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The art of War

  
  Education
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Sun Tzu, the author of The Art of War, would make a great stock trader.  Although The Art of War is a 2500 year old military treatise it could just as easily be written for today’s stock trader as the principles outlined therein are as applicable in the stock market as in the theatre of war.  I read The Art of War again this past weekend and highlighted what I believe are some of the most pertinent and applicable principles for stock traders as seen through the eyes of Sun Tzu the would be stock trader.   Make sure you copy and post these in a prominent place for quick reference when in the heat of battle.

I. 17  When the market is rewarding your trading strategy, you should modify your position sizing accordingly.

I. 26  Now the successful trader prepares before he enters battle.  The unsuccessful trader makes but a few, if any, preparations before he enters battle.  Proper preparation leads to victory; a little preparation leads to defeat; and no preparation leads to ultimate destruction!  The one who is properly prepared is the one who is most likely to win.

II. 7   Appreciating the gains better helps you accept the losses.

II. 19  In trading, let your great object be a quick and decisive victory, not the slow death of a lengthy loss.

III. 18  If you know who the enemy is and you know yourself, you will never fear the next trade.  If you know yourself but not the enemy, you will win one lose one.  If you do not know the enemy or yourself, you will lose on each trade.

IV. 1  The good traders of old first put themselves beyond the possibility of defeat and then waited for the right time to defeat the enemy.

IV. 4  It is possible to know technical analysis without being able to properly apply it.

IV. 13  The successful trader wins his battles by making no mistakes.  Making no mistakes establishes the certainty of victory.

V. 13  The quality of entry is like a well-timed swoop of a falcon which enables it to strike and destroy its victim.

V. 15  Proper preparation may be likened to the bending of a crossbow; decision, to the releasing of the trigger.

VI.  5  Take advantage of opportunities such as support and resistance where the enemy must put up a strong defense; take swift action and catch the enemy off guard.

VI. 19  Be prepared for battle by knowing the exact time and place for proper trade entry.

VI. 32  Just as water retains no constant shape, so in trading know the market is constantly changing.

VII. 5  Trading with familiar stocks is advantageous; with unfamiliar most dangerous.

VII. 13  We are not properly prepared to trade a stock until we are familiar with the most likely direction of the general market.

VII. 21  Ponder and deliberate before you enter a trade.

VII. 28  Now the trader’s spirit is keenest in the pre-market; by noon day it is becoming weary; and by post market ready to relax.

VII. 32  To refrain from entering a market that is prepared to defend its current course is the art of practicing patience by studying current market conditions.

VIII. 3  There are trades which must not be taken; sectors that are not ready to be attacked; patterns that are set up for failure; positions that are to be surrendered; egotistical commands that are not to be obeyed.

IX.  28  In a mixed market when some stocks are seen advancing and some retreating, it is a trap.

IX.  41  He who does not think through his trade while making light of the situation is sure to fall victim to a loss.

X.  24  The trader who makes money without coveting fame and loses money without fearing disgrace, whose only thought is to protect his equity and ignore his ego, is considered to be a jewel of the kingdom.

XI. 17  When it is to the trader’s advantage, he will enter a trade; when otherwise he will not.

XI. 67  Trade in the path defined by rules and do not face the enemy until you feel you can trade with confidence.

XII.  15  Unhappy is the fate of the trader who tries to win his battles and succeed in his decisions without cultivating the spirit of confidence, for the result will be a waste of time and a drain on his trading account.

XII.  17  Do not trade unless you see there is an advantage in doing so; use not your money unless there is something to be gained.

XII.  22 The successful trader is heedful and full of caution.  This is the way to have peace of mind and to live to trade another day.

XIII.  4  What enables the wise and successful traders to trade and conquer, and achieve things beyond the reach of ordinary traders, is proper preparation.

10 Questions for Trend Followers ,Yes Just Answer Them

  
  Education
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Now, let’s get practical. Answer the following five questions, and you have a trend following trading system:

1. What market do you buy or sell at any time?
2. How much of a market do you buy or sell at any time?
3. When do you buy or sell a market?
4. When do you get out of a losing position?
5. When do you get out of a winning position?

Said another way (Bill Eckhardt inspired):

1. What is the state of the market?
2. What is the volatility of the market?
3. What is the equity being traded?
4. What is the system or the trading orientation?
5. What is the risk aversion of the trader or client?

You want to be black or white with this. You do not want gray. If you can accept that mentality, you have got it.

30 Quotes For Traders/Investors

  
  Education
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“Wall Street people learn nothing and forget everything.”  Ben Grahameyes-MIRC

“ Buy on the cannons, sell on the trumpets.” Old French Proverb

“A stock broker is one who invests other people’s money until its all gone.”  Woody Allen

“It is fortunate for Wall Street as an institution that a small minority of people can trade successfully and that many others think they can.” Ben Graham (more…)

9 Wisdom Quotes from George Soros

  
  Education
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George Soros doesn’t need an introduction. He is a living trading legend. Here are some of the smartest things he has ever said about markets. His thoughts are in brown.

1. Perceptions affect prices and prices affect perceptionsGeorge-Soros-gold

I believe that market prices are always wrong in the sense that they present a biased view of the future. But distortion works in both directions: not only do market participants operate with a bias, but their bias can also influence the course of events.

For instance, the stock market is generally believed to anticipate recessions, it would be more correct to say that it can help to precipitate them. Thus I replace the assertion that markets are always right with two others: I) Markets are always biased in one direction or another; II) Markets can influence the events that they anticipate.

As long as the bias is self-reinforcing, expectations rise even faster than stock prices.
Nowhere is the role of expectations more clearly visible than in financial markets. Buy and sell decisions are based on expectations about future prices, and future prices, in turn are contingent on present buy and sell decisions.

2. On Reflexivity

Fundamental analysis seeks to establish how underlying values are reflected in stock prices, whereas the theory of reflexivity shows how stock prices can influence underlying values. One provides a static picture, the other a dynamic one.

Sometimes prices change before fundamentals change. Sometimes fundamentals change before prices change. Price is what pays and until expectations change, prices don’t change. What causes expectations to change? – it could be change in fundamentals or change in prices. So what I am saying is that sometimes prices could be manipulated to change expectations, which will fuel further price momentum in a self-reinforcing way.

3. “Once a trend is established it tends to persist and to run its full course.” – Sentiment changes slowly in trending markets (up or down) and extremely fast in choppy, range-bound markets.

4. “When a long-term trend loses it’s momentum, short-term volatility tends to rise. It is easy to see why that should be so: the trend-following crowd is disoriented.” (more…)

Stock Market Rules :There are only two !

  
  Education
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2fingersThe stock market has only two rules, both of which are vague and confusing. It is up to you to make them clear and simple to understand.
 Here are the guidelines:
You must write these rules down so that you will not forget them.
You must always follow these rules.
These rules will never change.
You must keep them forever.
These rules are never to be broken.
You must never add to these rules.
 Here are the rules: (more…)

10 Must Reads Books

  
  Education
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#10. Trading and Exchanges: Market Microstructure for Practitioners by Larry Harris

“Trading and Exchanges demystifies the complex world of trading. It is a must for anyone interested in investing in the public markets” –Maria Bartiromo, CNBC News Anchor

“My goodness, if only I had known this, or hadn’t let it happen to me!” or, “never again, the b##tards!” – Victor Niederhoffer

‎#9. The Art of War by Sun Tzu

The classical Chinese War Manual written 2500 years ago that is a must read at every Military Academy in the world still! Why do we need to understand war? Begin to think in the context of the markets, should I take this trade, should I not the type of conflict present in everyday trading life. ‎

#8. Statistics Without Tears: A Primer for Non-Mathematicians by Derek Rowntree

This primer without any of the mathematical formula and equations uses words and diagrams to help readers understand what statistics is and how think statistically. ‎

#7. Twenty-Eight Years in Wall Street by Henry Clews (more…)

5 Mistakes -Traders Always Do

  
  Education
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Over trading

Most new traders think that they must always be long or short the market. They lose a lot of money during certain market stages like corrections, high volatility, or bear markets. Sometimes the best position is cash. Sometimes the best trade is no trade. Sometimes their is no signal just chaos. Profitable trading is taking signals for trades that have good odds for success and the right risk/reward ratio for your win rate expectations. Cash is a position in itself. The less I trade the more money I make.

Ignorant of their own ignorance

The more you don’t know, the more sure you are that you know everything. New traders many times do not understand the danger of big losses. They also do not understand the mental and emotional strain of having on trades with real money in real time. A lot of hubris and arrogance is born out of not being humbled by the markets. Looking at historical charts and past history is nothing like holding positions in real time.With skin in the game and not being able to see the hard right edge of the chart as it unfolds is a different experience than theories, back tests, and reading trading books. The real traders I know that have a ton of experience are humble and know that they don’t know the future. (more…)

Mental Fitness Tips that Every Trader Should Know -Anirudh Sethi

  
Analysis, Education
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Mental Fitness for Traders makes no thought of your money related conditions. All material introduced inside is not to be viewed as venture exhortation, but rather for general enlightening purposes as it was. Trading stocks, fates, Forex, and choices do include chance, so alert should dependably be used. We can’t ensure benefits or flexibility from misfortune. You accept the whole cost and danger of any trading you attempt. You are exclusively in charge of settling on your own speculation choices. Trading achievement is needy more on the dealer’s enthusiastic state than on the system utilized, paying little respect to how vigorous it might be. We are people so having feelings like fear and voracity is ordinary in our everyday life yet not in trading when we are trading we need to act like machines or robots. Regardless of whether you’re a specialist trader or only a tenderfoot, a great tip can measurably affect your main concern. A couple of the world’s best Forex dealers we’re made a request to uncover the best three hints, traps, and strategies that assist them trade gainfully. The great ones are found and developed. The Bad ones… well, you see achievement is just a couple of basic orders, honed each day; while disappointment is essentially a couple of blunders in judgment, rehashed each day. Up to 75-80% of traders are, for the most parts. Make a bigger number of misfortunes than benefits. With such low achievement rates, stock trading may be among the more unsafe calling around. Be that as it may, the 20%+ that do profit reliably, appears to take after the same mental chain of considerations and we thought it may be fascinating to represent some of those musings here for the advantages of our pursuers.

Passion for Trading

The larger topic of good trading propensities is the absence of feelings. The less passionate you are, the more effective you can apply your psyche. When you put your brain to trading you have a tendency to pose more inquiries, actually! A few things that may ring a bell when you make inquiries could be:

Does this flag demonstrate a long or short position?

  • How is the market, in general?
  • How huge would a position it be advisable for me to take?
  • What would I be able to manage?
  • Are more individuals discussing my stock now, than prior?
  • Is the market assumption evolving? Which way?

(more…)

Trading Quotes from Trading Books

  
  Education
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“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…)

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