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10 Things I’ve Learned About Markets

  
Analysis, Education
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1. “There is no such thing as easy money”

2. Events that you think are affected by cardinal announcements like the employment numbers at 8:30 am on Friday are often known to many participants before the announcement

3. Markets that have little liquidity are almost impossible to profit from.

4. When the stock market is way down, policy makers take notice and do what they can to remedy the situation.

5. The market puts infinitely more emphasis on ephemeral announcements that it should.

6. It is good to go against the trend followers after they have become committed.

7. The one constant, is that the less you pay in commissions, and bid asked spread, the more money you’ll end up with at end of day. Too often, a trader makes a fortune on the prices showing when he makes a trade, and ends up losing everything in the rake and grind above.

8. It is good to take out the canes and hobble down to wall street at the close of days when there is a panic.

9. A meme about the relation between today’s events and those of x years ago is totally random but it is best not to stand in the way of it until it is realized by the majorit of susceptibles

10. All higher forms of math and statistics are useless in uncovering regularities.

Habits :Read them daily

  
  Education
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1) The market will instruct us what to do. Can we learn?
2) Participants’ humanity will cause typical price structures to arise.
3) Our primary job is risk manager…that’s why I believe in managing my resources. Most managers have too much career risk on the line. That is, they can lose more by being ‘out’ when it is perceived as a time to be ‘in’, than by losing money. The old saying “I’d rather lose half my clients than half my clients’ money” isn’t in their lexicon.
4) CASH IS A POSITION
5) The markets spend most of their time not trending
6) Multiple time frames allow more precise determination of decision-making
7) More ‘precise’ decisions may allow for smaller losses
8) The slope and direction of the 50 period moving average are telling
9) Our job is simple: make money.
10) Having a regular routine (preparation routine) is vital

11 Things I’ve Learned About Markets

  
  Education
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1. “There is no such thing as easy money”

2. Events that you think are affected by cardinal announcements like the employment numbers at 8:30 am on Friday are often known to many participants before the announcement

3. It’s bad to try to make money the same way several days in a row

4. Markets that have little liquidity are almost impossible to profit from.

5. When the stock market is way down, policy makers take notice and do what they can to remedy the situation.

6. The market puts infinitely more emphasis on ephemeral announcements that it should.

7. It is good to go against the trend followers after they have become committed.

8. The one constant, is that the less you pay in commissions, and bid asked spread, the more money you’ll end up with at end of day. Too often, a trader makes a fortune on the prices showing when he makes a trade, and ends up losing everything in the rake and grind above.

9. It is good to take out the canes and hobble down to wall street at the close of days when there is a panic.

10. A meme about the relation between today’s events and those of x years ago is totally random but it is best not to stand in the way of it until it is realized by the majorit of susceptibles

11. All higher forms of math and statistics are useless in uncovering regularities.

Trading Rules for Thirsty Traders

  
  Education
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“Don’t ever put your ego out there where you’re afraid to say that you’re wrong, because the market is right and you are wrong. Respect that.”

 “If you’re right at the wrong time, you’re wrong.”

 “The markets are like water. They will flow to the weakest point that they can push through, and they always do.”

“The market is smarter than you will ever be, with its combined knowledge of all participants. Pay attention to the signs. Be quick to admit that you’re wrong. Don’t be afraid to miss something.”

 “I believe money is fascist. It craves stability more than anything else. Nothing bothers money more than uncertainty.”

Perfectionism and Avoidance

  
  Education
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Perfectionists are often motivated by avoidance: the need to avoid unpleasant emotional experiences. Traders who seek the perfect system are also likely to be motivated by the need to avoid unpleasant experiences.  

Avoidance
Imagine taking part in a game where participants are divided into two groups, blindfolded and asked to stick out their right hand. The first group is given ten dollars each time they extend their hand. They soon learn how to play the game and, no doubt, enjoy playing at every opportunity.The second group is also given ten dollars, randomly, about 80% of the time. The remaining 20% of the time, instead of being given a dollar, their hand is jabbed with a pin. Most participants in this group are likely to quit fairly quickly — they focus on the pain and ignore the reward.With trading losses, the only pain that you will suffer is the emotional reaction to a loss — often far worse than being jabbed with a pin. If you concentrate on avoiding losses rather than on maximizing your overall gain, you are unlikely to succeed at trading. 

Five Defining Features of Market Pros

  
  Education
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Upon thinking about the differences between the highly successful traders I recently talked with and their less successful counterparts, five features stand out. Pretty much everything else follows from these five:.

1) The less successful traders are anticipating market movement and trading accordingly. The highly successful traders are identifying asset class mispricings and trading off those.

2) The less successful traders are trading particular instruments and pretty much stick to those. The highly successful traders recognize that any combination of trading instruments can be considered an asset class and appropriately priced (and gauged for mispricing).

3) The less successful traders think of their market as *the* market. The highly successful traders focus on interrelationships among markets that cut across nationalities and asset classes.
4) The highly successful traders place just as much emphasis on understanding markets as predicting them. The less successful traders don’t ask “why” questions.

5) The less successful traders are convinced they have proprietary information of value that they must not disclose to anyone. The highly successful traders use their proprietary information to selectively share with other highly successful participants, thereby gaining a large informational edge.

If I had to use one phrase to capture the essence of the highly successful traders, it would be analytical creativity. These traders are creative in their thinking about markets and rigorous in their pursuit of this creativity

How Trader Personality Affects Trading

  
  Education
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A recent pilot study addresses the interesting topic of how a trader’s personality affects his or her trading performance. The researchers focused on six personality traits and their impact upon trading:
* Locus of control – The degree to which a trader believes that the ability to be successful is within his or her control;
* Maximizing tendency – The degree to which individuals seek optimum outcomes from their decisions, not just outcomes that meet or exceed expectations;
* Regret susceptibility – The tendency to look back on outcomes of decisions and focus on negative aspects, creating regret;
* Self-monitoring – People’s tendency to track and control their own thoughts, feelings, and behaviors;
* Sensation seeking – The degree to which people seek varied and stimulating experience;
* Type A behavior – The degree to which individuals are driven to achieve.  (more…)

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