75% of the price movement in most stocks takes place in 20% of the time.The rest is notingbut noise withing a range.Relevant information that causes repricing doesn’t change quickly and frequently.This is why trends exist .Higher prices often attract more buyers and lower prices attract more sellers untull the rules of the game change.Focus on the main drivers and forget the rest.
Archives of “rules of the game” tag
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And the great sea with its friends and its enemies. And bed, he thought. Bed is my friend. Just bed, he thought. Bed will be a great thing. It is easy when you are beaten, he thought. I never knew how easy it was. And what beat you, he thought. ‘Nothing’, he said aloud. ‘I went out too far.’ – Hemingway, The Old Man and the Sea ‘At that point I ought to have gone away, but a strange sensation rose up in me, a sort of defiance of fate, a desire to challenge it, to put out my tongue at it. I laid down the largest stake allowed – four thousand gulden – and lost it. Then, getting hot, I pulled out all I had left, staked it on the same number, and lost again, after which I walked away from the table as though I were stunned. I could not even grasp what had happened to me.’ – The Gambler, by Fyodor Dostoevsky If you must play, decide upon three things at the start: the rules of the game, the stakes, and the quitting time. – Chinese Proverb Luck never gives; it only lends. – Swedish Proverb Depend on the rabbit’s foot if you will, but remember it didn’t work for the rabbit. – R.E. Shay |
Noise
75% of the price movement in most stocks takes place in 20% of the time. The rest is nothing but noise within a range. Relevant information that causes repricing doesn’t change quickly and frequently. This is why trends exist. Higher prices often attract more buyers and lower prices attract more sellers until the rules of the game change. Focus on the main drivers and forget the rest.
Stock Market Rules :There are only two !
The stock market has only two rules, both of which are vague and confusing. It is up to you to make them clear and simple to understand.
Here are the guidelines:
You must write these rules down so that you will not forget them.
You must always follow these rules.
These rules will never change.
You must keep them forever.
These rules are never to be broken.
You must never add to these rules.
Here are the rules: (more…)
Reminiscences of a Stock Operator (Jesse Livermore) : Edwin Lefevre 1923
101% Must Read this article +Buy this Book too …A Bible for Every Trader !
The book starts with Livermore’s early trading career that was essentially scalping the markets for short trem profits using the tape and how he got to understand price movements before a bullish or bearish run. Livermore made $millions 3 times and lost it each time. He sadly ended up committing suicide in 1940 in the Sherry Netherland Hotel. He had amassed a $100m fortune by this time and no-one knew what happended to it. Maybe a trading disaster of some kind….who knows.
Some quotes and passasges I loved from the book
Grades of Suckers : The beginner knows nothing and everybody, including himself, knows it. But the next, or second, grade thinks he knows a great deal and makes others feel that way too. He is the experienced sucker, who has studied not the market itself but a few remarks about the market made by a still higher grade of suckers. The second-grade sucker knows how to keep from losing his money in some of the ways that get the raw beginner. It is this semisucker rather than the 100 per cent article who is the real all-the-year-round support of the commission houses. He lasts about three and a half years on an average, as compared with a single season of from three to thirty weeks, which is the usual Wall Street life of a first offender. It is naturally the semisucker who is always quoting the famous trading aphorisms and the various rules of the game. He knows all the don’ts that ever fell from the oracular lips of the old stagers excepting the principal one, which is: Don’t be a sucker!
This semisucker is the type that thinks he has cut his wisdom teeth because he loves to buy on declines. He waits for them. He measures his bargains by the number of points it has sold off from the top. In big bull markets the plain unadulterated sucker, utterly ignorant of rules and precedents, buys blindly because he hopes blindly. He makes most of the money until one of the healthy reactions takes it away from him at one fell swoop.
Sitting Tight : It was never my thinking that made me my big money; but my sitting. Sitting tight! Men who can both be right and sit tight are uncommon
Being Wrong : I was wrong; and the only thing to do when a man is wrong is to be right by ceasing to be wrong. get out of the trade.
Being Right : What is the use of being right unless you get the most use out of it ?! (maximising trades)
News : I work in harmony with the markets and take the path of least resistance every time. The trend is always established before the news is published. In Bull markets bear items are ignored and Bull items are exaggerated. (more…)
Noise
75% of the price movement in most stocks takes place in 20% of the time. The rest is nothing but noise within a range. Relevant information that causes repricing doesn’t change quickly and frequently. This is why trends exist. Higher prices often attract more buyers and lower prices attract more sellers until the rules of the game change. Focus on the main drivers and forget the rest.
STOCK MARKET RULES: THERE ARE ONLY TWO!
The stock market has only two rules, both of which are vague and confusing. It is up to you to make them clear and simple to understand.
Here are the guidelines:
You must write these rules down so that you will not forget them.
You must always follow these rules.
These rules will never change.
You must keep them forever.
These rules are never to be broken.
You must never add to these rules.
Here are the rules:
KNOW WHEN AND WHY TO BUY.
KNOW WHEN AND WHY TO SELL.
Now, take these rules and develop your trading methodology around them. (more…)
NOISE
75% of the price movement in most stocks takes place in 20% of the time. The rest is nothing but noise within a range. Relevant information that causes repricing doesn’t change quickly and frequently. This is why trends exist. Higher prices often attract more buyers and lower prices attract more sellers until the rules of the game change. Focus on the main drivers and forget the rest.