience. never chase a stock.
  7. Before entering the trade very think carefully what will make you wrong, write it down clearly and put it infront of you where you trade, and when your wrong get out happy you’ve followed your trading discipline.
  8. Buy strength, sell weakness. Most traders are essentially counter-trend; most traders lose.
  9. No one ever went broke taking a profit!
  10. Once you find a good one, hang on unless of course they do you wrong.
  11. Never add to a losing position! (Unless scaling in was part of the plan).
  12. Whenever you think you’ve found the key to the lock, they’ll change the lock.
  13. Do not overtrade.
  14. Trade price not perception.
  15. Know the difference between stocks that you want to stay married to and those that are just a fling.
  16. The only sure way to make a small fortune is to start with a large one.
  17. and to paraphrase Will Rogers: Buy only stocks that will go up. Don’t buy the ones that don’t go up. “THIS is GAMBLING.”

  18. Cut your losses quickly and you may have a chance.
  19. An indicator works until it doesn’t.
  20. “MR. MARKET” IS ACTUALLY “MRS. MARKET” ONLY WOMEN CAN THINK, AND ACT THE WAY THE MARKET DOES. THAT IS WHY -ON AVERAGE -WOMEN ARE BETTER TRADERS THAN MEN, THEY UNDERSTAND WHAT THEY DEALING WITH! (more…)

Trading Truths

  1. It’s all about risk management … never risk what you can’t comfortably lose.
  2. Never fall in love with a stock.
  3. To be succesfull in trading; study, understand and practice. The rest is easier.
  4. Always start by assuming your analysis is WRONG and that people much smarter and with more recent information are already positioned opposite you.
  5. Never take on a position larger than your comfort zone. (Don’t overtrade)
  6. Patience. never chase a stock.
  7. Before entering the trade very think carefully what will make you wrong, write it down clearly and put it infront of you where you trade, and when your wrong get out happy you’ve followed your trading discipline.
  8. Buy strength, sell weakness. Most traders are essentially counter-trend; most traders lose.
  9. No one ever went broke taking a profit!
  10. Once you find a good one, hang on unless of course they do you wrong.
  11. Never add to a losing position! (Unless scaling in was part of the plan).
  12. Whenever you think you’ve found the key to the lock, they’ll change the lock.
  13. Do not overtrade.
  14. Trade price not perception.
  15. Know the difference between stocks that you want to stay married to and those that are just a fling.
  16. The only sure way to make a small fortune is to start with a large one.
  17. and to paraphrase Will Rogers: Buy only stocks that will go up. Don’t buy the ones that don’t go up. “THIS is GAMBLING.”

  18. Cut your losses quickly and you may have a chance. (more…)

Discipline and Devotion

No issue so pervades the trading psychology literature as that of “discipline”. It is very common for traders to lay their plans and define their setups, only to find that their actions undermine their careful preparation.
A good deal of the advice dispensed by trading coaches and psychologists addresses this discipline problem.
But what if the lack of discipline is not a problem? What if we view departures from trading plans and intentions as *information*, not as weakness? As it turns out, those departures can be quite informative.
You see, we naturally gravitate toward the nexus of our values (interests), talents (native abilities), and skills (acquired competencies). On average, we tend to enjoy doing what we’re good at and we tend to build skills when there is a foundation of talents to support them. The artist who spends long hours at the canvas doesn’t have to draw upon “discipline” to sustain an interest in painting. The hard work is hard play: the discipline stems from a devotion to a craft–and to the ability of that craft to crystallize the artists’ interests, talents, and skills. (more…)

Willingness to Make Mistakes

“[Michael Marcus] 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. [He] 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.”

– Bruce Kovner, Market Wizards

Bruce Kovner, now retired, is one of the all-time trading greats.

His observation is strikingly similar to the Soros observation (paraphrase): “It doesn’t matter how often you are right or wrong — what matters is how much you make when you are right, versus how much you lose when you are wrong.”

In many ways trading is remarkably different from any other profession. Imagine if doctors, lawyers, or company executives were encouraged to “make mistakes” on a regular basis. (They do make mistakes of course. They just can’t admit them, let alone be open about them.) (more…)

Willingness to Make Mistakes

“[Michael Marcus] 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. [He] 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.”

– Bruce Kovner, Market Wizards

Bruce Kovner, now retired, is one of the all-time trading greats.

His observation is strikingly similar to the Soros observation (paraphrase): “It doesn’t matter how often you are right or wrong — what matters is how much you make when you are right, versus how much you lose when you are wrong.”

In many ways trading is remarkably different from any other profession. Imagine if doctors, lawyers, or company executives were encouraged to “make mistakes” on a regular basis. (They do make mistakes of course. They just can’t admit them, let alone be open about them.) (more…)

Bill Gross Channels Michael Jackson In Latest Monthly Letter, Asks "What Makes A Great Investor?"

From Bill Gross of PIMCO

I’m starting with the man in the mirror
I’m asking him to change his ways
And no message could have been any clearer
If you wanna make the world a better place
Take a look at yourself, and then make a…
Chaaaaaaaange …..
 Must Read this………….!
— Michael Jackson
 
A Man in the Mirror
Am I a great investor? No, not yet. To paraphrase Ernest Hemingway’s “Jake” in The Sun Also Rises, “wouldn’t it be pretty to think so?” But the thinking so and the reality are often miles apart. When looking in the mirror, the average human sees a six-plus or a seven reflection on a scale of one to ten. The big nose or weak chin is masked by brighter eyes or near picture perfect teeth. And when the public is consulted, the vocal compliments as opposed to the near silent/ whispered critiques are taken as a supermajority vote for good looks. So it is with investing, or any career that is exposed to the public eye. The brickbats come via the blogs and ambitious competitors, but the roses dominate one’s mental and even physical scrapbook. In addition to hope, it is how we survive day-to-day. We look at the man or woman in the mirror and see an image that is as distorted from reality as the one in a circus fun zone. (more…)

The coming economic crisis in China

By Jim Jubak

Jim JubakI think investors are worried about the wrong kind of crisis in China.

Worry seems to focus on the possibility of an asset bubble and the chance that it will burst sometime in the next two to three months.

I’m more concerned about a slide into a crisis that will be an extension of the Great Recession. That slide could begin, I estimate, sometime in the next 12 to 18 months.

I understand the worry about the possibility of an asset bubble in China. After all, we’ve just been through two horrible asset bubbles — and busts — in the U.S. and global financial markets. And a Chinese bubble is a distinct possibility, one that should certainly figure into your investing strategy.

But China’s economy and political system are so different from ours in the U.S. and those in the rest of the developed world — and its relationship to the global financial market so unique — that I don’t think we’re headed toward any kind of replay of March 2000 or October 2007.

A bigger worry is a long-term slide into a lower-growth or no-growth world in which nations strive to beggar their neighbors and all portfolios slump. As crises go, it’s very different but ultimately just as painful for investors as the asset bubbles that draw all our attention now.

To paraphrase Leo Tolstoy in “Anna Karenina“: Happy bull markets are all alike; every unhappy bear market is unhappy in its own way.