Everyone makes mistakes. Some repeat their mistakes and suffer continuously. The smart ones learn from their own mistakes and call it experience. But the geniuses are a special breed, they’re the ones that learn from the mistakes of others. Here’s what Bruce Kovner has to say about this subject: “You have to be willing to make mistakes regularly; there is nothing wrong with it. Michael [Marcus] taught me about making your best judgment, being wrong, making your next best judgment, being wrong, making your third best judgment, and then doubling your money. Whenever I enter a position, I have a predetermined stop. That is the only way I can sleep. I know where I’m getting out before I get in. The position size on a trade is determined by the stop, and the stop is determined on a technical basis. I never think about other people who may be using the same stop, because the market shouldn’t go there if I am right. Place your stops at a point that, if reached, will reasonably indicate that the trade is wrong, not at a point determined primarily by the maximum dollar amount you are willing to lose. If you personalize losses, you can’t trade.”
Archives of “sleep” tag
rssQuote from :Reminiscences of a Stock Operator
“I can’t sleep” answered the nervous one. |
Livermore quotes
Livermore on irationality
Trying to figure out the “why” of amarket move can often cause great emotional strife. The simple fact is, the market always precedes economic news, it does not react to economic news. The market lives and operates in future time.
Livermore on knowing yourself
It is my conclusion that playing the market is partly an art form, it is not just pure reason. If it were pure reason, then somebody would have figured it out long ago. That’s why I believe every speculator must analyze his own emotions to find out just what stress level he can endure. Every speculator is different, every human psyche is unique, every personality exclusive to an individual. Learn your own emotional limits before attempting to speculate, that is my advice to any one who has ever asked me what makes a successful speculator. If you can’t sleep at night, because of your stock market position than you have gone too far, if this is the case then sell your position down to the sleeping level. (more…)
Black Belt Trading
Just like you shouldn’t practice your basic martial-arts forms in the ring where your mind is more focused on pain avoidance then executing the tactic correctly, a novice shouldn’t begin trading with real money and real consequences. Only once you’ve amassed significant practice in a safe environment where you can conduct your technical and fundamental analysis without being emotionally distracted should you begin to trade with real money. And when you finally start, don’t jump straight into the ring with Bruce Lee. Begin tentatively, gradually, slowly increasing your trading exposure over time as you become accustomed to the increasing levels of risk. How do you know you’ve moved too far, too fast? If you are finding it’s becoming harder to sleep at night, either because you are worrying about your trades or you are excited about your gains, then you have moved into the realm where your emotions are going to have too strong an effect. You are going to start making poor, emotionally-clouded decisions and so it is time to scale back.
Long or Short Position
Do you need to long or short the market today? If you’re a day trader, forget this question and ignore this post. But if you’re a positional player, perhaps having a holding period of at least 5 sessions, the above question is necessary.
Let us ponder.
1. What are your chances of success (initiating a trade that will eventually turn into a satisfactory profit)? Since you’re going to hold for several sessions, possibly facing several opening gaps along the way, might as well establish a position that you’re going to sleep with. So, unless you get the price you’re comfortable with, stay aside. Particularly practical with long holidays.
2. Is this your original plan? Are you trading according to your overall strategy or purely intraday impulse? I don’t think its very difficult to tell the difference. If you trade base on intraday impulse, you get a little more excited than usual.
3. ‘I have been dormant for some time, and I seriously need to do something’. The degree of this itchiness varies according to individuals. If you come from a day trading background, you’ll have a tougher time adjusting. After all, the mindset of ‘If I don’t do anything, I am not going to make anything either’ is in every human’s mind. Think about it. Position trading involves much passiveness, so technically, after establishing a position, you are dormant in some way.
4. ‘I am sure this is a solid short term opportunity’. I think this is the mother of all trading sin. Of course, this does not apply to day traders. But if you’re now a positional trader, stay a positional trader. Learn to let go the small fish.
20 Trading Wisdom Lines
(1) Those who work their plan will prosper, but those who chase fantasies lack judgment.
(2) Those who want to do right will get a rich reward. But those who want to “get rich quick” will quickly fail“.
(3) Trying to “get rich quick” is wrong & leads to poverty.
(4) Wealth taken from gambling quickly disappears; wealth from diligent effort & hard work grows“.
(5) Follow the rules & keep your financial life intact; ignoring them means financial ruin.
(6) A person without self-control is as defenseless as a city with broken-down walls.
(7) The wise control their temper. They know that anger causes mistakes.
(8) The intelligent are always open to new ideas, in fact they look for them.
(9) Get all the advice that you can & be wise all the rest of your life.
(10) Fools despise advice; ‘the wise’ consider each suggestion.
(11) Fools think they need no advice, but ‘the wise’ listen to others.
(12) To learn, you must want to be taught. To refuse correction is stupid.
(13) Anyone willing to be corrected is on the path to success. Those who refuse correction have lost their chance.
(14) Hard work brings prosperity; playing around brings poverty.
(15) If you love sleep, you will end up in poverty. Stay awake, work hard, & there will be plenty to eat.
(16) The foolish will lose in the end, ‘the wise’ will end up with the winnings.
(17) The wise save up for the future, but the foolish spend whatever they get”.
(18) Truth stands the test of time; lies are soon exposed.
(19 Be faithful & honest with yourself in your trading, bediligent & consistent & it will bring you Prosperity.
(20) Steady plodding brings prosperity; hasty speculation brings poverty.
Think carefully about each one of these quotes. I think you’ll find out a little something about yourself you didn’t already know. For example, your “strengths” and “weaknesses” in your trading should be clearly pointed out be analyzing each one of these phrases. These simple and short phrases should help you become a better trader — and hopefully a better person in general!
Improve Cognitive Performance-3 Simple Steps
Here are three simple practices that can improve alertness, concentration, and overall cognitive performance:
1) Hydration – Thanks to Henry Carstens for pointing this one out. A lack of proper hydration has been found to negatively impact mood among women and decrease alertness and concentration among men. A wide range of studies link dehydration to declines in short-term memory, concentration, alertness, visuomotor tracking, motor skills, and computational performance. Water is essential for feeding the brain.
2) Power Naps – Sleep is a restorative. Although sleeping on the job has a negative connotation, research finds that power naps improve creativity, memory, energy level, and general cognitive functioning. Naps also improve decision-making and problem-solving, with naps of different lengths offering different benefits. A 20-30 minute nap is ideal for improving alertness.
3) Moving Around – Prolonged sitting carries a number of health risks. Standing at the desk for a portion of the day can also increase energy and improve mood. Exercise during the day improves sleep quality, energy level, and mood.
So what does that tell us? The traditional way of working as a trader–sitting at the desk all day, hunched over and focused on screens, guzzling coffee and soda–is bad for our cognitive performance and bad for our health. If you’re a world-class athlete, you will do everything possible to maintain your body in peak condition. If you’re a world-class trader, keeping your brain in peak condition is equally important. It makes little sense to spend time looking for more and better trade setups when our minds are poorly maintained to act upon those.
Think More, React Less
Yesteraday finally watched Inception over the weekend and found it to be the most enjoyable movie so far of the summer. Of course, that’s not saying much as we continue to despise much of the garbage coming out of Hollywood these days, but we both found the movie fascinating.
One of the things in the movie that got me to thinking is the concept that when we sleep our minds keep working through problems at a higher level in order find and create solutions. I don’t know about you, but I immediately identified with this. In fact it caused me to remember something I use to do many years ago while in college but haven’t been doing lately due to my early-morning “up at 5″ work schedule. That is, whenever I ran into a difficult impasse in my research and work, I would often spend the last 30 minutes before bed simply thinking and studying the problem I was facing. Then after going to bed while I was asleep my mind would continue working on it so that when I would awake the next morning I’d have a new angle or approach to work on.
While the process didn’t always work and sometimes resulted in an unrestful night’s sleep as I tossed and turned throughout the night, by taking time out of my day to think about a problem without distractions before bed at times did enable me to find creative solutions that seemed to work more often than not. Although I’ve done the same thing for years through daily meditation (20 minutes each and every day), I must confess I think there is something to the process of preparing your mind to work on problems while you sleep and completely free from distractions, especially if you’re faced with a particularly cumbersome or complicated challenge.
Many of you are probably not surprised to hear me say that I think time spent to concentrated thought without any distractions is something I think many traders lack these days. As all of us continued to be constantly bombarded with real-time information, I think many have become far more reactionary than “thought” driven. At some level that is ok for some strategies (like day trading for example), but it wreaks havoc on others.
It has also been my experience through working one-on-one with members in the mentorship group that most are not devoting enough “think time” in their daily routines. In my experience, the average person only takes less than 5 minutes a day (if that) to actually think through their trades, strategies, and plans. That’s not enough! Not by a long shot!
For that reason alone, mixing up your routine to enable your mind to think without distractions while you sleep may be at least something you’ll want to try. While I know from experience that I always receive dubious feedback whenever I recommend utilizing meditation and breathing techniques to help clear the mind, boost productivity, and overall performance, you may want to at least try mixing up your work schedule a little bit in order to gear and ramp up your mental state more effectively. In addition, if you’re not devoting some time every day (at least 30 minutes) free from all distractions to think about your strategies, positions, and performance, then I truly believe you are not really giving yourself the best chance for success.
The more the world speeds up and becomes even more reactionary, the more important I think it will be for those of us engaged in the markets to think more and react less.
Blackstone's Byron Wien Discusses Lessons Learned in His First 80 Years
Here are some of the lessons I have learned in my first 80 years. I hope to continue to practice them in the next 80.
- Concentrate on finding a big idea that will make an impact on the people you want to influence. The Ten Surprises which I started doing in 1986 has been a defining product. People all over the world are aware of it and identify me with it. What they seem to like about it is that I put myself at risk by going on record with these events which I believe are probable and hold myself accountable at year-end. If you want to be successful and live a long, stimulating life, keep yourself at risk intellectually all the time.
- Network intensely. Luck plays a big role in life and there is no better way to increase your luck than by knowing as many people as possible. Nurture your network by sending articles, books and emails to people to show you’re thinking about them. Write op-eds and thought pieces for major publications. Organize discussion groups to bring your thoughtful friends together.
- When you meet someone new, treat that person as a friend. Assume he or she is a winner and will become a positive force in your life. Most people wait for others to prove their value. Give them the benefit of the doubt from the start. Occasionally you will be disappointed, but your network will broaden rapidly if you follow this path.
- Read all the time. Don’t just do it because you’re curious about something, read actively. Have a point of view before you start a book or article and see if what you think is confirmed or refuted by the author. If you do that, you will read faster and comprehend more.
- Get enough sleep. Seven hours will do until you’re sixty, eight from sixty to seventy, nine thereafter which might include eight hours at night and a one hour afternoon nap.
- Evolve. Try to think of your life in phases so you can avoid a burn-out. Do the numbers crunching in the early phase of your career. Try developing concepts later on. Stay at risk throughout the process.
- Travel extensively. Try to get everywhere before you wear out. Attempt to meet local interesting people where you travel and keep in contact with them throughout your life. See them when you return to a place. (more…)
Ed Seykota’s Magic Trading System
1: Do not stress about whipsaws – one good trend pays for them all.
A whipsaw is when you enter a stock, but get stopped out quickly. In a period of whipsaws, this may happen many times. This can be frustrating to a trader or investor, and it may cause them to change their system. But the fact is that one good trend will pay for all of these whipsaws, and if you change your system you lose the benefit of that!
2: When you Catch a Trend, ride it to the end.
Your system must be able to jump on a trending stock (for instance, up if you are going long), but then also be able to ride that trend to the end. Many novice traders will jump out of stocks before they are finished trending because they are scared the market has gone too far. Let your system tell you when the trend is ending, and only exit once it does.
3: When you show a loss, give the loss a toss.
Every single successful money manager ever interviewed has said something along the lines of: “Cut your losses short”. Get rid of your losses. Keep your winners. And once you have your system don’t second guess it! Being stopped out is part of the process.
4: We know if our risk is right when we make a lot of money, but can still sleep at night.
Risk is the amount of risk per trade (the price between your entry and your stop loss), and how much your total risk is (regarding how many positions you have open at one time). (more…)