Archives of “stock market” tag

rss

10 Insights from Benjamin Graham

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #

Benjamin Graham doesn’t need an introduction. His sober look at the stock market has built an enormous following and for a good reason.

1. “If you are shopping for common stocks, choose them the way you would buy groceries, not the way you would buy perfume.”   –  It is true that perfumes come and go out of popularity, but no trend lasts forever. There are trends that last 3 months; there are trends that last 3 years.

2. “Obvious prospects for physical growth in a business do not translate into obvious profits for investors.” – it depends on to what level has the expected growth been already discounted. The truth is that it is really hard to forecast growth in quickly developing businesses. The market always overdiscounts at some point, but in the meantime trend followers could make a killing. You never know how long or how fast a trend could go.

3. The only constants in the markets are change and uncertainty. Not only business environment changes, but also people’s perceptions of stocks change.

Most businesses change in character and quality over the years, sometimes for the better, perhaps more often for the worse. The investor need not watch his companies’ performance like a hawk; but he should give it a good, hard look from time to time.

4. Different catalysts matter for the different time frames:

Basically, price fluctuations have only one significant meaning for the true investor. They provide him with an opportunity to buy wisely when prices fall sharply and to sell wisely when they advance a great deal. At other times he will do better if he forgets about the stock market and pays attention to his dividend returns and to the operating results of his companies.

5. The difference between a trader and investor

The most realistic distinction between the investor and the speculator is found in their attitude toward stock-market movements. The speculator’s primary interest lies in anticipating and profiting from market fluctuations. The investor’s primary interest lies in acquiring and holding suitable securities at suitable prices. Market movements are important to him in a practical sense, because they alternately create low price levels at which he would be wise to buy and high price levels at which he certainly should refrain from buying and probably would be wise to sell.

6. How to think about risk (more…)

JOHN KENNETH GALBRAITH ON STOCK MARKET MEMORY LOSS

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #

Where else but in the markets can short term memory loss be both beneficial and profitable?

John Kenneth Galbraith, an economist, says the financial markets are characterized by…

“…extreme brevity of the financial memory.  In consequence, financial disaster is quickly forgotten.  In further consequence, when the same or closely similar circumstances occur again, SOMETIMES IN A FEW YEARS, they are hailed by a new, often youthful, and always extremely self-confident generation as a brilliantly innovative discovery in the financial and larger economic world.  There can be few fields of human endeavor in which history counts for so little as in the world of finance.” [emphasis mine].

10 -Trend Following Commandments

  
  Education
#  #  #  #  #  #  #  #  #  #  #

1.    You shall back test and develop quantify robust trend trading systems that are profitable over the long term.
2.    You shall identify and follow the long term trend in the markets you trade, and have no guru that you bow down to.
3.    You shall not try to predict the future, that is a fool’s game, but follow the current price trend.
4.    You shall remember the stop loss to keep your capital safe from destruction; you shall know your exit level before your entry is taken.
5.    Follow your trend following system all the days that you are trading, so that through discipline you will be profitable.
6.    You shall not give up on your trading system because of a draw down.
7.    You shall not change a winning system because it has had a few losing trades.
8.    You shall trade with the principles that have proven to work for successful traders. Manage risk, go with the trend, and diversify so your days in the market will be long.
9.    You shall keep the faith in your trend following system even in range bound markets; a trend will begin anew eventually.
10.    You shall not covet fundamentalist’s valuations, Blue channels talking heads, newsletter predictions, Holy Grails, or the false claims of any of the black box systems.

Daiwa to launch 'Trump-related' mutual fund

  
Analysis, Education
#  #  #  #  #  #  #  #  #

Daiwa Asset Management is set to start operating a mutual fund that invests in stocks related to U.S. President-elect Donald Trump’s infrastructure investment policy. Daiwa will launch the product on Tuesday.

The open-end mutual fund — the first of its kind in Japan since Trump’s election victory in November 2016 — is likely to be made available to retail investors by the end of the month.

 The U.S. infrastructure builder equity fund, which invests in U.S. companies, will quantify how much each stock will benefit from Trump’s infrastructure policy, based on criteria such as sales ratio in the U.S. and the degree of obsolescence of the target infrastructure. The details of the portfolio will be determined by how much share prices are undervalued and how competitive the companies are.

The portfolio, comprising 30-50 companies — mostly in the construction, transport and materials sectors — will be adjusted as appropriate as Trump’s policy takes form.

Trump has pledged to spend $1 trillion to overhaul the country’s aging infrastructure over the next decade.

10+1 Rules If You USE Charts

  
  Education
#  #  #  #  #  #  #  #  #  #  #

Rule 1 – If you cannot see trends and patterns almost instantly when you look at a chart then they are not there. The longer you stare, the more your brain will try to apply order where there is none.

If you have to justify exceptions, stray data points and conflicting evidence then it is safe to say the market is not showing you what you think it is.

Rule 2 – If you cannot figure out if something is bullish or bearish after three indicators then move on. The more studies you apply to any chart the more likely one of them will say “something.” That something is probably not correct.

When I look at a chart and cannot form an opinion after applying three or four different types of indicators – volume, momentum, trend, even Fibonacci – I  must conclude that the market has not decided what it wants to do at that time. Who am I to tell it what it thinks?

Rule 3 – You can torture a chart to say anything you want. Don’t do it.

This is very similar to Rule 2 but it there is an important point to drive home. You can cherry pick indicators to justify whatever biases you bring to the table and that attempts to impose your will on the market. You cannot tell the market what to do – ever. (more…)

7 reasons most traders fail in the markets

  
  Education
#  #  #  #

1. Most traders follow a flawed strategy with poor selection criteria, usually this is based on personal opinion or bad advice
2. Even when they find a good approach, the majority of traders don’t stay the course; they suffer what we call “style drift”, changing strategy when short-term results are unsatisfactory or become boring
3. The #1 mistake made by virtually all investors is they don’t cut losses
4. Most of the traders that blow themselves up usually do so by adding to losing positions
5. The grand majority of stock traders don’t know the truth about their trading – they fail to conduct in-depth post analysis regularly; they simply don’t know the math, so they have no idea how to manage risk in relation to reward
6. Many traders start with unrealistic goals; they want too much too fast and become disinterested when success doesn’t come quickly
7. Most failures in anything stem from a lack of belief in your own abilities; most people just don’t believe they can be exceptional at stock trading, but they can, if they really want it and follow the right plan

My Time at Lehman

  
Analysis, Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #

I started at Lehman Brothers on June 1st, 2007 as a first year analyst. It was my first job out of college. Dick Fuld, the CEO at the time, publicly discussed “the road to two-hundred,” in which he would not retire until the stock reached $200 per share, almost three times the price when I arrived. Everyone at the firm believed this as though it were a fact – that there was something special about Lehman Brothers stock – it always went up.

I joined Lehman for a few reasons. The first was personal. My mother worked on Wall Street and passed away when I was a teenager. I felt, somewhat misguidedly, as though following in her footsteps would bring me closer to her. The other reasons were simpler. I had been interested in the stock market as a kid (though I went to work trading bonds and credit derivatives), I wanted to make good money, and I thought maybe, just maybe, it would be a bit of fun. (more…)

Free 34 page technical analysis book to download

  
  Education
#  #  #  #  #  #  #  #

I cam across this yesterday and though it might be interesting for some weekend technical analysis reading. I haven’t read it yet.

Its from the Market Technicians Association, the August issue of “Technically Speaking”.

Free download etc. etc. The link is here.

Whats in it? …

Free technical analysis book 08 August 2014

Breaking Your Trading Bias

  
Analysis, Education
#  #

A trading bias is the tendency that leads traders and investors to follow a predetermined path in a trade or investment even when it appears they are wrong from a fundamental or technical perspective or both. A bias about a trade occurs when there is a loss of perspective because their opinions or predictions are held even after they are proven wrong. When you have losses in the timeframe that should have lead to profits it is time to reevaluate your entry. When traders and investors hold on to a bias many times it is because they lose the ability to accept evidence that shows them they were wrong. To break the spell of a bias toward your market position let moving averages be your trend signals, let stop losses be your risk managers, and let the price action prove you wrong. How do you know when you are wrong? You are losing money. Abandon your bias in favor of a trading plan and a system that reacts to price action.

Go to top