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Martin, The Risk Takers-Book Review

Individual traders are often told that they should view their activity as a business. But what exactly does this mean? After all, one business after the other fails; presumably these aren’t the best models. Renee and Don Martin, successful entrepreneurs themselves, come to the rescue with The Risk Takers: 16 Women and Men Share Their Entrepreneurial Strategies for Success (Vanguard Press, 2010). No, it’s not a new book, but I hadn’t read it and I suspect most of you haven’t either.

With two exceptions, the entrepreneurs founded their companies—Curves, Alvarado Construction, Kinko’s, Liz Lange Maternity, Geek Squad, The Corcoran Group, World Wide Technology, Build-A-Bear Workshop, John Paul Mitchell Systems, Spanx, Amy’s Kitchen, Trilogy, Invacare, Tova, The WW Group (Weight Watchers), and (the author’s own) The Cal-Surance Companies.

Many—actually, probably most—of the entrepreneurs were dreadful students. Many went from rags to riches, sometimes back to rags again before they ultimately triumphed, but I won’t recount any of these personal journeys. Rather, I’m going to pull out a few quotations that may have applicability to the trading business, although I’ll point out how some of them can steer the trader wrong. (more…)

Good Vs. Great Trading

Good traders are able to identify opportunities in the market, plan trades, execute trades, and manage trades at a reasonable level. A good trader identifies the opportunity, plans the trade, and executes the trade. He takes his losses with discipline. One might think that great traders are similar to good traders but just better. The reality is that great traders are distinctly different from good traders. The difference is not merely a difference in measure but a difference in kind.

Great trading is actually much closer to gambling. One of the key differences between great trading and good trading is that great traders don’t just play the odds: great traders play the unknown. The market simply isn’t predictable enough – enough of the time — to allow for the type of returns that great traders seek. So, great traders are much more likely to be going out into that unknown space. This seeking out the unknown always involves a cost. The cost for greatness is the potential for loss, even significant loss. A great trader will typically take more risks. The risks could involve taking trades with higher uncertainties (less confirmation), higher risk per trade (giving a trade more room), and in general just a higher level of risk. This increased level of risk taking is balanced by increased trading skill.

The problem with trading just trading well is that the game, the trading game, is really close to a zero sum game, even when played perfectly. The focus on limiting risk tends to ignore the reality that every business has to make a profit to survive. The problem with trying to avoid risks is that it tends to push the game to such a competitive level such that the trader must trade at a near perfect level just to break even and nobody can trade perfectly forever. Eventually mistakes are made and losses occur. Great traders are more creative. They move laterally and find creative solutions. Great traders don’t really compete against others. It is more of a dance. Instead of playing the games against others, they make up their own game. (more…)

Ten Characteristics of Successful Traders

1) The amount of time spent on their trading outside of trading hours (preparation, reading, etc.);10-ASR
2) Dedicated periods to reviewing trading performance and making adjustments to shifting market conditions;
3) The ability to stop trading when not trading well to institute reviews and when conviction is lacking;
4) The ability to become more aggressive and risk taking when trading well and with conviction;
5) A keen awareness of risk management in the sizing of positions and in daily, weekly, and monthly loss limits, as well as loss limits per position;
6) Ongoing ability to learn new skills, markets, and strategies;
7) Distinctive ways of viewing and following markets that leverage their skills;
8) Persistence and emotional resilience: the ability to keep going in the face of setback;
9) Competitiveness: a relentless drive for self-improvement;
10) Balance: sources of well-being outside of trading that help sustain energy and focus.

Ten Characteristics I See Among Successful Traders

Ten CharacteristicsThere’s no one formula for trading success, but there are a few common denominators that I’ve tracked in my years of working with traders:

1) The amount of time spent on their trading outside of trading hours (preparation, reading, etc.);

2) Dedicated periods to reviewing trading performance and making adjustments to shifting market conditions;

3) The ability to stop trading when not trading well to institute reviews and when conviction is lacking;

4) The ability to become more aggressive and risk taking when trading well and with conviction;

5) A keen awareness of risk management in the sizing of positions and in daily, weekly, and monthly loss limits, as well as loss limits per position; (more…)

How Your Finger Length can Affect Risk Taking

In a study by Concordia University which analyzed the difference in length between the second finger (index finger) and fourth finger (ring finger), the difference in length can determine risk taking and financial success; however, it applies to men only. It also signifies high levels of prenatal testosterone.risk-taker the man is.

The risk taking includes recreational, social and financial areas. It appears that the lower the ratio between the index and ring finger, the more of a