Tony Oz Trading Wisdom – The Stock Trader

Tony Oz: ‘The Stock Trader – How I make a living trading stocks.” Page 163-164

[…] The thing that drives me crazy about traders is that they always tell you about a great pick they had, and how they have left so much money behind. It is always about how much money they leave behind. I used to participate in these conversations myself, and I would share my grief about the trades that got away from me. In fact, I would even do so unintentionally while teaching a seminar. Now, every time I am about to tell a story about a trade that got away from me, I take a deep breath, and I tell myself, “No one really cares!” As they say,”Misery loves company.” You might be in pain for letting a big winner go early, and you feel you have to tell the world about it. It is not going to get you anywhere. Stop feeling sorry for yourself. It is impossible to be right all the time. When you are right and you have not capitalized on being right, you are simply wrong.

One of my dear friends bought XYZ stock at 70. The stock went up to 85, and he sold it. He never told me he was in the stock prior to him selling it, and after the stock has already declined back to 75. He was so proud of himself, because he bought it at 70 and sold it at 85, especially after the stock dropped back to 75; consequently, he did everything right. He then said to me, “keep an eye on it and buy it if it trades higher than 85. I have a stop buy order on it at 85 1/2 myself.” I never really followed XYZ stock; however, every time I spoke with my friend he would say, “did you see XYZ stock today? It went up a couple of bucks. It is my pick of the year!” A few months go by, and XYZ stock took out the 85 level. It was now at 180. My buddy is glowing. “I told you, it is my pick of the year,” he says. XYZ goes up to 240 and announces a 3 for 1 stock split. “It is my pick of the year,” my buddy says. The stock ten folds, it was a great pick. My buddy was right.

No! He was wrong! Although he made a great call, he never bought XYZ back once it hit his buy target! It was his pick of the year, and he has zero dollars to show for it. Moral of the story, put your money where your mouth is. Do not use the “I should have done…” phrase. Only speak about your actions, learn from your profits and losses.

Perfectionism And Trading


Perfectionism: Many traders try very hard to always be right. If the market shows that they are wrong with a loss, they work very hard to turn that loss into a profit. They may average down on a losing position or just hold the stock after their stop price has been exceeded with the hope that the market will turn around and turn their loser into a winner. It is the pursuit of perfectionism that causes us to ignore that trading stocks is a matter of probability. Trying to always be right leads to failure, for eventually, one of those losers fails to turn around and gives the trader a portfolio crushing loss.

Not A One Way Train

Words of wisdom from Dave Landry’s new book, The Layman’s Guide To Trading Stocks:

Wall Street Myth 1: The market always goes up longer term

It seems to be universally preached that the market “always goes up longer term.” And, all you have to do is buy a diversified mutual fund or index fund and wait. The problem is that markets do not always go up longer term. Well, I suppose it all depends on what you mean by longer term.

Suppose you bought stocks in 1929 at the market peak. Provided you could have held through a 90% loss, it would then have taken you a quarter of a century just to get back to breakeven.

Let’s say you bought stocks in the mid-1960’s. Your return would have been almost zero until the market finally broke out in 1983, which was 17 years later.

When I began this chapter, I was concerned that there might be a “that was then, this is now” mentality. After all, the benchmark S&P 500 wasn’t far below breakeven from the 2000 peak. I thought I was going to have to make a strong case for not buying and holding. Unfortunately for the buy and hold crowd, the market made my case for me. The bear market that began in late 2007 would turn out to be the worst since 1929. By March 2009, the S&P was at 13-year lows. From these lows, the market will have to rally over 200 percent just to get to breakeven.

At more than one cocktail party, I have had people laugh in my face when I tell them that the market can go 25 years or more without going up. This has made for some heated discussions and awkward social situations. I have since learned from Dale Carnegie and my wife Marcy to just nod my head and enjoy my drink. Do not take my word for it, just look at the charts and grab me a Black and Tan while you are at it!

Accepting Loss

One of the fundamental principals of trading stocks, or anything for that matter, is; you never play with money you cannot afford to lose. You should not be trading money needed for car payments, rent, food, diapers etc. The reason for this is, no matter how sound a system or piece of advice may sound, trades often go against you. Trading money you can afford to lose means that you have money to live, some money saved for a rainy day, and some for trading.

Now, by trading money you can afford to, or are willing to lose means just that. Even a successful trader’s account may experience dips or losses at many points. In fact, being willing to lose, or admit loss is essential to trading. (more…)

The Mind of the Greatest Trader-Livermore

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…)

Trust Your Gut

TRUST YOUR GUTThroughout my years trading, I’ve learned many things. In fact, it’s rare that a day goes by without learning something new. Which brings me to my first point; If anyone ever tells you they know everything there is to know about trading stocks, run away from that person as fast as you can!

OK, now that I got that out of the way let’s get back to the purpose of this post. One very important rule I have learned as a Trader is to trust your gut. Now, this rule only applies in specific circumstances. There are times when I have tried to convince myself that my gut wants me to do something. That’s no good! If you have to convince yourself that your gut agrees with a move you want to make in the market, it’s bogus.

The same applies if you have to ask yourself if your gut is telling you to make a move. Seeing a good trade idea and then sitting back and asking yourself if your gut agrees is not the way to go about applying the “trust your gut” rule.

Based on my experience, the only time to truly listen is when a “gut feeling” comes out of nowhere. It just happens…there’s no real explanation. You know it when it occurs, and I highly suggest you don’t ignore it.

That said, please do not add “what does my gut say?” to your pre-trade entry checklist. Also, please do not try to force a gut feeling. Let it come naturally! My objective here is to heighten your senses and hopefully make you more confident in acting those gut feelings when they come.

ABC’s of Stock Trading

This is not like any other ABC list you might have come across about trading stocks. There are no real terms here. The following is the ABC’s of successful stock trading.
A – Action, nothing happens until you DO SOMETHING.
B – Bear trap, don’t get sucked into it.
C – Cash, not making too much when you are holding cash.
D – Due diligence, don’t jump into a position blindly.
E – Early, the best traders make a move before its popular.
F – Fear to lose money, the hardest thing to overcome in trading.
G – Greed, try to make a quick buck, and lose a quick thousand.
H – Humbled, no trader is immune from bad trades.
I – Ignorance, following recommendations blindly puts all the blame on you.
J – Justification, the more you have to convince yourself, the less likely the trade will probably work.
K – Keep discipline, stick to your strategy and have faith it will work.
L – Losses, accept them and move on. Don’t dwindle on the past.
M – Money, what makes the world turn.
N – Never is impossible, in the stock market ANYTHING can happen.
O – Only if I had…, the worst statement a trader can make.
P – Perception, moves the market more than the actual facts.
Q – Quality vs. Quantity, which one works best for your system?
R – Realized Profit, you haven’t made or lost any money until you sell.
S – Strategy, never enter a position until you know the exit plan.
T – Trade Triangle Technology… need I say more?
U – Understatement, everybody succeeds in the stock market.
V – Value, reason traders buy and sell because they think the stock price should be higher or lower.
W – Write downs, something you don’t want to see a company do too often.
X – Xcited (I know, I know), nothing feels better than executing a profitable trade.
Y – Your alone, at the end of the day the only person who cares about your account is you.
Z – Zenith, where we would like to exit your stock position.

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