If you never trade, can you be a successful speculator?
If you dollar cost average, and are disciplined, are you a successful speculator?
If you compound at 50% per year for 10 years, and then lose everything in an afternoon, are you a successful speculator?
If you lose everything in an afternoon, and then learn from your mistake, and then compound at 50% for the next 10 years, are you a successful speculator?
If you compound at 6% per year for 10 years, and never have a meaningful drawdown, are you a successful speculator?
If the risk free rate is 6%, and you are making 12%, are you a more successful speculator then if the risk-free rate is 0% and you are making 6%?
If you think you are a successful speculator, can you really be a successful speculator?
If you think you are not a successful speculator, can you be a successful speculator?
Who are the most successful speculators of the past 100 years? Who are the least successful speculators of the past 100 years?
Archives of “speculators” tag
rssAdvice and money making system
This advice from Henry Clews is all you will need to make money.
But few gain sufficient experience in Wall Street to com-
mand success until they reach that period of life in which
they have one foot in the grave. When this time comes
these old veterans of the Street usually spend long intervals
of repose at their comfortable homes, and in times of panic,
which recur sometimes oftener than once a year, these old
fellows will be seen in Wall Street, hobbling down on their
canes to their brokers’ offices.
Then they always buy good stocks to the extent of their
bank balances, which have been permitted to accumulate for
just such an emergency. The panic usually rages until
enough of these cash purchases of stock is made to afford
a big “rake in.” When the panic has spent its force, these
old fellows, who have been resting judiciously on their oars
in expectation of the inevitable event, which usually returns
with the regularity of the seasons, quickly realize, deposit
their profits with their bankers, or the overplus thereof,
after purchasing more real estate that is oa the up grade,
for permanent investment, and retire for another season to
the quietude of their splendid homes and the bosoms of their
happy families.
What follows is very important in so many ways.
If young men had only the patience to watch the specu-
lative signs. of the times, as manifested in the periodical
egress of these old prophetic speculators from their shells
of security, they would make more money at these intervals
than by following up the slippery ” tips ” of the professional
“pointers” of the Stock Exchange all the year round, and
they would feel no necessity for hanging at the coat tails,
around the hotels, of those specious frauds, who pretend to
be deep in the councils of the big operators and of all the
new ” pools ” in process of formation. I say to the young
speculators, therefore, watch the ominous visits to the Street
of these old men. They are as certain to be seen on the eve
of a panic as spiders creeping stealthily and noiselessly
from their cobwebs just before rain. If you only wait to
see them purchase, then put up a fair margin for yourselves,
keep out of the u bucket shops “as well [as the “sample
rooms,” and only visit Delmonico’s for light lunch in busi-
ness hours, you can hardly fail to realize handsome profits
on your ventures.
Great stuff,indeed, written over a hundred plus years ago.
Robert Meier's Eleven Rules
1. Ask yourself what you really want. Many traders lose money because subconsciously their goal is entertainment, not profits.
2. Assume personal trade responsibility for all actions. A defining trait of top performing traders is their willingness to assume personal responsibility for all trading decisions.
3. Keep it simple and consistent. Most speculators follow too many indicators and listen to so many different opinions that they are overwhelmed into action. Few people realize that many of the greatest traders of all time never rely on more than two or three core indicators and never listen to the opinions of others.
4. Have realistic expectations. When expectations are too high, it results in overtrading underfinanced positions, and very high levels of greed and fear – making objective decision-making impossible.
5. Learn to wait. Most of the time for most speculators, it is best to be out of the markets, unless you are in an option selling (writing) program. Generally, the part-time speculator will only encounter six to ten clear-cut major opportunities a year. These are the type of trades that savvy professionals train themselves to wait for.
6. Clearly understand the risk / reward ratio. The consensus is that trades with a one to three or one to four risk / reward ration are sufficient.
7. Always check the big picture. Before making any trade, check it against weekly and monthly as well as daily range charts. Frequently, this extra step will identify major longer-term zones of support and resistance that are not apparent on daily charts and that substantially change the perceived risk / reward ratio. Point & figure charts are particularly valuable in identifying breakouts from big congestion / accumulation formations. (more…)
Risk & Chance
Here are some interesting quotes from ‘Risk & Chance’ (Dowie and Lefrere) that have a relevance to trading and speculation more generally:
Henslin (1967) notes …dice players behave as if they are controlling the outcome of the toss. One of the ways they exert this is to toss the dice softly if they want a low number, or hard for a high number. Another is to concentrate and exert effort when tossing. These behaviours are quite rational if one believes that the game is a game of skill.
As a trader I wish I could figure out what portion of my trading results can be attributed to luck, and what portion to skill. The problem is that trading seems to be a game of both skill and luck, so we spend half our time figuring out just how hard we should be throwing the dice. Splitting skill from luck is a problem for all speculators, but high frequency traders can find out much sooner than low frequency macro traders, who only take a few positions each year. In the latter case, it may be close to impossible to look back to a macro trader’s career and make this determination with any reasonable level of certainty.
De Charms(1968) stated that “Man’s primary propensity is to be effective in producing changes in his environment. Man strives to be a causal agent, to be the primary locus of causation for, or the origin of, his behaviour; he strives for personal causation.
The polar opposite of mastery is helplessness. (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. (more…)
Jesse Livermore :Timeless lessons
All through time, people have basically acted and reacted the same way in the market as a result of: greed, fear, ignorance, and hope. That is why the numerical (technical) formations and patterns recur on a constant basis.
The game of speculation is the most uniformly fascinating game in the world. But it is not a game for the stupid, the mentally lazy, the person of inferior emotional balance, or the get-rich-quick adventurer. They will die poor.
Don’t take action with a trade until the market, itself, confirms your opinion. Being a little late in a trade is insurance that your opinion is correct. In other words, don’t be an impatient trader.
It is foolhardy to make a second trade, if your first trade shows you a loss. Never average losses. Let this thought be written indelibly upon your mind.
Remember this: When you are doing nothing, those speculators who feel they must trade day in and day out, are laying the foundation for your next venture. You will reap benefits from their mistakes.
When a margin call reaches you, close your account. Never meet a margin call. You are on the wrong side of a market. Why send good money after bad? Keep that good money for another day.
Successful traders always follow the line of least resistance. Follow the trend. The trend is your friend.
A prudent speculator never argues with the tape. Markets are never wrongopinions often are.
Few people succeed in the market because they have no patience. They have a strong desire to get rich quickly.
I absolutely believe that price movement patterns are being repeated. They are recurring patterns that appear over and over, with slight variations. This is because markets are driven by humansand human nature never changes.
When you make a trade, you should have a clear target where to sell if the market moves against you. And you must obey your rules! Never sustain a loss of more than 10% of your capital. Losses are twice as expensive to make up. I always established a stop before making a trade.
I am fully aware that of the millions of people who speculate in the markets, few people spend full time involved in the art of speculation. Yet, as far as I’m concerned it is a full-time jobperhaps even more than a job. Perhaps it is a vocation, where many are called but few are singled out for success.
The big money is made by the sittin’ and the waitin’not the thinking. Wait until all the factors are in your favor before making the trade.
It was never my thinking that made big money for me. It was my sitting…Men who can both be right and sit tight are uncommon. I found it one of the hardest things to learn. But it is only after this that a stock operator can make big money. it is literally true that millions come easier to a trader after he knows how to trade than hundreds did in the days of ignorance.
Give up trying to catch the last eighth – or the first. These two are the most expensive eighths in the world.
Without faith in his own judgment no man can go very far in this game. That is about all I have learned – to study general conditions, to take a position and stick to it.
Remember that stocks are never to high for you to begin buying or too low to begin selling.
That is where the tape comes in – to enable you to decide as to the proper time for beginning. Much depends upon beginning at exactly the right time. (more…)
Risk & Chance
Here are some interesting quotes from ‘Risk & Chance’ (Dowie and Lefrere) that have a relevance to trading and speculation more generally:
Henslin (1967) notes …dice players behave as if they are controlling the outcome of the toss. One of the ways they exert this is to toss the dice softly if they want a low number, or hard for a high number. Another is to concentrate and exert effort when tossing. These behaviours are quite rational if one believes that the game is a game of skill.
As a trader I wish I could figure out what portion of my trading results can be attributed to luck, and what portion to skill. The problem is that trading seems to be a game of both skill and luck, so we spend half our time figuring out just how hard we should be throwing the dice. Splitting skill from luck is a problem for all speculators, but high frequency traders can find out much sooner than low frequency macro traders, who only take a few positions each year. In the latter case, it may be close to impossible to look back to a macro trader’s career and make this determination with any reasonable level of certainty.
De Charms(1968) stated that “Man’s primary propensity is to be effective in producing changes in his environment. Man strives to be a causal agent, to be the primary locus of causation for, or the origin of, his behaviour; he strives for personal causation.
The polar opposite of mastery is helplessness. (more…)
Stubbornness
If it doesn’t pay off the first time forget it.
Perseverance is a good idea for spiders and kings, but not always for speculators. Don’t fall into the trap of trying to squeeze a gain out of any single speculative entity.
Don’t chase any investment in a spirit of stubbornness. Reject any thought that an investment “owes you” something. And don’t buy the alluring, but fallacious idea that you can improve a bad situation by averaging down.