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21 Quotes for Traders

  
  Education
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1. “Twenty years from now you will be more disappointed by the things that you didn’t do than by the ones you did do.” ~ Mark Twain

2. “The market can stay irrational longer than you can stay solvent.” ~ John Maynard Keynes.

3. “I never buy at the bottom and I always sell too soon.” ~ Baron Rothschild

4. “When the facts change, I change my mind. What do you do, sir?” ~ John Maynard Keynes

5. “Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it.” ~ Warren Buffett

6. “It is not our duty as speculators to be on the bull side or the bear side but upon the winning side.” ~ Jessie Livermore in Edwin Lefevre’s Reminiscences of a Stock Operator

7. “The  principles of successful speculation are based on the supposition that people will continue in the future to make the mistakes that they made in the past.” ~ Thomas F. Woodlock

8. “It never was my thinking that made the big money for me. It was always my sitting tight. Got that?” ~ Mr. Partridge in Edwin Lefevre’s Reminiscences of a Stock Operator

9. “They say you never grow poor taking profits. No, you don’t.  But neither do you grow rich taking a four-point profit in a bull market.” ~ Jessie Livermore in Edwin Lefevre’s Reminiscences of a Stock Operator

10. “Remember that prices are never too high for you to begin buying or too low to begin selling.  But after the initial transaction, don’t make a second unless the first shows you a profit.” ~ Jessie Livermore in Edwin Lefevre’s Reminiscences of a Stock Operator

11. “A loss never bothers me after I take it. I forget it overnight. But being wrong – not taking the loss – that is what does the damage to the pocketbook and the soul.” ~ Jessie Livermore in Edwin Lefevre’s Reminiscences of a Stock Operator (more…)

Wisdom From Jason Zweig

  
  Education
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  1. 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.

  2. One of the clearest signals that you are wrong about an investment is having the hunch that you are right about it.
  3. Investors who focus on price levels earn between five and ten times higher profits than those who pay attention to price changes.
  4. The only way to be more certain it’s true is to search harder for proof that it is false.
  5. 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.
  6. When rewards are near, the brain hates to wait.
  7. The market isn’t always right, but it’s right more often than it is wrong.
  8. Often, when we are asked to judge how likely things are, we instead judge how alike they are.
  9. Most of what seem to be patterns in stock prices are just random variations.
  10. In a rising market, enough of your bad ideas will pay off so that you’ll never learn that you should have fewer ideas.
  11. The more often people watch an investment heave up and down, the more likely they are to trade in and out over the short term – and the less likely they are to earn a high return over the long term.
  12. Investing is not you versus “Them”. It’s you versus you.
  13. The single greatest challenge you face as an investor is handling the truth about yourself.
  14. Hindsight bias keeps you from feeling like an idiot as you look back – but it can make you act like an idiot as you look forward.
  15. Ignorance of our own ignorance haunts our financial judgments. (more…)

12 Market Wisdoms from Gerald Loeb

  
  Education
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It is funny how the best traders of all times basically repeat the same things with different words. 

Gerald Loeb is the author of ‘The Battle for Investment Survival’ and is one of the most quotable men on Wall Street.  Here are 12 of the smartest things he has ever said about the stock market:

1. The single most important factor in shaping security markets is public psychology.

2. To make money in the stock market you either have to be ahead of the crowd or very sure they are going in the same direction for some time to come.

3. Accepting losses is the most important single investment device to insure safety of capital.

4. The difference between the investor who year in and year out procures for himself a final net profit, and the one who is usually in the red, is not entirely a question of superior selection of stocks or superior timing. Rather, it is also a case of knowing how to capitalize successes and curtail failures.

5. One useful fact to remember is that the most important indications are made in the early stages of a broad market move. Nine times out of ten the leaders of an advance are the stocks that make new highs ahead of the averages.

6. There is a saying, “A picture is worth a thousand words.” One might paraphrase this by saying a profit is worth more than endless alibis or explanations. . . prices and trends are really the best and simplest “indicators” you can find. (more…)

The Golden Rule

  
  Education
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10% of your trades will account for 90% of your profits

1 or 2 months will account for most of your annual profits

1 or 2 days will account for most of your monthly profits

Good investors and traders know that very well. They are ready to press extra hard when realize that they might have a home run in play. They are ready to disappear in 60 seconds when things don’t go as planned.

Dennis Gartman knows that The Golden Rule is what distinguishes smart from not so smart money:

We’ve learned one good lesson from that one trade, and that is that we only get one or two or perhaps three good ideas each year that work. So, when they work, it is our duty to beat them into submission; to add to them when we can; to embrace them as they insulate themselves from random market noise, and to use them to make up for the myriad numbers of truly idiotic ideas  we are capable of coming up with, keeping those losses small.

Sometimes one good opportunity could turn your life upside down.

Trading Wisdom – Jesse Livermore

  
  Education
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[” . . . remember that stocks are never too high for you to begin buying or too low to begin selling. But after the initial transaction, don’t make a second unless the first shows you a profit. Wait and watch.”]

Jesse Livermore reiterates the importance of buying with the primary trend and beginning new deployments in small increments. Since trends can run a long time, he wisely points out that absolute stock prices are really irrelevant for buying and selling decisions for speculators.

All that matters for speculators is today’s temporal position within the prevailing trend. If the trend has time to run yet then today’s prices really don’t matter. If you buy today on a bull trend that is not yet finished, odds are that your stocks will head to even higher prices before the trend reverses. Similarly if you short sell an already battered stock when a general bear trend hasn’t yet ended, then you will probably still earn a profit. The key is carefully watching the market conditions and keeping the pulse of the primary trend with which you are betting.

But, since we cannot know for certain how long a trend has left to run before it ends, it is wise to gradually scale in positions as Jesse Livermore taught. Start out by only deploying a fraction of your desired capital in your target bet. If you are right, and the profits come, then you can scale in more as time marches on. But if you are wrong and the markets move against you, the prudent use of scaling shields you from large losses and keeps your precious capital protected until a more opportune time.

New Trading Rules for Traders

  
  Education
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Play to win, not for a score. Traders who desire only to make money versus simply trying to trade well and their best ability will struggle. This is a money-focused game, but trading well requires you to focus on goals beyond the money to achieve the performance you really desire.

Recognize a real gamble. When you are trading well, take the possibility of a major loss out of the equation whenever you can. It is true, when we are the most vulnerable is when everything is going right and it seems like we can do no wrong. Moreover, there are times to make the big aggressive trade, and times when doing so is foolhardy. Recognizing the difference is so very important.

Root hard for yourself. When everything goes wrong, the quickest way to turn it around is to force yourself to be optimistic and enthusiastic. Even after making the so-so trades which only pay out puny returns, you’ve got to pat yourself on the back and slowly gain your confidence back. confidence is everything in trading and you need a steady supply of reassuring confidence to trade at your very best.

Forget the holes up ahead. Focus on today’s trade, not the next one or the one you think you see is falling into place weeks from now. As Hunter recommends, “You really have to stay in the present.” Traders often let big picture themes and views prevent them from seeing setups that occur daily. This tunnel vision can really limit overall returns. Find the next trade, focus on that trade, and after that, move to the next. Don’t let issues you see so far down the road prevent you from making profits today.

The right way to play safe. If you play chicken, you’ll invite bad trades and disaster. As others have said, you’ve always got to trade to win, instead of trading not to lose. There’s a tremendous difference. I know traders who try to hedge every trade they make and ultimately don’t achieve the returns they should. If your approach is sound, hedging should only be a tool to use sparingly, not as an entire strategy substitute or for protecting your ego when you are wrong.

No Patience on Entry

  
  Education
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Anticipating a signal that never comes is common for traders monitoring the market closely and eager to get some money working. For example, a good buying opportunity arises when a stock breaks from an ascending triangle. Jumping in ahead of the breakout is not an ideal situation because the probability of success buying an ascending triangle is not as good as buying a breakout from one. What causes this mistake? I think a fear of missing out on the maximum amount of profit or the fear of too much risk in buying a stock are the two most common mistakes. Essentially, the two guiding forces of the stock market are at work here; fear and greed. By buying early, we can realize a greater profit when the stock does breakout since we will have a lower average cost. Or, by buying early we can reduce risk since a breakout followed by a pull back through our stop will result in a smaller loss as we have a lower average cost. What tends to happen, however, is that the stock does not break out when expected and instead pulls back. This either leads to an unnecessary loss or an opportunity cost of the capital being tied up while other opportunities arise.

The Solution

The simple and obvious solution is to wait for the entry signal, but there are also some things you can do to help yourself stay disciplined. Rather than watch potentially good stocks tick by tick, use an alarm feature to alert you to when they actually make the break. Watching stocks constantly is somewhat hypnotic, and I think the charts can talk you in to making a trade. However, letting the computer watch the stock may help you avoid the stock’s evil trance. Another good solution is to focus on different thoughts when considering a stock. Don’t think about potential profits, don’t think about minimizing losses. Instead, focus in on the desire to execute high probability trades. It takes time to reprogram yourself, so persevere.

William Eckhardt Quotes

  
  Education
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Partner of perhaps the best-known futures speculator of our time, Richard Dennis.Created the famous trading group known as the Turtles. William has averaged over 62 percent return.  

“I take the point of view that missing an important trade is a much more serious error than making a bad trade”. 
”Buying on retracement is psychologically seductive because you feel you’re getting a bargain versus the price you saw a while ago. However, I feel that approach contains more than a drop of poison.”
”You shouldn’t plan to risk more than 2 percent on a trade. Although, of course, you could still lose more if the market gaps beyond your intended point of exit.”
”I haven’t seen much correlation between good trading and intelligence. Some outstanding traders are quite intelligent, but a few aren’t. Many outstanding intelligent people are horrible traders. Average intelligence is enough. Beyond that, emotional makeup is more important.”
”The answer to the question of whether trading can be taught has to be an unqualified yes. Anyone with average intelligence can learn to trade. This is not rocket science.”
”If you bring normal human habits and tendencies to trading, you’ll gravitate toward the majority and inevitably lose.”
”Watch idly while profit-taking opportunities arise, but in adversity run like a jackrabbit.”
”One adage that is completely wrongheaded is that you can’t go broke taking profits. That’s precisely how many traders do go broke. While amateurs go broke taking large losses, professionals go broke by taking small profits.”
”What feels good is often the wrong thing to do.”
”Human nature does not operate to maximize gain but rather to maximize the chance of a gain. The desire to maximize the number of winning trades (or minimize the number of losing trades) works against the trader. The success rate of trades is the least important performance statistic and may even be inversely related to performance.”
”Two of the cardinal sins of trading – giving losses too much rope and taking profits prematurely – are both attempts to make current positions more likely to succeed, to the severe detriment of long-term performance.”
”Don’t think about what the market’s going to do; you have absolutely no control over that. Think about what you’re going to do if it gets there.”
”It is a common notion that after you have profits from your original equity, you can start taking even greater risks because now you are playing with ‘their money’. We are sure you have heard this. Once you have profit, you’re playing with ‘their money’. It’s a comforting thought. It certainly can’t be as bad to lose ‘their money’ as ‘yours’? Right? Wrong. Why should it matter whom the money used to belong to? What matters is who it belongs to now and what to do about it. And in this case it all belongs to you.”  

A Winning Trading Method is Really All About this…..

  
  Education
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eagle-newSuccessful trading is the attempt to be on the right side of the flow of capital. Each change in price happens with a new agreement between the current buyer and seller. Buyers and sellers are always equal for a transaction to take place, the cause of movement is determined by whether the buyers want in more than the sellers want out. Prices moves when capital flows into and out of a market, and inflow pushes up prices because demand becomes more than supply, price discovery happens to find out what sellers are willing to take to sell their position.

Many crazy over bought or over sold trends occur because one side has little pressure on it, position holders, shorts, or buyers sit tight as a trend accelerates. Equity markets rise when new money has to enter to be put to work but there is little interest at selling due to position holders sitting on winning positions.

Price resistance on a chart is caused by simply being the place that current holders are taking their profits. Price support happens at the price that people on the sidelines are ready to get back in at. These are simply spots where capital flows in and out. (more…)

Overtrading: A Common Mistake

  
  Education
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Over trading is one of the biggest causes why traders never make it in the financial markets. With a click of a button, a trader can place a trade anytime he wants. It takes tremendous discipline to hold yourself back from over trading. There are many reasons why one may choose to over trade.

1. Traders without a plan

Traders without a plan are my favorite type of traders because they will always lose. Without a plan, how would one know when to take a trade and when not to? Having a trading plan is a necessity. I can not trade if I do not have a plan for the day. I feel lost without one.

2. Revenge trading

Many new traders become tilted after a loss or a string of losses. This causes them to revenge trade just to break even. This often leads to reckless trading forcing a trade when opportunity is low.

3. Chasing the markets

Alot of new traders feel more pain when they have missed a move than an actual loss. This is why new traders love to chase the markets. If price has moved away from your projected entry point, let it go. There are plenty of more opportunities. Chasing is one of the worst habits a trader can have. Not only does it offer you low rewards, it also gives you a horrible entry and alters your stop loss placement. Always think about the risk before the profits.

When you have a plan to follow, it is easy to filter out bad trades from good one. This keeps you discipline and selective in your trades. I personally do not like trading more than 5 round trips a day. Patience is a virtue. There are always good high probability trading opportunities everyday. Just sit tight and don’t jump the gun.

One way to control a loss is by reducing your size. The problem with gamblers is that they will often double up their stake so they can get even quicker. This usually leads to a greater loss and devastation. Having the strength to grind your way back from a loss is important in trading. Whenever I am having a losing streak, I will trade small and gradually recover. This also gives me the confidence I need after a string of losses.

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