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 (technical) formations and patterns recur on a constant basis.
– Jesse Livermore, Reminiscences of a Stock Operator
Traders come to the markets with great expectations, but few make profits and most wash out. The industry hides good statistics from the public, while promoting its Big Lie that money lost by losers goes to winners. In fact, winners collect only a fraction of the money lost by losers. The bulk of losses goes to the trading industry as the cost of doing business– commissions, slippage, and expenses– by both winners and losers. A successful trader must hop over several high hurdles– and keep hopping. Being better than average is not good enough– you have to be head and shoulders above the crowd. You can win only if you have both knowledge and discipline.
– Alexander Elder, Come Into My Trading Room
FROM MUNICIPAL BONDS to futures, options and warrants, there are literally thousands of financial instruments that can be traded on a daily basis. Whether you’re an aggressive trader gunning for capital gains or a lower-volatility investor looking for income, there are many choices out there besides money-market funds and Standard & Poor’s 500 index funds.
Like a four-star film, a successful trade is carefully planned, meticulously researched and delicately executed. And when it comes time to put money on the line, investors should not only like the trade, but also the product they’re trading. Making the right trade at the right time using the right product well, it feels like heaven on earth.
Despite the paternalistic tone coming from nervous regulators these days, new investment products continue to be developed at a speedy clip. Keeping abreast of the latest innovations is critical so that, like Batman, you can pull them out of your utility belt at just the right time.
Some products are outright flops. Folios have been moribund since their much-heralded inception a few years back. The same goes for the Chicago Mercantile Exchange’s bankruptcy futures and the Chicago Board Options Exchange’s options on mutual funds, neither of which gained sufficient volume to justify their existence. (more…)
Neurotic traders use trading for the “high” it gives them. These people have a need to be always on the edge. They trade during the day, bet on professional sports at night, go to the racetrack on weekends, and even plan their vacations around gambling. For them, the thrill is in the bet, not the outcome. Their mind is always on the next game, the next trade, wherever money can be won or lost. They have no goal beyond the moment…That is the underlying psychology of impulsive behavior, and it is the exact opposite of the healthy psychology of successful traders.
– Victor Sperandeo, Trader Vic II: Principles of Professional Speculation
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