Archives of “stock market” tag

rss

Gerald Loeb’s Market Wisdom

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

READ THIS NOW1. The most important single factor in shaping security markets is public psychology.

2. To make money in the stock market you either have to be ahead of the crowd or very sure they are going in the same direction for some time to come.

3. Accepting losses is the most important single investment device to insure safety of capital.

4. The difference between the investor who year in and year out procures for himself a final net profit, and the one who is usually in the red, is not entirely a question of superior selection of stocks or superior timing. Rather, it is also a case of knowing how to capitalize successes and curtail failures.

5. One useful fact to remember is that the most important indications are made in the early stages of a broad market move. Nine times out of ten the leaders of an advance are the stocks that make new highs ahead of the averages. (more…)

To Be Successful Trader-U Must Have These 5 Qualities

  
  Education
#  #  #  #

5pitfalls1) Capacity for Prudent Risk-Taking – Successful young traders are neither impulsive nor risk-averse. They are not afraid to go after markets aggressively when they perceive opportunity;
2) Capacity for Rule Governance – Successful young traders have the self-control needed to follow rules in the heat of battle, including rules of position sizing and risk management;
3) Capacity for Sustained Effort – Successful young traders can be identified by the productive time they spend on trading–research, preparation, work on themselves–outside of market hours;
4) Capacity for Emotional Resilience – All young traders will lose money early in their development and experience multiple frustrations. The successful ones will not be quick to lose self-confidence and motivation in the face of loss and frustration;
5) Capacity for Sound Reasoning – Successful young traders exhibit an ability to make sense of markets by synthesizing data and generating market and trading views. They display patience in collecting information and do not jump to conclusions based on superficial reasoning or limited data.
Finally, I would say that successful developing traders approach their work with a kind of humility. They don’t know it all and they don’t pretend to know it all. They absorb wisdom from mentors and markets, and they are quick to acknowledge when they’re wrong, so that they can get out of bad positions and learn from their experience. Show me a stubborn young trader with a defensive ego, and I’ll show you one who will fight his or her learning curve every step of the way, with predictably poor results.

(more…)

10 Characteristics of Successful Traders

  
  Education
#  #  #  #  #  #  #  #  #  #

1) The amount of time spent on their trading outside of trading hours (preparation, reading, etc.);
2) Dedicated periods to reviewing trading performance and making adjustments to shifting market conditions;
3) The ability to stop trading when not trading well to institute reviews and when conviction is lacking;
4) The ability to become more aggressive and risk taking when trading well and with conviction;
5) A keen awareness of risk management in the sizing of positions and in daily, weekly, and monthly loss limits, as well as loss limits per position;
6) Ongoing ability to learn new skills, markets, and strategies; (more…)

Trading Wisdom

  
  Education
#  #  #  #  #  #  #  #  #  #

The stock market, just like life, can change on a dime.  In the market, just as in life, we must learn to adapt to change.  What separates the great trader from the rest of the crowd is his or her ability to change based on current market conditions.  In other words, NO EGO ALLOWED.  Mark Douglas, in his first book entitled The Disciplined Trader writes,

“There must be a difference between these two types of traders-the small majority of winners and the vast majority of losers who want to know what the winners know. The difference is that the traders who can make money consistently on a weekly, monthly, and yearly basis approach trading from the perspective of a mental discipline.  When asked for their secrets of success, they categorically state that they didn’t achieve any measure of consistency in accumulating wealth from trading until they learned self-discipline, emotional control, and the ability to change their minds to flow with the markets.”

We trade the current market conditions as they unfold with a plan to trade one way or the other.  To do otherwise would be to fight an undefeated foe.

The two best predictors of long-term trading success are

  
  Education
#  #  #  #  #

1)  Originality – Traders who develop their own, unique approach to markets are more likely to succeed that traders that employ generic methods.  My common impression when I meet a promising trader is, “Wow…why didn’t I think of that?”  I quickly recognize that the trader has achieved an insight that others have not.  That original thinking is more likely to generate distinctive results than run-of-the-mill thinking you could hear from any of a dozen market participants.
2)  Flexibility – The worst traders I know are perma-bulls or perma-bears.  They fit markets to their own thinking, rather than adapt to changing markets.  The best traders work with a kind of anti-confirmation bias:  they actively scan for information that does not fit with their views.  That enables them to be flexible and adapt quickly to new market conditions.    
If I were to place these two predictors of success under one umbrella, it would be “real-time creativity.”  The successful trader sees and approaches markets in fresh ways–and continually refreshes those perceptions and methods.  

Fast Easy Money

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

You know, it never stop puzzling me, why people think the stock market is a place for fast easy money.
J-LIf you had read Livermore, the guy’s puzzled too.
Let me quote an excerpt from Richard Smitten’s How to Trade Like Jesse Livermore
Livermore believed that 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, or the person of inferior emotional balance, or for the get-rich-quick adventurer. They will die poor.
dinner-party-

Over a long period of years, he rarely attended a dinner party including strangers when someone did not sit down beside him and inquire after the usual pleasantries:
“How can I make some money in the market?”
In his younger days, he went to considerable pains to explain all the difficulties faced by the trader who simply wishes to take quick and easy money out of the market; or through courteous evasiveness, he would work his way out of the snare.
In later years, his answer became a blunt “I don’t know.” (more…)

10 Trading Mistakes

  
  Education
#  #  #  #  #  #  #  #  #
  1. Are you trading without a plan? Trading without a plan makes you emotional and a gambler.
  2. Do you ever trade too big for your trading account size? Big trades are bad trades for the emotional engagement and risk of ruin that they entail over the long term.
  3. Do you risk losing more if you are wrong than you will make if you are right? The biggest driver of profitability in your trading will be big wins and small losses. Big losses and small wins is a sure path to losing your trading capital.
  4. Have you traded without studying charts to see what has happened historically with similiar price patterns? If you do your homework you can make money understanding possibilities and probabilities from past patterns. Trading your own opinions will usually put you on the wrong side of the market. 
  5. Did you trade a system before you back-tested it?Or are you just trading blindly?
  6. Have you ever exited a trade due to fear instead of due to hitting your stop loss or trailing stop? The right exit is what determines your profitability and whether your win is a big one or your loss is a big one.
  7. Have you ever entered a trade becasue of greed without an entry signal? Chasing a trade after the trend is over is a great way to lose money consistently and quickly.
  8. Have you ever copied someone else’s trade not knowing their time frame or position size? Ultimately you have to trade your own system and your own method that matches your own personality and risk tolerance. Only you can make yourself profitable with faith in yourself and your method.
  9. Are you that person that loves to short during market up trends and miss a whole up move?The easy money is on the side of the trend in your time frame going against the trend is a great way to lose money.
  10. Are you that knife catcher that keeps going long at the worn time in a down trend? When everyone is exiting a market that is the worst time to be getting long as wave after wave of holders are leaving. 

Trader’s Emotions

  
  Education
#  #  #  #  #  #

The hardest thing about trading is not the math, the method, or the stock picking. It is dealing with the emotions that arise with trading itself. From the stress of actually entering a trade, to the fear of losing the paper profits that you are holding in a winning trade, how you deal with those emotions will determine your success more than any one thing.

To manage your emotions first of all you must trade a system and method you truly believe will be a winner in the long term.

You must understand that every trade is not a winner and not blame yourself for equity draw downs if you are trading with discipline.

Do not bet your entire account on any one trade, in fact risking only 1% of your total capital on any one trade is the best thing you can do for your stress levels and risk of ruin odds.

With that in place here are some examples of emotional equations to better understand why you feel certain emotions strongly in your trading:

Despair = Losing Money – Trading Better

Do not despair look at your losses as part of doing business and as paying tuition fees to the markets. (more…)

Getting Results While Ignoring the Noise

  
  Education
#  #  #

  1. I am more concerned with keeping profits than making them. Anyone can get lucky and make money trading but only the skilled can hold onto that money over the long term.

  2. I am more concerned with how good a trader I will be a year from now than I am today. While I know what my skills are currently the upside of my futures skills is open ended based on my focus and work in this field.
  3. I am more concerned with my draw downs than my equity peaks. I know how to make capital grow and it is a much more pleasant task when I do not have to play catch up after a losing streak or trading too big.
  4. I am more concerned about what the chart is saying than what some talking head is saying on television or social media. The more they believe they have a crystal ball the more I try to avoid them.

  5. I am more concerned about whether my trailing stop or stop loss is triggered in a trade than about my own personal opinion about what may happen next. While the market is open I trade the plan I made when the market was closed regardless of what my emotions, opinions, and ego want me to do after entering a trade.

Michael Lewis’ Flash Boys: A Wall Street Revolt -A Remarkable Read

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

Michael Lewis has a spellbinding talent for finding emotional dramas in complex, highly technical subjects. He did it for the role of left tackle in American football in The Blind Side (2006), and for the science of picking baseball players in Moneyball (2003). In Flash Boys, he turns his gaze on high-frequency computerised trading in US stock markets.

In terms of sheer storytelling technique, Flash Boys is remarkable. High-frequency trading, although often in the news when things go wrong, as in the 2010 “flash crash”, is hard for a specialist to understand, let alone the average reader. It is as if a violinist, bored with the repertoire, opted to play Paganini right-handed as a challenge.

Lewis reaches a stark conclusion: US stock markets are now rigged by traders who go to astonishing lengths to gain a millisecond edge over their rivals. As the innocent investor presses a button to buy shares, they leap invisibly into electronic markets to profit from the order and thousands of others, siphoning off billions of dollars a year.

The rise of high-frequency trading (HFT) was encouraged by a regulation passed in 2005, which aimed to open large exchanges such as the New York Stock Exchange and Nasdaq to stiffer competition. The idea was to make trading fairer; it instead unleashed, in Lewis’s view and that of other critics, a tidal wave of algorithmic front-running by traders whose superfast connections to stock exchanges allow them to react to buying and selling before others can. (more…)

Go to top