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Perpetuating A Myth Is Worse Than Contrived Lies

  
  Education
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March 2015 Tigers in Africa 
“The great enemy of the truth is very often not the lie, deliberate, contrive d and dishonest, but th e myth, persistent, persuasive and unrealistic.” John F. Kennedy  
“Do you want to see another animal?”  My family were on the last leg of a wonderful trip to the Kruger Park in South Africa, and they were all getting a bit tired, but the French woman next to them had no such quarrels. “Yes”, she quipped, “I would love to see a tiger”. Everyone else was stunned into silence. I am telling you this little tale, not to make fun of the poor French woman, but because it reminds me of something we are all guilty of from time to time – unrealistic expectations. As I have learned over the years, if we cut corners on our homework, we may be expecting things to unfold in a way that just isn’t going to happen. In the following, I will review a handful of ‘African tigers’ – concepts or ideas which have become so engrained that a substantial part of the investment public takes them for granted, even if more in-depth research suggests otherwise.  We are confronted by difficult choices almost every day. The easy way out is to follow the herd and believe that a tiger was just spotted in Africa.  We all know, though, that it just isn’t going to happen (in the wild).  Tiger 1 – Equity returns will be just fine Academics operate with an expression called recency. It basically means that we, as humans, assign greater relevance and importance to more recent events than we do to more distant ones. When equities delivered exorbitant returns during the great bull market of 1982-2000, it became the norm to expect double digit returns from equities, despite the fact that equities had rarely delivered such high returns before the 1980s 

New Golf expressions

  
Education, Humour, Life
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A ‘Rock Hudson’ – a putt that looked straight, but wasn’t.

A ‘Saddam Hussein’ – from one bunker into another.

A ‘Yasser Arafat’ – butt ugly and in the sand.

A ‘John Kennedy Jr.’ – didn’t quite make it over the water.

A ‘Rodney King’ – over-clubbed.

An ‘O.J.’- got away with one.

A ‘Princess Grace’ – should have used a driver.

A ‘Princess Di’ – shouldn’t have used the driver.

A ‘Condom’ – safe, but didn’t feel very good.

A ‘Brazilian’ – shaved the hole.

A ‘Rush Limbaugh’ – a little to the right.

A ‘Nancy Pelosi’ – Way to the left and out of bounds.

A ‘James Joyce’ – a putt that’s impossible to read.

A ‘Ted Kennedy’ – goes in the water and jumps out.

A ‘Pee Wee Herman’ – too much wrist.

A ‘Sonny Bono’ – straight into the trees.

A ‘Paris Hilton’ – a very expensive hole.

A `Tiger Woods’ – Wrong Hole.

During and After the Trade

  
  Education
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1. What’s your game plan if it goes against you and threatens your survival?

2. Will you be able to get out? Did you take that into account in your workout?

3. More typically, what will you do if it goes way against you and then meanders back to give you a breakeven? Or if it immediately goes for you or aginst you?

4. Would you be willing to take a ½% profit if you get it in the first 10 minutes?

5. Did you test whether taking small opportunistic profits turns a winning system into a bad one?

6. How will unexpected cardinal events affect you like the “regrettably,” or the pre-annnouncement of something you expected for the next open? And what happens if you’re trading an individual stock and the market goes up or down a few percent during the day, or what’s the impact of a related move in oil or interest rates?

7. Are you sure that you have to monitor the trade during the day? If you’re using stops, then you probably don’t have to but then your position size would have to be reduced so much that your chances of a reasonable profit taking account of vig are close to zero. If you’re using 10% of your capital on a trade, they you’ll have to monitor it for survival. But, but, but. Are you sure you won’t be called away by phone calls, or the others?

8. Are you at equilibrium in your personal life? You’re not as talented as Tiger Woods, and you probably won’t be able to handle distressed calls for money or leaks on the home front. Are you sure that if you’re losing you won’t get hit on the head with a 7-iron, or berated until you have to give up at the worst possible time?

9. After the trade did you learn anything from the trade?

10. Are you organized sufficiently to have a record of all your trades for your accounting and learning?

11. Should you modify your existing systems based on it?

12. How does recency and frequency and value affect your future?

13. Did you fit your after activities to your mojo?

14. If you made a good profit, did you take some capital out of the fray for a rainy day?

15. Have you learned to say “fair” whenevever anyone asks you how you’re doing and are you sure that you don’t spend a fortune after a good trade, and dissipate your profits with non-economic activities?

16. Is there a better use for your time than monitoring the ticks or the market every minute of the day if you do, and if you don’t, do those who do so and have much faster and better equipment than you have an insurmountable advantage against you?

Learn from Losses

  
  Education
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As a trader you have to learn how to take losses. Period. Don’t be a crybaby. Learn how to take losses.

Learning how to take losses is one of the most important lessons you must learn if you want to survive as a trader. Nobody is 100% right all the time. Losses are inevitable. Even Michael Jordan and Tiger Woods lose sometimes and they’re considered the best in their field.

There will be trading streaks where you’ll have a number of successful consecutive trades, but that will eventually come to an end you will take a loss.

As that point it’s very important not to lose your head, you must remain in control of yourself. Don’t have a cow man.

Take a break. Calm down and relax. Take a chill pill dude.

Until you’ve regained a clear mind and an ability to think logically again, stay out of the market.

Don’t whine about your loss and never carry a prejudice against a loss.

The key to manage losses is to cut them quickly before a small loss becomes a large one.

I repeat. The key to manage losses is to cut them quickly before a small loss becomes a large one.

Never ever think that you will never lose. That’s just ludicrous. Losses are just like profits, it’s all part of the trader’s universe.

Losses are unavoidable. Get over the loss and move on to the next trade.

Learning from Tiger Woods

  
  Education
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tigerwoods

I am sure most of the questions on the eve of the third round of the British Open revolve around Tiger Woods absence.  “What’s wrong with Tiger?” “Is he losing his mental edge?”  “Is he hurt?” “Has something gone wrong in his personal life?”  “Why so many mistakes?”
Here is my question: Why can we not celebrate the fact that Tiger Woods is human? He is human isn’t he?  I know he is as mortal as we all are. That is what we all have in common. Why do we insist on him winning every tournament he enters? He won the last tournament he entered.
I think someone who always wins dies a slow death.  You know, the Alexander the Great syndrome.  “He [Alexander] wept with sorrow,” Plutarch said, “Because there were no more worlds to conquer.” (more…)

My Checklist :During and After the Trade

  
  Education
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checklist-1. What’s your game plan if it goes against you and threatens your survival?

2. Will you be able to get out? Did you take that into account in your workout?

3. More typically, what will you do if it goes way against you and then meanders back to give you a breakeven? Or if it immediately goes for you or aginst you?

4. Would you be willing to take a ½% profit if you get it in the first 10 minutes?

5. Did you test whether taking small opportunistic profits turns a winning system into a bad one?

6. How will unexpected cardinal events affect you like the “regrettably,” or the pre-annnouncement of something you expected for the next open? And what happens if you’re trading an individual stock and the market goes up or down a few percent during the day, or what’s the impact of a related move in oil or interest rates?

7. Are you sure that you have to monitor the trade during the day? If you’re using stops, then you probably don’t have to but then your position size would have to be reduced so much that your chances of a reasonable profit taking account of vig are close to zero. If you’re using 10% of your capital on a trade, they you’ll have to monitor it for survival. But, but, but. Are you sure you won’t be called away by phone calls, or the others? (more…)

CONCENTRATE ON EXECUTION

  
  Education
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Trade execution is very important.  It is the same in sports – you can have a good team, a very talented team that you put on the field.  But if they don’t execute the plays like they’re trained to, the team will probably not win.  It’s a simple fact of life.  You’ve got to be able to execute.  Tiger Woods can have a game plan when he hits that course, but if he doesn’t execute and follow through his game plan, no matter how talented he is, the competition is going to beat him.  This is a very important factor in trading a portfolio of technical or priced based strategies that is grossly overlooked. You need to get the execution of trades correctly day in and day out, because there’s just one or two missed opportunities which get away that could have made your month or there can be mistakes that can take away weeks and weeks of profitable work.  This is where the use of good automated trading software can control some of these variables. 

Don't be a mouse.

  
  Education
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mouseI want to share with you an old fable that I’m sure you already know. It is about the mouse that roared.
Once up on a time, there lived a little mouse. He lived in constant fear of a cat that lived in the village. One day, a powerful space alien magician came to town. “M’lord,” the mouse begged of him, “thou art wise and powerful, and my life is most miserable because of a cat. Woudst thou return joy into my life by making me into a cat? Then I would no longer live in fear.”
The magician smiled, raised his wand, said some magical words, drew some lines on a chart, and the mouse found himself a cat as he wished. But, he was the most frightened (more…)

Don't be tempted

  
  Education
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One of the easiest things to do is to over think. There are so many possible outcomes and our little minds love to run through all of those that it encounters or can dream up and try to assign likelihoods to each of them. I agree the human mind is an amazing thing but seriously, what’s the odds that you are going to 1) identify all the variables and 2) assign proper weighting to their probable outcomes and 3) realize the implications of the interactions between them all. It just isn’t going to happen so don’t be tempted.

Sure, you can think you have it figured out and if it goes your way you’ll pat yourself on the back and reinforce the thought that you have got the answer when all you have is a tiger by the tail. It will turn on you before you know it.

All you can do is map out what you believe will happen based on qualified trends and trend trading set-ups, put your stops in and let it rip. Of course you monitor and adjust as needed but you can only control risk and once you realize that the tiger’s tail seems a lot less frightful.

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