Consider everything that appears on the tape as an evidence of support and lifting power, or pressure and selling power. Continually compare the strength of these forces. Use all the judgment and reasoning power at your command. Endeavor to improve your judgment by constant study and practice. Strive to lift your judgment from commonplace to good; from good to better; from better to excellent.
– Richard Wyckoff
WITH CISCO SYSTEMS (CSCO) down some 70% from its all-time high, analysts are falling all over themselves to divine the next move for the beleaguered stock. At $19 a share and a $140 billion market cap, it isn’t exactly cheap. Some think Cisco is attractive at current levels. Others think it’s a buy way down in the low teens, and still others wouldn’t touch it until the single digits. As always, two sides make a market, and nobody knows the future.
Like my well-pedigreed colleagues, I too have a price at which I’d like to buy Cisco: $81.82 a share. In fact, I would love Cisco at $81.82, its all-time high. I’d adore it. I’d be all over it.
Seem strange? Perhaps. After all, if Cisco ever got back up to the high it reached last March, plenty of people — especially those sitting on losing positions — would sell, anxious to recoup their losses or protect profits before the stock took another dive. It’s what I hear when I talk to prospective clients about reallocating some of their assets away from tech. Everyone is waiting for a bounce.
That thinking is understandable, but flawed: The truth is that if the stock ever did rebound back to its old highs, it would be a signal to increase, not decrease, your exposure. It’s a question of timing, and from baseball cards to Brocade Communications (BRCD), trading is all in the timing. (more…)
The market forces you, if you’re going to succeed, to be completely honest with yourself. If you’re losing money, you are forced to confront that reality. It’s an objective reality, it’s right in front of you, and you have to acknowledge it. The market weeds out people who are unable to be honest with themselves.
Trading is one of the most self-revelatory things that a person can do. If you allow yourself to be really open, it’s like going through psychotherapy everyday.
– Robert Koppel
There are several concrete things you can do to grasp what part your emotions play in your trading success or failure. For instance, keep a journal of your feelings so that you can track your emotions and more easily see our progress or setbacks. By having this detailed written information, you can visually follow your progress, and your notes will help you more readily find solutions to your problems.
– Ari Kiev, Trading to Win
Victor Sperandeo says that if there were a Hall of Fame for trading he wouldn’t be in it but he sees himself as a career pro who consistently performs at an elite level year after year. In fact consistent performance is his central theme, which he says requires not only a successful approach to trading but to life itself. He delves into this in the second part of the book that is dedicated to the psychological approach.
The main topics in this book include: Preservation of capital, consistent profitability, technical analysis and trading rules. He tells how to spot a trend and discusses technical analysis. How to spot the tops and bottoms in any market. There is also a lot of detail about economics and what makes the system tick, which as he says he didn’t learn in school. Moving averages, booms and busts, and how to manage risk and have a good business philosophy for consistant success are also part of this well written book of trader knowledge. He covers a great deal of useful information in a very compact form that is actually easy to read and understand. (more…)
I think that successful traders have a personality, that they’re not afraid to have nineteen losing trades out of twenty, because the twentieth can be a trade that’s much greater than all the nineteen put together. They’re not hung up on losing money. They want to protect what they’ve got and wait for an opportunity to make a lot of money.
– George Segal
WHAT MAKES ME strong in my convictions is that I’m always ready to abandon them. As a trader, I have no allegiance to one stock, sector, analyst, idea or asset class. My only loyalty is to the bottom line.
And while we are influenced by the past, we live and trade in the present. TV’s talking heads have an explanation for everything, but the truth is there are no rules for how the market “should” act.
So in positioning my portfolio, I start by erasing any preconceived notions about how a trade might turn out. It’s a technique that entails keeping not only your eyes open, but your mind as well. In short, assume nothing. When everybody knows something is so, it usually ain’t.
One of the things everybody knows is so: When the Federal Reserve cuts interest rates, the stock market rises. But after six rate cuts and seven months, the big caps are still underwater year-to-date. Fighting the Fed hasn’t exactly been that bad a strategy lately. (more…)
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