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Trading Quotes

  1. “Time is your friend; impulse is your enemy.” John (Jack) Bogle
  2. “When reward is at its pinnacle, risk is near at hand.” John (Jack) Bogle
  3. “Rule no. 1 is never loose money. Rule no. 2 is never forget rule number one.” Warren Buffett
  4. “Look at market fluctuations as your friend rather than your enemy. Profit from folly rather than participate in it.” Warren Buffett
  5. “I paraphrase Lord Rothschild: The time to buy is when there is blood on the streets.” David Dreman
  6. “It is absurd to think that the general public can ever make money out of market forecasts.” Benjamin Graham
  7. “The whole secret to winning and losing in the stock market is to lose the least amount possible when you are not right.” William J. O Neil
  8. “It is not whether you are right or wrong that is important, but how much money you make when you are right and how much you lose when you are wrong.” George Soros
  9. “If you want to have a better performance than the crowd, you must do things differently from the crowd.” John Templeton
  10. “My first rule is not to lose money. Losing an opportunity is minor in comparison, because there are always new opportunities around the corner.” Burt Dohmen
  11. “Experienced traders control risk, inexperienced traders chase gains.” Alan Farley
  12. “Most traders take a good system and destroy it by trying to make it into a perfect system.”
  13. “Trade what you see, Not what you think”
  14. “A Technician is an Artist and Technical Analysis is the Super Skill of discovering sharp and compact Charts and Patterns depicting Trends and Targets with Precision and Perfection.”
  15. “Identifying the “Rhythmic Flow” of Financial Instruments for skimming the crème, quietly and consistently is the fascinating nature of the Technician’s profession.”
  16. “Like any craft, such as piano playing, perfection may be elusive – I’ll never play a piece perfectly, and I’ll never buy the low and sell the high – but consistency is achievable if you practice day in and day out.”
  17. “You never need to chase a trade. The market has plenty of opportunities. The money runs out before the opportunities do.”
  18. “Good trading is a peculiar balance between the conviction to follow your ideas and the flexibility to recognize when you have made a mistake.”
  19. “Always understand the risk/reward of the trade as it now stands, not as it existed when you put the position on.”
  20. “At all levels of play the secret of success lies not so much in playing well as in not playing badly.”

Seven surprising things you may not know about Warren Buffett

Here are seven interesting things I learned about Warren Buffett from The Snowball, and some ideas on how they can help your investing:

1. Buffett set goals young. (He really started, really young)

Buffet began obsessing over numbers as a child. He raced marbles with a stopwatch and calculated the lifespan of hymn composers when six-years old. He sold chewing gum at seven and Coca Cola when he was eight: the same year he began wearing a money-changer on his belt.

  • His dad was a stockbroker. This gave him an early view of the markets
  • At ten he was chalking stock prices at a local broker’s office
  • The same year he visited the New York Stock Exchange, and was asked for a tip by senior Goldman Sachs partner Sidney Weinberg – an experience he never forgot
  • His favourite childhood book was One Thousand Ways to Make $1,000
  • At 11 he announced he was going to be a millionaire at 35, a seemingly crazy goal in 1941 (when a million really was a million)
  • He filed his first tax return aged 14, having already made $1,000 (equivalent to around $12,500 in today’s money)

The takeaway: The power of compound interest takes years to work its magic. None of us has a time machine, so the main lesson is not to delay a day when investing for the future.

2. Buffett bought his first stock when he was 12-years old

Warren put everything his schemes had earned him into a stock, Cities Service Preferred, when he was 12. He also enrolled his sister, Doris.

Buffet was already learning how to hold shares through a slump

He paid $114.75 dollars for three shares, and watched the stock price fall from $38.25 to $27 a share. His sister Doris was not happy. When Cities Service went back up to $40, he sold. He made $5 a share profit, and got Doris off his back. After he sold, the stock rose to $202 a share.

Takeaway: We all learn the same lessons. Buffett’s business partner Charlie Munger says that because Warren started thinking about odds, stocks, and goals before he was a teenager, he’s years ahead of the rest of us.

I used to watch share prices rise and fall on the Teletext TV service when I was 11 or 12. At the same age Buffett was learning real-world lessons on holding shares through a slump and selling too soon.

You’ll only discover whether you have the stomach to invest through a bear market or whether you’ll be sucked up by the next property bubble by being an active investor. Start with small sums, sure, but don’t delay that start.

3. Buffet lied, shoplifted, and played truant as a kid

This one was a real surprise. As a teenager Buffett revealed a wild streak. He says:

“We’d steal stuff for which we had no use. We’d steal golf bags and golf clubs. I walked out of the lower level where the sporting goods were, up the stairway to the street, carrying a golf bag and golf clubs, and the club was stolen and so were the bags. I stole hundreds of golf balls.

“I made up this crazy story for my parents – I told them I had this friend, and his father had died. He kept finding more of these golf balls that his father had bought. Who knows what my parents talked about at night.”

Takeaway: Even Buffett had to learn to be Buffett. I don’t know about you, but I found this heartening to read. Together with discovering that Buffett was a shy child who enrolled himself in Dale Carnegie’s public speaking course, it made him seem more human.

It’s easy to feel you haven’t got what it takes to make money. Some are born special, you might conclude. But Buffett’s history shows that even the world’s richest and most admired investor had to iron out his kinks.

Buffett’s history also makes me proud to be an outsider. Many of my college classmates entered the city or became management consultants, and have earned six-figure salaries for a decade. When property prices were booming, I’d sometimes wonder if I’d made the wrong decision by deciding to go it alone – even though I know that working a nine-to-five in an office and answering to some buffoon of a manager would kill me.

Discovering Buffett made being his own boss a top priority puts me in good company. I also suspect the unusual structure of Berkshire Hathaway grew out of Buffett’s non-confirming mentality.

4. Buffett is a businessman first, investor second (more…)

20 Ways to Stop Losing Money

1. Don’t trust the opinions of market gurus. Remember that it’s your money at stake, not theirs. Listen to what they say, then step back and do your own homework.

2. Don’t believe in a company. Trading isn’t investing, so you need to focus on the price action and forget the balance sheets. Leave the American Dream to Warren Buffett.

3. Don’t break your entry and exit rules. You made them for bad trades, just like the one you’re stuck in right now.

4. Don’t try to get even. This isn’t a game of catch-up. Every action you make has to stand on its own merits. Take your losses with detachment and make your next trade with absolute discipline.

5. Don’t trade over your head. If your last name isn’t Kass or Cramer, stop trading like them. Just concentrate on playing the game well, and stop thinking about making money.

6. Don’t seek the Holy Grail. There is no secret trading formula, other than good position choice and solid risk management. So why are you looking for it?

7. Don’t forget your discipline. Anyone can learn the basics of the trading game. Sadly, most of us will fail because of a lack of self-control, not a lack of knowledge.

8. Don’t chase the crowd. Tune out the groupthink and dance to the beat of your own drummer. Get out of the chat rooms and off the stock boards. This is serious business.

9. Don’t trade the obvious. Everyone sees the most perfect-looking patterns, which is why they set up the most painful losses. Simply stated, if it looks too good to be true, it probably is.

10. Don’t ignore the warning signs. Big losses rarely come without warning. Don’t wait for a lifeboat before you abandon a sinking ship.

11. Don’t count your chickens. That delicious profit isn’t yours until you close out the trade. Trail stops, take blind exits and do everything possible to get that money into your pocket.

12. Don’t forget the plan. Remember the reasons you took a trade in the first place, and don’t get blinded by greed or fear when the position finally starts to move.

13. Don’t have a paycheck mentality. You don’t need to get paid every week or every month, as long as you take advantage of the opportunities as they come. Classic wisdom: traders book 80% of their profits on just 20% of the days the market is open for business. (more…)

Light, Taming the Beast

Larry Light’s Taming the Beast: Wall Street’s Imperfect Answers to Making Money (Wiley, 2011) is perfect summer reading fare. The author, a financial reporter and editor, is a skilled storyteller. In this book he explores a range of investment strategies and instruments, traces their development, and in the process profiles some of the best-known investors and academics.

He covers value investing (Benjamin Graham and Warren Buffett), stocks (Jeremy Siegel), indexes (John Bogle), bonds (Bill Gross), growth investing (Thomas Rowe Price), international investing (John Templeton), real estate (Donald Trump), alternatives, asset allocation, short selling (James Chanos), hedge funds (Alfred Winslow Jones and Steve Cohen), and behaviorism (Daniel Kahneman and his followers).

Light’s thesis is that “investing success does not come in one flavor” and that “the trick is to be sufficiently flexible to dip into any or all of [the approaches he describes], but by the same token, to know their limitations.” (p. 254) He does a good job of spelling out these limitations. Even for more experienced investors who are well aware of many of these limitations, Little’s prose is so quick-paced that the book should be read, not skimmed. (more…)

25 Must-Read Quotes From Buffett's Letter to Shareholders

Warren Buffett released his annual letter (PDF file, Adobe Acrobat required) to Berkshire Hathaway (NYSE: BRK-B  ) on Saturday. If you have the time, it’s worth reading the whole thing. If not, here are 25 important quotes.

On value: “The logic is simple: If you are going to be a netbuyer of stocks in the future, either directly with your own money or indirectly (through your ownership of a company that is repurchasing shares), you are hurt when stocks rise. You benefit when stocks swoon. Emotions, however, too often complicate the matter: Most people, including those who will be net buyers in the future, take comfort in seeing stock prices advance. These shareholders resemble a commuter who rejoices after the price of gas increases, simply because his tank contains a day’s supply.”

On market moves: “Here a confession is in order: In my early days I, too, rejoiced when the market rose. Then I read Chapter Eight of Ben Graham’s The Intelligent Investor, the chapter dealing with how investors should view fluctuations in stock prices. Immediately the scales fell from my eyes, and low prices became my friend. Picking up that book was one of the luckiest moments in my life.”

On foreclosures: “A largely unnoted fact: Large numbers of people who have ‘lost’ their house through foreclosure have actually realized a profit because they carried out refinancings earlier that gave them cash in excess of their cost. In these cases, the evicted homeowner was the winner, and the victim was the lender.”

On share buybacks: “The first law of capital allocation — whether the money is slated for acquisitions or share repurchases — is that what is smart at one price is dumb at another.”

On predicting turnarounds: “Last year, I told you that ‘a housing recovery will probably begin within a year or so.’ I was dead wrong.” (more…)

Word-for-word: What Warren Buffett said about cryptocurrencies Monday

Verbatim on Bitcoin and cryptocurrencies


Warren Buffett was on CNBC on Monday and was asked about cryptocurrencies after he called Bitcoin “rat poison squared” at Berkshire Hathaway’s annual meeting.
Question: What is it about Bitcoin that gets you so fired up:
Buffett: “When you buy a farm, you look at the crop every year and what prices are and decide whether it was a satisfactory investment. I mean, you look to the asset itself and what it produces for you. When we buy a business, we look at what the business earns and decide how we feel about it in terms of what we paid, but we are buying something that at the end of the period, we have not only what we bought but what the asset produced and when you buy non-productive assets, all you’re counting on is whether the next person will pay you more because they’re even more excited about another ‘next person’ is coming along. The asset itself is creating nothing. (more…)

Benjamin Graham Quotes

  • Individuals who cannot master their emotions are ill-suited to profit from the investment process. – View Quote Details on Individuals who cannot master their emotions are ill-suited to profit…
  • Most of the time common stocks are subject to irrational and excessive price fluctuations in both directions as the consequence of the ingrained tendency of most people to speculate or gamble…to give way to hope, fear and greed. – View Quote Details on Most of the time common stocks are subject to irrational…
  • You are neither right nor wrong because the crowd disagrees with you. You are right because your data and reasoning are right. – View Quote Details on You are neither right nor wrong because the crowd disagrees…
  • Warren Buffett, story from Benjamin Graham: A story that was passed down from Ben Graham illustrates the lemminglike behavior of the crowd: “Let me tell you the story of the oil prospector who met St. Peter at the Pearly Gates. When told his occupation, St. Peter said, “Oh, I’m really sorry. You seem to meet all the tests to get into heaven. But we’ve got a terrible problem. See that pen over there? That’s where we keep the oil prospectors waiting to get into heaven. And it’s filled—we haven’t got room for even one more.” The oil prospector thought for a minute and said, “Would you mind if I just said four words to those folks?” “I can’t see any harm in that,” said St. Pete. So the old-timer cupped his hands and yelled out, “Oil discovered in hell!” Immediately, the oil prospectors wrenched the lock off the door of the pen and out they flew, flapping their wings as hard as they could for the lower regions. “You know, that’s a pretty good trick,” St. Pete said. “Move in. The place is yours. You’ve got plenty of room.” The old fellow scratched his head and said, “No. If you don’t mind, I think I’ll go along with the rest of ’em. There may be some truth to that rumor after all.” – View Quote Details on Warren Buffett, story from Benjamin Graham: A story that was…

Speculation In This Sector Will End "Very Badly," Canada's Warren Buffett Says

Whether it’s subprime auto lending, Janet Yellen’s “stretched” biotech sector, or corporate credit, bubbles abound in today’s fragile market and like Mark CubanPrem Watsa thinks the valuations investors are placing on private tech companies are simply ludicrous. But the insanity isn’t confined to private companies, Canada’s Warren Buffett says. “Speculation” is rampant in publicly traded shares as well. 

From Fairfax Financial’s shareholder letter:  

I am always amazed at the speculation that can take place in the stock market, as shown in the table below, and how long it can last:

  (more…)

Emotional Intelligence v Intellectual Intelligence in trading.

What is more important for success as a trader – A high level of Intellectual Intelligence, or a high level of Emotional Intelligence?

Warren Buffett once said; “Success in investing doesn’t correlate with I.Q. once you’re above the level of 25. Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing“.

 Very briefly emotional intelligence can be defined as an ability, skill or a self-perceived ability to identify, assess, and control the emotions of oneself, of others, and of groups. 

 Broadly speaking intellectual intelligence can be defined an academic or cognitive intelligence. Resing and Drenth (2007) use the following definition: “The whole of cognitive or intellectual abilities required to obtain knowledge, and to use that knowledge in a good way to solve problems that have a well described goal and structure.”