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WHAT WALL STREET CAN LEARN FROM COWBOYS

  
  Education
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James P. Owen, a 40 year veteran on Wall Street, has written a interesting book entitled Cowboy Ethics: What Wall Street Can Learn From the Code of the West.  In it he lists the 10 codes of the working cowboy, explaining how each code can be a source of inspiration for all those involved in Wall Street, from traders to institutions.  Along with the message are beautiful photographs throughout by David Stoecklein.  You could actually classify this as a trader’s coffee table book.  Here are the codes:

1.  Live Each Day With Courage.  Real courage is being scared to death and saddling up anyway, setting aside the fear of the unknown knowing there is work to be done.

2.  Take Pride in Your Work.  Cowboying doesn’t build character, it reveals it.  Stock trading brings out what is already there: pride in the preparation.

3.  Always Finish What You Start.  When you’re riding through hell…keep riding.  Good stock traders, like cowboys, never quit in the face of uncertainty.

4.  Do What Has to be Done.  The true test of a man’s honor was how much he would risk to keep it intact.  Stock trading is about taking responsibility for decisions and results, just like the cowboys.

5.  Be Tough, But Fair.  The Golden Rule was nothing less than a key to survival.  Cowboys always treated others with respect, especially those who differed.  Should we not do the same, whether bull or bear?

6.  When You Make a Promise Keep It.  A man is only as good as his word.  You have no one to trust but yourself and when you have rules they are there for you to follow.  If you do not, then you have broken a promise to yourself.  Same with traders as with cowboys.

7.  Ride For The Brand. The cowboy’s greatest devotion was to his calling and his way of life.  If you have clients, the clients come first; if you have family depending on your discipline, then they come first.  Period.

8.  Talk Less and Say More.  When there’s nothing more to say, don’t be saying it. No room for bragging or boasting out on the range or in the market.  Your work, devotion, and steadfastness speaks for itself.  Enough said.

9.  Remember That Some Things Are Not For Sale.  To the cowboy, the best things in life aren’t “things.”  What matters most on the range and in the trading room is not what money can buy but what can’t be bought.  Reputation is all that really matters.

10.  Know Where to Draw the Line.  There is right and there is wrong, and nothing in between.  Insider trading, whispers, rumors, secret deals behind close doors, and all manner of questionable activities may be all around us but we do not have to embrace them as our own.

Of all the places to learn a few lessons about investing and ourselves, is it not refreshing to find a few on the open range from a time not so long ago?

Six steps for Traders

  
  Education
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  • Define the question
  • gather information and resources
  • form hypothesis
  • perform experiment and collect data
  • analyze data
  • interpret data and draw conclusions that serve as a starting point for a new hypothesis.

1. Define the question: What is it exactly that you are trying to achieve? Are you shooting for high returns with high risk, long term gains with minimal risk, day trading, swing trading, position trading? Are you trying to make enough money to buy a new car or enough to buy a yacht? First define what it is that you want out of your trading!

2. Gather information and resources: What will be the best route to achieve your trading goals? Are you going to be a stock trader, a futures trader, a forex trader? Maybe everything? Doing the necessary research and taking the time to really get to know your market/markets is absolutely key to successful trading. Some people make great futures traders but horrible stock traders and vice-versa, while others are able to dabble in a little bit of everything and be successful. One way to see what fits you best is to try trading a little bit of everything and see where you feel the most comfortable. Start with small accounts and see what fit is a good one for you.

3. Form hypothesis: This is the fun part and where you get to design your “system” or “rules” by which to trade. Does your trading hypothesis revolve around chart patterns, trendlines, support and resistance, or are you more of a numbers kind of person that trades strictly off price? Do you use indicators? Maybe you are a programmer that has developed an algorithm. Whatever it is I believe it is important to form a hypothesis and then… (more…)

The Mind of the Greatest Trader-Livermore

  
  Education
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As revolutionary as this early-day stock guru’s approach to trading was for his time, in truth, Jesse’s stock trading “secrets” just came down to good, sound basics. His success stands as a testament to the fact that the further we wander away from trading breakout stocks and a simple, disciplined approach to trading stocks, the less success we’re inclined to have. Just how unconventional was Jesse Livermore? Take a look:

  • He believed in trading top quality stocks, not “weaker sister” stocks.
  • A stock hitting new highs was a signal of a stock’s strength to Livermore, and meant the stock had broken through its overhead supply of sellers. Today, we call this a “breakout stock”.
  • He was one of the first stock traders to realize that stocks tend to move in industry groups not in isolation.
  • Unlike today’s self-appointed stock pick gurus, Jesse Livermore was a humble student of the market, and never considered himself a master.

Livermore was ever conscious of the part one’s psychology played in achieving stock trading success, so he never spoke about what he was doing to anybody, and actually was known to ask people to keep their stock tips to themselves! He was so protective of his trading psychology that he would not even use the words “bullish” or “bearish,” thinking they would create an emotional mindset that he wanted to avoid. (more…)

One Out Of Every Ten Wall Street Employees Is A Psychopath, Say Researchers

  
Analysis, Education
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Maybe Patrick Bateman wasn’t such an outlier.

One out of every 10 Wall Street employees is likely a clinical psychopath, writes journalist Sherree DeCovny in an upcoming issue of the trade publication CFA Magazine (subscription required). In the general population the rate is closer to one percent.

“A financial psychopath can present as a perfect well-rounded job candidate, CEO, manager, co-worker, and team member because their destructive characteristics are practically invisible,” writes DeCovny, who pulls together research from several psychologists for her story, which helpfully suggests that financial firms carefully screen out extreme psychopaths in hiring.

To be sure, typical psychopathic behavior runs the gamut. At the extreme end is Bateman, portrayed by Christian Bale, in the 2000 movie “American Psycho,” as an investment banker who actually kills people and exhibits no remorse. When health professionals talk about “psychopaths,” they have a broader range of behavior in mind.

A clinical psychopath is bright, gregarious and charming, writes DeCovny. He lies easily and often, and may have trouble feeling empathy for other people. He’s probably also more willing to take dangerous risks — either because he doesn’t understand the consequences, or because he simply doesn’t care. (more…)

Stock Market Wisdom :Benjamin Lee

  
  Education
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Benjamin Lee

“There are laws governing the financial markets just as there is gravity law to keep all things together on the earth.”

  • “Stock market is a battlefield. Always remember to survive in the game first. Only those that survive the battle can enjoy the spoils of the war.”
  • “Never revenge for your losses in share market. It will get you killed.”
  • “It is better to be late, and catch the right worm, than catching the snake’s tail.”
  • “The stock market is always there. It has been there for centuries, and it lives longer than anyone of us here. Therefore, don’t rush and trade all your capital like there is no tomorrow.”
  • “Human is always subject to his own emotion. How many of us can break free from the greed, fear, and unfounded hope that are so common in stock market?”

“Do not underestimate the power of a raging bull, and the strength of a bear in stock market. Both have the power to trample you to death if you fight against them.”

“The secret recipe for success in stock market is simple. 30% in market analysis skills, 30% in risks management, 30% in emotion control, and 10% in luck.”

“Time is the cause, Volume is the fuel, and Price is the result. Of all these three, Time is the greatest factor in determining stock market direction.”

“The worst enemy to any stock traders and investors are Greed, Fear, and unfounded Hope.”

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