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An Investment Poem

  
  Education
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The newfound opportunity arises softly at first

Like pearl shaped dew drops on a tea leaf

Quite unexpected but fast entranced and immersed

Her presence over the former solitude brings relief

More precious than any amount of money or power

More beautiful than the most stunning of jewels

You cannot appreciate the sweet without the sour

The kind of perfect pattern that makes investors drool

Finding shares to short are most difficult to borrow

But who would bet against an investment with so much potential?

Elation is now the norm starting yesterday, today and tomorrow

The biggest challenge lay in exercising prudential

Potentially an addicted lost cause am I

An investor who has witnessed too many ups and downs

Is it possible to stay grounded or is my destiny the sky?

Disciplined I promise to be, carefully soaking in the sights and sounds

Because true greatness only comes around every so often

Where your hands can’t help but shake and you feel it in your gut

The time is now, the place is here — this is Zen

As nature intended, this squirrel has found his nut

SNIPER LESSONS

  
  Education
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One of the trader’s biggest psychological barriers to overcome is over trading. Of course, over trading is relative depending on the type of trader you are and the time frame(s) used to make trading decisions. However, if you have a well formulated trading plan, you will know from past experience when you are walking the line between planned trading and over trading.

Here are some of the symptoms of over trading:

1. not sticking to a plan or system

2. taking trades for no clear reason

3. taking on larger than normal positions

4. second guessing your system

5. jumping the gun (entering a trade in anticipation of an affirmative signal/pattern)

6. obligatory trading (if I am not in a trade, then I am not working)

The underlying cause of over trading is purely a lack of confidence either in yourself and/or your system. If you truly believe that your trading strategy provides X number of high probability set-ups over X number of days, then why would you waste your energy (and capital) taking high risk, low probability trades? The answer: lack of confidence. The solution: think and train like a sniper.

According to the dictionary a sniper is a skilled military shooter detailed to spot and pick off enemy soldiers from a concealed place using long-range small arms. The word originates from the snipe, a game bird difficult for hunters to sneak up on. (more…)

‘Alexander Elder Quotes’

  
  Education
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Trading is not all about just stock picking, it is not just about a winning system. Yes, first you have to understand how to trade and put the odds in your favor of winning, but that is not enough. You must also add in risk management so when you lose ten times in a row your trading career and account does not end there. You also must have  faith in your system and method to be able to keep trading it even when you are losing, and you will have losing months, maybe even a losing year, can you keep going to be around for the big wins?

One dimensional traders just pick stocks, if they are right they win for a while, but eventually they do not stop out when they are wrong and they blow up their account. They also eventually get emotionally frustrated from wild equity swings  and they eventually quit and blame the market.

Two dimensional traders have a good system and cut their losses but have trouble with self confidence and belief in their system. They tend to blame themselves when their accounts draw down 10% to 20% and have trouble understanding that it is just part of the game. The market environment is determining wins and losses not the trader, they don’t  understand this. All they can do is take their entries and exits as they come and let the market do what it does. They have not separated themselves from their trading.

The three dimensional trader takes entries and exits based on his methodology that he believes in, he manages risk per trade carefully and never loses more than 1% t0 2% of his capital on any one trade. The 3D trader’s self worth and confidence is not tied up in any one trade, or monthly performance he understands this is a long term process with ups and downs. Wins and losses do not change his mindset. It is just a business, stocks are just inventory, the market gives and the market takes away, and he just takes what it is giving.

Is Your Self-Esteem Tied To Your Account Equity?

  
  Education
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Does your self-esteem rise and fall with your account equity? If so, your probably in for some difficult times ahead with you’re trading. For some traders, a trade is more than a trade, it can represent how successful they are as a person, how much status they feel, etc.  When your self-concept is closely tied to your trading outcomes the result is a yo-yo effect in terms of your self-esteem and your internal state.  And our internal state has a lot to do with how well we trade.

Trading already involves a lot of uncertainty, and tying one’s sense of self-worth to the ups and downs of trading is unnecessarily adding emotional volatility to the picture and is usually not a good idea.

Most traders need to work on being more resilient in the face of disappointment. Trading will always involve disappointments, its part of the territory.  A delicate balance between being fully engaged in the trade with a ‘watchful curiosity’ and without being overly attached to the outcome, is how many successful traders describe their internal state.

What Warren Buffett said…

  
  Education
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W.B* For some reason, people take their cues from price action rather than from values. What doesn’t work is when you start doing things that you don’t understand or because they worked last week for somebody else. The dumbest reason in the world to buy a stock is because it’s going up.
* Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good results.
* The important thing is to keep playing, to play against weak opponents and to play for big stakes.
* Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can’t buy what is popular and do well.
* There are all kinds of businesses that Charlie and I don’t understand, but that doesn’t cause us to stay up at night. It just means we go on to the next one, and that’s what the individual investor should do. (more…)

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