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ECB announces cut to deposit facility rate by 10 bps to -0.50%

uropean Central Bank monetary policy decision – 12 September 2019

  • Prior decision
  • Main refinancing rate 0.00%
  • Marginal lending facility 0.25%
  • Deposit facility rate -0.50%
  • Announces rate tiering system
  • To introduce two-tier system for negative rate policy
  • Reintroduces QE, €20 billion per month from 1 November
  • Says to buy bonds as long as needed
  • To stop purchases shortly before raising rates
  • Modalities of TLTROs will be changed
  • Sees rates at present or lower levels until inflation outlook robustly converges to central bank’s aim
Overall, the decision here looks to be a weak one in terms of what markets are expecting. But the fact that QE is being reintroduced is giving bond buyers something to chew at (although it is just €20 billion per month). In my view, that’s not good enough.

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POSITION ENTRY

Why not buy at the bottom of the cup? The Risk is Higher

  • The objective is not to buy at the cheapest price when the probability of the stock having a huge move may be only so-so.
  • The objective is to buy at exactly the right time — the time when the chances are greatest that the stock will succeed and move up significantly.
  • I found through our detailed historical studies that a stock purchased at this correct “pivot point,” if all the other fundamental and technical factors of stock selection are in place, will simply not go down 8% (your protective sell rule), and has the greatest chance of moving substantially higher. So ironically, if done correctly, this is your point of least risk.
  • On the day the stock breaks out, its trading volume should increase at least 50% above its average daily trading volume.

Pyramid your initial buy

  • After your initial purchase (50% of your full position), identify a price area at which you will add a small amount as a follow-up buy if it continues to perform well.
  • I usually add more once a stock is up 2.5% to 3% from my first buy (32.5% of your full position).
  • If the stock advances 2% or 3% more, you may complete your position (17.5% of your full position).
  • Then stop buying that stock. You’ve got your basic position in the stock during its first 5% advance. Sit back and give it some time and room to grow.

10 Trading -Wisdom Quotes

  1. Ignore hearsay and don’t let your ego get the better of you.

“I learned that an opinion isn’t worth that much. It is more important to listen to the market.”
“Most traders who fail have large egos and can’t admit that they are wrong. Even those who are willing to admit that they are wrong early in their career can’t admit it later on! Also, some traders fail because they are too worried about losing. I’m not afraid to lose. When you start being afraid to lose, you’re finished.”

Brian Gelber

  1. Timing is paramount.

“I don’t lose much on trades, because I wait for the exact right moment.”

Mark Weinstein

  1. Accept full responsibility for your actions and don’t fall prey to self-sabotage.

“Many people actually want to lose on a subconscious level.”

“The realization that you are responsible for your results is the key to successful investing. Winners
know they are responsible for their results; losers think they are not.”

Dr. Van K. Tharp (more…)

A Good Trade -One Liner

  • A good trade is based on your trading plan; a bad trade is based on emotions and beliefs.
  • A good trade is based on your own personal edge; a bad trade is based on your opinion.
    • “A trader should have no opinion.  The stronger your opinion, the harder it is to get out of a losing position.”  -Paul Rotter
  • A good trade is made using your own time frame; a bad trade changes timeframe due to a loss.
  • A good trade is made in reaction to current price reality; a bad trade is made based on personal judgment.
    • Your plans can make you money because you’re not trying go predict what will happen; you’re adjusting in real time to what is happening.
    • Always trade in the direction of the longer-term trend of your time frame where the easiest money is located.
  • A good trade is made after identifying and trading with the trend; a bad trade fights the trend.
    • “The answer to the question, ‘What’s the trend?’ is the question, ‘What’s your timeframe?”  -Richard Weissman
  • A good trade is made using the trading vehicles you are an expert in; a bad trade is when you trade unfamiliar markets.
    • In the markets you will see that money flows from those who have not done their homework to those who have”

5 Minutes of Daily Conditioning

Deciding to be a profitable financial trader is the first step in becoming one. Trite you say? Not really. Missing this one step or doing it out of order xplains why 90% of brokerage accounts go to zero within the first year, many doing so in the first 4 months!

In addition to arbitrarily deciding to be a profitable financial trader, a more powerful and lasting way is to use psychological conditioning on yourself so that you CONSISTENTLY decide that you are a profitable trader Here’s my interpretation of the method for doing this that I learned from the famous success guru I alluded to in my comments two blogs back.

First, write out the sentence below on a piece of paper.

“FROM THIS MOMENT FORWARD, I AM A PROFITABLE TRADER”.

Second, consider the pain you have experienced before because you have not consistently thought of yourself as a profitable trader. Imagine experiencing that again in the present and future. Do this for 30 seconds. Notice how you feel as you do that. (more…)

10 Things that Great Traders have Declared Independence From –

 

  1. Great traders do not have to be right about any one trade, their success is based on winning more than they lose on a large amount of trades.
  2. Great traders do not need trade ideas from other traders, they trade a system and method independent of others opinions.
  3. The best traders are independent of holding on to losing trades stubbornly trying to prove they are right, they cut losses.
  4. The best traders are not prisoners of their emotions they can make clear headed decisions due to trading like it is a business not an ego trip.
  5. Rich traders became rich because they had systems that allowed winning trades to be free to run as far as they would go. They are independent of price targets.
  6. Rich traders trade independently from BLUE CHANNEL sentiment.
  7. Great traders trade charts independently of market sentiment.
  8. Great traders trade independently of talking heads on financial television.
  9. Winning traders are independent of market gurus they have proven systems and methods.
  10. Great traders are free from the risk of ruin because they never risk more than 1% to 2% of their total capital on any one trade.

The Education of a Speculator – Victor Niederhoffer (Great Quotes )

I always mark possible quotations when reading a book. This book is so full of them! Here are some random excerpts:

  • “Risk taking…is positively correlated with how well we feel about ourselves.” (page 113)
  • “One thing is for sure. Among the emotionally charged, you will not find one single long-term winner. Where are they? According to Bacon: “These quiet professionals are quite inconspicuous unless you look for them, because there are so many careless gamblers, crazy amateurs, jumping from one crackpot idea to another betting on hope and fear”. I show this passage to any trader in my office who is showing color or palpitation.” (206)
  • I find that Chinese handball has much to teach me about market practices. A limit order is a good tactic for Chinese trading, but a market order works best for handball trading. The direct market order against a quickly moving target frequently leads to a fast rebound against. The game is then over before it starts….I use limits orders. I don’t win fast, but the losses are a lot slower in coming.” (397)
  •  ”…chain smoking, temper tantrums, screaming…these expressions of emotion have within them the seeds of destruction. I enforce a ban against all jocularity and temper tantrums.” (207)
  • “Offering advice without expertise is aggressive ignorance.” (188)
  • “With the increasing specialization in modern times, born losers are commonplace.” (85)
  • “During the 10 years I traded for George Soros, I never heard him speak about a winning trade. To hear him talk, you’d think he had nothing but losers. Conversely, listening to the biggest losers, you’d think they had nothing but winners.” (95)
  • “Do not follow the mentally lazy habit of allowing a newspaper or a broker or a wise friend to do our security market thinking.” (114)
  • “The best opportunities come out of the clear blue.” (129)
  • “The exchange is a market ecosystem.” (353)
  • “Oracles, forecasts, and prophecies are a business. They should be evaluated with the same skepticism and savvy that would be applied to a used-car dealership.” (64)
  • “The only newspaper I read is the National Enquirer. I don’t own a television, don’t follow the news, don’t talk to anyone during the trading day, and don’t like to read books less than 100 years old.” (ix – preface)
  • “My resistance to conformity has been the bedrock of my speculative persona.” (110)
  • “…institutional learning, like the Harvard Colleges and Lincoln High Schools of Life – the kind that prepares most of us to become good soldiers, true believers, and conformists.” (110)
  • “An incapability of relying on oneself and faith in others are precisely the conditions that compel brutes to live in herds.” A quote from Niederhoffer’s intellectual hero, Francis Galton (136)

They are endless! If you are just to by one trading book, this is it. Enjoy!

Poker/Trading Similarities

pokertrading

  1. Actual winning/losing of a trade is unimportant.
  2. Each well executed trade, win or lose, is a victory.
  3. Each poorly executed trade is a defeat (even if you make money).
  4. Each move or action lacking discipline can eventually cost much more money than the original trade in the form of monetary/emotional loss.

Jesse Livermore: Original Trend Follower and Great Trader

jl2

The unofficial biography of Jesse Livermore was Reminiscences of a Stock Operator published 1923. Below are selected quotes:

  • Another lesson I learned early is that there is nothing new in 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.
  • I told you I had ten thousand dollars when I was twenty, and my margin on that Sugar deal was over ten thousand. But I didn’t always win. My plan of trading was sound enough and won oftener than it lost. If I had stuck to it I’d have been right perhaps as often as seven out of ten times. In fact, I have always made money when I was sure I was right before I began. What beat me was not having brains enough to stick to my own game- that is, to play the market only when I was satisfied that precedents favored my play. There is a time for all things, but I didn’t know it. And that is precisely what beats so many men in Wall Street who are very far from being in the main sucker class. There is the plain fool, who does the wrong thing at all times everywhere, but there is the Wall Street fool, who thinks he must trade all the time. No man can always have adequate reasons for buying or selling stocks daily- or sufficient knowledge to make his play an intelligent play.
  • It takes a man a long time to learn all the lessons of 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.
  • There is nothing like losing all you have in the world for teaching you what not to do. And when you know what not to do in order not to lose money, you begin to learn what to do in order to win. Did you get that? You begin to learn!
  • I think it was a long step forward in my trading education when I realized at last that when old Mr. Partridge kept on telling the other customers, Well, you know this is a bull market! he really meant to tell them that the big money was not in the individual fluctuations but in the main movements- that is, not in reading the tape but in sizing up the entire market and its trend.
  • The reason is that a man may see straight and clearly and yet become impatient or doubtful when the market takes its time about doing as he figured it must do. That is why so many men in Wall Street, who are not at all in the sucker class, not even in the third grade, nevertheless lose money. The market does not beat them. They beat themselves, because though they have brains they cannot sit tight. Old Turkey was dead right in doing and saying what he did. He had not only the courage of his convictions but the intelligent patience to sit tight.
  • ?the average man doesn’t wish to be told that it is a bull or bear market. What he desires is to be told specifically which particular stock to buy or sell. He wants to get something for nothing. He does not wish to work. He doesn’t even wish to have to think. It is too much bother to have to count the money that he picks up from the ground.
  • To tell you about the first of my million dollar mistakes I shall have to go back to this time when I first became a millionaire, right after the big break of October, 1907. As far as my trading went, having a million merely meant more reserves. Money does not give a trader more comfort, because, rich or poor, he can make mistakes and it is never comfortable to be wrong. And when a millionaire is right his money is merely one of his several servants. Losing money is the least of my troubles. A loss never bothers me after I take it. I forget it overnight. But being wrong- not taking the loss- that is what does damage to the pocketbook and to the soul.
  • What I have told you gives you the essence of my trading system as based on studying the tape. I merely learn the way prices are most probably going to move. I check up my own trading by additional tests, to determine the psychological moment. I do that by watching the way the price acts after I begin.
  • Of all speculative blunders there are few worse than trying to average a losing game. My cotton deal proved it to the hilt a little later. Always sell what shows you a loss and keep what shows you a profit. That was so obviously the wise thing to do and was so well known to me that even now I marvel at myself for doing the reverse.
  • The loss of the money didn’t bother me. Whenever I have lost money in the stock market I have always considered that I have learned something; that if I have lost money I have gained experience, so that the money really went for a tuition fee. A man has to have experience and he has to pay for it.
  • In booms, which is when the public is in the market in the greatest numbers, there is never any need of subtlety, so there is no sense of wasting time discussing either manipulation or speculation during such times; it would be like trying to find the difference in raindrops that are falling synchronously on the same roof across the street. The sucker has always tried to get something for nothing, and the appeal in all booms is always frankly to the gambling instinct aroused by cupidity and spurred by a pervasive prosperity. People who look for easy money invariably pay for the privelege of proving conclusively that it cannot be found on this sordid earth. At first, when I listened to the accounts of old-time deals and devices I used to think that people were more gullible in the 1860’s and 70’s than in the 1900’s. But I was sure to read in the newspapers that very day or the next something about the latest Ponzi or the bust-up of some bucketing broker and about the millions of sucker money gone to join the silent majority of vanished savings.
  • There are men whose gait is far quicker than the mob’s. They are bound to lead- no matter how much the mob changes.
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