1. It is morally wrong to allow a sucker to keep his money 
2. Everyone has a trading strategy that won’t work
3. For every expert who says prices are going up, there is one who says they are going down
4. If you can drink it, don’t trade it
5. The market is not logical; it is psychological
6. The successful speculator is one who dies before his time comes
7. If you drop a dead cat far enough, it will bounce
8. The market goes your way the day after your stop was hit
ITS COROLLARY
9. The big move begins the day after your option expires
10. He who sells uncovered options goes broke
11. If you feel like doubling up a profitable position, slam your dialing finger in the drawer until the feeling goes away
12. The perfect strategy works every time until you start using it
13. If your strategy seems to be working well, you haven’t been using it long enough
14. The guy who owns the horse when it dies is the loser
15. When it comes to luck or skill, you can’t beat luck (more…)
Archives of “speculator” tag
rssGambling vs. Trading
The expectancy in gambling is ALWAYS terrible, while market speculation at times offers outstanding opportunities. To get a 2:1 or 3:1 opportunity in gambling, one needs to accept incredibly low odds of victory. In financial markets, those 2:1 or above opportunities come around like clockwork and offer high enough probability that long-term positive expectancy is possible. Not only that, but the market speculator has the opportunity to adjust his or her position after the game begins…when was the last horse race where you could take a little off the table after the first turn? Or reclaim most of your bet when your horse stumbles out of the gate?
Greed
Small excerpt is from the book: ‘Wall Street. Its Mysteries Revealed: Its Secrets Exposed’ published in New York, 1921 by William C. Moore. The book contains short and to the point chapters like: ‘The crowd mind’, ‘How the public speculates’, ‘Mental suggestion’ and‘Market advice’ to name but a few. I chose the one on ‘Greed’ as I consider it great advice and timeless wisdom. Enjoy.
Greed p. 123-124
An avaricious or keen desire for profits is one of the most prevalent causes of failure inspeculation. This weakness is general among traders. They desire “just a little more ” profit. If the stock or commodity bought advances, then that’s proof to them that it will advance further and so they hang on. They usually overstay and thus miss their market. If they fail to obtain the top price and it reacts, then they assure or console themselves by the expression: “Oh, it will come back.” It may “come back” but often it does not, and instead, declines to below the purchase price and frequently results in a loss. The same observations apply to a short sale for a further anticipated decline. It is a good policy to be satisfied with a reasonable profit and be willing to leave some for the other fellow. The market is always there and other opportunities for making profits will present themselves while the greedy trader is waiting to get the last eighth.
Greed leads to disaster in another way. A speculator has started in to buy at the inception of a bull movement. He makes money. The more he makes, the more avaricious he becomes as the market moves forward. His confidence in himself increases until he develops a mental state known in the vernacular as “big head” or “swelled head”. He now has unbounded confidence in himself and “plays the limit”. Soon thereafter the market culminates at the top and the trend reverses, but Mr. Swelled Head is ignorant of this, so continues to buy on set-backs instead of selling on rallies. A drastic slump follows and Mr. B.H. goes to the scrap pile – BUSTED.
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…)
The Right Side
A quote from one the best traders of our time, Jesse Livermore: “It takes a man a long time to learn all the lessons of all his mistakes. They say there are two sides to everything. But there is only one side to the stock market; and it is not the bull side or the bear side, but the right side. It took me longer to get that general principle fixed firmly in my mind than it did most of the more technical phases of the game of stock speculation.”
Being a bull or a bear alone is meaningless out of the crucial context of the current market conditions. All that really matters for the great game of speculation is being on the “right side”, knowing when the markets are in a bull or a bear trend and deploying your speculative capital accordingly.
Once again Livermore ties speculation back into the speculator’s own internal emotions. He points out that it makes no sense to be bullish or bearish as a rule, but to carefully watch the market conditions in order to be on “the right side” at any given moment. Most speculators are burdened with an innate emotional bias to be bullish that is dangerous and must be eradicated if they wish to succeed in speculation. (more…)
Livermore on speculation
Just remember, without a discipline, a clear strategy and a concise plan, the speculator will fall into all the emotional pitfalls of the market and jump from one stock to another, hold a losing position too long, cut-out of a winner too soon and for no reason other than fear of losing the profit. Greed, fear, impatience, ignorance and hope, will all fight for mental dominance over the speculator. Then after a few failures and catastrophes, the speculator may become demoralized, depressed, despondent, and abondon the market and the chance to make a fortune of what the market has to offer.
Develop your own strategy, discipline and approach to the market. I offer my suggestions as one, who has traveled the road before you. Perhaps I can act as a guide for you and save from falling in some of the pitfalls that befell me. But in the end the decisions must be your own”.
Trading Quotes from Trading Books
“There is only one side to the stock market; and it is not the bull side or the bear side, but the right side”
Comparing Paper Trading vs. Real Trading
“Are you a good shot?” “I can snap the stem of a wine glass at twenty paces” “That’s all well, but can you snap the stem of a wine glass while the wine glass is pointing a loaded pistol straight at your heart?”
“A man must believe in himself and his judgement if he expects to make a living at this game. That is why I don’t believe in tips. If I buy stocks on Smith’s tip, I must sell those stocks on Smith’s tip. I am depending on him”
“Speculation is a hard and trying business, and a speculator must be on the job all the time or he’ll soon have no job to be on”
“The more I made, the more I spent. This is the usual experience with most men. No, not necessarily with easy-money pickers, but with every human being who is not a slave of the hoarding instinct. Some men, like old Russell Sage, have the money-making and the money-hoarding instinct equally well developed, and of course they die disgustingly rich”
“If a stock doesn’t act right, don’t touch it; because being unable to tell precisely what is wrong, you cannot tell which way it is going. No diagnosis, no prognosis. No prognosis, no profit”
“The big money was not in the individual fluctuations but in the main movements-that is, not in reading the tape but in sizing up the entire market and its trend” (more…)
The Zurich Axioms – Forecasts Predictions And Prophets
Here’s what Max Gunther, author of ‘The Zurich Axioms’ has to say:
The Zurich Axioms: ‘On Forecasts’, page 62:
Human behavior cannot be predicted. Distrust anyone who claims to know the future, however dimly.
‘Speculative Strategy’:
The Fourth Axiom tells you not to build your speculative program on a basis of forecasts, because it won’t work. Disregard all prognostications. In the world of money, which is a world shaped by human behavior, nobody has the foggiest notion of what will happen in the future. Mark that word. Nobody.
Of course, we all wonder what will happen, and we all worry about it. But to seek escape from that worry by leaning on predictions is a formula for poverty. The successful speculator bases no moves on what supposedly will happen but reacts instead to what does happen. (more…)
William Eckhardt Quotes
Partner of perhaps the best-known futures speculator of our time, Richard Dennis.Created the famous trading group known as the Turtles. William has averaged over 62 percent return.
Partner of perhaps the best-known futures speculator of our time, Richard Dennis.Created the famous trading group known as the Turtles. William has averaged over 62 percent return. “I take the point of view that missing an important trade is a much more serious error than making a bad trade”.
”Buying on retracement is psychologically seductive because you feel you’re getting a bargain versus the price you saw a while ago. However, I feel that approach contains more than a drop of poison.”
”You shouldn’t plan to risk more than 2 percent on a trade. Although, of course, you could still lose more if the market gaps beyond your intended point of exit.”
”I haven’t seen much correlation between good trading and intelligence. Some outstanding traders are quite intelligent, but a few aren’t. Many outstanding intelligent people are horrible traders. Average intelligence is enough. Beyond that, emotional makeup is more important.”
”The answer to the question of whether trading can be taught has to be an unqualified yes. Anyone with average intelligence can learn to trade. This is not rocket science.”
”If you bring normal human habits and tendencies to trading, you’ll gravitate toward the majority and inevitably lose.”
”Watch idly while profit-taking opportunities arise, but in adversity run like a jackrabbit.”
”One adage that is completely wrongheaded is that you can’t go broke taking profits. That’s precisely how many traders do go broke. While amateurs go broke taking large losses, professionals go broke by taking small profits.”
”What feels good is often the wrong thing to do.”
”Human nature does not operate to maximize gain but rather to maximize the chance of a gain. The desire to maximize the number of winning trades (or minimize the number of losing trades) works against the trader. The success rate of trades is the least important performance statistic and may even be inversely related to performance.”
”Two of the cardinal sins of trading – giving losses too much rope and taking profits prematurely – are both attempts to make current positions more likely to succeed, to the severe detriment of long-term performance.”
”Don’t think about what the market’s going to do; you have absolutely no control over that. Think about what you’re going to do if it gets there.”
”It is a common notion that after you have profits from your original equity, you can start taking even greater risks because now you are playing with ‘their money’. We are sure you have heard this. Once you have profit, you’re playing with ‘their money’. It’s a comforting thought. It certainly can’t be as bad to lose ‘their money’ as ‘yours’? Right? Wrong. Why should it matter whom the money used to belong to? What matters is who it belongs to now and what to do about it. And in this case it all belongs to you.”
Trading Wise Words
Turtle Trading Principle
Trade with an edge, manage risk, be consistent, and keep it simple.
The entire Turtle training, and indeed the basis of all successful trading, can be summed up in these four core principles.
Curtis Faith, Way Of Turtle
Why Chart Patterns Repeat Themselves
All through time, people have basically acted and re-acted the same way in the market as a result of: greed, fear, ignorance, and hope.
That is why the numerical formations and patterns recur on a constant basis.
Jesse Livermore, How To Trade In Stocks
Stick To Your Trading Rules
Successful trading is about finding the rules that work and then sticking to those rules.
William J. O’neil
Perfect Speculator
Perfect speculator must know when to get in; (more…)