ZF Capital > 2010 February

Thought of the Day (February 13, 2010)

On February 13, 2010, In Thought of the Day, by ElfLord

I have two basic rules about winning in trading as well as in life:(1) If you don’t bet, you can’t win. (2) If you lose all your chips, you can’t bet.

– Larry Hite

Tradecraft – Hot Stock Tip? I’ll Pass

On February 12, 2010, In Good Articles, by ElfLord

WHEN IT COMES TO the Kentucky Derby, the Final Four and the stock market, everybody’s got a hot tip. Most portfolio managers still focus on what to trade, not on how to trade.

Yet when I lose money in the market, it’s poor technique, not bum stock picking, that’s always to blame. Despite all the emphasis on independent research and proper due diligence, I lose money not when I’m wrong in my analysis, but when I’m undisciplined in my approach.

For example, when a stock of mine is doing well, generally speaking, I get stupid. I scour the message boards looking for praise. I comb through the headlines. I daydream about potential acquirers. I browse the online company store. I look for favorable mentions in the business press. I fall in love.

And when the stock starts to sink, and my profit begins to disappear, I foolishly listen to everything else but the market itself — despite my years of experience as a hedge-fund manager. (more…)

Thought of the Day (February 12, 2010)

On February 12, 2010, In Thought of the Day, by ElfLord

I strongly suspect that even the most successful traders have a constructive side and a destructive side– a self that is capable of mastering the markets and a self that is capable of implosion. The traders who are ultimately successful have found ways of continuously accessing the mastery they possess.

The ones who fail may be every bit as knowledgeable and experienced, but they remain locked in states that undermine their goals. Overcoming problem patterns is only half the game. The equal challenge is to cultivate successful patterns that can be invoked at will. This is only possible to those who have developed a high degree of intentionality– the capacity to sustain significant effort and purpose.

– Brett Steenbarger, The Psychology of Trading

Thought of the Day (February 11, 2010)

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

The minute the ego starts coming into our trading, it’s disaster. The minute we start doing stuff that is more about building up our ego, the more likely it’s going to show up in our results.

– Don Miller

Tradecraft – I’d Rather Be Rich Than Right

On February 10, 2010, In Good Articles, by ElfLord

LAST WEEK, I MADE another elaborate case for bonds over stocks. I combed through historical data, made pretty graphs. It was passionate, well-reasoned and sound research. And last week, it didn’t mean a damn thing. The bond market got clobbered. At least for this moment, I’m dead wrong.

While I believe my analysis that bonds are historically cheap is correct, the fact is, the point of investing is to make money, not to be “right.” When a market moves against me, good technique dictates that I look to reduce exposure, no matter how good my research is.

My analysis hasn’t changed, but the market has. And whether I was early, or just plain wrong, the recent weakness in bonds can’t be ignored. While I still remain a bull on bonds, let the record show that I’ve been stopped out of several positions, many at a loss. My overall exposure is still long bonds, but for now, it has been reduced (as has my capital). Fresh stop loss orders have been set.

OK, I’ve got egg on my face. But that’s all part of the game. No matter how good the research is, you’ve got to be flexible. When the wind blows, you’ve got to bend in order not to break. (more…)

Thought of the Day (February 10, 2010)

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

I never buy stocks on tips, rumors, or inside information. It simply is an extremely unsound investment practice. Of course, tips, rumors, or inside information seem to be what most people are looking for. But, again, what most people believe and do in the market doesn’t work; so beware!

Certain advisory services and some daily business newspapers carry regular columns fed by Street gossip, rumors, tips, and planted personal opinions or inside information. This, in my opinion, is not the most professional approach, nor is it too sophisticated. There are far sounder and safer methods of investing in the stock market.

– William O’Neil, How To Make Money in Stocks

Thought of the Day (February 9, 2010)

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

To be a successful trader, you have to be able to admit mistakes. The person who can easily admit to being wrong is the one who walks away a winner.

– Victor Sperandeo, The New Market Wizards by Jack Schwager

ZF Capital

Thought of the Day (February 13, 2010)

Tradecraft – Hot Stock Tip? I’ll Pass

Thought of the Day (February 12, 2010)

Thought of the Day (February 11, 2010)

Tradecraft – I’d Rather Be Rich Than Right

Thought of the Day (February 10, 2010)

Thought of the Day (February 9, 2010)

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