Buffet learned how to involve in high probably investments since high-school. Back in those years, he and one of his friends bought a reconditioned pinball machine for $25. They put the game in a barber shop. They checked the coin box at the end of the first day and found $4. “I figured I had discovered the wheel,” says Buffet. Eventually the pinball business was netting $50 per week. By the time Warren graduated high school, he is an owner of a small farm in Nebraska and has $9,000 in his bank account (more…)
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1.) When it comes to trading, it turns out that the skills we learn to earn high marks in school, advance our careers and create relationships with other people, turn out to be inappropriate for trading. Traders must learn to think in terms of probabilities and surrender all of the skills acquired to achieve in virtually every other aspect of life.
2.) Within 9 months of moving to Chicago, I had lost nearly everything I owned. My losses were the result of both my trading activities and my exorbitant lifestyle, which demanded that I make a lot of money as a trader.
3.) You don’t need to know what’s going to happen next to make money. Anything can happen. Every moment is unique, meaning every edge and outcome is truly a unique experience. The trade either works or it doesn’t.
4.) More or better market analysis is not the solution to his trading difficulties or lack of consistent results. It is attitude and “state of mind” that determine his results. A winner’s mindset means learning how to think in probabilities.
5.) The edge means there’s a higher probability of one outcome than another. The greater your confidence, the easier it will be to execute your trades.
6.) Do you ever feel compelled to make a trade because you are afraid that you might miss out?
7.) People , expressing their beliefs and expectations about the future, make prices move- not models. The fact that a model makes a logical and reasonable projection based on all the relevant variables is not of much value if the traders who are responsible for most of the trading volume aren’t aware of the model or don’t believe in it. In other words, people who trade don’t always act in a rational manner.
8.) Price movement could be so volatile that it would be very difficult, if not impossible, to stay in a trade in order to realize the fundamental analysts’ objective. (more…)
Are we addicted to being right? Is being thought of as being right more important to us than actually being right?
You tell me…
From the Harvard Business Review:
In situations of high stress, fear or distrust, the hormone and neurotransmitter cortisol floods the brain. Executive functions that help us with advanced thought processes like strategy, trust building, and compassion shut down. And the amygdala, our instinctive brain, takes over. The body makes a chemical choice about how best to protect itself — in this case from the shame and loss of power associated with being wrong — and as a result is unable to regulate its emotions or handle the gaps between expectations and reality. So we default to one of four responses: fight (keep arguing the point), flight (revert to, and hide behind, group consensus), freeze (disengage from the argument by shutting up) or appease (make nice with your adversary by simply agreeing with him).
All are harmful because they prevent the honest and productive sharing of information and opinion. But, as a consultant who has spent decades working with executives on their communication skills, I can tell you that the fight response is by far the most damaging to work relationships. It is also, unfortunately, the most common.
1. Figure out what you’re so passionate about that you’d be happy doing it for 10 years, even if you never made any money from it. That’s what you should be doing.
2. Always be true to yourself.
3. Figure out what your values are and live by them, in business and in life.
4. Rather than focus on work-life separation, focus on work-life integration.
5. Don’t network. Focus on building real relationships and friendships where the relationship itself is its own reward, instead of trying to get something out of the relationship to benefit your business or yourself.
6. Remember to maximize for happiness, not money or status.
7. Get ready for rejection.
8. Success unshared is failure. Give back — share your wealth.
10. Successful people do all the things unsuccessful people don’t want to do.
What would you add to the “Billionaire’s Secrets” List?
This is a tough book to review, because I generally respect the author, but there are many things I don’t like about the book. Let’s start with the main one:
My friend Alice Schroeder came to speak to the Baltimore CFA Society early in November. It was a great talk, and afterward, I took her back to the Amtrak station. What was our main topic of conversation? The many authors with limited or no dealings with Warren Buffett who invoke his name in order to get better sales. I won’t name names. I have relationships with a number of them.
I will review “The Snowball” soon. Alice Schroeder spent around five years creating that lengthy book, and I can see why she would be upset over those that use Buffett for their own personal gain.
This book is another example of that. Only chapters 1 and 2 have anything to do with Buffett, and there he is quoted extensively to the point where he should be listed as a secondary author, and get a cut of the royalties. But in the next nine sections have almost nothing from Buffett; it is all the philosophy of Larry Swedroe. (more…)
1)In panics there is almost nowhere to make money without taking excessive risk
2)Timing entries and exits to oversold & overbought conditions helps achieve low-risk/high-reward entries
3)There is no such thing as a safe investment
4)Markets are dysfunctional, corrupt, and have no oversight
5)To let a stock prove itself to me, prior to jumping in based on my analysis alone (more…)
If you are after specific investment advice, stop reading now. We seek to explore one of Adam Smith’s obsessions: what it means to be happy. We also discuss why that’s important to investors, and how we can seek to improve our own levels of happiness. The list below shows our top ten suggestions for improving happiness.
- Don’t equate happiness with money. People adapt to income shifts relatively quickly, the long lasting benefits are essentially zero.
- Exercise regularly. Taking regular exercise generates further energy, and stimulates the mind and the body.
- Have sex (preferably with someone you love). Sex is consistently rated as amongst the highest generators of happiness. So what are you waiting for?
- Devote time and effort to close relationships. Close relationships require work and effort, but pay vast rewards in terms of happiness.
- Pause for reflection, meditate on the good things in life. Simple reflection on the good aspects of life helps prevent hedonic adaptation.
- Seek work that engages your skills, look to enjoy your job. It makes sense to do something you enjoy. This in turn is likely to allow you to flourish at your job, creating a pleasant feedback loop.
- Give your body the sleep it needs.
- Don’t pursue happiness for its own sake, enjoy the moment. Faulty perceptions of what makes you happy, may lead to the wrong pursuits. Additionally, activities may become a means to an end, rather than something to be enjoyed, defeating the purpose in the first place.
- Take control of your life, set yourself achievable goals.
- Remember to follow all the rules.
First, let me say that I know of examples of successful trader’s that don’t have each of the characteristics that I would say the “typical” good trader shares. So there are exceptions to each of these. (more…)
Let me begin by telling you of my system for isolating trades with odds 10 to 1 in my favor. Those are million dollar odds. Unfortunately, I still haven’t developed a method for calling all the big moves all the time. What I have done is develop a set of criteria that will, when they coincide, tell you the odds are heavily in favor of either an up or down move.
This method seldom speaks, but when it does, you have as close to a sure thing as you’ll ever get. As you will see, this method will not call all the swings, but that’s not its purpose. Its function is to segregate the super trades from trades that are questionable.
Trading in this manner is much easier because it allows you to take a longer term view of the market. I have found there is no need to monitor the market on a trade-by-trade basis, or, at times, even a daily basis. The signals are so strong that you don’t need to concern yourself with a microscopic view.
I use two major tools for selecting “bankable trades”. They are: 1) premium relationships, and 2) open interest. When these two click, the odds are 75% in your favor. To further substantiate the 75% probability, I also check contrary opinion, the market’s reaction to news, trend direction, and a few chart formations.
by Larry Williams, excerpt from his book, How I Made $1,000,000 Trading Commodities Last Year.
Temperament – In general, people with more analytical and even tempered personalities make better traders.
There is a counterbalancing trait which is the willingness to take risks. Some traders with volatile temperaments are successful because they can take risks easily and can keep trading after getting knocked down. They also tend to blow up more often.
Character – Humility is a very important ingredient in trading success. The truth does not care what you think of yourself. The markets don’t care what you want to believe reality is. Trader’s that are humble are better able to examine their methods and trading objectively and make changes where appropriate.
I’ve known a lot of successful traders that most people might consider arrogant but when it comes down to their own success and the reasons for that success they were able to see the faults in themselves and their trading. The trader’s that were out of touch with reality tended to blow up and have short-lived success.
Intelligence – General intelligence is correlated with success but not as highly as you might think. The ability to discern patterns and relationships with limited information is very useful.
I’d say that you need to be relatively smart to be successful but not extremely smart. Smart enough to understand the principles but beyond that it doesn’t necessarily help you. I’ve seen many very smart people tie themselves up in knots by second-guessing themselves.
Social Skills – Most of the really successful traders are not very socially skilled. Many tend to be reclusive and introverted. There are some exceptions. (more…)