ZF Capital > 2009 November

Thought of the Day (November 25, 2009)

On November 25, 2009, In Thought of the Day, by ElfLord

Having the will to execute means having the capability or power to carry through on a plan of action designed to achieve a specific goal.

It means having the ability to decide. The word decide comes from Latin roots that mean “to cut off.” When you really make a decision, your mind has concluded that no other alternative is either desirable or possible. When you achieve this state of mind, carring through your plan becomes less a matter of choice and more a matter of necessity.

The plan itself becomes a value, and if integrated into your subconscious, can actually be supported by your emotions. In this way, practicing emotional discipline not only enhances your ability to act, but also reduces the level and frequency of emotional conflict– it becomes a source of consistency in thought, actions, and feelings.

– Victor Sperandeo, Trader Vic — Methods of a Wall Street Master

Tradecraft – First Thinks First

On November 25, 2009, In Good Articles, by ElfLord

JUST NINE DAYS after the most horrific attack on the U.S. since Pearl Harbor, President Bush posed a crisp challenge to the world’s 190 countries and six billion residents. “Every nation, in every region, now has a decision to make,” he said. “Either you are with us, or you are with the terrorists.”

And while the president’s point was to stress the vigilance with which the U.S. would fight the war on terrorism, the truth is that he committed a common logical fallacy that plagues even the smartest individuals, from politicians to portfolio managers.

His rhetoric was a perfect example of what logicians refer to as a “false dilemma,” or fallacy of distraction. By limiting the number of options, we forget the reality that, truth be told, there are actually more than two choices in this highly complex scenario. And whether you are coping with terrorism or Tyco (TYC), that’s usually the case.

This sort of black-or-white thinking, a topic we first touched on a few weeks back, is just one of a handful of common trading traps that can affect your performance. (more…)

Thought of the Day (November 24, 2009)

On November 24, 2009, In Thought of the Day, by ElfLord

Almost every successful investor that I have encountered has realized that success in the markets comes from internal control. This is a radical change for most investors. Internal control is not that difficult to achieve, but it is difficult for most people to realize how important it is. For example, most investors believe that markets are living entities that create victims. If you believe that statement, then it is true for you. But markets do not create victims; investors turn themselves into victims. Each trader controls his or her own destiny. No trader will find success without understanding this important principle at least subconsciously.

– Van Tharp, Trade Your Way to Financial Freedom

Thought of the Day (November 23, 2009)

On November 23, 2009, In Thought of the Day, by ElfLord

Although the cheetah is the fastest animal in the world and can catch any animal on the plain, it will wait until it is absolutely sure it can catch its prey. It may hide in the bush for a week, waiting for just the right moment. It will wait for a baby antelope, and not just any baby antelope, but preferably one that is also sick or lame. Only then, when there is no chance it can lose its prey, does it attack. That, to me, is the epitome of professional trading.

– Mark Weinstein, Market Wizards by Jack Schwager

Tradecraft – The Bottom-Fisher’s Tackle Box

On November 23, 2009, In Good Articles, by ElfLord

THE MARKET’S WEAKNESS over the last two years has been chalked up to everything from election jitters to energy prices, the economy to Enron (ENRNQ). Likewise, in the early 1970s, there was an equally daunting list of fundamental factors, from Vietnam to Watergate, Cambodia to communism that got blamed for dragging stocks down.

On May 21, 1973, U.S. News & World Report featured an enthusiastic cover story called “Brighter Days Ahead for Stock Market?”

“Conditions are shaping up for a sustained rise in stock-market prices,” the magazine suggested, citing analysis from a number of then well-known pundits, who almost universally expected better times ahead. “The market is ready to move up” predicted Ian Cramer of Kohnmeyer and Co. “We are buying stocks.” Pundits, it turns out, have been missing the boat for years.

The Dow, which at 900 had already been in a trading range for the better part of six years, went on to drop another 35%, hitting new bear-market lows and, for a period, trading at levels that hadn’t been seen since the late 1950s. The recently introduced Nasdaq went on to drop 50%. (more…)

Thought of the Day (November 22, 2009)

On November 22, 2009, In Thought of the Day, by ElfLord

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.

– Jesse Livermore, Reminiscences of a Stock Operator

Thought of the Day (November 21, 2009)

On November 21, 2009, In Thought of the Day, by ElfLord

A trade does not end when you close out your position. You must analyze it and learn from it. Many traders throw their confirmation slips into a folder and go looking for the next trade. They miss an essential part of growing to become a professional trader– review and self-analysis.

Have you identified a good trade? Which indicators were useful and which did not work? How good was your entry? Was the initial stop too far or too close? Why and by how much? Did you move your stop to a breakeven level too early or too late? Were your protect-profit stops too loose or too tight? Did you recognize the signals to exit a trade?

What should you have done diffeently? What did you feel at the various stages of the trade? This analysis is an antidote against emotional trading.

Ask yourself these and other questions and learn from your experiences. A cool, intelligent analysis does you more good than gloating about profits or wallowing in regrets.

– Alexander Elder, Trading for a Living

ZF Capital

Thought of the Day (November 25, 2009)

Tradecraft – First Thinks First

Thought of the Day (November 24, 2009)

Thought of the Day (November 23, 2009)

Tradecraft – The Bottom-Fisher’s Tackle Box

Thought of the Day (November 22, 2009)

Thought of the Day (November 21, 2009)

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