ZF Capital > 2010 January

Tradecraft – Only the Strong Survive

On January 11, 2010, In Good Articles, by ElfLord

PEOPLE LIKE TO ASK ME questions about the markets, whether I’m appearing on cable television or gabbing at a cocktail party. Is Dow 7000 cheap, or are we heading for a capitulation low? Is it time to buy tech stocks like Oracle (ORCL) and Cisco (CSCO), or short them even further into the single digits?

Here’s the thing: It doesn’t really matter what I think. It matters what they think.

As we’ve pointed out before, good trading is built more on sober technique than hot stock tips. Investors must be confident enough to take a position, yet humble enough to abandon it just the same. After all, the market is constantly changing, and no matter how good our analysis might be, we can always be wrong. Whether you’re Abby Joseph Cohen or Ms. Cleo, the future is always unknowable and largely out of our control.

But while we can’t change the market, we can alter our position within it. And I can’t stress enough that the most important aspect of any trading decision is never the condition of the market, but rather that of your own position. For active managers not content to buy and hope, the trick is to be constantly moving toward a position of strength, both within an individual trade and within the marketplace at large. Just like basketball, chess or any other activity that requires focus, you know you’re in the “zone” of trading when you start playing for position, not for points. (more…)

Thought of the Day (January 11, 2010)

On January 11, 2010, In Thought of the Day, by ElfLord

You get a sense of control with entry signals because the point at which you choose to enter the market is the point at which the market is doing exactly what you want it to do. As a result, you feel like you have some control, not just over your entry, but over the market. Unfortunately once you are in a position in the market, the market is going to do whatever it wants to do-you no longer have any control over anything except your exits.

– Van Tharp, Trade Your Way to Financial Freedom

Thought of the Day (January 10, 2010)

On January 10, 2010, In Thought of the Day, by ElfLord

Keeping good records is the single most important contribution to your success. If you maintain scrupulous records, review them, and learn from them, your performance will improve. If your money management is in place to ensure survival during the learning process, you’re sure to become a success.

Records are more important to your success than any indicator, system, or technical tool. Even the best system is bound to have some holes, but good records will allow you to find them and plug them up. A person who keeps detailed records makes a huge leap in his development as a trader.

Show me a trader with good records, and I’ll show you a good trader.

– Alexander Elder, Come Into My Trading Room

Thought of the Day (January 9, 2010)

On January 9, 2010, In Thought of the Day, by ElfLord

Traders hate to think about discipline. After all, it’s not as sexy as just becoming a market gunslinger. But the bottom line is that most of us don’t follow our own rules. This is ironic, because the folks who ignore the reasons they lose money are the same ones who spend thousands of dollars attending trading seminars. Personal discipline is the one thing you can’t learn sitting in an audience.

– Alan Farley, The Profitable Trader

Thought of the Day (January 8, 2010)

On January 8, 2010, In Thought of the Day, by ElfLord

Imagine that a stranger walks into your driveway and tries to sell you an automatic system for driving your car. Just pay a few hundred dollars for a computer chip, install it in your car, and stop wasting energy on driving, he says. You can take a nap in the driver’s seat while the “Easy Swing System” whisks you to work. You would probably laugh the salesman out of your driveway. But would you laugh if he tried to sell you an automatic trading system?

Traders who believe in the autopilot myth think that the pursuit of wealth can be automated. Some try to develop an automatic trading system while others buy one from the experts. Men [and presumably women] who have spent years honing their skills as lawyers, doctors, or businessmen plunk down thousands of dollars for canned competence. They are driven by greed, laziness, and mathematical illiteracy.

– Alexander Elder, Trading For A Living

Tradecraft – A Dollar Saved Is a Dollar Earned

On January 8, 2010, In Good Articles, by ElfLord

BANKING IS THE MOST competitive and lucrative business in the world. It always has been. But here’s something you might not realize: Whether you’re a teacher, an executive, a construction worker or a salesman, the reality is that you are a banker, too — in charge of thousands of dollars of liquid assets every month.

Nowadays we think of banks simply as electronic accounts on which we can draw checks and earn interest. But historically, banks’ main purpose has been to protect assets. Years ago, one needed a local bank to store valuables in a safe deposit box, and depended on a bank to earn steady (if unspectacular) returns that would at least keep pace with inflation. Despite the once-per-generation stock market mania that sweeps over America, investors historically have been far more concerned with holding on to their wealth than with striking it rich with their investments. Rightfully so.

Before you can invest, you must save. And regardless of what the market does over the next few months, I predict the Depression-era savings mentality I first wrote about a couple of months ago will make a far bigger comeback than most people realize. The truth of the matter is that, right now, as much as it hurts to admit it, most people aren’t investors as much as they are aggressive savers — willing to take risk, but on a much more limited scale. And although stocks have historically been the highest-returning asset class over the long haul, for the first time in memory investors are unwilling to stick around to see if history repeats itself. (more…)

Thought of the Day (January 7, 2010)

On January 7, 2010, In Thought of the Day, by ElfLord

As a trader, you must be willing to create and develop your own unique style which works for you. Imitators are often not successful in art or trading. They do not possess the same personality as the originator, and therefore, cannot understand or believe in the trading method. Trading is not just an understanding of the market but and understanding of your method and how you work with it.

– Michael Douglas, Trading in the Zone

ZF Capital

Tradecraft – Only the Strong Survive

Thought of the Day (January 11, 2010)

Thought of the Day (January 10, 2010)

Thought of the Day (January 9, 2010)

Thought of the Day (January 8, 2010)

Tradecraft – A Dollar Saved Is a Dollar Earned

Thought of the Day (January 7, 2010)

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