ZF Capital > 2010 January

Thought of the Day (January 21, 2010)

On January 21, 2010, In Thought of the Day, by ElfLord

Lorenzo Ghiberti, the fifteenth-century sculptor, had all the character traits necessary to be a great day trader: dedication, focus, concentration, determination, and willpower to complete a task. Ghiberti spent 48 years sculpting four bronze doors for the Baptistery of San Giovanni in Florence, Italy. Imagine working on a single project for 48 years. With no one to talk to for most of the day, the painstaking work would seem endless.

In many respects, the willpower and mind-set of a trader is not too different from that master sculptor. Both work alone, in focus, concentrating on minor detail, forming the details in their minds, then bring it forth. They are both very individual, solemn businesses, and the results are rather slow and plodding, yet they can add up to a masterpiece.

– Victor Sperandeo, Trader Vic II: Principles of Professional Speculation

Thought of the Day (January 20, 2010)

On January 20, 2010, In Thought of the Day, by ElfLord

Perhaps desire to squeeze the last point out of a trade is the most difficult to fight against. It is also the most dangerous. How often has it happened in your own case that you have entered a commitment with a conservatively set goal which your judgment has told you was reasonable, only to throw over your resolutions when your stock has reached that point, because you thought, “there were four more points in the move?” The irony of it is that seemingly nine times out of ten (I know, for it has happened with me) the stock does not reach your hoped-for objective; then– to add humiliation to lost profits– it goes against you for another number of points; and, like as not, you end up with no profit at all, or a loss.

– Humphrey Neill, Tape Reading and Market Tactics

Tradecraft – The Real World: Wall Street

On January 20, 2010, In Good Articles, by ElfLord

FOOTBALL MIGHT have my Sundays cornered, but the real drama in my life occurs over an exhausting 120-hour stretch that starts Sunday night in New Zealand and ends late Friday afternoon in San Francisco.

There is no greater sport than the financial markets. The action in baseball, football, even BattleBots pales in comparison with the tick-for-tick drama of the QQQs (QQQ), Spiders (SPY) and, lately, even the long bond’s TLTs. I don’t care how many ESPN channels there are — who needs another highlights show when you’ve got 24-hour biz cable or Webfn? When you’ve got money at work — even just a little bit — it’s March Madness, the Super Bowl and “Survivor” all wrapped up into one.

Trading is exciting, emotionally draining work. Just as athletes go to the gym and lawyers study for the bar, good trading requires discipline. And more often than not, if it hurts, it means you’re doing it correctly. Whether you’re managing hundreds of your own dollars or millions of other people’s dollars, trading is the worst job you’ll ever love. (more…)

Thought of the Day (January 19, 2010)

On January 19, 2010, In Thought of the Day, by ElfLord

Beginners become emotional when they trade, but if you want to survive and succeed, you must develop discipline. The moment you become aware of feeling fear or joy, use that as a signal to tighten your discipline and follow your system. You developed that system when the markets were closed and you felt calm. Now it gives you your only chance of survival and success in the markets.

– Alexander Elder, Come Into My Trading Room

Thought of the Day (January 18, 2010)

On January 18, 2010, In Thought of the Day, by ElfLord

A Harvard professor once asked his students to do a special report on fish. His scholars went to the library, read books about fish, and then wrote their expositions The students were shocked when, after turning in their papers, the professor tore them up and threw them in the waste basket. When they asked what was wrong with the reports, the professor said, ‘If you want learn anything about fish, sit in front of a fish bowl and look at fish.’

– William O’Neil

Tradecraft – Death by Doubling Down

On January 18, 2010, In Good Articles, by ElfLord

THE MARKET DOESN’T slit our throats — we do it to ourselves. The Martingale, gambling lingo for what experienced traders call “doubling down,” is perhaps the quickest means to a bloody end. I got my first gray hair the day I understood why the Martingale system, despite all its attractions, simply doesn’t work.

The gambling system, which dates back to a London gaming house in the late 1700s, is completely irrational, yet incredibly seductive. The thinking: If you keep doubling your losing bets, eventually a winning trade will make up for the losses. Like making a deal with the devil, the Martingale system will always comes back to haunt you — and often more quickly than you might expect. (For a more detailed history of the Martingale, I’d recommend Nicholas Dunbar’s wonderful book, “Inventing Money.”)

Unlike Jim Cramer or Arch Crawford, I don’t give out a list of stock picks each week. My philosophy is that trading technique, not security selection, is what ultimately determines success. We of the Tradecraft prefer not to give a man a fish so that he may eat for a day, but to teach a man to fish so that he may eat everyday. (more…)

Thought of the Day (January 17, 2010)

On January 17, 2010, In Thought of the Day, by ElfLord

You do not have to be more intelligent than other traders – only better disciplined.

– Alexander Elder

ZF Capital

Thought of the Day (January 21, 2010)

Thought of the Day (January 20, 2010)

Tradecraft – The Real World: Wall Street

Thought of the Day (January 19, 2010)

Thought of the Day (January 18, 2010)

Tradecraft – Death by Doubling Down

Thought of the Day (January 17, 2010)

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