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Confusion and Frustration for Traders

  
  Education
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Maslow one commented that, when all you have is a hammer, you tend to treat everything as a nail. So it is with psychologists that involve themselves in markets. Lacking an understanding of actual speculative strategies and tactics–not to mention portfolio construction–they reduce performance problems to the lowest, psychological denominator. In so doing, they confuse cause and effect: they observe frustrated traders and assume that relieving frustration is the key to making money.

The professional speculator, unlike the retail daytrader, rarely falls into performance problems because of derelict discipline or runaway emotions. Rather, it is the very competence of the professional that leads to performance challenges. *It is when pros are most in sync with markets, identifying and profiting from themes and patterns, that they are most vulnerable to ever-changing patterns of direction, volatility, and correlation*. The confidence that permits healthy risk-taking under the best of speculative conditions inevitably gives way to confusion and frustration when skilled participants are no longer in sync with their markets. (more…)

Jeremy Grantham's 10 Investment Lessons

  
  Education
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1. Believe in history: “history repeats and repeats, and forget it at your peril. All bubbles break, all investment frenzies pass away.”

2. Neither a lender nor a borrower be: “Unleveraged portfolios cannot be stopped out, leveraged portfolios can. Leverage reduces the investor’s critical asset: patience.”
3. Don’t put all your treasure in one boat: “This is about as obvious as any investment advice could be … Several different investments, the more the merrier, will give your portfolio resilience, the ability to withstand shocks.”
4. Be patient and focus on the long term: Wait for the good cards. If you’ve waited and waited some more until finally a very cheap market appears, this will be your margin of safety.”
5. Recognize your advantages over the professionals: “The individual is far better-positioned to wait patiently for the right pitch while paying no regard to what others are doing, which is almost impossible for professionals.”
6. Try to contain natural optimism: “optimism comes with a downside, especially for investors: optimists don’t like to hear bad news.” (more…)

Minimize The Impact Of A Setback!

  
  Education
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First, minimize its symbolic importance. Many people over interpret setbacks by imbuing them with more emotions than are warranted. They view setbacks as a form of punishment, as if a teacher or parent is punishing them for doing something wrong. Take the setback in stride and move on to the next winning trade.

Second, don’t confuse trading outcomes with personal significance. If you lose big, for example, the loss may have great financial significance but it doesn’t need to have great personal significance. You can wipe out your entire account, but that doesn’t mean you are diminished in the eyes of friends and family. You don’t need to let a loss or setback make you feel less worthy as a person.

Ironically, when you psychologically minimize the impact of a setback, and treat it as if it isn’t important, you’ll stay calm, free, and objective. And when you feel this way, you’ll trade profitably.

20 Lessons From Stock Market Wizards

  
  Education
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3994-1Most of you have probably heard of this book and some may have read it. For the benefit of those who have not read it or heard of it, Stock Market Wizards is basically a book that consists of interviews with 15 top stock traders in America. These top traders come from a myriad of backgrounds and have varied interests- from mathematician, historian, scientist, to those with an interest in photography and even farming. But they have quite a few things in common when it comes to trading:
DISCIPLINE
LOSS CONTROL
HARD WORK

Most of the traders interviewed were quite forthcoming, but a few were reluctant to talk about their strategies (even past strategies that worked but is now no longer used) for fear that disclosure would render its effectiveness. Of the 15 traders, only Mark Cook and John Bender are options trader. By the way, Mark Cook’s story is one of my favourite and he is also the guy that likes to farm.
I am interested to read about these traders, not simply because they are top traders, but also because many of them encountered major failures and lost tons of money before they become successful in trading. The path to success is never easy and this book really keeps me inspired. I think in future if I meet with setbacks in my trading journey, This is 4th time ,I had completed reading this book.

Here’s my 20 lessons from Stock Market Wizards (more…)

Minimize The Impact Of A Setback!

  
  Education
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SportFirst, minimize its symbolic importance. Many people over interpret setbacks by imbuing them with more emotions than are warranted. They view setbacks as a form of punishment, as if a teacher or parent is punishing them for doing something wrong. Take the setback in stride and move on to the next winning trade.
Second, don’t confuse trading outcomes with personal significance. If you lose big, for example, the loss may have great financial significance but it doesn’t need to have great personal significance. You can wipe out your entire account, but that doesn’t mean you are diminished in the eyes of friends and family. You don’t need to let a loss or setback make you feel less worthy as a person.
Ironically, when you psychologically minimize the impact of a setback, and treat it as if it isn’t important, you’ll stay calm, free, and objective. And when you feel this way, you’ll trade profitably.

Don't Let Negative Emotions Control You

  
  Education
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Successful traders do not allow negative emotions to affect their decision-making. Trading is a stressful process, and you will experience many setbacks. Expect them, however, and don’t see losses as indications that you will never succeed. Instead, be prepared to identify your negative reactions and act on them in positive ways.

Successful traders turn fear into gain. They realize that losses are a part of their business, and they expect them. But while they know that some trades will cost them money, they let those same trades become a gain in knowledge. Remember that each time you have a loss, this gives you some guidelines on how to alter your strategy. Perhaps your stop loss needs to be set higher, perhaps you need to alter how you identify trends, or perhaps you need to use new indicators.

The key point is to remember to turn fear of loss into anticipation of learning. Otherwise, your fear can cause you to forget to ask why that trade was unsuccessful and, in the worst cases, to unwisely overtrade to try to compensate for your loss.

Along similar lines, successful traders do not blame anyone or anything for their losses. They accept their setbacks and refuse to dwell on them. Instead, they learn from their mistakes and move on with their trading. Focusing on blame can cause you to feel insecure and lead you to make unwise trades to compensate for your losses. Or you may feel a desire for revenge against some non-existent enemy that “caused” your loss. Both of these emotions will distract you from your real goal of understanding how to revise your strategy based on what you learned from this trade.

8 Ways to be great

  
  Education
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First Principle: Find Your “Why?”

“The reason most people go through life with big dreams but fail to achieve them is because they ask themselves “how” before they know their “why”(9).

Second Principle: Get To Know Yourself

“The perfect trader-if such a person exists-is methodical and careful about making decisions, extremely disciplined, resilient to setbacks, with a high degree of internal confidence.  He holds strong opinions but is also able to admit quickly when he is wrong, not take it personally, and view it as a learning opportunity rather than a failure.  He understands the value of leaving his ego at the door.  He’s willing and able to trust his gut and place big bets when the opportunity presents itself.  In fact, that pretty well describes the ideal blend of characteristics of any successful person, no matter what he is doing professionally or personally” (18-19).

Third Principle:  Learn To Love The Process

“The best traders don’t think about how many millions they need to make each year.  They focus on making the best trading decision they can with each trade they make. And if there isn’t a good trading opportunity right now, they have the discipline to do nothing and just wait. Concentrating on one trade at a time is their process” (38).

Fourth Principle:  Sharpen Your Edge

“Gaining a competitive advantage is like having a two-edged sword, and you need to keep both of them sharp.  On edge is internal-knowing what unique skills you bring to the table.  The other is external and comes from gathering knowledge that makes it more likely you’ll succeed” (45). (more…)

Ritualize practice

  
  Education
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“The best way to insure you’ll take on difficult tasks is to ritualize them — build specific, inviolable times at which you do them, so that over time you do them without having to squander energy thinking about them.”  The best time to prepare for trading is before the market opens or late in the evening after you have had a break from the close.  Execution is based on proper preparation.  If you are properly prepared for the battle then the execution will be a synch.  Remember:  trading is war PREPARE your weapons.

If you wish to excel at trading it is going to take a lot of hard work but we all know that anything really worth having comes with a sacrifice of one thing for another.  As Mr Swartz sums it up:  “If you want to be really good at something, it’s going to involve relentlessly pushing past your comfort zone, along with frustration, struggle, setbacks and failures. That’s true as long as you want to continue to improve, or even maintain a high level of excellence. The reward is that being really good at something you’ve earned through your own hard work can be immensely satisfying.”

Minimize The Impact Of A Setback!

  
  Education
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SportFirst, minimize its symbolic importance. Many people over interpret setbacks by imbuing them with more emotions than are warranted. They view setbacks as a form of punishment, as if a teacher or parent is punishing them for doing something wrong. Take the setback in stride and move on to the next winning trade.

Second, don’t confuse trading outcomes with personal significance. If you lose big, for example, the loss may have great financial significance but it doesn’t need to have great personal significance. You can wipe out your entire account, but that doesn’t mean you are diminished in the eyes of friends and family. You don’t need to let a loss or setback make you feel less worthy as a person.Ironically,  when you psychologically minimize the impact of a setback, and treat it as if it isn’t important, you’ll stay calm, free, and objective. And when you feel this way, you’ll trade profitably.

DOUG HIRSCHHORN’S 8 WAYS TO GREAT

  
  Education
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I just completed reading a book 8 WAYS TO GREAT.  It is short (114 pages) but packed with great insight on what makes great people great.  I read it in a few hours and as is the case in all the books I read I highlight major points and make margin notes about what strikes me as important enough to share with others.  What follows are the eight principles or “ways to great” and the quotes I found worth passing along.

First Principle: Find Your “Why?”

“The reason most people go through life with big dreams but fail to achieve them is because they ask themselves “how” before they know their “why”(9).

Second Principle: Get To Know Yourself

“The perfect trader-if such a person exists-is methodical and careful about making decisions, extremely disciplined, resilient to setbacks, with a high degree of internal confidence.  He holds strong opinions but is also able to admit quickly when he is wrong, not take it personally, and view it as a learning opportunity rather than a failure.  He understands the value of leaving his ego at the door.  He’s willing and able to trust his gut and place big bets when the opportunity presents itself.  In fact, that pretty well describes the ideal blend of characteristics of any successful person, no matter what he is doing professionally or personally” (18-19).

Third Principle:  Learn To Love The Process

“The best traders don’t think about how many millions they need to make each year.  They focus on making the best trading decision they can with each trade they make. And if there isn’t a good trading opportunity right now, they have the discipline to do nothing and just wait. Concentrating on one trade at a time is their process” (38).

Fourth Principle:  Sharpen Your Edge

“Gaining a competitive advantage is like having a two-edged sword, and you need to keep both of them sharp.  On edge is internal-knowing what unique skills you bring to the table.  The other is external and comes from gathering knowledge that makes it more likely you’ll succeed” (45).

Fifth Principle:  Be All That You Can Be

“The takeaway lesson for everyone wanting to optimize their own performance without regard for what others are doing is fourfold: 1) know your edge; 2) act only when you have the edge; 3) avoid taking the outcome personally because it involves factors that are beyond your control; 4) measure your success in terms of how well you performed and not only the outcome” (70).

Sixth Principle: Keep Your Cool

“Deciding when to cut your losses is one of the toughest decisions for anyone to make, but traders at the top of their game know that they always have to make the decisions they need to make, which may or may not be the ones they want to make” (77).

Seventh Principle: Get Comfortable With Being Uncomfortable

“In the trading world, you will either make money or lose money on any given trade. All that matters in the end is making more money when you’re right than you lose when you’re wrong.  Knowing this, traders have learned to accept failure as part of the game, but they also use the information they acquire from their mistakes as a learning tool.  Frequently, what they learn from losing money is more valuable than what they learn when they make money” (90).

Eighth Principle: Make Yourself Accountable

“Commitment, perseverance, and discipline are the characteristics that move people beyond desire to action, that differentiate mediocrity from greatness, and that separate greatness from superstardom” (95).

And to sum up: “True success begins with a state of mind.  But it takes specific actions and behaviors to move from intentions into action and get results” (2)

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