When it comes to market timing, you’ve got to UNLEARN responses that you’ve spent your whole life learning. Market timing isn’t about you. It is just a strategy that works over time. In other fields, probability plays little if any role. You put in effort, make sure you meet the expectations of the people who pay you, and you’re a success. In the traditional workplace, it makes sense to put a little ego and pride into your work. Your effort and talent often have a direct payoff. But with market timing, the odds can go against you, no matter how much work you put in. The perfect trade can go wrong. That’s hard to accept for most people because it means that being a successful (profitable) market timer or trader, to some extent, is just a matter of the odds randomly working in your favor. But there is good logic behind this randomness. And a successful timing or trading strategy uses this logic to profit. A successful timing strategy will exit losses quickly. It will not stay with a bullish or bearish position to sooth the ego of the strategy’s designer. It will also stay with a successful trade and not exit quickly to lock in a profit. That may feel good for a day, but if the profitable trend lasts two, three, five times longer, you have lost out on a huge profit. Recognizing that odds are part of trading takes some of the glory out of it. But on the other hand, understanding odds helps you cope with inevitable drawdowns.
Archives of “whole life” tag
rssTrading Commandments From A Samurai
1. “Accept everything just the way it is.”
= accept the market reality in front of you.
2. “Do not seek pleasure for its own sake.”
= don’t trade for pleasure
3. “Do not, under any circumstances, depend on a partial feeling.”
= don’t jump or out of trade on shallow half-baked impulsive feelings.
4. “Think lightly of yourself and deeply of the world.”
= don’t take your trading skills too seriously, take the ability of market to surprise seriously.
5. “Be detached from desire your whole life long.”
= make money, but don’t let money make you.
6. “Do not regret what you have done.”
= smile at your mistake, laugh off your profit.
7. “Never be jealous.”
= what you’ve got is good and enough and incomparable
8. “Never let yourself be saddened by a separation.”
= a loss is never final. it either stays back as lesson or returns as profit.
9. “Resentment and complaint are appropriate neither for oneself or others.”
= accept the reality, keep the power with yourself by not complaining.
10. “In all things have no preferences.”
= don’t measure your profit or loss, just measure them by the lesson or experience.
11. “Do not act following customary beliefs.”
= dare to think!
12. “Do not collect weapons or practice with weapons beyond what is useful.”
= a handful of tools are enough if you are willing to submit.
13. “Do not fear death.”
= do not fear unforeseen loss.
14. “Do not seek to possess either goods or fiefs for your old age.”
= don’t trade under pressure to accumulate profit. if you remain alive, markets will always be there. just keep learning the game.
15. “Respect Buddha and the gods without counting on their help.”
= respect luck, acknowledge god’s blessing, but don’t drag them in the market.
The Path to Greatness
There is much wisdom in the following and I wish these were my words, but sadly they are not. This particular speech doesn’t even pertain to trading, but reminds me so much of what Mark Douglas teaches. However, I always seem to find ways to relate just about everything in my life to trading, as I’m sure most who read this blog. Therefore I thought you would find as much value here as do I.
You are where you are…you have a goal
As you move towards that goal, things will happen
Some of those things will eventually, trigger in you an emotion that is counterproductive to your goal
It will cause you to act in a way, that will take you away from where you were heading, and towards something more familiar in your life that has plagued you your whole life
We all have these areas of vulnerabilityThose who master this vulnerability are the people who master their craft. The people who master that moment in time, where that reaction occurs, are the people who do extraordinary things with their life. Who overcome things that others can’t even imagine confronting. It’s because at that moment, they manage themselves through that triggered state in an effective way, rather than defaulting to their old system they developed at a very young age, that does nothing but protect them, but not advance them. If you can master those moments, your life will be catapulted into extraordinary experiences beyond anything you can imagine.
The Luckiest Day Of My Life
Warren Buffett says that one of the luckiest days of his life was when he was 19-years-old and happened to have picked up Benjamin Graham’s book, The Intelligent Investor.
That book changed his investment philosophy and his whole life.
He says that had it not been for the book, he would’ve been a different person at a different place.
Ego & Nervous Traders
There are a whole host of characters who regularly lose money in the market place, and most fall into two catogories:
False Ego Traders
& Nervous Traders The false ego mistakes come from a mixture of false pride and bravado and are the most dangerous mistakes to make. The trader, generally a beginner or intermediate — call him Tader A — gets an opinion in his head about market direction. His analysis may have even been sound, but his opinion keeps him from reading/seeing the signs that a change is occuring in the market he has targeted. He subconsciously see the changes, but false pride is the devil, and blocks the information from making it into his conscious decision making process. The change he needs to see may even be pointed out to him by a fellow trader –Trader B– but Trader A’s false ego blocks this because he knows “I’m smarter than Trader B…In fact I think its a good idea to fade Trader B”.
Trader A is also likely someone who is accustomed to being listened to. He may have been upper management in a company, or even owned the company. “People better listen to me” is how he sees it. He is likely more accustomed to talking rather then listening.
Despite trader A’s previous success’ Mother Market will bring him down quickly. Any early success he has in the market will only make for bigger losses down the road as he gets caught in the spiral of trying to make up for lost money and still make money. He doesn’t just want to get his money back, he wants that and then some. His time is valuable. He is going to make the market pay.
Well we all know how that works out, which is to say we won’t be seeing Trader A around for long. (more…)
Investment philosophy
- “Good information, thoughtful analysis, quick but not impulsive reactions, and knowledge of the historic interaction between companies, sectors, countries, and asset classes under similar circumstances in the past are all important ingredients in getting the legendary ‘it’ right that we all strive so desperately for.”
- “[T]here are no relationships or equations that always work. Quantitatively based solutions and asset-allocation equations invariably fail as they are designed to capture what would have worked in the previous cycle whereas the next one remains a riddle wrapped in an enigma. The successful macro investor must be some magical mixture of an acute analyst, an investment scholar, a listener, a historian, a river boat gambler, and be a voracious reader.Reading is crucial. Charlie Munger, a great investor and a very sagacious old guy, said it best: ‘I have said that in my whole life, I have known no wise person, over a broad subject matter who didn’t read all the time — none, zero. Now I know all kinds of shrewd people who by staying within a narrow area do very well without reading. But investment is a broad area. So if you think you’re going to be good at it and not read all the time you have a different idea than I do.'”
- “[T]he investment process is only half the battle. The other weighty component is struggling with yourself, and immunizing yourself from the psychological effects of the swings of markets, career risk, the pressure of benchmarks, competition, and the loneliness of the long distance runner.” (more…)