Archives of “rewards” tag

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Three stages of trading objectives.

  
  Education
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To make money every trade. At first, I did not have the ability to make money every trade.  After I had the ability to make money on most trades I realized it was a horrible objective.  If you want to make money on every trade you are always waiting.  You can never take that much risk and hence the rewards are very small.  I was trading 1′s and 2′s to start, which was the right thing to do.  I would watch my mentor take every trade, no matter how dog shit it was.  As a 1 and 2 lot trader you do not have the same luxury to take dog shit trades because you can only trade one way.  Because of the flexibility he had he could do more and the truth is no matter how good or bad a trade looks we don’t know until we are in it. Getting the most out of a trade is the mark of good trader.  Risk is always related to reward.  There is very little money in making money on every trade.  This type of trading is like making 100k and keeping 80K

To make huge chunks of money.  After I realized that objective did not work for me I shifted to the extreme.  I started to swing for the fences whenever I had the ability.  It is nice when I was right but I struck out a lot too. At this point, I did not respect trading.  I did it because money made me a bad ass.  Well as you know you hard to pay your bills with bad ass.  This type of trading is like making 200k and keeping 80k.

Here are the major risks of having both of those objectives.  The first is making small amounts of money no matter the situation.  Eventually you will get in a hole because statistically you are behind.  Trading every situation the same is bad.  The second objective is trying to make huge amounts of money on every trade.  If the first trades were the best and I stopped it was great.  If the first trades were bad, I was forced to stop.  It made it hard to learn.

Trading Wisdom – Larry Hite

  
  Education
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Larry Hite – Turned a $2 million managed account into $800 million in 8 years.
LarryHite

Throughout my financial career, I have continually witnessed examples of other people that I have known being ruined by a failure to respect risk. If you don’t take a hard look at risk, it will take you. If you argue with the market, you will lose. It is incredible how rich you can get by not being perfect. Never risk more than 1% of your total equity in any one trade. By risking 1%, I am indifferent to any individual trade. Keeping your risk small and constant is absolutely critical. I have two basic rules about winning in trading as well as in life:

  1. If you don’t bet, you can’t win. 
  2. If you lose all your chips, you can’t bet. Frankly, I don’t see markets. I see risks, rewards, and money.

 

Milton Friedman's Brilliant 2 Minute Defense Of Capitalism

  
Analysis, Education, Video
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Nobel prize winning economist Milton Friedman would’ve turned 101-years-old today.

And there are plenty of people who would’ve loved to have him around today to witness how the Federal Reserve is running monetary policy.

Friedman, who is famous for his ideas on monetarism, was against the idea of a Federal Reserve.  However, he did support the expansion of money supply. (more…)

Trading Wisdom

  
  Education
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Trading wisdom“The trend is your friend” – perhaps the best known trading adage of all time, it is meant to remind traders to always identify the prevailing trend, and never to trade against it, but rather wait for retracements and then enter trades in the direction of the trend.

“The market can stay irrational longer than you can stay solvent” – The way the market reacts to certain news or events may not seem rational at times, but there is no sense in trying to fight the market – it moves where it moves and does not care one bit about your opinion.

“A fool and his money are soon parted” – If you are not smart about where you put your money, you will most likely lose it.

“The trading rules I live by are: (a) Cut losses, (b) Ride Winners, (c) Keep bets small, (d) Follow the rules without question, and (e) Know when to break the rules.” – Rules are important, but following them blindly does not necessarily lead to success. Know which conditions produced those rules in the first place, so that when the conditions change, the rules can too.

“Amateurs Focus On Rewards. Professionals Focus on Risk.” – Experienced traders think first about how much they can lose on a trade, base their calculations on that, and then see if they are happy with the potential reward the trade offers. Novices usually do the opposite, blinded by the allure of quick riches.

Trading Wisdom by Larry Hite & Marty Schwartz

  
  Education
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Larry Hite

While the speculator doesn’t have the product knowledge or speed, he does have the advantage of not having to play. The speculator can choose to only bet when the odds are in his favor. That is an important positional advantage.

In the above quote, Larry is referring to the fact that smaller retail traders have the advantage of being able to sit out an wait patiently for the best opportunities. Bigger institutional traders have to trade more and whilst they might have a speed advantage, the retail trader has to use his advantage of being able to trade like a sniper to its fullest.

Frankly, I don’t see markets; I see risks, rewards, and money.

The above quote stresses the importance of seeing each trade as a risk reward ratio, rather than just a potential profit opportunity. Pro traders calculate their risk first and then their reward, if the risk reward ratio of a trade doesn’t make sense then they don’t trade.

Marty Schwartz

 I always laugh at people who say, “I’ve never met a rich technician.” I love that! It’s such an arrogant, nonsensical response. I used fundamentals for nine years and got rich as a technician. (more…)

20 Thoughts from -Richard Love’s “Superperformance Stocks”

  
  Education
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If you read Jesse Livermore’s “How to Trade in Stocks” from 1940, Nicolas Darvas’s ‘How I made 2M in the stock market” from 1960, Richard Love’s “Superperformance Stocks” from 1977, William O’Neil’s early version of “How to make money in stocks” from the 1990s or Howard Lindzon’s “The Wallstrip Edge” from 2008, you will realize that after so many years, the main thing that has changed in the market is the names of the winning stocks. Everything else important – the catalysts, the cyclicality in sentiment, has remained the same.

Here are some incredible insights from Richard Love’s book ‘Superperformance Stocks’. In his eyes, a superperformance stock is one that has at least tripled within a two-year period.

1. The first consideration in buying stock is safety.

Safety is derived more from the good timing of the purchase and less from the financial strength of the company. The stocks of the nation’s largest and strongest corporations have dropped drastically during general stock market declines.

The best time to buy most stocks is when the market looks like a disaster. It is then that the risk is lowest and the potential rewards are highest.

2. All stocks are price-cyclical

For many years certain stocks have been considered to be cyclical; that is, the business of those companies rose and fell with the business cycle. It was also assumed that some industries and certain companies were noncyclical— little affected by the changes in business conditions. The attitude developed among investors that cyclical industries were to be avoided and that others, such as established growth companies, were to be favored. To a  certain extent this artificial division of companies into cyclical and noncyclical has been deceptive because although the earnings of some companies might be little affected by the business cycle the price of the stock is often as cyclical as that of companies strongly affected by the business cycle. Virtually all stocks are price-cyclical. Stocks that are not earnings-cyclical often have higher price/earnings ratios, and thus are susceptible to reactions when the primary trend of the market begins to decline. This can occur even during a period of increasing earnings. (more…)

Today I know that …

  
  Education
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mylessonsMy lessons may have been costly ,but they brought with them a kind of undertstanding more precious than gold.

😆 Playing the market is much different from being an investor.

😆 Pride is another word for stupidity if you claim credit for profits temporarily created by a bull market run wild.

😆 Paper profits are the illision of wealth created by the myopia of greed.

😆 Margin is a secuctive temptress more enticing than Delilah-and far more dangerous.

😆 Money doesn’t make people better ;it just allows them to become kinder and more charitable.

😆 Losing money doesn’t mean you’re a fool ,just as making a fortune doesn’t prove you’re a genius.

😆 Maturity means knowing how to cope with failure-and with sucess.

😆 The market respects those who treat is seriously and research it thoroughly ;it mocks those who think its rewards are freely granted to the followers of friendly tips and exicted phone calls from “helpful” strangers.

😆 Just as in every other game of chance ,all of your winning should never be left on the table.

😆 The law of gravity was not repealed for the sake of Dalal street ;even there the rule still holds that “whatever goes up must come down .”

😆 Forgiveness is a virtue even to myself ;I can forgive the fact that I failed-because I know that Iam not a failure.

 

To Be Happy

  
Education, Life
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be-happyIf 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.

Bill Lipschutz-Trading Quotes

  
  Education
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Missing an opportunity is as bad as being on the wrong side of a trade. Some people say (after they have the opportunity to realize a profit) “I was only playing with the market’s money.” That’s the most ridiculous thing I ever heard.

When you’re in a losing streak, your ability to properly assimilate and analyze information starts to become distorted because of the impairment of the confidence factor, which is a by-product of a losing streak. You have to work very hard to restore that confidence, and cutting back trading size helps achieve that goal.

I don’t have a problem letting my profits run, which many traders do. You have to be able to let your profits run. I don’t think you can consistently be a winner trading if you’re banking on being right more than 50 percent of the time. You have to figure out how to make money by being right only 20 to 30 percent of the time.

Successful traders constantly ask themselves: What am I doing right? What am I doing wrong? How can I do what I am doing better? How can I get more information? Courage is a quality important to excel as a trader. It’s not enough to simply have the insight to see something apart from the rest of the crowd, you also need to have the courage to act on it and stay with it.

It’s very difficult to be different from the rest of the crowd the majority of the time, which by definition is what you’re doing if you’re a successful trader.

So many people want the positive rewards of being a successful trader without being willing to go through the commitment and pain. And there’s a lot of pain.

Avoid the temptation of wanting to be completely right.

Bill Lipschutz :Trading Quotes

  
  Education
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Missing an opportunity is as bad as being on the wrong side of a trade. Some people say (after they have the opportunity to realize a profit) “I was only playing with the market’s money.” That’s the most ridiculous thing I ever heard.

When you’re in a losing streak, your ability to properly assimilate and analyze information starts to become distorted because of the impairment of the confidence factor, which is a by-product of a losing streak. You have to work very hard to restore that confidence, and cutting back trading size helps achieve that goal.

I don’t have a problem letting my profits run, which many traders do. You have to be able to let your profits run. I don’t think you can consistently be a winner trading if you’re banking on being right more than 50 percent of the time. You have to figure out how to make money by being right only 20 to 30 percent of the time.

Successful traders constantly ask themselves: What am I doing right? What am I doing wrong? How can I do what I am doing better? How can I get more information? Courage is a quality important to excel as a trader. It’s not enough to simply have the insight to see something apart from the rest of the crowd, you also need to have the courage to act on it and stay with it.

It’s very difficult to be different from the rest of the crowd the majority of the time, which by definition is what you’re doing if you’re a successful trader.

So many people want the positive rewards of being a successful trader without being willing to go through the commitment and pain. And there’s a lot of pain.

Avoid the temptation of wanting to be completely right.


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