The task of beating the market is not difficult, it is the job of beating ourselves that proves overwhelming.
– Martin Pring, Investment Psychology Explained
On October 21, 2009, In Thought of the Day, by ElfLord
On October 21, 2009, In Good Articles, by ElfLord
LET’S BE HONEST: Even before the atrocities of September 11th, the widely owned names were in bad shape. Now, given the dramatic declines we’ve seen over just the past few weeks, many strategists are calling the market a bargain. Goldman Sachs’s Abby Joseph Cohen recently raised her equity allocation, as did Tom McManus of Banc of America. Uber-bull Tom Galvin of Credit Suisse First Boston also urged investors to buy, and even Treasury Secretary Paul O’Neill has weighed in with his investment strategy, telling CNN he felt the Dow could approach new records within 18 months.
The country isn’t just patriotic — it’s bullish. From Joe Sixpack to Joe Battipaglia, most people aren’t questioning a rebound, but just waiting for it to occur. As we often point out, two sides make a market. Many investors feel as if the worst is over, while others expect more downside to come.
While I am not a roaring bear, I am a realist. And besides rising or falling, the third scenario for stocks — one it seems bulls and bears alike have completely forgotten about — is that the market might go absolutely nowhere for quite some time.
Most financial planners, market analysts and mutual-fund companies like to harp on the idea that the market returns about 10% a year. And while it’s true that the long-term average return on stocks has been approximately 10%, to suggest that an average year sees the market up 10% isn’t just misleading, but just plain wrong. Indeed, as we first pointed out a few months back, there have been long periods of time where the market has done absolutely squat. (more…)
On October 20, 2009, In Thought of the Day, by ElfLord
Trader, know thyself. It’s been said that 97% of successful trading is understanding and utilizing one’s own strengths and limitations. If you continually put yourself into trades that don’t play into your strengths, then you’re going to lose money, and you’re going to beat yourself up mentally in the process.
– StoryTeller, TMF Boards
On October 19, 2009, In Thought of the Day, by ElfLord
Traders are often surprised when I tell them that the single most important factor in their success or failure is the quality of their records. The records you keep have a greater impact on your performance than any indicator, system, or service.
Good records allow you to learn from your wins and losses, identify problem areas, and correct mistakes before they damage your account. Traders who keep bad records tend to be chronic losers, while successful professionals have good records.
– Alexander Elder
On October 19, 2009, In Good Articles, by ElfLord
WHETHER IT’S FROM friends, colleagues or the endless stream of televised talking heads, the more analysis I hear, the worse I trade. We all want to be informed investors, but I find that constantly hearing opinions on the market is more of a hindrance than a help.
In fact, as strange as it may seem research, inquiry and due diligence aren’t always what they’re cracked up to be. As with anything else in trading or life, there can be too much of a good thing.
When buying a stock, some people evaluate the economic fundamentals. Others check the charts. Some survey the “experts” or watch what the supposed “smart money” is doing.
As I’ve written before, once I’ve bought a stock I systematically avoid any news or research reports about the company. It’s tempting to seek validation from others about our own positions, but I have found listening to anyone or anything besides the market itself to be a dangerous proposition. Unless you want to be constantly second-guessing your judgment, take your cues from the military: Don’t ask and don’t tell. Trading is tough enough as it is without a squadron of armchair critics squeaking in your ear. (more…)
On October 18, 2009, In Thought of the Day, by ElfLord
If somebody had told me my method would not work I nevertheless would have tried it out to make sure for myself, for when I am wrong only one thing convinces me of it, and that is, to lose money. And I am only right when I make money. That is speculating.
– Jesse Livermore, Reminiscences of a Stock Operator