Archives of “stock market” tag

rss

I Say Lower Rates Below 0%!

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

Richard Russell can write:

“The big advance from the May 2009 lows was a bear market rally. The good economic news of the last few months were a mixture of hopes, BS government statistics and rosy propaganda from bleary-eyed economists and the administration. There’s no point in my going over all the damage — the plunge in the NASDAQ, the crash in the Stoxx Europe 600 Index, the smash in the Morgan Stanley World Index, the gruesome fact that at 1071, the S&P 500 is 24% below its level of ten years ago. The damage in dollar terms is reported to be $5.3 trillion. That sounds to me to be a sh– load of money. And the tragedy is that our government has spent two trillion dollars in a vain attempt to halt or reverse the primary bear trend of the market. I said at the beginning, “Let the bear complete his corrective function.” One way or another, it’s going to happen anyway. Better to have taken the pain and losses — than to push the US to the edge of the cliff. Now with the stock market crashing, the national debt is larger than ever. In fact, it is so large that it can never be paid off, regardless of cut-backs in spending or increases in taxes. Had Obama or Summers or Bernanke understood this, they never would have bled the nation dry in their vain battle to halt the primary bear trend. As I’ve said all along, the primary trend of the market is more powerful than the Fed, the Treasury, and Congress all taken together. Our know-nothing leaders have boxed the US into a situation that is so difficult that, for the life of me, I don’t see how we’re going to get out of it. Well, there’s always one way — renege on our debt. Can a sovereign nation renege on its debt and in effect, declare bankruptcy? Sad to say, I think we may find out. One basic force that the world will have to deal with is deflation. This is the monster that Bernanke is so afraid of. To fight inflation is easy — you just raise interest rates and cut back on the money supply. But deflation is a totally different animal. Interest rates are already at zero. The money has been passed out by the trillions of dollars. The stimuli have been issued. What can Bernanke do in the face of deflation?” (more…)

Art Huprich’s Market Truisms and Axioms

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

Raymond James’ P. Arthur Huprich published a terrific list of rules . Other than commandment #1, they are in no particular order:

• Commandment #1: “Thou Shall Not Trade Against the Trend.”

• Portfolios heavy with underperforming stocks rarely outperform the stock market!

• There is nothing new on Wall Street. There can’t be because speculation is as old as the hills. Whatever happens in the stock market today has happened before and will happen again, mostly due to human nature.

• Sell when you can, not when you have to.

• Bulls make money, bears make money, and “pigs” get slaughtered.

• We can’t control the stock market. The very best we can do is to try to understand what the stock market is trying to tell us.

• Understanding mass psychology is just as important as understanding fundamentals and economics.

• Learn to take losses quickly, don’t expect to be right all the time, and learn from your mistakes.

• Don’t think you can consistently buy at the bottom or sell at the top. This can rarely be consistently done.

• When trading, remain objective. Don’t have a preconceived idea or prejudice. Said another way, “the great names in Trading all have the same trait: An ability to shift on a dime when the shifting time comes.” (more…)

What is the probability of…

  
  Education
#  #  #  #  #  #  #  #  #
  • A sideways market?
  • A trending market?
  • A trend continuing;
  • A trend reversal?
  • Getting stopped out of a trade?
  • Winning a trade?
  • Breaking even?
  • Losing a trade?

All questions that need to be answered if you are to have confidence in your trading system.  For it is confidence that allows you to profit from the markets.

Ridiculous notion?  Perhaps.  But true nonetheless. 

You see, despite our civilized veneer, we are still animals that react to fear, the most powerful of emotions.  And it is fear that supercedes our thoughts when we trade.

To circumvent fear, you should develop trading plans, trade according to plan, and analyze your trades in a trading journal.  As do this, you will build a database that will create statistical patterns of your trades.  This can be studied and help you to predict the outcome of future trades. (more…)

24 Mistakes done by 90% of Traders

  
  Education
#  #  #  #  #  #  #  #  #  #  #
  • EGO (thinking you are a walking think tank, not accepting and learning from you mistakes, etc.)MISTAKE-UPDATE
  • Lack of passion and entering into stock trading with unrealistic expectations about the learning time and performance, without realizing that it often takes 4-5 years to learn how it works and that even +50% annual performance in the long run is very good
  • Poor self-esteem/self-knowledge
  • Lack of focus
  • Not working hard enough and treating your stock trading as a hobby instead of a small business
  • Lack of knowledge and experience
  • Trying to imitate others instead of developing your unique stock trading philosophy that suits best to your personality
  • Listening to others instead of doing your own research
  • Lack of recordkeeping
  • Overanalyzing and overcomplicating things (Zen-like simplicity is the key)
  • Lack of flexibility to adapt to the always/quick-changing stock market
  • Lack of patience to learn stock trading properly, wait to enter into the positions and let the winners run (inpatience results in overtrading, which in turn results in high transaction costs)
  • Lack of stock trading plan that defines your goals, entry/exit points, etc.
  • Lack of risk management rules on stop losses, position sizing, leverage, diversification, etc.
  • Lack of discipline to stick to your stock trading plan and risk management rules
  • Getting emotional (fear, greed, hope, revenge, regret, bragging, getting overconfident after big wins, sheep-like crowd-following behavior, etc.) (more…)

A Look at 9 Quotes from George Soros

  
Education, Life
#  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #

1. Perceptions affect prices and prices affect perceptions

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. (more…)

Successful Traders are Having 3 Things

  
  Education
#  #  #  #  #

1)  Resilience – Successful traders take risk.  Successful traders are sometimes wrong.  Successful traders take hits.  Successful traders learn from the hits, get up, and move on.  They are resilient.  They succeed, as Churchill observes, by moving from failure to failure with enthusiasm.
2)  Selectivity – Successful traders have clear criteria for what makes good trade ideas.  They also have separate criteria for what turns good ideas into good trades.  They don’t watch everything, and they certainly don’t trade everything.  They wait for good ideas to become good trades.
3)  Calling – Successful traders have an uncanny sense that this is what they’re meant to be doing.  It’s not a job, and it’s not a career for them.  It’s a calling.  That’s the only thing that can keep people searching and re-searching, banging away for good ideas and good trades.  And it’s the only thing that enables them to gain the immersive pattern recognition experience that separates them from average traders.
To be sure, there are other success ingredients, from discipline to creativity.  What I see among the traders listed above, as well as those I work with, is an unusual combination of these three factors.  It’s a pleasure and a true education to study successful people.  There is much more to success than avoiding failure.

1 Thing Critical To A Trader's Success

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

I think more than anything it has to be discipline. Because as important as finding a suitable methodology, developing a strategy, sound risk management, and position sizing is, it will be for nothing if you don’t have the discipline to consistently execute it and follow your rules.

Discipline is an integral part of all trading, whether systematic or discretionary, day trading or buy-and-hold, across all asset classes. I don’t believe you can be consistently successful without it.

Risk control based on risk per trade, risk control based on sector, risk control based on total portfolio.

You must know how much you can lose on a given trade, and the maximum loss to your entire portfolio at any one time. Only then can you take the necessary measures to manage these risks.

Almost equally important is correct trading psychology. Being able to accept trades that do not work. Staying focused and strong in the complete uncertainty of trading.

Because even the best trading system will have losing periods and this is when you need to remain discipline and continue executing your trades.

A trader must have many different ingredients to be successful in trading, but what is absolutely critical is that you must love the type of trading you do.

Many people think they have a passion for trading but the reality of trading; watching charts, managing risk all day, is not as exciting as many believe. If you are a day trader then you must actively enjoy this process.

If not, you must find another form of trading (or profession) that suits your style. That might be swing trading, automated trading, systems trading, whatever. But what you must have is passion!

The Right Side

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

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.

A speculator must not foolishly try to bend the markets to his will, but instead prudently bend his will to the markets! If a bull trend is evident, be long. If a bear trend dominates, be short. An elite speculator doesn’t care at all which way the markets are moving, he just wants to be “right” and recognize the trend early enough to prudently deploy his own capital and be blessed to harvest profitable trades.

Forget the endless bull and bear arguments and don’t let any other speculators try to pigeonhole you into one of the two warring camps. Instead of being a perma-bull or perma-bear, instead strive to listen to the rhythm of the markets and simply be “right” about what is coming to pass next and trade accordingly.

Greatest Challenge in Trading

  
  Education
#  #  #  #  #

“One of the greatest challenges in trading is dealing with ambiguous information. The market is always sending mixed information to various degrees. We can also see this ambiguity in the commentary from the market pundits in the media. Each pundit chooses (consciously and/or subconsciously) to focus or emphasize one thing over another thing. I came across the following quote recently by Robert Gates addressing a group at the CIA in 1991: ‘the most difficult task that falls to us in intelligence is to see the world as it is, not as we – or others – would wish it to be.’ I talk about this all the time, using different words: ‘we don’t see the market as it is; we see it as we are.’ What do I mean by that? Our thoughts, feelings, hopes, expectations, and beliefs (both conscious and subconscious) create a personal filter that we see the market through. And that filter forms the basis for our entry and exit decisions. That’s just the way it is. It’s part of being human. And this filter not only impacts how you see the market, even your choice of instrument, time frame, trading style, etc, are influenced. Traders who are self-aware, who understand their own biases, their fears and hopes and what triggers them are in a better position to profit from the market. Going one step further, traders who are self-aware and who are honest with themselves are in an even better position. And taking another step, traders who are self-aware, honest, and have the courage and willingness to do the work to incorporate their own personal trading psychology into their plan are in the best position. What kind of trader are you?” 

Focus on You

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

It is never the system or author writing the trading book that fails.
It is YOU! It is your lack of focus.
Focus on yourself and then you can focus on trading successfully.

Trading is at least 98% psychological. It’s a mental state of mind based upon your beliefs of what may happen. Books, systems and technical indicators can only take you so far! You must accept and understand that the market is all in your head. It is you versus the other trader. If you don’t understand YOU, how will you ever understand other traders; thus taking advantage of market moves based on their mental state of mind and their underlying beliefs.

Many investors, both novice and experienced, drift from book to book to book and system to system to system, never understanding why they produce inconsistent profits. They are confused, looking at too many things, complicating the entire process while ignoring the essentials to success.

Keep it simple.

Why complicate things when simplicity works; especially when it comes to trading? We know that trading may be the most difficult endeavor that any human may attempt to undertake.

Thousands of different systems work in the stock market so we can conclude that it is the user that ultimately fails because of lack of concentration and motivation to stay the course. Wall Street is not for drifters and most people can’t play the game profitably because they never sharpen their own mental skills while applying basic money management techniques. They focus on the wrong set of skills.

We all see people come and go every day: rags to riches to rags. They are motivated for weeks, months and sometimes years but most fizzle away after they fail and can’t figure out what they are doing wrong. Some investors copy a system from a so-called guru and may find success for a while but they don’t tailor it to their personality, integrate it with their investing style and focus on their mental state of mind, therefore, it will become obsolete and they will fail. Working hard to become successful in the market is fine but understand that working smarter will always take you further.

Our goal as traders and investors is to understand the crowd and anticipate how they will act and react based on the thoughts we had, prior to focusuing on the proper skills, when we were just one of the sheep (waiting to be slaughtered)!

Focus on what is important and the success will follow.

Stop focusing on iffy stochastics, Bollinger bands, MACD, ADX, earnings releases and bogus news stories. Yes they can aid you to success but the main focus is on you!

Personally speaking, I require specific fundamentals, price, volume and basic daily and weekly charts to succeed but they are secondary tools. They can help me make money as long as I am focusing on the overall picture which is my mental focus and my emotional balance.

I know I am getting all “Dr. Perruna” on you but it is true.

Once your conscious mind understands how the beliefs of the crowd work, your subconscious mind takes over and intuition kicks in and you start making some of the best decisions of your life by flawlessly following your system.

As Jesse Livermore said:

“Wall Street never changes, the pockets change, the stocks change, but Wall Street never changes, because human nature never changes”

Why? Because humans never change!

Once you understand this and learn to trade other humans, you will become successful. Yes, you will need some of the tools mentioned above but don’t focus your attention in this area. Focus when investing by mastering the beliefs of the crowd and you will always be one step ahead.

Go to top