MarketMantras

Over Traders Anonymous: Here's A Great Tip

2009-05-09T22:33:00.000-07:00

Over trading is the single most damaging thing to an account. the commissions alone will eventually slowly eat away at capital and that's not even taking into consideration the mental and emotional drain you will go thru. Your soul goes into a dark place when you over trade and get poor results. Sometimes it made me even angry and i used to lash out at others.It took me years to figure out that trading more ironically meant more losses, NOT more profits. The less you do, the better. I average about 2-3 trades per day normally. Any more than that and you are opening up the potential to getting emotional. It's a fact, the more you trade, the more emotional you will be get and the less rational you will be get. You will to likely scalp too much and you end up going short and long and short and long. Your head will be all over the place. Like a vegas gambler looking for one more fix.here's an awesome tip to avoid emotional trading or over trading: Make sure every trade have a story behind it. Give each trade a personality and a reason why you are in it. Write down in a quick email to yourself on why you like this trade. By the time you are done writing the email to yourself and you are getting ready to send it out, you have might already realized that this trade was an emotional reaction and there was nothing there to begin with. So before each trade, write an a email to yourself describing what you like about this trade and i guarantee you will realize that many of your trades are just emotionally driven visuals. At the end of the day, you can look back at those emails and see what you were thinking and what you were doing right or wrong.

"Common Sense" Rules for Traders

2009-05-09T21:33:00.000-07:00

Divide your capital into 10 equal parts, and never risk more than 1/10 of your capital on any one trade.
Use stop-loss orders and always protect a trade when you use a stop-loss order by using reasonable price limits.
Never over-trade and adhere to your risk management rules.
Never turn a profit into a loss. If you are using a stop-loss order, then raise your stop-loss so as to lock in a profit.
Remember, "the trend is your friend," and never buy and sell if you are not sure of the trend according to the fundamentals and technicals.
When in doubt, get out. Only trade when you feel confident about your trading strategies.
Trade in the most active markets, and refrain from the slow, inactive markets. Also, trade the most liquid contract months.
Your risk should be equally distributed. Trade in 2 or 3 different commodity products so as to avoid tying up all your capital in any one commodity.
Trade "at the market" whenever possible and try to avoid using orders with a fixed buying and selling price (except a stop-loss).
Establish a "surplus account" after you have a series of successful or winning trades. Your goal is to retain the "surplus account" in times of emergency or panic.
Never get into the market because you are anxious from waiting, and never get out of the market just because you have lost your patience.
Never buy just because the price of the commodity is "low", or sell just because the price is "high."
Never change your position in the market without a good reason. If you execute a trade, base it on a fundamental reason or technical rule. And then do not get out without a definite indication of a change in trend.
Do not guess where the top and bottom of the market is, but let the market prove its top and bottom.
Reduce your trading after your first loss; never increase or "double-up."
Perception is not reality. Only trade on "quality" advice.
Avoid the natural tendency toward increasing your trading after a long period of success or a period of profitable trades.
Use self-discipline as your guide when the market goes against your position. Take your loss and wait for another opportunity.
Never average a trading loss.
Avoid getting in and out of the market wrong, and getting in right and out wrong. This only leads to doubling your mistakes.
Avoid taking small profits and big losses.
Strategize according to market consensus. When too many market participants are moving the market in any one direction, the market becomes very vulnerable. Determine the make-up of open interest, utilizing such tools as the CFTC "Commitment of Traders Report.".
Only trade with genuine risk capital, and be aware of the risk of losing.
Do not trade when you do not understand the market. Trade with confidence and conviction.
Find your personal trading niche, and remain focused. Be cautious to not over extend your attention span.
Do not treat all markets the same. Learn to adjust the size of your positions and the frequency of your trades for different markets.
Look at all sides of the market. Try to understand why a buyer would buy, and why a seller would sell. This will enable you to be more flexible, and less resistant to change.
Ignore the minor price fluctuations and place positions with the basic trend of the market. Remember, the odds are on your side when you trade with the trend rather than try to pick trend reversal points.
Guessing key reversal points can be risky. Therefore, let the market tell you when it is over by a patterned reverse in direction.
Always remain true to your trading plan, and follow the trading style that works best for you. This may be accomplished through the help of a broker or done independently.
Never make a mistake without asking yourself why. Learn from your trading mistakes. If possible, keep a log of your trades - why you maded them, what happened and why, etc.
Do not establish your trading size based solely on margin requirements.
Always trade within your capabilities, financial and otherwise.
Put your trust in the markets, and do not be afraid when they reach historic highs or lows.
Never underestimate the makeup and volume of the market’s participants. There's a lot of money out there!
Remember, the key to any plan is how well it performs over time.
Never let greed or fear take control over your winning positions.
It is very difficult to make and keep profits by becoming addicted to either the action in minor fluctuations, or to opposing the majority just to be a contrarian.
Declining volume usually indicates the market is not accepting higher or lower prices, and could indicate a turn.
A market that is topping or bottoming out does not spend much time at the extremes, so there will be little volume at these points.
Be flexible with your trading. This will promote your growth as a trader. Alter your plan as it suits your increasing knowledge of the markets.
Finally, have confidence and believe in yourself!
______________________________

The broker and the dead donkey

2009-05-09T20:55:00.000-07:00

A broker named, Jean Paul, moved to Texas and bought a donkey froman old farmer named Ben for $100. The farmer agreed to deliver thedonkey the next day.
The next day, Ben drove up and said, "Sorry, but I have some bad news.The donkey died.""Well, then, just give me the money back," said the broker"Can't do that. I went and spent it already." Replied Ben"OK, then. Just unload the donkey," said Jean Paul."What ya going to do with him?" asked Ben."I'm going to raffle him off," said Jean Paul."You can't raffle off a dead donkey!" uttered Ben."Sure can. Watch me. I just won't tell that he's dead," said Jean Paul.A month later Ben met up with the Cajun and asked, "What happenedwith that dead donkey?""I raffled him off, I did. I sold 500-hunderd tickets at two dollars apieceand made a profit of $898," said Jean Paul."Didn't anyone complain?" inquired Ben."Just the guy who won. So I gave him his two dollars back,” said the broker

Characteristics Of A Losing Trader

2009-05-09T20:46:00.000-07:00

1.Undiscplined 2. No money management3. Unprepared 4. Overtrading habits 5. Easily tilted 6. Does not trade with probabilities 7. Trades emotionally without controlling: greed, hope, fear, and euphoria 8. Does not have a trading plan and strategy

Common emotions while trading

2009-05-09T20:36:00.000-07:00

Happiness: True happiness is the key emotion that most traders aim to reach. Sure, thrills are a part of the process, but happiness is the feeling that you get when you have had a successful trading day. However, you have to keep a clear head and know that the trading room can turn just as quickly down as it turned up.
Greed: Greed is one of the more commonly seen emotions in the trading room, and it can quickly become a habit. Greedy traders get pulled into the trading psychology that ‘just a little bit more is better.’ Obviously this is a behavior that you need to stop before it hits you. Many trading seminars will lecture extensively on this emotion and tell you that you should learn to scalp trade first, where you concentrate on making small profits, to avoid greed.
Frustration: Frustration commonly affects a lot of traders, and if you are trading everyday, then you have certainly felt frustrated at some point. There’s no trading plan to get around this emotion. You need to have a sound trading psychology that works like a mind-set of determination. You just can’t let a series of bad trades frustrate you because this can lead to a hurried approach, and that’s where you can get into trouble.
Desperation: Desperation is the emotion that captures lots of traders once they hit frustration. Desperation often throws out any and all technical analysis of the market and relies heavily on emotion. Desperation needs to be avoided at all costs because it relies on risk, not sound trading knowledge.
Thrills: Thrills are part of the trading environment that keeps many traders going. Thrills aren’t to be confused with true happiness because they aren’t the big picture; they are the small victories that you win each day. You can get a thrill when a trade starts going the way you predicted due to your use of candlestick chart patterns or another of your trading tools and tactics. While you need these daily thrills, you also need to rely on technical analysis and trading knowledge first and foremost.

List of Things I Do When I Plan a Trade

2009-05-09T20:08:00.000-07:00

1. My better trades come when I have found a place to quietly think about the trade idea, before I take the trade. I lay down for a few minutes and let my mind roam. This settles me down at an otherwise tense moment. It also allows me to clearly consider what I like or don't like about the trade.
2. It's important to me to ignore outside influences when I am planning a trade. I'd rather pay attention to my own reasons for the trade, instead of someone else's views of the currency pair that have nothing to do with the indicators and other things that I look at when wanting to buy or sell.
3. It's one thing to have a rule- or principle-based trading methodology. It's another thing to actually trade that system with a clear and rational mind.
4. Sometimes I realize that I have become very anxious about a trade idea, or a trade plan. These are good times to find a quiet place and get away from the computer, until I've sorted out the reason for the anxiety. I take plenty of trades when I'm anxious, of course, but I've at least thought about the reasons behind the anxiety first.
5. How many losses I've taken recently is the last thing on my mind.

What Does a Trader Do?

2009-05-09T19:58:00.000-07:00

One thing that I couldn't accept as an attorney (for the five minutes I seriously considered that as a profession) was that I'd be confronted with the temptation to make money from projects and clients with whom I did not want to work. The wealth that is created from doing a law-job is wealth that comes from the support of, allegiance to, and active promotion of a client's business.
How is trading different?
A trader creates wealth from scratch. When you produce income from trading, you are creating wealth from the following ingredients:
ChartsFundamental informationPriceYOUR MIND
Some would argue that trading is a zero-sum game, and what you win is someone else's loss. I think that's an immature description of trading. It's far more productive to view trading as the opportunity to use your mind, your talents, your discipline, and your friendships to create wealth.
When you produce income in this way, you're not extracting (consuming) a piece of someone else's pie. You're not feeding off the labor of others, or piggybacking on the business interests of some other party. Or earning wages from the support of a cause that you cannot support. Or befriending others for the purpose of winning their business rather than because you have shared goals. The cause is the support of you and your family. Of your ideals. The cause is the charities that you support, the friendships you can foster through trading, and the development and strengthening of your own talents.
In summary, a trader is self-sufficient. The practice of using ingredients like charts, fundamentals, price, a computer, and your mind to produce wealth enhances your ability in the long term to be completely independent.

OVERCONFIDENCE

2009-05-08T06:26:00.000-07:00

Instead of reacting to market rumors, anecdotes or advice with a healthy dose of skepticism, many people not only believe, but also act on what they hear, supremely confident that they are able to discern fact from fiction. Thinking that they know more than they do, they express their opinion as fact on subjects they actually know little about. Because admitting you don?t know something is considered a sign of ignorance, people would rather pretend to be confident and live with the consequences of being wrong. Instead of listening, they talk. Instead of learning, they lecture. Instead of waiting patiently, they act speculatively.

Trader's mindset

2009-05-03T20:04:00.000-07:00

How does someone know that they reached the trader's mindset?

Here are a few characteristics:

1. No anger whatsoever.2. Confidence and being in control of the self3. A sense of not forcing the markets4. An absence of feeling victimized by the markets5. Trading with money you can afford to risk6. Trading using a chosen approach or system7. Not influenced by others8. Trading is enjoyable9. Accepting both winning and losing trades equally10. An open mind approach at all times11. Equity curve grows as skills improve12. Constantly learning on a daily basis13. Consistently aligning trades with the market's direction14. Ability to focus on the present reality15. Taking full responsibility for your actionsDeveloping the trader's mindset takes time.

It usually takes traders 2-5 years before they can read through the above list and honestly say that it describes themselves.

ANIRUDH SETHI QUOTE

2009-05-03T17:46:00.000-07:00

Trading can be an expression of self esteem; it cannot substitute for a self. To change yourself is noble, but only shattered dreams come from efforts to change your self. You will succeed by becoming more of the person you are at your best, not by overreaching in vain hopes of transformation.

Trading Wisdom Via John Templeton

2009-05-03T17:16:00.000-07:00

*There is only one long term investment objective, maximum total after tax return.
*Success requires study and work. It’s harder than you think.
*Outperforming the majority of investors requires doing what they are not doing.
*Buy when pessimism is at its maximum, sell when optimism is at its maximum.
*Therefore, buy what most investors are selling.
*Buying when others have despaired, and selling when they are full of hope, takes fortitude.
*Bear markets aren’t forever. Prices usually turn up a year before the business cycle hits bottom.
*Popularity is temporary. When a sector goes out of fashion, it stays out for many years.
*In the long run, stock index prices fluctuate around the EPS trend line.
*Stock index earnings fluctuate around replacement book value for the stocks in the index.
*Buy what other people buy and you will succeed or fail as other people do.
*Timing: buy when short term owners have finished selling and sell when they’ve finished their buying, always opposing the fashion.
*Stock prices fluctuate more than values. So stock indexes will never produce the best total return performance.
*Focus on value because most investors focus on outlooks and trends.
*Invest worldwide.
*Stock price fluctuations are proportional to the square root of the price.
*Sell when you find a much better bargain to replace what you are selling.
*When your method becomes popular, switch to an unpopular method.
*Stay flexible. No asset or method is forever.
*Stock market investing takes more skill than any other kind of investing.
*A person can outperform a committee.
*If you begin with prayer, you will think more clearly and make fewer mistakes.
*I can’t say I’m familiar with Templeton’s work, but his name is infamous with investing. I’m up for any words of wisdom from those who came before me.

Where Is Your Head When You're Trading?

2009-05-03T16:57:00.000-07:00

Where is your head during the market day?

Are you looking through the rear-view mirror, criticizing your last trade?Are you looking at your profit/loss for the day and filtering trades through that?Are you distracted by people or the phone?Are you thinking about yourself and how well or poorly you've been doing?Are you locked in an opinion of what the market "should" be doing instead of observing what it *is* doing?Are you wanting to get your money back after a loss or hold onto it after a gain?Are you focusing more on yourself or on what markets are doing?Many times, our head just isn't in the game. We can't be focused on performance outcomes and immersed in our performance at the same time.When you ask yourself questions such as the ones above, you are thinking about your thinking: you become your own observer. Asking the right questions: That is the start of all self-coaching. With repetition, we internalize the coaching role and take control over our learning curves..

THINK !!

2009-04-25T12:12:00.000-07:00

GOLD FORECAST -27th April

2009-04-25T11:07:00.000-07:00

Last close $ 914

Hurdles :917 & 923.50.Once crosses 923.50 will take to $943-- 949.50 level.

Now $865 is major Rock Bottom !!From last three hitting same level and taking U-turn !!

Cutting Losses

2009-04-25T10:59:00.000-07:00

I simply cut my losses and by doing so kept them small. I’ve had my share of bad decisions in my trading career and keeping losses small in order to avoid huge losses is the toughest part.
Why is that so? From a psychological point of view nobody wants to sell at a loss as in most situations in life making mistakes and admitting them is associated with being a loser. That’s why most people prefer sticking to a losing position. They don’t want to be labeled a loser. So they start hoping their position will turn around and end up being a huge winner. The stock then keeps tanking. Then they hope they will be able to sell for a break even. The stock then goes down even more. That’s when being objective and balanced isn’t possible anymore. Losses have become huge and they are trapped.
The cost is simply huge. You lost money. You lost time. There’s an opportunity cost as well as during that time other stocks would have made you a profit. You lost huge amounts of energy as you couldn’t get this stock out of your mind.
Notice I’ve made ample use of the word ‘huge’. Avoid huge losses at all cost. Avoid thinking in terms of huge gains as well. Stay balanced. Stay focused and calm.

GOLD FORECAST -Updated upto 3rd April '09

2009-04-05T05:02:00.000-07:00

The levels of $ 884---879 are crucial support points.Once breaks 884 or closes below this level will take to 863---858 level.

-Any Rise ,Any Revival ...go short on Rise.

Very soon wil crash to kiss $ 820---800 level.

For more Details join us !!

10 Essential Trading Words

2009-04-05T04:54:00.000-07:00

1. Simplicity - have a simple, well defined way to generate trading ideas. Have a simple approach towards the market. You can’t take everything into account when you try to make an educated decision. Filter the noise and focus on several key market components. For me, they are relative strength and earnings’ growth.
2. Common sense - create a trading system that is designed on the basis of proven trading anomaly. For example, trend following in different time frames.
3. Flexibility - be open to opportunities in both directions of the market. Be ready to get long and short.
4. Selectivity - chose only trades with the best risk/reward ratio; stocks with the best set ups; it doesn’t make sense to risk a dollar to make a dollar.
5. Don’t overtrade - two or three well planned trades in a week (month) might be more than enough to achieve your income goals. Patiently wait fot the right set up to form and to offer good risk/reward ratio.
6. Exit strategy - Always, absolutelly always have an exit strategy before you initiate a trade. Know at which point the market is telling you that you are wrong and do not hesitate to cut your losses short immediatelly. Don’t be afraid or ashamed to take a trading loss. Everyone has them. Just make sure that you keep their size to a minimum.
7. Let’s profits run - one or two good trades might make your month. One or two good months might make your year. Letting profits run is as important as cutting losses short. Bigger winners will allow you the luxury to be right in less than half of the trades and still be profitable.
8. Consistency - Stick to your method of trading ideas’ generation.
9. Specialize - Specialize in one or two distinct setups. It could be a combination of technicals and fundamentals, certain timeframe or special event as a trading catalyst, certain sector or trading vehicle.
10. Have a plan - Which are the stocks that you will be paying special attention to - this week, today. Why those stocks? In which direction you expect them to continue their move? What will give you a clue for the beginning of the move? Follow them exclusivelly and enter without a hesitation when they give you a signal. Don’t just wake up and sit in front of your monitor without having a clue what you are going to trade today.

Manage Your Ego

2009-04-05T04:50:00.000-07:00

“Everyone wants to feel like a winner. It’s tempting to pat ourselves on the back for making a winning trade, but it’s essential to face the facts: Many times a winning trade is a combination of an astute insight AND being at the right place at the right time. In other words, external circumstances such as plain good luck make you a winner.
When you put too much of your ego on the line with your money, you may feel great when you win, but on the other hand, you may feel discouraged when you lose. When you allow your ego to enter your trading, you put subtle pressure on yourself to succeed. This added pressure could compel you to make dumb mistakes like holding on to losing trades to avoid hurting your ego. It’s better in the end to take a professional approach to trading marked by objectivity and rationality. Sure, it is necessary to have a passion for what you do, but it is not necessary to get a swelled head.”
Indeed, one of the most important things you can learn is to keep your ego under firm control so that you’re never in the position of having to protect it when you’re wrong. Doing so is usually a costly mistake, even though we all let our own egos (and yes, that includes me) get to the best of us sometimes.

Tested Classic Trading Rules

2009-03-21T20:39:00.000-07:00

1. Plan your trades and trade your plans.2. Hope and fear are the two greatest enemies of speculators.3. Keep records of your trading results.4. Maintain a positive attitude no matter how much you lose.5. Avoid overconfidence——it could be your greatest enemy.6. Continually set higher trading goals.7. Stops are the key to success for many traders——limit your losses!8. The most successful traders are those that trade long term.9. Successful traders buy into bad news ＆ sell into good news.10. The successful trader is not afraid to buy high ＆ sell low.

Eight Cognitive Biases That Affect Trading

2009-03-21T20:31:00.000-07:00

1) Loss Aversion - The tendency for people to have a strong preference for avoiding loses over acquiring gains.

2) Sunk Costs Effect - The tendency to treat money that already has been committed or spent as more valuable than money that may be spent in the future.

3) Disposition Effect - The tendency for people to lock in gains and ride losses.

4) Outcome Bias - The tendency to judge a decision by its outcome rather than by the quality of the decision at the time it was made.

5) Recency Bias - The tendency to weigh recent data or experience more than earlier data or experience.

6) Anchoring - The tendency to rely too heavily, or anchor, on readily available information.

7) Bandwagon Effect - The tendency to believe things because many other people believe them.

8) Belief In The Law Of small Numbers - The tendency to draw unjustified conclusions from too little information.

Stop Pretending You Control the Markets

2009-03-21T20:11:00.000-07:00

Summary: When it starts to rain, you can seek shelter, or you can get wet. Nature doesn’t give you any other choices, and neither do the markets.
When my cats jump up on my countertops, they do their best to plan beforehand. They step back and look for any objects big enough to see from the ground. They stand on their hind legs and try to peek at their desired landing area. But, they still can’t see enough to be sure. At some point, they have to use their past experience, and their best guesses, and just jump. This is the same thing we do when we trade stocks.
I know what I expect my target stock to do, based on all the charts I’ve seen in the past. I look at various indicators, and market mood, to try to confirm my guesses. In the end, though, I just have to jump in and see what happens.
The difference between cats and novice traders is: when the cat doesn’t like the situation it finds, it jumps right back down. Sometimes, it’s able to change course in mid-air, not even landing at all. Novice traders, on the other hand, jump into a stock trade, and stick with it no matter what. They seem to have an infinite capacity for denial.
Say a stock trader opens a position expecting a run, and the price action stalls instead. Most traders I’ve met take this as a cue to start doing further analysis. “It’s still got good tone compared to its sector,” they might conclude (or any number of other reasons why the trade is still looking great). A lot of them also focus on what they want to happen (as in “I’ll wait for it to move just a few more cents and I’ll get out”), as if the market cares.
Some see reality (perhaps whining “hey, the trade’s stalled out” in some public forum), but they still do not close out their position. Another common reaction is to root for the stock, or otherwise somehow try to mentally prop it up.
All these reactions are stressful, and ultimately useless. Be like the cat. The cat knows it can always jump back up again, whenever it wants to. Deal with your situation.

2009-03-21T20:01:00.000-07:00

People lose money at the stock market for very simple reasons:
1. They don't have a method at all. They rely on other people opinions.
2. People don't have a winning method. The method they are trading has a negative expectancy. Being disciplined about stop losses and position sizing won't help, if you are trading a losing method. Expectancy changes with volatility. When your method stops providing satisfying results, you either find another that is working in the current market conditions or stay on the side until things change.
3. Those who have a winning strategy often don't use it. They get emotional and forget about their strategy.
“Good trading is 10% technology and 90% psychology. People defeat themselves. It doesn’t matter how often you repeat basic trading principles when almost no one will practice them” (Maoxian)
Everybody knows the four cardinal rules of trading, but so few people follow them — 1) Trade with the trend. 2) Cut losses short. 3) Let profits run. 4) Manage risk.
There is a big difference between knowing something and applying it. Most people don't use what they know.

TREND

2009-03-21T19:33:00.000-07:00

Jesse Livermore: “It may surprise many to know that in my method of trading, when I see by my records that an upward trend is in progress, I become a buyer as soon as a stock makes a new high on its movement, after having had a normal reaction. The same applies whenever I take the short side. Why? Because I am following the trend at the time. My records signal me to go ahead!”

Richard Wyckoff and His Methods

2009-03-13T22:25:00.000-07:00

I derived much of my information on Richard Wyckoff from two good books: The first is "How I Trade and Invest in Stocks & Bonds," by Wyckoff. This book was first published in 1924 by "The Magazine of Wall Street." The second book is "Charting the Stock Market: The Wyckoff Method," first published in 1986 by Jack Hutson, the publisher of the magazine "Technical Analysis of Stocks & Commodities."

Richard Wyckoff, like Jesse Livermore, was a Wall Street stock trader in the early 1900s. Wyckoff's first job in 1888 was as a 15-year-old stock runner on Wall Street. By the age of 25, he had his own brokerage office. He also published his own market magazine and advisory newsletter.

Wyckoff's basic trading methodology was to chart price, volume and their relationships over time. He would then search for "turning points" in the stocks or markets. He also grouped stocks into sectors and then charted the sectors. He called these "wave charts." Wyckoff believed that stock price action consists of waves of buying (or selling) that last just as long as they can attract buyers (or sellers). When that following is exhausted, the wave stops and a counter-wave begins. His theory is not unlike the Elliott Wave theory. Importantly, Wyckoff's method in determining critical turning points was based not on mathematical formulas, but on investor psychology.

Below are some valuable "nuggets" I gleaned from the two books above. Many of these nuggets are direct quotes from Wyckoff, himself.
"Anyone who buys or sells a stock, a bond or a commodity for profit is speculating if he employs intelligent foresight. If he does not, he is gambling."
Wyckoff's goals were to select only stocks that move soonest, fastest and farthest in bull or bear markets. He limited losses and let profits run.
"Stock market technique is not an exact science. Stock (and commodities) prices are made by the minds of men (and women)." Mechanical trading methods or mathematical formulas cannot compete with good human market judgment.
Whenever you find hope or fear warping judgment, close out your position.
Being in the market at all times is not the key to profits. Being in the market when there is a clear, unconfused technical signal, and the trader's judgment is not swayed by emotion, was Wyckoff's method for trading success.
"I have yet to find a man, in or out of Wall Street, who is able to make money in (markets) continuously or uninterruptedly. Like anyone else, I have good and bad periods."
"Success in trading means excess of profits over losses. If anyone tells you they can almost be invariably successful, put him down as trying to impose on your credulity."
"While I have made it a practice to limit my risk in most cases, I can trace most of my principal losses to my failure to place stop orders when the trades were made."
"Whenever a (market) situation is not entirely clear to me, I find I can clarify it by putting down on paper all the facts, classifying them as favorable and unfavorable. In thus writing it down on paper, I not only have time to reason out each point as I go along, but when I get it all down it can be looked over an analyzed to much better advantage."
"People are successful in business because, while they make mistakes at first, they study these mistakes and avoid them in the future. Then by gradually acquiring a knowledge of the basic principles of success, they develop into good business men. But how many apply this rule to investing and trading? Very few do any studying at all. Very few take the subject seriously. They drift into the market, very often get 'nipped' as the saying is, avoid it for a while, return from time to time with similar results, then gradually drift away from it, without ever having given themselves a chance to develop into what might be good traders or intelligent investors. This is all wrong. People go seriously into the study of medicine, the law, dentistry, or they take up with strong purpose the business of manufacturing or merchandising. But very few ever go deeply into this vital subject (of trading and investing) which should seriously be undertaken by all."

Trade what you Observe - Not what you Believe

2009-03-12T23:26:00.000-07:00

One of the hardest lessons to learn in your quest to become a true trader is to suspend your beliefs and to trade that which you have learned through hours of observation.

How many times have you stated that company x is overvalued only to watch it go higher? Or undervalued only to watch it continue lower? How many times have you thought that the "market" can't go any higher and yet it did day after day? Or lower? How many times have you been scratching your head because the "market" is rising on such low volume? When is the last time you were in disbelief because company y has closed higher for 10 days in a row (after shorting it on the third day)? And have you ever acted on a recommendation from Jim Cramer only to watch in disbelief because as soon as you entered it reversed course?

Bottom line - trading what "you" believe is a recipe for disaster.

Eventually most folks figure out that the market is so chaotic that they are lost and admit they don't know how to trade. Many quit in disgust. A few of you press on and begin a journey of real study.Along the way you start to recognize when stocks are about to "break out" or "break down". You learn how to spot when an industry or a group of stocks are "on the move". You learn to when it is "safe" or "risky" to be in the market. You learn to enter a trade when the time is "right" and accept the fact that you have "no" clue as to what will happen next but are willing to "accept" what ever the outcome is and more importantly you "know" prior to the trade at what points you will exit ("initial stop", "profit target", "trailing stop"). You also learn that you are not your last trade whether it was a winner or a loser, you quietly move on and get prepared for your next trade.This is what I mean by "Trade what you Observe"! You have spent time observing the market and have found ways to profit from it's movements and you have no use for those old beliefs.

Why Traders Lose Their Discipline ?

2009-03-11T01:39:00.000-07:00

1) Trading a time frame, style, or market that does not match your talents, skills, risk tolerance, and personality.

2) Personality traits that lead to impulsivity and low frustration tolerance in stressful situations;

3) Situational performance pressures, such as trading slumps and increased personal expenses, that change how traders trade (putting P/L ahead of making good trades)

4) Trading positions that are excessive for the account size, created exaggerated P/L swings and emotional reactions

5) Not having a clearly defined trading plan/strategy in the first place

6) Unwillingness to accept losses, leading to alterations of trade plans after the trade has gone into the red

7) Loss of confidence in one's trading plan/strategy because it has not been adequately tested and battle-tested

JEWISH BRAIN !!

2009-03-10T23:20:00.000-07:00

One day at school, a second grade teacher said to the class, "I'll give $10 to the child who can tell me who was the most famous man who ever lived."
A little Irish boy put his hand up and said, "It was St. Patrick." The Teacher said, "Sorry Sean, that's not correct."
Then a little Scottish boy put his hand up and said, "It was St.Andrew." The Teacher replied, "I'm sorry, Hamish, that's not right either."
Finally, a little Jewish boy raised his hand and said, "It was Jesus Christ."
The teacher said, "That's absolutely right, Marvin. Come up here and I'll give you the $10." As the Teacher was giving Marvin his money, she said, "You know, Marvin, since you're Jewish, I was very surprised you said 'Jesus Christ'." Marvin replied, "Yeah. In my heart, I knew it was Moses, but business is business".

INVESTMENT vs GAMBLING

2009-03-10T21:35:00.000-07:00

“Investors are the big gamblers. They make a bet, stay with it, and if it goes the wrong way, they lose it all.” Jesse Livermore
Not having an exit strategy before initiating a trading position is worse than gambling, where you realize that the chance to lose is too big, therefore you risk only money you can afford to lose. Not having a stop loss means that you are most likely risking more than you could afford to lose. As they say amateurs go out of business because of taking big losses. Professionals go out of business by taking small profits. Cut your losses short when your stop level is hit. Even more, make sure to put your stop loss order immediately after you initiate a trade. Put your stop loss at a place where the trend you are following will be over. Let your profits run by gradually lifting you profit protection stop order. In order to maximize your profits you have to be willing to give some of them back.
"I don’t believe anyone ever gets wiped out in the market because of bad luck; there is always some other reason for it. Either you were off when you did the trade, or you didn’t have the experience. There is always a mistake involved.”

GOLD OUTLOOK -Updated :11th March '09

2009-03-10T21:24:00.001-07:00

Last close $ 895.90.

Do u remember from last 10 days we were highly Bearish in Gold and Silver.Now ,What to do and What to expect ?

Below $ 995 our target was $ 956---943 -904--891 level.

Now Break and close below $ 891 will take to $852----839 level in hrs only.Already completed 13 days from recent peak of $ 1008 level.

Below 891.......Don't hold long positon.

More Details our Subscribers.

PATIENCE

2009-03-10T21:13:00.000-07:00

In my opinion, patience is much harder for a "trader" than it is for a "long". It is also something that takes a lot of practice and willpower to achieve.
Conventional investing wisdom tells us that with a long time horizon, equities render a higher return than other asset classes such as bonds. There is, however, a debate over whether a buy-and-hold strategy is actually superior to an active investing strategy; both sides have valid arguments. A buy-and-hold strategy has tax benefits, however, because long-term investments tend to be taxed at a lower rate than short-term investments.

Do Not Quit!

2009-03-10T21:08:00.000-07:00

If you want to succeed in trading, don’t quit. Others will say quit. Screw them. If you want to be a trader, the best strategy for being a trader is: Don’t Quit.
Even if you lose your money. It’s the tuition you didn’t spend on a Masters, if you choose to learn the lessons. Get some kind of system down. Dont’ make it the best cause it’s not what will make you great. Its part of the equation. My final point is, if you want to be a trader, if you are a trader, then you don’t quit learning.
Trade at a level that you can learn at. Trade at the level where you see the market and can see what its telling you moment to moment. When you do this, you will be in the zone occasionally. You will know it.
I don’t agree that your rules have to be science, but you need to listen to your rules. Not doing so will show you the bad feelings of losing big. Perhaps you need to feel those feelings of losing big. What’s the message? You will lose big until you experience that and learn.

Jesse Livermore, How To Trade In Stocks

2009-03-10T20:56:00.000-07:00

-All through time, people have basically acted and reacted the same way in the market as a result of: greed, fear, ignorance, and hope. That is why the numerical formations and patterns recur on a constant basis.

-The game of speculation is the most uniformly fascinating game in the world. But it is not a game for the stupid, the mentally lazy, the person of inferior emotional balance, or the get-rich-quick adventurer. They will die poor.

Investing vs Gambling

2009-02-14T04:37:00.000-08:00

Investing vs Gambling
“Investors are the big gamblers. They make a bet, stay with it, and if it goes the wrong way, they lose it all.”
Jesse Livermore
Not having an exit strategy before initiating a trading position is worse than gambling, where you realize that the chance to lose is too big, therefore you risk only money you can afford to lose. Not having a stop loss means that you are most likely risking more than you could afford to lose. As they say amateurs go out of business because of taking big losses. Professionals go out of business by taking small profits. Cut your losses short when your stop level is hit. Even more, make sure to put your stop loss order immediately after you initiate a trade. Put your stop loss at a place where the trend you are following will be over. Let your profits run by gradually lifting you profit protection stop order. In order to maximize your profits you have to be willing to give some of them back.
I” don’t believe anyone ever gets wiped out in the market because of bad luck; there is always some other reason for it. Either you were off when you did the trade, or you didn’t have the experience. There is always a mistake involved.”
Mark Weinstein

Risk

2009-02-14T04:27:00.000-08:00

RISK is the possibility of loss. That is, if we own some stock, and there is a possibility of a price decline, we are at risk. The stock is not the risk, nor is the loss the risk. The possibility of loss is the risk. As long as we own the stock, we are at risk. The only way to control the risk is to buy or sell stock. In the matter of owning stocks, and aiming for profit, risk is fundamentally unavoidable and the best we can do is to manage the risk.
Risk Management
To manage is to direct and control. Risk management is to direct and control the possibility of loss. The activities of a risk manager are to measure risk and to increase and decrease risk by buying and selling stock.

Evolutionary Trading

2009-02-08T05:54:00.000-08:00

The problem with "evolutionary trading" is the constant adjusting to the ever changing wind, and, thus, loosing sight of your original port of call. By the time you get to your final destination, you have carved out a new routine.Knowing exactly, precisley, what your set-ups can deliver, will prevent you from manipulating your original system. This internalization of singular vision, can only come from tirelessly backtesting.

No Holy Grail In Daytrading!

2009-02-08T05:47:00.000-08:00

There never was and there never will be anything secret or new about the markets, not now, and not a hundred years from now.
Why? Because the more markets change, the more they remain the same!

The best we can ever hope to achieve as traders, is a favorable probability from trading our "perceptions of market behavior". And, like snowflakes that never was, there never will be any two traders who think exactly alike, in the ever changing present of NOW!

Market "Secrets" I am never afraid to divulge because there are no such things. Personalized trading methodology, on the other hand, while guarded with strenuous envy by some traders, are quite difficult to teach, because the backbone of any trading system is a function of the trader's unique psychological nuances.

Game Rules!

2009-02-08T05:44:00.000-08:00

There are two basic reasons why discipline is critical. First, it is a prerequisite for maintaining effective risk control. Second, you need discipline to apply your method without second-guessing and choosing which trades to take.

Supreme Confidence!

2009-02-08T05:42:00.000-08:00

Soros is the best loss taker I've ever seen. He doesn’t care whether he wins or loses on a trade. If a trade doesn't work, he's confident enough about his ability to win on other trades. There are a lot of shoes on the shelf; wear only the ones that fit. If you're extremely confident, taking a loss doesn't bother you.

-Stanley Druckenmiller

Clarity!

2009-02-08T05:40:00.001-08:00

"Free from obscurity and easy to understand; the comprehensibility of clear expression".

Ya Gotta Have An Edge!

2009-02-08T05:37:00.000-08:00

An edge is a skill or a belief that you have that enhances your probability of making money!
An edge is not something that you and only you possess. Many traders may share the same edge and all still profit, for example, cutting losses and letting profits run!.

Trading Perceptions!

2009-02-08T05:34:00.000-08:00

As in the markets, you see what you want to see and trade what you perceive to be!

TRADING SUCESS

2009-02-03T07:10:00.000-08:00

"Trading success is a function of possessing a statistical edge in the market and being able to exploit this edge with regularity. Trading failure is most likely to occur when you trade subjective, untested methods that possess no valid edge or when you are incapable of consistently applying edges that are available. Improving your psychology as a trader by itself will not confer an objective edge. Developing or purchasing a valid trading system will not in and of itself make you a great trader. The development of trading methods and the development of yourself as a trader thus must proceed in concert. You are only as good as the methods you implement and your ability to implement the methods."

Financial jokes

2009-02-02T16:31:00.000-08:00

*The market may be bad, but I slept like a baby last night. I woke up every hour and cried.
*The problem with investment bank balance sheets is that on the left side nothing is right and on the right side nothing is left.
*How do you find a good small-cap fund manager?Find a good large-cap fund manager, and wait
*The credit crunch has helped me get back on my feet. The car's been repossessed.
There's a surgeon, an architect and an economist. The surgeon said, 'Look, we're the most important. God's a surgeon because the very first thing God did was to extract Eve from Adam's rib.' The architect said, 'No, wait a minute, God is an architect. God made the world in seven days out of chaos.' The economist smiled, 'And who made the chaos?'
There are two types of economists: those who cannot forecast interest rates and those who do not know that they cannot forecast interest rates.
The United States has developed a new weapon that destroys people but it leaves buildings standing. It's called the stock market.
President Bush said clients shouldn’t be concerned by all the bank closings. If the bank is closed, you just use the ATM, he said.

President Bush said that he is saddened to hear about the demise of Lehman Brothers. His thoughts at this time go out to their mother as losing one son is hard but losing two is a tragedy.
Two Lehman employees get into an elevator to go home.One pushes the button but it doesn’t move. “What’s going on?” he asks, “why doesn’t it move”?The other pulls out his laptop and says “Well of course, according to my model, nothing can go down further.”
A new teacher was getting to know the kids by asking them their name and what their father did for a living.The first little girl said: “My name is Mary and my Daddy is a postman.”The next child, a little boy said: “I’m Andy and my Dad is a mechanic.”And so it went until one little boy said: “My name is Johnny and my father is a striptease artist.”The teacher gasped and quickly changed the subject. Later, in the school yard, the teacher approached Little Johnny privately and asked if it was really true that his dad danced nude.Little Johnny blushed and said, “No, he’s really a Business Development Director at Lehman Brothers, but I’m just too embarrassed to tell anyone.”
AIG, you know the insurance company who’s getting over $11-billion of our dollars in bailout money? Well, they announced they’re giving 130 of their executives cash awards of up to $3-million. These are cash awards, not bonuses. They say they are payments to guarantee that their top executives stay with the company. Oh, yeah, God forbid AIG should lose any of these business geniuses. Imagine what kind of shape they’d be in without these people. Again, these are cash awards, not bonuses. So we should send them to jail, not prison, see? – Jay Leno
Why have estate agents stopped looking out the window in the morning?Because otherwise they'd have nothing to do in the afternoon.
Because of the ongoing market turmoil, several companies are merging in order to survive. Some results of these mergers:Hale Business Systems, Mary Kay Cosmetics, Fuller Brush, and W. R. Grace Co. will merge and become – Hale, Mary, Fuller, Grace3M and Goodyear will merge and become – MMMGoodFedEx is expected to join its competitor UPS to become – FedUPHoneywell and Dewey Electronics – Honey Dew
P/E RATIO – The percentage of investors wetting their pants as the market keeps crashingBROKER – What my broker has made me
What’s the definition of optimism?An Investment Banker ironing five shirts on a Sunday evening.
Even when you put Bernanke on “mute”, the market still goes down.
The government is going to be handing out rebate checks. We’re like a bad car dealership now in this country, handing out the rebate checks. They’re trying to restore confidence in the U.S. economy. The bad news – half the people want the money in euros, the other half want it in pesos. – Jay Leno
A plan to bail out the Big Three automakers stalled in Congress today. Yeah. As a result, Congress plans to buy a better-built Japanese bailout plan. – Conan O'Brien General Motors versus ToyotaA Japanese company (Toyota) and an American company (General Motors) decided to have a canoe race on the Missouri River. Both teams practiced long and hard to reach their peak performance before the race.On the big day, the Japanese won by a mile. The Americans, very discouraged and depressed, decided to investigate the reason for the crushing defeat. A management team made up of senior management was formed to investigate and recommend appropriate action. Their conclusion was the Japanese had 8 people rowing and 1 person steering, while the American team had 8 people steering and 1 person rowing.Feeling a deeper study was in order, American management hired a consulting company and paid them a large amount of money for a second opinion. They advised, of course, that too many people were steering the boat, while not enough people were rowing.Not sure of how to utilize that information, but wanting to prevent another loss to the Japanese, the rowing team's management structure was totally reorganized to 4 steering supervisors, 3 area steering superintendents and 1 assistant superintendent steering manager. They also implemented a new performance system that would give the 1 person rowing the boat greater incentive to work harder. It was called the 'Rowing Team Quality First Program,' with meetings, dinners and free pens for the rower. There was discussion of getting new paddles, canoes and other equipment, extra vacation days for practices and bonuses.The next year the Japanese won by two miles. Humiliated, the American management laid off the rower for poor performance, halted development of a new canoe, sold the paddles, and canceled all capital investments for new equipment. The money saved was distributed to the Senior Executives as bonuses and the next year's racing team was outsourced to India.
Should you trust a stockbroker who's married to a travel agent?

Trade what you See - Not what you Believe

2009-01-30T19:56:00.000-08:00

One of the hardest lessons to learn in your quest to become a true trader is to suspend your beliefs and to trade that which you have learned through hours of observation.

Bottom line - trading what "you" believe is a recipe for disaster.

Along the way you start to recognize when stocks are about to "break out" or "break down". You learn how to spot when an industry or a group of stocks are "on the move". You learn to when it is "safe" or "risky" to be in the market. You learn to enter a trade when the time is "right" and accept the fact that you have "no" clue as to what will happen next but are willing to "accept" what ever the outcome is and more importantly you "know" prior to the trade at what points you will exit ("initial stop", "profit target", "trailing stop"). You also learn that you are not your last trade whether it was a winner or a loser, you quietly move on and get prepared for your next trade.

This is what I mean by "Trade what you See"! You have spent time observing the market and have found ways to profit from it's movements and you have no use for those old beliefs.

Trading Wisdom Not Heard Often

2009-01-30T19:40:00.000-08:00

Buy from the scared, sell to the greedy.
Buy their pain, not their gain.
Successful traders are quick to change their minds and have little pride of opinion.
I made my money because I always got out too soon. (Bernard Baruch)
Don't try to buy at the bottom and sell at the top. It can't be done except by liars. (Bernard Baruch)
Throughout all my years of investing I've found that the big money was never made in the buying or the selling. The big money was made in the waiting. (Jesse Livermore)
The faster a stock has climbed, the quicker it will fall.
The more certain the crowd is, the surer it is to be wrong. (Menschel)
Bear markets begin in good times. Bull markets begin in bad times
Never confuse genius with a bull market.
Always sell what shows you a loss and keep what shows you a profit

Know Yourself: Trend Following Secret Weapon!

2009-01-30T19:27:00.000-08:00

Knowing yourself means understanding how you?re likely to behave under various circumstances. Over the past couple of decades, behavioral finance researchers have developed a clearer understanding of the psychological traps investors fall in. The best way for you to avoid these traps is to become aware of them, the forms they take, and which you are most likely to fall into.
Here are five common pitfalls:
Over-confidence. Researchers have found that people consistently overrate their abilities, knowledge, and skill?especially in areas outside of their expertise. Investors must seek and weigh qualityfeedback and stay within their circle of competence.
Anchoring and adjusting. In considering a decision, we often give disproportionate weight to the first information we receive, hence anchoring our subsequent thoughts. You can mitigate this risk by seeking information from a variety of sources and viewing various perspectives.
Improper framing. The decisions of investors are affected by how a problem, or set of circumstances, is presented. Even the same problem framed in different, and objectively equal, ways can cause people to make different choices. Framing, too, plays a central role in assessing probabilities.
Irrational escalation of a commitment. Investors tend to make choices that justify past decisions, even when circumstances change. To avoid this trap, investors must only consider future costs and benefits.
Confirmation trap. Investors tend to seek out information that supports their existing point of view while avoiding information that contradicts their opinion. Psychologist Thane Pittman?s slip of tongue sums it up: ?I?ll see it when I believe it.?
You must also understand how you tend to react under stress. People with different personality profiles behave in dissimilar ways when stressed. Here again, self-awareness and some basic techniques to offset suboptimal behavior go a long way. Pearson declares, ?A gambler?s ace is his ability to think clearly under stress. That?s very important, because, you see, fear is the basis of all mankind....That?s life. Everything?s mental in life.?

Countries :Highest default risk

2009-01-26T08:55:00.000-08:00

Highlight CDS prices for sovereign debt. These prices measure the cost of protection against default for 38 countries around the world. Specifically, the CDS prices represent the cost per year to insure $10,000 worth of sovereign debt for five years.
As shown, Argentina and Venezuela have the highest default risk, followed by Iceland, Kazakhstan, Russia, and Egypt. While the UK and US have relatively low default risk compared to most other countries, their CDS prices are getting worrisomely high. At the start of 2008, it cost about $8 to insure $10,000 of UK and US debt. It now costs $135 to insure UK debt and $75 to insure US debt. Japan has the lowest default risk of all of the countries highlighted, followed by Germany and France.

Where My Interest RATE ??

2009-01-23T18:21:00.000-08:00

USAFed Funds 0.13%Discount Rate 0.50%

Japan Overnight Call 0.10%

Euroland Deposit 1.00%Lending 3.00%Repo (2 week) 2.00%

UKRepo Rate 1.50%

CanadaBank Rate 1.25%

Overnight Rate Target 1.00%

Poland28 day OMO ref rate 5.00%

Hungary Base Rate 9.50%

SwedenRepo Rate 2.00%

Denmark Repo (2 Week) 3.00%

Switzerland 3 Month CHF LIBOR 0.00% - 0.50%

AustraliaCash Rate 7.25%

Brazil Selic Rate 12.75%

Chile TPM Rate 7.25%

China 1-year deposit 2.25%1-year lending 5.31%

India Repo Rate 5.50%Reverse Repo Rate 4.00%

New ZealandOfficial Cash Rate 6.50%

Russia Overnight Rate 0.00%

South AfricaRepo Interest Rate 11.50%

South Korea BOK overnight call rate 2.50%

Turkey Overnight Borrowing 13.00%

TAKING RISK !!

2009-01-18T22:24:00.000-08:00

Everything in this world involves risk but by far the greatest risk is staying in your comfort zone because this involves the risks of lost opportunities. The secret to risk lies in knowing how to minimise its impacts on you. If you want to be a successful trader you must become passionate about the learning process. You must become totally focused on trading well as opposed to making money. You must learn from someone who can show you how to trade successfully rather than rely on machines and promises of "golden eggs". You must become absolutely disciplined in the activity of trading.

Why Do Trend Traders Win the Big Money?

2009-01-18T22:03:00.000-08:00

Ted Williams. The man epitomizes the word "discipline". Trend Followers, like Williams, wait for their pitch -- and then whack it for homeruns.
Now think for a moment about investment sites such as all of the stock tip chat houses. They are useless when it comes to helping you to make money in the long run. Why? There is no discipline. They say there is a good pitch to hit everyday. This is far from true.
There are typically three stages an investor goes through before they become successful. Building discipline starts with an understanding of these points:
Easy Money: The first stage involves thinking there is easy money to be made. This is the thinking of a newbie. Often, after a big stock tip gone wrong or a couple great broker recommendations that lose serious money, you enter the second stage.
I need a plan: The second stage begins when an investor or trader decides a plan is needed to win. The problems begin when the search for a plan becomes a search for the Holy Grail. And we all know there is no Holy Grail. What is needed is more than just a "system". What is needed is you following the system. This leads to stage three.
I'm responsible for my success: Stage three comes when the investor or trader realizes that success comes from inside the person, not outside. To achieve true success you must understand the market is not responsible, you are. There is no one to blame or compliment but yourself when it comes to trading. So find a solid plan and follow it.
Trend Following demands that you detach emotions from your trading and maintain exacting discipline. Trend Following, for example, can be a winning plan, but you must be disciplined to do the hard (and right) thing everyday.

LOSS

2009-01-18T21:57:00.000-08:00

My approach is to confront losses even before they materialize. I rehearse the process of losing. Whenever I take a position, I like to imagine what it would be like under the worst-case scenario. In doing so, I minimize the confusion if that situation actually develops. In my view, losses are a very important part of trading. When a loss happens, I believe in embracing it.

By embracing a loss, really feeling it, I tend to have less fear about a potential loss the next time around. If I can’t get over the emotions of taking a loss in twenty-four hours, then I’m trading too large or doing something else wrong. Also, the process of rehearsing potential losses and confronting actual losses helps me adapt to increasing levels of risk over time.

Think & Act !!

2009-01-18T21:43:00.000-08:00

Always respect the marketplace. Never take anything for granted. Do your homework. Recap the day. Figure out what you did right and what you did wrong. That is one part of the homework; the other part is projective. What do I want to happen tomorrow? What happens if the opposite occurs? What happens if nothing happens? Think through all the “what-ifs.” Anticipate and plan, rather than react.

RAJU DA DHABA

2009-01-17T20:17:00.000-08:00

Pain of Loss

2009-01-16T20:48:00.000-08:00

Ervolini says market losses affect the brain in the same way excrement or a foul smell does. We recoil without thinking, as if we’re confronted with a disgusting and possibly harmful physical presence. This reaction stems from our unconscious desire to immediately end the pain. “The experience of losing $1 is three times more emotionally impacting than the experience of winning $1,” Ervolini says. “We learn more intensely when we lose.” Because the pain of loss is so much greater than the joy of gains, which Ervolini says affect the same parts of the brain as sex and certain narcotics, people are more likely to hang onto losing investments as they drop and to sell winners before they should. The joy of riding an investment on the way up isn’t enough to overcome the fear we have of losing money if it turns. If it goes up $3, but then drops $1 from its high before we sell it, we feel pain even though we’re able to sell at a profit. That $2 net gain just isn’t enough.

Sample of Trading Floor Hand Signals

2009-01-15T18:21:00.000-08:00

Why Many Traders Lose Money?

2009-01-13T21:32:00.000-08:00

They lack discipline: It takes an accumulation of knowledge and sharp focus to trade successfully. Most traders would rather listen to the advice of others than take the time to learn a trading system. Let’s face it: Most people are lazy when it comes to trading. Although money may be the most important concern they have, and earning it, the most important goal they work towards, learning how to invest it is low on their to do list.
They are impatient: Traders have an insatiable need for action. It may be the adrenaline rush they’re after. It may be their gambler’s mentality. It may be they feel life is passing them by, and they say, It’s now or never. Trading is never: now or never. Trading is about patience and objective decision-making.
Traders do not trade objectively: Many traders have the habit of not cutting losses fast enough. It goes against their grain to sell. At the same time they often get out of winners too soon. It sounds simple, but it takes emotional disengagement to trade objectively.
Traders personalize losses: Some speculators don't have the temperament to accept small losses in a trade. They take each loss as a personal failure.
Traders are greedy: They try to pick tops or bottoms in hopes they’ll be able to time their trades to maximize their profits.
Traders won’t admit to reality: They are not willing to believe the only truth there is: The truth of price. As a result, they act contrary to the trend, and, deluding themselves, they lose.
Traders buy and hold: Out of fear, they hold on to losers, anxiously watching them tank, but taking no action. When they finally sell, they are angry and embarrassed, yet they still buy and hold because they are rigid about change.
Traders act impulsively: They often jump into a market based on a story in the morning paper. The market has already discounted the data, or it is outdated and misleading information.

Stock Market Drinking Game

2009-01-12T17:09:00.000-08:00

EMERGENCY ?

2009-01-12T07:37:00.000-08:00

Try to answer the following questions:

2009-01-11T22:40:00.000-08:00

1)Have you often gambled longer than you had planned?
2)Have you often gambled until your last dollar was gone?
3)Have thoughts of gambling caused you to lose sleep?
4)Have you used your income or savings to gamble while letting bills go unpaid?
5)Have you made repeated, unsuccessful attempts to stop gambling?
6)Have you broken the law or considered breaking the law to pay for your gambling?
7)Have you borrowed money to pay for your gambling?
8)Have you felt depressed or suicidal because of your gambling losses?
9)Have you been remorseful after gambling?
10)Have you ever gambled to get money to meet your financial obligations?
We could not help but see their relevance for the legions of losing day traders out there. Just replace the word gambling with trading.

Anirudh Sethi's -Lessons From 2008 -PART II

2009-01-10T18:36:00.000-08:00

1)In panics there is almost nowhere to make money without taking excessive risk
2)Timing entries and exits to oversold & overbought conditions helps achieve low-risk/high-reward entries
3)There is no such thing as a safe investment
4)Markets are dysfunctional, corrupt, and have no oversight
5)To let a stock prove itself to me, prior to jumping in based on my analysis alone
6)The ability to change and adapt to market conditions quickly is more important than I thought
7)Don’t look back on missed opportunities but to look ahead for the next one
8)Buy & hold is dead
9)Discipline to a plan is crucial
10)I always tend to make the same mistakes (not having enough patience and trying to get the maximum return in the shortest period)
11)You cannot be complacent in face of headwinds
12)To accept a small gain rather than always looking for a home run
13)Ignore the noise - focus on price action and you’ll do fine!
14)You must take time to analyze your position through multiple time frames
15)Do not succumb to “green screen fever”
16)Just when you think a stock price can’t get any lower, it goes much lower!
17)Takes a long time to build profits and very little time to lose it all. Risk management is key
18)Get a handle on psychology - yours AND the market’s
19)You have to be in it to win it
20)It’s better to wait for the right setup than it is to force something that isn’t there
21)Keep a better trading journal so I can go back and review things
22)There is even more manipulation in the stock market than I ever dreamed
23)- trading is a confidence game. Once you’ve lost it, go to cash until it returns

Read Part III ........very soon

The Right Side

2009-01-08T22:41:00.000-08:00

A quote from one the best traders of our time, Jesse Livermore: “It takes a man a long time to learn all the lessons of all 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. It took me longer to get that general principle fixed firmly in my mind than it did most of the more technical phases of the game of stock speculation.” Being a bull or a bear alone is meaningless out of the crucial context of the current market conditions. All that really matters for the great game of speculation is being on the “right side”, knowing when the markets are in a bull or a bear trend and deploying your speculative capital accordingly. Once again Livermore ties speculation back into the speculator’s own internal emotions. He points out that it makes no sense to be bullish or bearish as a rule, but to carefully watch the market conditions in order to be on “the right side” at any given moment. Most speculators are burdened with an innate emotional bias to be bullish that is dangerous and must be eradicated if they wish to succeed in speculation.

A speculator must not foolishly try to bend the markets to his will, but instead prudently bend his will to the markets! If a bull trend is evident, be long. If a bear trend dominates, be short. An elite speculator doesn’t care at all which way the markets are moving, he just wants to be “right” and recognize the trend early enough to prudently deploy his own capital and be blessed to harvest profitable trades.Forget the endless bull and bear arguments and don’t let any other speculators try to pigeonhole you into one of the two warring camps. Instead of being a perma-bull or perma-bear, instead strive to listen to the rhythm of the markets and simply be “right” about what is coming to pass next and trade accordingly.

Anirudh Sethi's -Lessons From 2008

2009-01-07T20:23:00.000-08:00

Last week ...Many Traders had asked me :Dear Anirudh Sethi... “What would you say is the most important thing you’ve learned about investing and/or trading in 2008?”
Here are some of the replies ....I had given
1)Knowledge is better than luck, but luck surely helps
2)Don’t try to guess where the market is headed - you’ll always be wrong to some degree. Trade what you see not what you want to see
3)Let the market speak before I get in the correct mindset to trade. If I don’t, my losses mount
4)Eliminate greed and take my time. Be cool
5)Always limit your downside and don’t be afraid to go short
6)Markets do and need corrections
7)Trade in smaller positions when strategies fail to work as they have in the past
8)Don’t just think about stop losses - but use them!!!!!!
9)Patience and discipline to stay out of the market if one doesn’t have a good idea
10)Always believe the charts
11)Pay more attention to the technicals
12)Thoroughly understand your own risk tolerance
13)That there is no simple system that will work every time
14)When profits come too easily, it is time to reduce risk
15)I learned to trust myself and follow my own plan
16)Comparing stock market returns from the past 50-100 years bears little insight into the next 10-50-100 years. We live in a completely different world and face unique challenges and unknowns
17)Sometimes the best move is no move
18)You must learn to think for yourself
19)Trends, once established, last much longer than anyone expects
20)Clear entry and exit points before the trade is critical
21)Understand the various scenarios that the market may present you and then plan your actions for each of them. That is preparation, not prediction. Prediction tends to bind you to one point of view because when that doesn’t come true, you don’t know what to do.
22)I’ve learned to seek out opinions that challenge my analysis and beliefs and ignore the rest
23)Anything that “can never happen” can happen
24)When the heat is on, you must stick to your plan and obey your trading rules

Trading Wisdom - John W. Henry

2009-01-07T19:15:00.000-08:00

Excerpts from the CME Magazine interview with John W. Henry discussing his philosphy on trading:[" . . . early on I read Reminiscences of a Stock Operator, the autobiography of Bernard Baruch, and the writings of W.D. Gann. I was particularly taken with Gann's philosophy. I had been a student of philosophy and quickly began to find a bias toward trading philosophy over and above results. I always distrusted results in the commodity markets and eventually across all markets.Life is too dynamic to place a lot of credence in the past results of any program or any trader. I strongly felt that the key to success in markets over the very long term was in having a valid philosophy of the markets that could not be shaken by results over the short or intermediate term. I equated this with valid philosophies in other areas such as business principles that endure regardless of cycles. With any valid philosophy in any field, there are going to be periods in which doing the right thing every day appears to be counterproductive.If Keynes said, "In the long run, we are all dead," I would say, "Remaining true to your principles, if they are valid, will produce great results over the long run."]

Success = Easy + Hard

2008-12-31T22:07:00.000-08:00

The easy includes
passing the exam to become a licensed realtor
getting a degree
putting together a business plan
having an idea (that will change the world)
keeping your job (or getting a job in better times)
taking lessons to improve your golf handicap
getting a government bailout
contemplating a different career
thinking about your retirement

and the hard part
identifying a niche, creating credibility and working hard to become a sought after agent
applying your education to excel at what you do
defining, funding and executing the idea
learning to play the game
consistently and persistently working hard to improve your game
restructuring your business for success
taking the first steps towards your new career
making your retirement happen
Bottomline - the hard part gets you to your objective but sometimes it is even a challenge to get step one (which is easy) going. It is a long road but if you can persist - you can make it happen!

Do You Have The Right Tools To Trade?

2008-12-30T08:23:00.000-08:00

Click to enlarge

Letter to the bank

2008-12-29T16:28:00.000-08:00

Dear Sirs,
In view of what seems to be happening internationally with banks at the moment, I was wondering if you could advise me on the following matter:
If one of my cheques is returned marked "insufficient funds", how do i know whether that refers to me or to you..?
Sincerely,

MARKETBHAVISHYA TEAM

A Russian Professor's Prediction................

2008-12-29T16:23:00.000-08:00

Click to enlarge

OBSERVATION

2008-12-28T09:04:00.000-08:00

I don't think the alternatives are trading to not lose vs. imprudent boldness. Rather, the alternative is to trade or not to trade. One should trade when there is a demonstrable edge in one's favor: then it's trading to win. If one lacks that edge and (rightly) fears losing, the rational choice is to refrain from trading. The pallbearers enter the picture when there's a need to trade that exceeds the limits of one's demonstrable edge. Such "boldness" also manifests itself in improper sizing of trades and poor trade management. It has nothing to do with trading to win--and everything to do with the need for stimulation. Trading to not lose is certainly more effort than it's worth and also expensive. Unlike the "bold" trader, the fearful trader exits positions prematurely, fails to enter trades with good edges, and undersizes positions.Most trading problems boil down to deficient self-control and resulting impulsivity. The impulse for excitement and the impulse to avoid harm are flip sides of the same coin--and not infrequently alternate within the same trader. Both take the trader away from the prudent trading to win.

My quotes

2008-12-28T08:55:00.000-08:00

1)Two traders: one increases size after a loss; the other gets smaller. Both continue to lose.

2)One encounters losing traders as often as one encounters losing golfers--and for much the same reason.

xxx11111111 -TRADING RULES

2008-12-28T07:36:00.000-08:00

1)We accumulate trading information - buying books, going to seminars and researching.
2)We begin to trade with our 'new' knowledge.
3)We consistently 'donate' and then realize we may need more knowledge or information.
4)We accumulate more information.
5)We switch the commodities we are currently following.
6)We go back into the market and trade with our 'updated' knowledge.
7)We get 'beat up' again and begin to lose some of our confidence. Fear starts setting in.
8)We start to listen to 'outside news' & other traders.
9)We go back into the market and continue to donate.
10)We switch commodities again.
11)We search for more trading information.
12)We go back into the market and continue to donate.
13)We get 'overconfident' & market humbles us.
14)We start to understand that trading success fully is going to take more time and more knowledge then we anticipated.

----------------------------------------------------Many Traders Will Give up at this Point as they Realize Work is Involved
15)We get serious and start concentrating on learning a 'real' methodology.
16)We trade our methodology with some success, but realize that something is missing.
17)We begin to understand the need for having rules to apply our methodology.
18)We take a sabbatical from trading to develop and research our trading rules.
19)We start trading again, this time with rules and find some success, but overall we still hesitate when it comes time to execute. We start trading again, this time with rules and find some success, but overall we still hesitate when it comes time to execute.
20)We add, subtract and modify rules as we see a need to be more proficient with our rules.
21)We go back into the market and continue to donate. We go back into the market and continue to donate.
22)We start to take responsibility for our trading results as we understand that our success is in us, not the trade methodology.
23)We continue to trade and become more proficient with our methodology and our rules.
24)As we trade we still have a tendency to violate our rules and our results are erratic.
25)We know we are close.
26)We go back and research our rules.
27)We build the confidence in our rules and go back into the market and trade.
28)Our trading results are getting better, but we are still hesitating in executing our rules.
29)We now see the importance of following our rules as we see the results of our trades when we don't follow them.
30)We begin to see that our lack of success is within us (a lack of discipline in following the rules because of some kind of fear) and we begin to work on knowing ourselves better.
31)We continue to trade and the market teaches us more and more about ourselves.
32)We master our methodology and trading rules.
33)We begin to consistently make money. We begin to consistently make money.
34)We get a little overconfident and the market humbles us.
35)We continue to learn our lessons.
36)We stop thinking and allow our rules to trade for us (trading becomes boring, but successful) and our trading account continues to grow as we increase our contract size.
37)We are making more money then we ever dreamed to be possible.
38)We go on with our lives and accomplish many of the goals we had always dreamed of.

In this Life.....Read this Book !!

2008-12-28T05:36:00.000-08:00

"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!"

Reniniscences of a Stock Operator by Edwin LeFevre

Bear market logos

2008-12-28T05:05:00.000-08:00

Day Trading Mistakes-MUST READ

2008-12-28T01:00:00.000-08:00

Day Trading Mistakes
This describes some major mistakes which will almost certainly cause your day trading career to end in failure.
Mistake 1. Lack of a Trading Plan
Many day traders fail because they trade without the benefit of any pre-determined trading plan. It is absolutely critical to have a complete, well-thought out plan of action before entering any trade. If a plan proves to be wrong, so be it. This includes the number of contracts you will trade and when you will enter, when you will exit, and when you will exit to cut your losses. You should decide in advance how long you will hold your position if the price fails to move at all, and at what price you may wish to add to or reduce your position.
Once you develop a plan, stick to it and do not change it solely as a result of your emotions. This is where failure begins for many traders - not sticking to their plan. This mistake is often caused by making false steps, or misjudgements.
Mistake 2. Failure to Control Emotions
It is highly unlikely that you will become a successful day trader if you allow your emotions to control your trading decisions. Greed, fear and pride are the most destructive emotions leading to poor trading decisions.
Greed tends to keep a trader from closing out a position when a reasonable profit has already been made, in the hope that the price will go even higher. Staying in the market for too long (hoping for a big win) will backfire more often than not. Greed also tends to result in impulsive dangerous trades.
Fear causes traders to sell existing positions too soon or avoid entering a signaled position in the first place. In other words, fear leads to trading decisions becoming "paralyzed".
Pride tends to keep a trader in a losing position for too long because of a reluctance to admit that the original trading decision may not have been the right one.
Use the discipline that a good trading plan is designed to foster and try to keep your emotions from unduly influencing your trading decisions.
Mistake 3. Over-Trading
Many traders feel the need to trade constantly at all times on every trading day. There are many occasions, and times of day, however, where it is best to stand aside and avoid holding any position in the markets at all. Always conserve your trading capital for those trading days offering good trading opportunities. Its always a miscalculation to over-trade, no matter how good the opportunity looks.
Failure often results when things look too good to be true.
Mistake 4. Failure to Accept and Limit Losses
Another major contributing reason to day trading failure, is the reluctance of many traders to exit from a losing position. Many traders hold on to losing positions for far too long, in the hope that the price will recover. It is essential to limit and accept losses in advance, in accordance with your trading plan, by pre-determining your exit point if the price moves against you. Stop-loss orders provide a convenient and essential tool to do this. Better to accept an error now than later when losses are much worse.
Mistake 5. Lack of Commitment
Day traders who are unwilling to make a serious commitment of time and effort to study and monitor the markets, engage in training and education so as to enable them to learn about technical analysis, new trading systems and methods, order routing software, etc., will almost always fail. Thinking that you know it all, is the sign of an immature trader. A winning trader cannot afford to be lazy. A simple lapse in judgement or omission of information can cause a big mistake to happen.
The above trading mistakes are avoidable if the trader doesn;t take unnesesary risks or make foolish trading moves.

Timing

2008-12-27T21:21:00.000-08:00

Timing your entries and exits is crucial to your success as a trader. The charts and price action tell you when the time is right. You just need to pay attention and recognize what they are saying.When you can simplify your information sources down to only a few then your task will become easier. After all , how many indicators do you really need when the chart shows it is going up and the markets show they are going up? How much confirmation do you need? And confirmation of what? The future is unwritten. The more you wait, the farther way the prime entry/exit spot is moving away from you. The more risk you take on. More risk can play on your emotions. Indicators are always behind the times. I view them as pretty useless. The price on the chart and the candles are my REAL TIME indicators. Sounds simple and it is.So if you have simplified things in the manner I describe, the next item to truly believe in is probabilities. I (and everybody else) don't know what is going to happen in the future. However, I know that profit taking will happen after long trends, pops, drops etc. Trading the probability of a reversal after a extended uptrend when the candles are getting shorter, volume is dropping off and the overall markets showing the same is only taking the view that gravity usually takes effect and that the stock will drop. This is timing the market. My mind is not encumbered by hopes, dream and predictions of what will happen. I think of only the probability. There is a huge difference between the two psychologically after you take some losers in a row. I don't take the losers personally as a reflection of my poor judgment. I just think that it's the law of probabilities playing themselves out and so I can go into my next trade opportunity unafraid and without hesitation.

2009 ... Heads or Tails?

2008-12-26T18:13:00.000-08:00

Adam Smith (1723 - 1790) in "The Money Game" wrote:
"Prices have no memory and yesterday has nothing to do with tomorrow. Every day starts out fifty-fifty!"

If the above statement is to be trusted, then you could just take the 50 - 50 odds, expand their daily time horizon to a yearly one, and decide whether or not to "stay in the stock market game" in 2009!
Decide on just a flip of a coin?

Given the past year's negative returns, what does this "flip" imply for the investors' chances this coming year?
Well, that is a matter of asking the question the right way!
If you assume that the years are flipping randomly, and that there is no bias for any year, then you could ask if it is fair enough to assume that flipping through a calendar is otherwise the same as just flipping a coin?
Let's assume that you were just flipping a coin. Then, YES ...
The odds of one flip would always be 50 - 50!
Indeed, you might be led to start questioning about how fair the coin actually would be! In this case, you really should look back and base your expectations on historical econometric analysis and try to establish how fair the coin would be!
But if you are guessing that some things do look like a flip of a coin, shouldn't you also assume that just because we had a negative year, we're now going to get a positive one?
Who knows ... Investments based on that kind of speculation might actually end up yielding a positive result!
But the odds are still only 50 - 50!
On the other hand ...
I do know that ...
I will get a much better than 50 -50 chance!

Ten Trading Mistakes

2008-12-26T10:27:00.000-08:00

1. Refusing to define a loss. 2. Not liquidating a losing trade, even after you have acknowledged the trade's potential is greatly diminished.3. Getting locked into a specific opinion or belief about market direction. From a psychological perspective this is equivalent to trying to control the market with your expectation of what it will do: "I'm right, the market is wrong."4. Focusing on price and the monetary value of a trade, instead of the potential for the market to move based on its behavior and structure.5. Revenge-trading as if you were trying get back at the market for what it took away from you.6. Not reversing your position even when you clearly sense a change in market direction.7. Not following the rules of the trading system.8. Planning for a move or feeling one building, but then finding yourself immobilized to hit the bid or offer, and therefore denying yourself the opportunity to profit.9. Not acting on your instincts or intuition.10. Establishing a consistent pattern of trading success over a period of time, and then giving your winnings back to the market in one or two trades and starting the cycle over again.

25 rules of trading discipline

2008-12-24T20:44:00.000-08:00

1)The market pays you to be disciplined.
2)Be disciplined every day, in every trade, and the market will reward you. But don’t claim to be disciplined if you are not 100 percent of the time.
3)Always lower your trade size when you’re trading poorly.
4)Never turn a winner into a loser.
5)Your biggest loser can�t exceed your biggest winner.
6)Develop a methodology and stick with it. don�t change methodologies from day to day.
7)Be yourself. Dont try to be someone else.
8)You always want to be able to come back and play the next day. Once you reach the daily downside limit, you must turn your PC off and call it a day. You can always come back tomorrow.
9)Earn the right to trade bigger. Remember: if you are trading poorly with two lots you must lower your trade size down to a one lot.
10)Get out of your losers.
11)The first loss is the best loss.
12)Dont hope and pray. If you do, you will lose.
13)dont worry about news. it�s history.
14)Dont speculate. if you do, you will lose.
15)Love to lose money. What I mean is to accept the fact that you are going to have losing trades throughout the trading session. Get out of your losers quickly. Love to get out of your losers quickly.
16)If your trade is not going anywhere in a given timeframe, it�s time to exit.
17)Never take a big loss. Only a big loss can hurt you. Please review rules #5, #8, #10, #11 and #15. If you follow any one of these rules you will never violate rule #17.
18)make a little bit everyday. dig your ditches. don�t fill them in.
19)Hit singles not home runs.
20)consistency builds confidence and control.
21)Learn to sweat out (scale out) your winners.
22)Make the same type of trades over and over again � be a bricklayer.
23)dont over-analyze. dont procrastinate. don�t hesitate. if you do, you will lose.
24)all traders are created equal in the eyes of the market.
25)Its the market itself that wields the ultimate scale of justice.

The Art of Trading

2008-12-23T22:08:00.000-08:00

A GOOD Trader WILL: 1. Always wait for the setup: No Setup-NO Trade. 2. Knows that winning trades work almost right away. 3. Never takes a big loss. Sell it and start over. 4. Takes small loses regularly. Winners will come. 5. Lets the stock keep working until it does NOT! 6. Is eager to sell a loser, NOT a winner! 7. Buys pullbacks/patterns on the strongest stocks. 8. Will always trade small so he is not emotional. 9. Takes responsibility for his own trades.

Eight Cognitive Biases That Affect Trading

2008-12-16T08:36:00.000-08:00

1) Loss Aversion - The tendency for people to have a strong preference for avoiding loses over acquiring gains.

2) Sunk Costs Effect - The tendency to treat money that already has been committed or spent as more valuable than money that may be spent in the future.

3) Disposition Effect - The tendency for people to lock in gains and ride losses.

4) Outcome Bias - The tendency to judge a decision by its outcome rather than by the quality of the decision at the time it was made.

5) Recency Bias - The tendency to weigh recent data or experience more than earlier data or experience

6) Anchoring - The tendency to rely too heavily, or anchor, on readily available information.

7) Bandwagon Effect - The tendency to believe things because many other people believe them.

8) Belief In The Law Of small Numbers - The tendency to draw unjustified conclusions from too little information.

Warren Buffet

2008-12-14T10:35:00.000-08:00

With all of the turmoil and uncertainty about the stock market, here six good quotes from Warren Buffet:

1. The future is never clear, and you pay a very high price in the stock market for a cheery consensus. Uncertainty is the friend of the buyer of long-term values.

2. The most common cause of low prices is pessimism - sometimes pervasive, some times specific to a company or industry. We want to do business in such an environment, not because we like pessimism but because we like the prices it produces. It's optimism that is the enemy of the rational buyer.

3. 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.

4. Investors should remember that excitement and expenses are their enemies. And if they insist on trying to time their participation in equities, they should try to be fearful when others are greedy and greedy when others are fearful.

5. The stock market is designed to transfer money from the active to the patient.6. If you don't feel comfortable owning something for 10 years, then don't own it for 10 minutes.

Stock Market Wisdom - The Tortoise And The Hare

2008-12-14T10:14:00.000-08:00

Once upon a time, there was a young hare, a hotshot rabbit investor who would always brag to anyone that would listen and that he was the smartest, fastest, best performing investor in the world. He would constantly tease the old tortoise about his slow, solid investment style.Then, one day, the annoyed tortoise answered back: "There is no denying that you are very aggressive in your investment strategy. You take very high risks and get high returns. But even you can be beaten."The young hare squealed with laughter. "Beaten? By whom? Surely not by you. I bet there's nobody in the world that can win against me, because I'm so good. If you think that you can beat me, why don't you try?"Provoked by such bragging, the tortoise accepted the challenge. Each of them put an equal amount of money into a new account and the race was on. The hare yawned sleepily as the meek tortoise trudged slowly off.As might be expected, the tortoise invested in high quality blue chips, companies with household names.The hare, as anticipated, invested his money in dotcom stocks and options.You know the story. The aggressive hare jumped out to a big early lead. In a rising market, the highest risk stocks perform the best. This is called momentum investing. Money flows into the investments that are performing the best.The hare, having jumped out to such a large early lead, stopped paying attention to the market environment. Basically, he fell asleep. He thought to himself, "I'll have 40 winks and still remain way ahead of that stupid old turtle."The hare awoke from his sleep and gazed around looking for the tortoise, who was nowhere in sight. Unfortunately, while he was sleeping, dreaming about what he would do with his winnings, the market turned against him.His very high-risk portfolio had taken a terrible beating and was now practically worthless.The tortoise, a Warren Buffett style investor, had passed the sleeping rabbit long ago. He had been plodding forward, steadily, since the beginning of the contest. The Tortoise never for a moment stopped, but went on with a slow but steady pace straight to the end of the course.The hare realized that the tortoise was way ahead of him, and away he dashed. He leaped and bounded while gasping for breath, but it was too late. The tortoise had beaten him.There are two very important lessons to be learned here.First - slow and steady wins the race.Second - never confuse your own intelligence with a bull market.

New Definiations:

2008-12-14T09:53:00.000-08:00

PE - Plunge Endless
EBITDA- Exit Before It Tumbles Down Again
QIB - Quixotic Indian Blunder
HNI - Has No Idea
FII - Furious Impoverished Investors
PMS - Premeditated Scam
SIP - Suicide by Investing Patiently
Fund Manager - Last year's ace stock picker now locked up in an asylum
Investor - Someone who is broke
Broker - Worse off than an investor
Correction - The next day after you bought shares
Momentum buying - The fine art of buying high and selling low
Value buying - The art of buying low and selling even lower

Iphone Vs a stone

2008-12-14T08:41:00.000-08:00

Click to Enlarge............!!!

The Turtle Mind

2008-12-14T06:00:00.000-08:00

1) Think in terms of the long run when trading.

2) Avoid outcome bias.

3) Believe in the effects of trading with positive expectation.

4) The secret of trading and of the Turtles' success is that you can trade successfully by using ideas and concepts that are well known and have been around for years. But you have to follow those rules consistently.

5) Trade with an Edge : Find a trading strategy that will produce positive returns over the long run because it has a positive expectation.

6)Manage Risk : Control risk so that yo can continue to trade or you may not be around to see the benefits of a positive expectation system.

7) Be Consistent : Ex cute your plan consistently to achieve the positive expectation of your system.

8) Keep It Simple : The core of the approach is simple : catch every trend. Two or more trades might account for all the profit, so don't miss a trend or you might kill your whole year.This is simple and easy to understand, not easy to do.

9) Turtles do not care about being right, they do not pretend to be able to predict the future. It is impossible to know whether a market is going to go up or down or whether a trend will stop now or in two months.You do know that that there will be trends and that the character of price movement will not change because human emotion and cognition will not change.It you have 10 losing trades in a row and you are sticking to your plan, you are trading well; you are just having a bit of bad luck.

10 ) Forget the past, don't berate for mistakes you made.Avoid recency bias.The ability to avoid recency bias is an important component of successful trading.

Consistent And Discipline

2008-12-14T05:53:00.000-08:00

Consistent And Discipline

In order to realize the full potential of your trading systems it is critical that you take every trading entry, adjust every stop, and close out every trade as and when your system says you should do. This takes extreme confidence in your trading systems, good robust reliable technology, and the mental discipline to stick to your trading plan whatever happens.An underlying assumption about being consistent and disciplined is that you have a pre-defined plan for every situation you may face in your trading, so that you know how you are defining what being consistent is. Your plan needs to include at least the following items:All your trading rules for entering, adding to, and exiting positionsWhat you will do if your trading computer, internet connection, broker, power, telephoneetc. failsWhat you will do if you are unable to tradeWhat you will do if you lose X% of your accountWhat you will do if all the markets are closed and you cant exit your positionsUnless you write the answers down to all these issues, you cannot be consistent and disciplined in your approach to trading and if you lose money you will not know whether it is because you didnt follow your plan, because your plan is incomplete, because your systems do not work, or simply because you are going through a losing period.

The Ten Trading Commandments

2008-12-14T05:44:00.000-08:00

1) Trade for success not for money.

2) Strive for discipline.

3) Know yourself and how well you handle risk.

4) Lose your ego.

5) Know your risk level and when you hit your stop point exit the trade.

6) Know when to trade and when to wait.

7) Love your losers like you love your winners.

8) Losing trades will be your best teachers.

9) After three losing trades in a row, take a break.

10) Don't break any of the above nin rules.

SPECULATOR

2008-12-14T01:05:00.000-08:00

A fundamentalist and a speculator go on winter skiing holiday to the Alps. Upon arriving at the cabin the fundamentalist goes to the window and comments, "Look, Snow is falling".
Instantly, The speculator replies, "Sell snow"

5 Things

2008-12-14T00:28:00.000-08:00

A trading pal of mine recently reminded me of Mark Douglas's 5 essential trading truths, and it seems to me that no. 5 is very relevant re this discussion.
1. Anything can happen.
2. You don’t need to know what is going to happen next in order to make money.
since you cant know what is going to happen...everbody has to make money under the condition of uncertainty..without exeption.
3. There is a random distribution between wins and losses for any given set of variables that define an edge.
4. An edge is nothing more than an indication of a higher probability of one thing happening over another.
5. Every moment in the market is unique.

Try to Remember

2008-12-13T08:06:00.000-08:00

Planned, patient trading always makes more money in the long term over quick, short term manic trading.
Learning a lot about a few things is a marvelous way to make a career as a trader.
Trading begins before you push the “buy/sell” key.
Trading because you want to make money is an excellent way to lose money.
You trade your beliefs, even if you think you are trading a plan.
Knowing yourself will make you more money than “knowing the market.”
Great traders are sometimes lazy people.

OVERCONFIDENCE

2008-12-13T07:18:00.000-08:00

Studies in behavioral finance find that about 3/4 of all traders rate their prowess as "above average", despite the obvious reality that only half of us are better than the other half. This overconfidence, moreover, affects actual trading performance. Research by Terence Odean and colleagues finds that overconfidence affects frequency of trading, which in turn contributes to poor trading results. In one study of online traders, the group of traders favored high beta (volatile) small cap companies and tended to not diversify their portfolios. Their actual trading results slightly beat the small cap index, but after trading costs were factored in, they significantly underperformed the index. The most frequent traders were the ones who underperformed the index by the greatest margin.One of my favorite studies of overconfidence came from the London Business School. Traders were shown price patterns and asked to figure out the market's next direction and indicate their confidence in their prediction. The price patterns were generated entirely randomly. The traders with the highest confidence in their predictions traded the most frequently and incurred the greatest losses.A completely random trader--50% right, 50% wrong--who trades once a day will have runs of five consecutive winners about six times during a year. It is difficult to not think you have the hot hand after such a string, become overconfident, and raise your trading size. Of course, the random trader will have an equal number of strings of losers. That is likely to burst confidence and lead the trader to cut trading size--assuming, of course, that he's still in the game at that point.Is it any wonder that traders seek help from coaches and psychologists? Few of those coaches and psychologists, however, will tell the trader the truth: You're trading random patterns and your problem is overconfidence in them.

Emotional Intelligence

2008-12-12T23:03:00.000-08:00

Dictionary meaning of emotional :actuated, effected, or determined by emotion rather than reason
Dictionary meaning of intelligence :the faculty of understanding

If you are a trader already and have money in the stock market then you know how you react or respond when your trades don’t happen the way you want them to. It is just a matter of learning from your trades and not being attached to them. It is a good idea to have some money to donate so that when the market hasn’t gone your way, you know that the loss is not really a big deal and that you can make it back.
If you happen to react and start kicking and screaming and feeling sorry for yourself, then you have not learned the lesson. If this happens you can make some bad choices. Rather, if you respond and change the way you view the situation, you will do even better the next time.
If you are trading for cashflow, then you really have to have a plan in place. I am not here to advise you on your rules for trading as everyone eventually finds the way it works for them. It’s like learning anything new, you try a system and then tweak it to suit your personality.
So its a little like when you are in your car driving along… do you focus on the bugs on the windscreen or on your destination? If you let the little things in life get in the way and focus on the trades that didn’t go your way, that’s what you will keep on getting. Take charge of your emotional intelligence today and focus on your destination with a sense of certainty. You will be a whole lot happier on your journey

Top Ten Reasons Traders Lose Their Discipline

2008-12-12T22:42:00.000-08:00

Losing discipline is not a trading problem; it is the common result of a number of trading-related problems. Here are the most common sources of loss of discipline, culled from my work with traders:

10) Environmental distractions and boredom cause a lack of focus;

9) Fatigue and mental overload create a loss of concentration;

8) Overconfidence follows a string of successes;

7) Unwillingness to accept losses, leading to alterations of trade plans after the trade has gone into the red;

6) Loss of confidence in one's trading plan/strategy because it has not been adequately tested and battle-tested;

5) Personality traits that lead to impulsivity and low frustration tolerance in stressful situations;

4) Situational performance pressures, such as trading slumps and increased personal expenses, that change how traders trade (putting P/L ahead of making good trades);

3) Trading positions that are excessive for the account size, created exaggerated P/L swings and emotional reactions;

2) Not having a clearly defined trading plan/strategy in the first place;

1) Trading a time frame, style, or market that does not match your talents, skills, risk tolerance, and personality.

Never Chase A Trade

2008-12-12T08:28:00.000-08:00

You never need to chase a trade. The market has plenty of opportunities. The money runs out before the opportunities do.

Momentum

2008-12-12T08:20:00.000-08:00

More and more I'm finding that momentum is the crucial aspect of my trading, no matter what the time frame. Practically speaking its almost the only edge that ever means anything to me. If the market is moving then its good to trade, and if its drifting then there's no point being involved.Something so simple as that - you don't even need any indicators, you can just use your eyes. You can tell by how the bids are coming in, how the bars tick up and down. You can almost hear the pit noise (virtual pit noise) by watching the bars and how they move.When I trade intra-day then the sessions become important. Just watch the inflow of trading activity and feel the energy building up as we cross over from Asia into the London session. Wait for some kind of clue as to the direction and get in. I guess this is getting close to tape reading, but if thats where I'm going then so be it.

Murphy's Laws in the Stock Markets

2008-12-11T09:50:00.000-08:00

Developing Trading Strategies
*Sometimes it takes several years to recognize the obvious.
*The simpler it looks, the more problems it hides.
Buying Stocks
*If anything can go wrong, it will.
*If anything can't go wrong, it will.
*If you know something can go wrong, and take due precautions against it, something else will go wrong.
*You will never run out of things that can go wrong.
*Failure is the opportunity to begin again more intelligently.
*The less you do, the less can go wrong.
*You can never tell which way the train will go by looking at the track.
*Always assume that your assumption is invalid.
Selling Stocks
*You never know how soon it is too late.
*When things go wrong, don't go with them.
*If you are in a hole, stop digging.
*Following Trading Strategies
*Being punctual means only that your mistake will be made on time.
*A good place to start from is where you are.
*To learn from you mistakes, you must realize that you are making mistakes.
*Experience is what causes you to make new mistakes instead of old ones.
*The best defense against logic is ignorance.
*If you enjoy what you are doing; you are probably wrong.
About Diversification
*Things go wrong all at once, but things go right gradually.
Customer Service of Financial Sites
*If you don't know the answer, someone will ask the question.
*You don't have to explain something you never said.
*If you want to make enemies, try to change something.
*Be kind to everyone you talk with. You never know who's going to be on the jury.
*Never be too right too often.
*The only changes that are easily adopted are changes for the worse.
*The less you have to do, the slower you do it.
*Always do exactly what your boss would do if he knew what he was talking about.
*The e-mail never comes when you have nothing to do and finally, always remember that ...
The Less You Say ... The Less You Have to Retract!

Great Shirt To Wear For Your Upcoming Job Interviews

2008-12-11T08:10:00.000-08:00

It's a classy conversation starter.

My Advice for Traders

2008-12-10T07:36:00.000-08:00

1) Cut Risk – It’s that “above all else, do no harm” principle. If you don’t have a feel for the market, trade small while you regain your feel. Preserve as much of your capital as possible to lay the foundation for your recovery;

2) Focus on Your Strengths – It’s not unusual for frustrated traders to try to make all kinds of changes in their trading in a frantic effort to gain some traction. These efforts can compound difficulties by getting traders further and further from their strengths. During rebuilding periods, you want to focus on the markets and strategies that you know most about, that represent your strengths.

3) Reach Out – It’s especially helpful to reach out to traders who trade markets and strategies similar to yours. Are they also struggling? If so, this suggests that market changes, indeed, may be at the root of the problem. If the traders you contact are succeeding, try to find out what they’re doing differently from you. It may well be that a simple tweaking of execution, holding times, and risk management could turn your performance around.

4) Stay Constructive – You may well be in a rebuilding period. This happens to the best athletes and sports franchises. It doesn’t mean you’ve lost all talent and skill. Identifying the kinds of trades that are working for you is a start toward rebuilding: you want to find the common denominators behind your successful trades so that you can emphasize these going forward.

5) Work on Your Self-Talk – Hard as it is, it’s important to stay positive during a rebuilding period. The last thing you want to do is create additional interference by beating up on yourself and dampening your motivation. This is one of the areas where coaching can be helpful. Setting attainable goals and creating plans for learning new patterns and trading strategies can fuel optimism, determination, and focus.

6) Control the Budget – It very much helps to have a cash cushion to weather these rainy day periods. Living within one’s means also helps greatly. I’ve generally found that traders can adapt to shifting markets if they have enough time to make the transition. It’s when the pressures of bringing in money month to month add to the performance pressures of a drawdown period that turnarounds become difficult to sustain. Perhaps the best advice, however, is preventive. Identify slumps early and control losses before they get out of hand. Perform regular inventories of your winning and losing trades, so that you’re always on top of what’s working for you and minimizing what’s hurting performance. During your best times, remember that markets always change and keep powder dry to weather the inevitable lean times. Ironically, the best way to master declines in trading performance is to embrace them early and turn them into prods for learning and development.

Psychology Problem

2008-12-10T05:34:00.000-08:00

How do you know if your trading psychology problem is really just about trading or is a sign of larger problems? Here is a quick checklist:

A) Does your problem occur outside of trading? For instance, do you have temper and self-control problems at home or in other areas of life, such as gambling or excessive spending?

B) Has your problem predated your trading? Did you have similar emotional symptoms when you were young or before you began your trading career?

C) Does your problem spill over to other areas of your life? Does it affect your feelings about yourself, your overall motivation and happiness in life, and your effectiveness in your work and social lives?

D) Does your problem affect other people? Do you feel as though others with whom you work or live are impacted adversely by your problem? Have others asked you to get help?

E) Do you have a family history of emotional problems and/or substance use problems? Have others, particularly in your immediate family, had treated or untreated emotional problems?

If you answered "yes" to two or more of the above items, consider that you may not be alone. More than 10% of the population qualifies with a diagnosable problem of anxiety, depression, or substance abuse. Tweaking your trading will be of little help if the problem has a medical or psychological root. A professional consultation if you answered "yes" to two or more checklist items might be your best money management strategy.

At least GM is still buying ads....

2008-12-10T05:26:00.001-08:00

The Top Twelve Stock Market Scams of the Last Twelve Years

2008-12-10T05:11:00.000-08:00

The title is self-explanatory.

Here are the top 12 scams since 1995:

12. The Emulex Press Release Hoax. In the summer of 2000, Mark Jakob, a former employee of Internet Wire, sent out a fake press release stating that Emulex was under investigation by the SEC, that its CEO was resigning and that it was restating its previous quarter earnings to a loss. Mark Jakob, now a student at El Camino Community College, used his connections and knowledge of Internet Wire to fudge the press release through the standard screening procedures. The stock tumbled as low as $43 from the previous day's close of $113.06 before quickly recovering. Jakob ended up profiting almost $250k from the scam. He was quickly caught, sentenced to 44 months in jail and had to forfeit his gains, plus pay an extra $103k in fines.

11. Market Maker Gouging. February, 2004. Top market makers agree with regulators to pay a $240 million dollar penalty for trading abuses, including trading ahead of customers and other violations including "interpositioning." Market makers involved in this settlement included LaBranche & Company, Fleet Specialist and Leeds & Kellogg. None of these names sound too significant until you see the names of the companies that own them: FleetBoston, Goldmans Sachs and Bear Stearns. These market makers took advantage of the antiquated system of trading on the NYSE and exploited their customers for their own benefit.

10. CEO Compensation - CEO's of publicly traded companies making tens of millions of dollars per year in compensation. Fired company officials with only six months of service at a company walking away with millions of dollars in compensation. As shareholders in these companies, this is OUR money that they are pilfering. Eventually, CEO compensation will become a big issue.

9. Tyco. For a time, Tyco was a darling of Wall Street, as was company officer Dennis Kozlowski. Along with CFO Mark Swartz and CLO Mark Belnick, the three pilfered hundreds of millions of dollars from the company and its shareholders by issuing themselves unauthorized loans and unauthorized stock sales. These three were addicted to their extravagant lifestyle, and used these ill-gotten funds to fuel their lifestyles. Eventually they were caught and convicted to 25 years in jail. The main victims in all of this were the shareholders, that saw their shares plunge over 80% in just a few short weeks.

8. Centennial Technologies. Traded as high as $55.00 on the New York Stock Exchange, but the entire company was built on smoke and mirrors in the form of forged company documents. The company reported millions of dollars in sales of PC memory cards, when in fact they were shipping fruit baskets to their customers and falsifying sales invoices. Eventually the SEC caught up with them and found that the company had overstated earnings by $40 million dollars. Supposed profits turned into losses and the company went up in smoke.

7. Day-Trading Chat Rooms. In the late '90s, Daytrading was a huge business. Most people followed the stock market religiously, and quite a few people decided to dip their toes into the water and try trading on their own. Most people, intoxicated by the allure of easy money trading high-flying Internet stocks, started to day-trade. Buy a high-flying Internet stock in the morning, sell it in the evening for a quick five digit gain. Chat rooms such as Tokyo Joe and Anthony Elgindy's room quickly became very popular, and they charged an arm and a leg for their day-trading recommendations. When the dot-com bubble popped, these daytrading chat rooms quickly lost their appeal, and in some cases, their operators were either fined and sanctioned by the SEC or sent to jail for trading infractions.

6. Bre-X. Was purported to own the richest gold mine ever, containing over 200 million ounces of gold in Indonesia. At its peak, Bre-X had a capitalization of over $4 billion dollars. Can you see the pattern here? The entire gold mine story was bogus, and the stock price evaporated overnight. Core samples were falsified, and the Busang site in Indonesia turned out to be worthless. In 1997, the stock completely collapsed, and thousands lost their investments in the company.

5. Worldcom. Was a giant company, which made the "book-cooking" seem even more unbelievable. I mean, how could such a massive company make such stupid mistakes? The company recorded operating expenses as investments in the company, which grossly exaggerated total profits. In 2001, the company reported a profit of $1.3 billion dollars, which was completely bogus. The stock, which was an 800 pound gorilla at one time and a seemingly bulletproof investment, tumbled from $60 to pennies per share. Because of mutual fund and index fund exposure, tens of thousands of people lost money due to the Worldcom hoax, plus tens of thousands of people lost their jobs.

4. Healthsouth. Another case of a company engaging in deception to make their earnings reports seem much better than they actually were. CEO Richard Scrushy instructed employees to inflate revenues and overstate income. The scandal eventually came to light when CFO William Owens, now working with the FBI, recorded Scrushy talking about the deception on tape. Scrushy also sold shares of the company just before a major loss was announced. The stock was crushed when the allegations came to light, trading from $20 down to pennies in just one trading session.

3. The Pattern Daytrader Rule. A ridiculously stupid rule instituted by the SEC once the Internet bubble had popped. Big brokers were getting their heads handed to them by companies such as E-Trade and Ameritrade, and since these big brokers sit on the boards of the NYSE and NASDAQ, they proposed the "Pattern Daytrader Rule." The PDT is meant to neuter small-time daytraders and make it very difficult for them to trade their own money how they see fit. Basically, you are not allowed to daytrade more than 3 times in 5 days if you have less than $25,000 in your account. Forget the fact that it's your money. Forget the fact that you could be profitable on every trade. The SEC instituted this rule to "protect people from themselves." BS. The big brokers implemented this rule to protect their retail trading business, and they slid this rule in when no one was paying any attention.

2. Enron. Was once one of the top 10 biggest companies in the United States. Through the elaborate usage of shell companies and offshore companies, Enron cooked its books to hide debt and multiply their earnings. Not only they do this to make their earnings reports look better, but certain company officials also enriched themselves personally. Enron was a huge mess, taking down accounting firms and sending multiple people to jail in the process. The stock price fell from $90 down to pennies a share, and many people lost their retirement savings.

1. Dot Com Boom 1.0 - A massive fraud that was perpetrated on the public. Everyone had their hands dirty; big brokerages upgrading and pushing dot com stocks on their customers while privately calling the companies worthless in internal memos; big brokerages again for underwriting companies that they knew had no chance of ever making money just so they could bank their huge underwriting fees; big brokerages again for upgrading these POS stocks so that they could earn more fees underwriting the worthless companies' secondary offerings; big brokerages once again for allowing their analysts to issue outlandish price targets with no real justification; television stations such as CNBC for breathlessly hyping Internet stocks; the government for not giving the SEC the proper resources to investigate all of the shenanigans that were taking place at the time, and the media in general for not having the intestinal fortitude to critically analyze the dot com bubble for fear of alienating their readers. The extent of the fraud was far-reaching and millions lost money, and many thousands lost their life savings.