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The Four Poisons

  
  Education
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There is a Korean martial art called Kum Do. This is a brutal game that involves a fight to the death with very sharp swords. The way it is practiced today is with bamboo sticks, but the moves are the same. Kum Do teaches the student warriors to avoid what are called “The Four Poisons of the Mind.” These are: fear, confusion, hesitation and surprise. In Kum Do, the student must be constantly on guard to never anticipate the next move of the opponent. Likewise, the student must never allow his natural tendencies for prediction to get the better of him. Having a preconceived bias of what the markets or the opponents will do can lead to momentary confusion and—in the case of Kum Do—to death. A single blow in Kum Do can be lethal, and is the final cut, since the object is to kill the opponent. One blow—>death—>game over.

Instead of predicting, anticipating, and being in fear and confusion, you must do exactly the opposite if you are to survive a death blow from the market movements. You must watch with a calm, clear and collected attitude and strike at the right time. A few seconds of anticipation, hesitation or confusion can mean the difference between life and death in Kum Do—and wins or losses in the stock markets. If you are not in tune with the four poisons of fear, confusion, hesitation or surprise in the markets, you are at risk for ruin. Ruin means that your money is gone and the game is over.

How can you avoid the four poisons of the trading mind: fear, confusion, hesitation and surprise?

Replace fear with faith—faith in your trading model and trading plan

Replace confusion with the attitude of being comfortable with uncertainty

Replace hesitation with decisive action

Replace surprise with taking nothing for granted and preparing yourself for anything.

Jim Rogers: Stocks To Be Crushed Any Day Now

  
Analysis, Education, Global Indices
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Governments need to tighten their monetary policies more according to Jim Rogers. Such tightening will result in stocks being crushed nevertheless.

Bloomberg: “We’re overdue for a correction” said Rogers, chairman of Rogers Holdings, said in an interview in Hong Kong. “Stock markets around the world have been going up for the past 10 months.”

“I don’t think anybody has tightened enough. I think everybody should tighten more,” he told Bloomberg. “We have huge amounts of money printed throughout the world. It’s going to cause currency instability. It’s going to cause more inflation. It’s going to cause higher interest rates.”

An extended, related video of Jim Rogers with Bloomberg is below, start from 11:00 for Jim Rogers. He talks across stocks, stimulus, commodities, and gold in particular.

One of the oddest things discussed however, toward the very end of the video, at 27:00, is how Jim Rogers is long both the U.S. dollar and gold. He’s also long the Japanese yen even though in his own words, it, like the dollar, is a ‘terribly flawed currency’.


 

 

Four Poisons

  
  Education
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poisonThere is a Korean martial art called Kum Do. This is a brutal game that involves a fight to the death with very sharp swords. The way it is practiced today is with bamboo sticks, but the moves are the same. Kum Do teaches the student warriors to avoid what are called “The Four Poisons of the Mind.” These are: fear, confusion, hesitation and surprise. In Kum Do, the student must be constantly on guard to never anticipate the next move of the opponent. Likewise, the student must never allow his natural tendencies for prediction to get the better of him. Having a preconceived bias of what the markets or the opponents will do can lead to momentary confusion and—in the case of Kum Do—to death. A single blow in Kum Do can be lethal, and is the final cut, since the object is to kill the opponent. One blow—>death—>game over.

Instead of predicting, anticipating, and being in fear and confusion, you must do exactly the opposite if you are to survive a death blow from the market movements. You must watch with a calm, clear and collected attitude and strike at the right time. A few seconds of anticipation, hesitation or confusion can mean the difference between life and death in Kum Do—and wins or losses in the stock markets. If you are not in tune with the four poisons of fear, confusion, hesitation or surprise in the markets, you are at risk for ruin. Ruin means that your money is gone and the game is over.

How can you avoid the four poisons of the trading mind: fear, confusion, hesitation and surprise? (more…)

Poker and Trading…Some Rules Applicable to Both.

  
  Education
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Pay Attention…and It Will Pay You. Concentrate on everything when you are playing/trading. Watch and listen; remember to do both and relate the two.

Understand When to Play Aggressively…It’s the Winning Way. Don’t be a tight or a loose player/trader; be a solid one and recognize when it is time to press your bets/positions. To attain superior returns in poker and investing over the long run, grind it out (in stocks until you are up 30%-40%, and then if you have convictions, go for a 100% year). If you can avoid losing and put together a few 100% years, you can achieve outstanding long-term investment performance.

Tells: Look For Them and You Will Find Them. Poker players and stock markets have tells — giveaway moves that are very revealing. Learn to recognize them. History is your textbook.

ESP…It’s a Jellyroll. In those rare instances when all your card knowledge and market judgment/knowledge leaves you in doubt, go with your strong feelings and not against it.

Honor: A Gambler/Trader’s Ace-in-the-Hole. A good reputation and respect from others will put you in good stead.

Be as Competitive as You Can Be. Go into a poker game and into a trade with the idea of completely destroying your opponent or scoring a major investment coup. If you win a pot or make a successful trade, nearly always play the next pot or make the next trade shortly thereafter — within reason. Although the cards and trades might break even in the long run, rushes do happen and momentum often feeds upon itself. When you earn the right to be aggressive, you should be aggressive. When one has a tremendous conviction in a poker hand or trade, you have to go for the jugular.

Art and Science…It takes Both. Both activities are more art than science — that’s why they are so difficult to master. Knowing what to do is about 10% of the game. Knowing how to do it is the other 90%.

Money Management. The same sound principles of money control apply to the business of tournament/professional poker and to successful investing. The way to build long-term returns or poker winnings is through preservation of capital and home runs.

The Important Twins of Poker/Investing, Patience and Staying Power. Come to the poker table or to the markets with enough time to stay and play for a while.

Alertness is a Key. You must stay alert at all times.

So is Discipline.

Never Let Your Mind Dwell on Personal Problems. Never play/trade when you are upset. Make a conscious and constant effort to discover any leaks in your play, and then eliminate them.

Control Your Emotions. Allowing your confidence to be shaken can turn a simple losing streak into a terrible case of going bad. Keep your emotions in check. When you lose a pot or make a poor investment decision, get up, walk around the chair or take some deep breaths. Don’t lose your poise. If a trade or poker hand does not work out, walk away from the position/hand. Be confident enough about your ability to win afterwards.

What is Hope ?What is Regret ?

  
  Education
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What is Hope?

Hope is a feeling of expectation and desire for a certain thing to happen. It’s an individual’s desire to want or wish for a desired event to happen.

Hope may be the most dangerous of all human emotions when it comes to trading. Hope is what keeps a trader in a losing trade after it has hit the stop. Greed and hope are what often prevent a trader from taking profits on a winning trade. When a stock is going up, traders will often remain in the trade in the “hope” of recouping past losses. Every swing trader hopes that a losing trade will somehow become a winning trade, but stock markets are not a charity. This type of thinking is dangerous because the group (stock market) could not care less about what you hope for, or what is in your best interest. Rest assured, when your thinking slips into hope mode, the market will punish you by taking your money.

What is regret?

Regret is defined as a feeling of sadness or disappointment over something that has happened or been done, especially when it involves a loss or a missed opportunity. (more…)

Core Trading Concepts

  
  Education
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If you are serious about your trading there are some concepts you must know in significant details. Those concepts will help you build a strong foundation on which you can build a trading system. There are seven  concepts you should study:
 
  • Momentum : If you understand this you will understand trends and mean reversion. You will understand why and how momentum works in the market. Most indicators are momentum based. Trend following and buying strength also works, so does mean reversion. They are all part of the momentum phenomenon. 
  • Market Breadth: Stock markets are composite markets. The overall move in market is an aggregate of moves of several hundred or several thousand stocks. So the level of participation in a move is important. 
  • Equity Selection: Because the overall market is a composite of many individual moves, it becomes critical to select right kind of stocks from the universe of stocks. Hence equity selection is extremely critical. You should know various ways in which one can select equities.
  • Market Anomalies: Market anomalies are the distortions in the market. If you base your trading on a proven and statistically significant anomaly, you will be profitable. Absent that no amount of indicators will help you. A through understanding of anomalies will give you an edge.
  • Market Microstructure: Market Microstructure is a branch of finance concerned with the details of how exchange occurs in markets.  Understanding this will tell you how the market operates. The concept of market microstructre is very critical if you are trading very small time frames or are a day trader. Because to be successful on those time frame you need to find exploitable anomalies in market microstructure. You need to understand role played by market makers, automated programs, arbitragers, large fund buyers and so on. Their tactics and behaviour creates certain patterns 
  • Growth investing : Growth investors buy stocks of companies growing faster than the average company in the market. 
  • Value investing : Value investors buy stocks of companies which are cheap or out of favor.

MSCI goes beyond BRICs

  
Analysis, Education
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MSCI has launched the MSCI EM Beyond BRIC Index, a new subset of the MSCI Emerging Markets Index.

The new index comprises seventeen countries and excludes the ‘BRIC’ economies of Brazil, Russia, India and China, which currently represent around 40% of the wider emerging markets index. MSCI said the new index offered a way to ‘track and evaluate the emerging markets opportunity set for those wishing to invest in countries outside the BRIC region’.

The index is market cap weighted, but the weighting towards the larger markets of Korea, South Africa and Taiwan is capped on a quarterly basis at 15% to ensure greater diversification. This gives greater prominence to smaller emerging market countries.

As it stands, after Korea, South Africa and Taiwan, the largest weightings in the index will be towards Thailand, Malaysia and Indonesia. Chile, Columbia, the Philippines, Turkey and Poland all have a weighting in excess of 2%.

Performance comparison (more…)

The Magical Number of Pi and Stock Markets

  
  Education
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There are some magical numbers and sequences of numbers that have their prints in the nature. They were there in the first place because God who created the whole universe encoded them just like His signature or autograph. Now, we might wonder, why is these magical numbers so important in our discovering of the secrets of the stock market trading and investing business? The simple and quick answer to that question is that these numbers resonate and vibrate in the stock markets, commodity markets and forex just as they are found in the universe that we live in. This is true for any financial markets. Before you discredit my claim of the magical number pi (π) and its application in making money in financial markets, take a good look of Fibonacci. This magical sequence of numbers of Fibonacci that starts from 1, 1, 2, 3, 5, 8, 13, 21, and etc, had been a very good technical indicator of when (time) and where (price) should the index futures reverses its trend. The number of pi (π) is so magical that its decimal portion is unique and there is no repetition of patterns. Just in case that some of you wonder what pi (π) is, it is a constant number where pi π = 3.1415926535897932384626433832795… The study of market cycles and market geometry uses pi (π) to pin-point the exact reversal date and price for stock markets and other financial markets. Here I present to you a video that sings out the magical number of pi (π).



Seven Concepts

  
  Education
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If you are serious about your trading there are some concepts you must know in significant details. Those concepts will help you build a strong foundation on which you can build a trading system. There are seven  concepts you should study:
 

  • Momentum : If you understand this you will understand trends and mean reversion. You will understand why and how momentum works in the market. Most indicators are momentum based. Trend following and buying strength also works, so does mean reversion. They are all part of the momentum phenomenon. 
  • Market Breadth: Stock markets are composite markets. The overall move in market is an aggregate of moves of several hundred or several thousand stocks. So the level of participation in a move is important. 
  • Equity Selection: Because the overall market is a composite of many individual moves, it becomes critical to select right kind of stocks from the universe of stocks. Hence equity selection is extremely critical. You should know various ways in which one can select equities.
  • Market Anomalies: Market anomalies are the distortions in the market. If you base your trading on a proven and statistically significant anomaly, you will be profitable. Absent that no amount of indicators will help you. A through understanding of anomalies will give you an edge.
  • Market Microstructure: Market Microstructure is a branch of finance concerned with the details of how exchange occurs in markets.  Understanding this will tell you how the market operates. The concept of market microstructre is very critical if you are trading very small time frames or are a day trader. Because to be successful on those time frame you need to find exploitable anomalies in market microstructure. You need to understand role played by market makers, automated programs, arbitragers, large fund buyers and so on. Their tactics and behaviour creates certain patterns 
  • Growth investing : Growth investors buy stocks of companies growing faster than the average company in the market. 
  • Value investing : Value investors buy stocks of companies which are cheap or out of favor.

 

7 concepts that can make you a better trader

  
  Education
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  • Momentum : If you understand this you will understand trends and mean reversion. You will understand why and how momentum works in the market. Most indicators are momentum based. Trend following and buying strength also works, so does mean reversion. They are all part of the momentum phenomenon. 
  • Market Breadth: Stock markets are composite markets. The overall move in market is an aggregate of moves of several hundred or several thousand stocks. So the level of participation in a move is important. 
  • Equity Selection: Because the overall market is a composite of many individual moves, it becomes critical to select right kind of stocks from the universe of stocks. Hence equity selection is extremely critical. You should know various ways in which one can select equities.
  • Market Anomalies: Market anomalies are the distortions in the market. If you base your trading on a proven and statistically significant anomaly, you will be profitable. Absent that no amount of indicators will help you. A through understanding of anomalies will give you an edge.
  • Market Microstructure: Market Microstructure is a branch of finance concerned with the details of how exchange occurs in markets.  Understanding this will tell you how the market operates. The concept of market microstructre is very critical if you are trading very small time frames or are a day trader. Because to be successful on those time frame you need to find exploitable anomalies in market microstructure. You need to understand role played by market makers, automated programs, arbitragers, large fund buyers and so on. Their tactics and behaviour creates certain patterns 
  • Growth investing : Growth investors buy stocks of companies growing faster than the average company in the market. 
  • Value investing : Value investors buy stocks of companies which are cheap or out of favor.
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