ZF Capital » Thought of the Day

Thought of the Day (June 22, 2010)

ElfLord — Mon, 21 Jun 2010 21:01:10 +0000

When you do what your emotions tell you to – on the spur of the moment – you are doing exactly what the “masses” are doing, and this is not generally profitable.

– Claude Rosenberg Jr, The Investor’s Anthology by Charles Ellis

Thought of the Day (June 21, 2010)

ElfLord — Sun, 20 Jun 2010 21:58:39 +0000

What is the ultimate rationalization of a trader in a losing position? “I’ll get out when I’m even.” Why is getting out even so important? Because it protects the ego. I became a winning trader when I was able to say, “To hell with my ego, making money is more important.”

– Martin Schwartz , Market Wizards by Jack Schwager

Thought of the Day (June 20, 2010)

ElfLord — Sat, 19 Jun 2010 21:57:15 +0000

Before I began my trading career, I played a lot of poker. I read every book I could find on the subject and learned that poker isn’t a game of luck, but one of both risk and odds management. Leaving bluffs aside, if you bet or call only when the odds are in your favor and plan your bets so that you stay at the table, you will make money over time. That doesn’t mean you’ll win every hand, far from it. But if you always keep the odds in your favor and scale your bets accordingly, you will come out a winner in the long run.

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

Thought of the Day (June 19, 2010)

ElfLord — Fri, 18 Jun 2010 21:56:04 +0000

It is stupidity which makes people “rush in where angels fear to tread.” And there is something about the Wall Street atmosphere which makes people think that whatever is to be done must be done at once, otherwise the opportunity will get away from them. I find that opportunities are coming along all the time, and that the majority are not as good as they look. So the best ones are worth waiting for.

– Richard Wyckoff, How I Trade and Invest in Stocks and Bonds

Thought of the Day (June 18, 2010)

ElfLord — Thu, 17 Jun 2010 21:54:31 +0000

The speculator is not an investor. His object is not to secure a steady return on his money at a good rate of interest, but to profit by either a rise or a fall in the price of whatever he may be speculating in. Therefore the thing to determine is the speculative line of least resistance at the moment of trading; and what he should wait for is the moment when that line defines itself, because that is the signal to get busy.

– Jesse Livermore, Reminiscences of a Stock Operator

Thought of the Day (June 17, 2010)

ElfLord — Wed, 16 Jun 2010 21:53:09 +0000

People become primitive and action-oriented when they join crowds. Crowds feel simple but strong emotions such as terror, elation, alarm, and joy. Crowds swing from fear to glee, from panic to mirth. A scientist can be cool an rational in his lab but make harebrained trades after being swept up in the mass hysteria of the market. A group can suck you in, whether you trade from a crowded brokerage office or from a remote mountaintop. When you let others influence your trading decisions, you lose your chance of success.

– Alexander Elder, Trading for a Living

Thought of the Day (June 16, 2010)

ElfLord — Tue, 15 Jun 2010 21:51:46 +0000

If there is one generalization about the whole subject of stock charts which we may suggest at the very introduction of our study, it is the definite caution that the reader be skeptical of any apparently sure thing.

– Richard Schabacker, Technical Analysis and Stock Market Profits

Thought of the Day (June 15, 2010)

ElfLord — Mon, 14 Jun 2010 21:50:19 +0000

Your judgment will become poorer from the very time when you decide that you know more about the market than the market is telling you. From that moment your results will be unsatisfactory, for in this trading business the tape is the boss. You must learn to obey its orders, doing exactly what it tells you. When you can accomplish this, you are on the high road to success in your stock trading.

– Richard Wyckoff, Stock Market Technique No. 1

Thought of the Day (June 14, 2010)

ElfLord — Sun, 13 Jun 2010 21:49:00 +0000

The more sophisticated you become as a trader, the more you will realize that trading is completely mental. It isn’t you against the markets, it’s just you. All the other traders participating to make the market provide you with an opportunity to make money from their divergent beliefs about the future. If people didn’t disagree about the future value of any particular commodity or stock, then there would be nothing to compel them to either bid a price higher or offer it lower, and the opportunity to profit from these changes would cease to exist. So the markets just offer the individual trader opportunity.

– Mark Douglas, The Disciplined Trader

Thought of the Day (June 13, 2010)

ElfLord — Sat, 12 Jun 2010 21:47:21 +0000

It is my conclusion that playing the market is partly an art form, it is not just pure reason. If it were pure reason, then somebody would have figured it out long ago. That is why I believe every speculator must analyze his own emotions to find out just what stress level he can endure. Every speculator is different, every human psyche is unique, every personality exclusive to that person. Learn your own emotional limits before attempting to speculate-that is my advice to any one who has ever asked me what makes a successful speculator. If you can’t sleep at night because of your stock market position then you have gone too far; if this is the case, then sell your position down to the sleeping level.

– Jesse Livermore, Reminiscences of a Stock Operator

Thought of the Day (June 12, 2010)

ElfLord — Fri, 11 Jun 2010 21:45:40 +0000

There is no rule that says you always have to have action; yet that is perhaps the most disastrous of all the common errors we noticed. Rather than continually confronting the market on its own often inscrutable terms, stop and ask yourself what you know, whether what you know is enough to act upon, and how you are relating to it.

Maybe it is a period when the market’s personality conflicts with yours, or something in your extra-market life is hampering your ability to view stock action objectively, or, simply, perhaps it’s a time when the markets course isn’t clear to anyone. Then it is best to step aside. You owe it to yourself to find out exactly how ready and able you are to play, because it’s yourself you end up playing against.

– Justin Mamis, When to Sell

Thought of the Day (June 11, 2010)

ElfLord — Thu, 10 Jun 2010 21:43:37 +0000

Study and practice are the two things farthest removed from the minds of the majority. Everyone knows that people who engage in speculation for the first time do not want to bother with such details. The average man who comes to Wall Street comes to speculate, although he may pay in full for his purchases. All he asks is to be told “something good.” That is not speculation, it is gambling; for speculation, to quote Thomas F. Woodlock, “involves the use of intelligent foresight.” Most people use neither foresight nor intelligence.

– Richard Wyckoff, How I Trade and Invest in Stocks and Bonds

Thought of the Day (June 10, 2010)

ElfLord — Wed, 09 Jun 2010 21:42:22 +0000

Recognize our single purpose when the market opens each morning. We are there to take other people’s money before they take ours.

– Alan Farley, The Master Swing Trader

Thought of the Day (June 9, 2010)

ElfLord — Tue, 08 Jun 2010 21:41:30 +0000

There are numerous similarities between the serious trader and the serious gambler. In the casino, the difference between the winner and the loser is that the former leaves the table when he has reached his goal for the session, and the latter leaves when he has lost his stake. Most gamblers, like many traders, don’t realize that the only way they can stop gambling is by losing.

– Franklin Chu, The Mind of the Markets

Thought of the Day (June 8, 2010)

ElfLord — Mon, 07 Jun 2010 21:39:36 +0000

It is not given to any man to know it all. When he thinks he’s the smartest man in the world, he puts himself in a class we call fools.

– Roy Longstreet, Viewpoints of a Commodity Trader

Thought of the Day (June 7, 2010)

ElfLord — Sun, 06 Jun 2010 21:38:19 +0000

You should either make a business of trading or else not try to be a trader.

– Richard Wyckoff, How I Trade and Invest in Stocks and Bonds

Thought of the Day (June 6, 2010)

ElfLord — Sat, 05 Jun 2010 21:36:49 +0000

It took me over a decade to figure out my natural direction. I’d suggest that you take the time to seriously ponder whether the path you are on is the one you want to be on. Perhaps your journey will then be shortened.

– Jack Schwager, The New Market Wizards

Thought of the Day (June 5, 2010)

ElfLord — Fri, 04 Jun 2010 21:35:23 +0000

It was not that all I needed to learn was not to take tips but follow my own inclination. It was that I gained confidence in myself and I was able finally to shake off the old method of trading. That Saratoga experience was my last haphazard, hit-or-miss operation. From then on I began to think of basic conditions instead of individual stocks. I promoted my self to a higher grade in the hard school of speculation.

– Jesse Livermore, Reminiscences of a Stock Operator

Thought of the Day (June 4, 2010)

ElfLord — Thu, 03 Jun 2010 21:34:11 +0000

In your market analysis, do not get so cerebral that you are ineffective. It doesn’t matter if the computer says so, reality is the last sale. Traders and investors have a tendency to overanalyze. One of the stages every trader (and many investors) goes through is over reliance on mechanical and computerized trading systems. These are very useful tools, but they are not answers. Many times I have seen the technical indicators say, ‘sell,’ yet the market just refuses to cooperate. It keeps trading up. The only truth is the last sale. Fight the tape and you will collapse.

– Dean Lundell, Sun Tzu’s Art of War for Traders and Investors

Thought of the Day (June 3, 2010)

ElfLord — Wed, 02 Jun 2010 21:32:30 +0000

Investors with large amounts of capital obtained from a windfall or from inheritance are much more likely to suffer large losses because they are less likely to truly feel the pain of losing money. Because they did not go through the arduous process of earning it themselves, they view their capital as ‘found money.’

In comparison, the long-term trader is able to feel the pain of losing and, accordingly, takes the necessary steps to mitigate his losses and to reduce the likelihood of incurring similar losses in the future. Financial survival in the markets is very difficult without the capacity to feel pain, for pain and fear can function as a protective covering, which the psychiatrists claim allows the organism the opportunity to recover and return to a neutral state.

– Franklin Chu, The Mind of the Markets

Thought of the Day (June 2, 2010)

ElfLord — Tue, 01 Jun 2010 21:30:16 +0000

The mature trader arrives at a stage where most trading actions have become nearly automatic. This gives you the freedom to think about strategy. You think about what you want to achieve, and less about tactics of how to achieve it. To reach that point, you need to trade for a long time. The longer you trade and the more trades you put on, the more you’ll learn. Trade a small size while learning and put on many trades. Remember, the first item on the agenda for a beginner is to learn how to trade, not to make money. Once you’ve learned to trade, money will follow.

– Alexander Elder, Come Into My Trading Room

Thought of the Day (June 1, 2010)

ElfLord — Mon, 31 May 2010 21:46:56 +0000

Dieting provides an apt analogy for trading. Most people have the necessary knowledge to lose weight– that is, they know that in order to lose weight you have to exercise and cut your intake of fats. However, despite this widespread knowledge, the vast majority of people who attempt to lose weight are unsuccessful. Why? Because they lack the emotional discipline.

– Victor Sperandeo, The New Market Wizards by Jack Schwager

Thought of the Day (May 31, 2010)

ElfLord — Sun, 30 May 2010 21:45:44 +0000

Many traders who report emotional problems in the market are experiencing their diffuculties because they have not found a good fit between their trading styles and their personalities. Tolerance for risk is, in part, a traitlike personality variable. The issue isn’t so much one of which approach to trading is best. Rather, it is important to find the proper fit between the trader and the trading.

– Brett Steenbarger, The Psychology of Trading

Thought of the Day (May 30, 2010)

ElfLord — Sat, 29 May 2010 21:44:27 +0000

You will need a sound approach – one that allows you to win at trading. It’s best to try to win on the grind: Plan on taking a small profit from a small number of trades. Don’t think of yourself as a take-off artist; rather, think of yourself as marketing an idea whenever you enter a trade.

– Peter Steidlmayer, Steidlmayer on Markets

Thought of the Day (May 29, 2010)

ElfLord — Fri, 28 May 2010 21:43:04 +0000

When I get hurt in the market, I get the hell out. It doesn’t matter at all where the market is trading. I just get out, because I believe that once you’re hurt in the market, your decisions are going to be far less objective than they are when you’re doing well. If you stick around when the market is severely against you, sooner or later they’re going to carry you out.

– Randy Mckay, The New Market Wizards by Jack Schwager

Thought of the Day (May 28, 2010)

ElfLord — Thu, 27 May 2010 21:41:46 +0000

Most people start out with too little money, and most traders do not give themselves enough time to learn. Trading is very different from physics or mathematics, where genius reveals itself early. In science, if you’re not a star by the time you’re 25, you’ll never be one. Trading, on the contrary, is an old man’s game, and now increasingly a woman’s. Patience is a virtue and memory a great asset. If you slightly improve each year, you can grow into a brilliant trader.

– Alexander Elder, Come Into My Trading Room: A Complete Guide to Trading

Thought of the Day (May 27, 2010)

ElfLord — Wed, 26 May 2010 21:40:21 +0000

Hope is a dirty word for a trader, not only in regards to procrastinating in a losing position, hoping the market will come back, but also in terms of hoping for a reaction that will allow for a better entry in a missed trade. If such trades are good, the hoped-for reaction will not materialize until it is too late. Often the only way to enter such trades is to do so as soon as a reasonable stop-loss point can be identified.

– Jack Schwager, The New Market Wizards

Thought of the Day (May 26, 2010)

ElfLord — Tue, 25 May 2010 21:39:08 +0000

The successful plunger may make a great name for himself for many years, on account of his huge profits. But by far the majority make just as great names for themselves, and far more tragic ones, by later failure and disaster. No names need be mentioned but the reader is probably familiar with those great meteors of past market fame who have gone through one bankruptcy after another, and who have finally died in poverty, loneliness and despair.

Let the reader ponder this basic fact. Out of a thousand individuals who enter the market, he may read in the newspapers of two, because of their practical success. One of these will be a conservative and will be consistently successful and happy. The other will be a plunger and will very likely get later publicity because he has lost the fortune that he previously made.

– Richard Schabacker, Stock Market Profits

Thought of the Day (May 25, 2010)

ElfLord — Mon, 24 May 2010 21:21:31 +0000

I trade for the thrill of victory. This the greatest job in the world. Where else can you be alone in your home, watching your monitors, not having to fight traffic, and not having a boss! I’m constantly intrigued all day long and never bored. I can’t wait for the day to start and I’m very sad to see the day end. I just love this work so much!

– Dan Zanger

Thought of the Day (May 24, 2010)

ElfLord — Sun, 23 May 2010 21:34:40 +0000

Given ample opportunity to rise during a bull market, the failure of a particular issue to move upward in gear with the averages can be warning enough in itself that something is wrong. Laggards are losers.

Speculative flings in search of “something that hasn’t moved yet” can sometimes sweep up a laggard issue or two, but by and large, the hope is that what did not happen yesterday and today will happen tomorrow– only because the market seems so marvelous– and as the bull surges on without that stock, the reality becomes progressively more urgent: a stock does not have to go down first to show that it is becoming weak. Merely not going up is, under most bullish circumstances, a sign of trouble brewing.

– Justin Mamis, When to Sell

Thought of the Day (May 23, 2010)

ElfLord — Sat, 22 May 2010 21:33:18 +0000

The length of time it takes you to master trading is totally dependent upon how long it takes to master yourself. People who excel in any activity are excellent because they have become their new beliefs and distinctions. They are not trying to be confident; they are confident. They are not trying to trade free of fear; they have no fear. The act of trying means that you are still not there.

– John Hayden, The 21 Irrefutable Truths of Trading

Thought of the Day (May 22, 2010)

ElfLord — Fri, 21 May 2010 21:32:11 +0000

Emotions get in the way of making good investment decisions. For example, your desire to feel good about yourself – seeking pride – causes you to sell your winners too soon. Trying to avoid regret causes you to hold your losers too long. The consequences are that you sell the stocks that perform well and keep the stocks that perform poorly. This hurts your return and causes you to pay higher taxes.

– John Nofsinger, Investment Madness

Thought of the Day (May 21, 2010)

ElfLord — Thu, 20 May 2010 21:30:41 +0000

A successful trader does not forecast the future – he monitors the market and manages his trading position.

– Alexander Elder, Trading For a Living

Thought of the Day (May 20, 2010)

ElfLord — Wed, 19 May 2010 21:29:39 +0000

In the early stages of your trading career, don’t worry too much about whether you should buy or sell, but rather about how you’ve executed whatever trade you’ve made. You’ll learn more from your trades that way.

– Peter Steidlmayer, Steidlmayer on Markets

Thought of the Day (May 19, 2010)

ElfLord — Tue, 18 May 2010 21:28:15 +0000

The markets don’t owe you anything (regardless of how hard you work to be successful) because every other trader participating is doing so to take your money away. You and you alone are completely responsible for whatever you end up with. The sooner you accept that responsibility (if you haven’t already), the easier it will be to identify what skills you need to learn to interact with the markets more successfully. Even if you can’t identify the mental components responsible for what you ended up with, at least by assuming that you are responsible, you will be opening yourself up to find out.

– Mark Douglas, The Disciplined Trader

Thought of the Day (May 18, 2010)

ElfLord — Mon, 17 May 2010 21:26:47 +0000

Markets operate in an atmosphere of uncertainty. Trading signals are clear in the middle of the chart, but as you get closer to the right edge, you find yourself in what John Keegan, the great military historian, called “the fog of war.” There is no certainty, only odds.

Here you have two goals– to make money and to learn. Win or lose, you have to gain knowledge from a trade in order to be a better trader tomorrow. Scan your fundamental information, read technical signals, implement your rules of money management and risk control. Now you are ready to pull the trigger. Go!

– Alexander Elder, Come Into My Trading Room

Thought of the Day (May 17, 2010)

ElfLord — Sun, 16 May 2010 21:25:30 +0000

Ego is another problem. Ego can be devastating. I firmly believe that if you have an ego when you’re trading the markets, you will potentially give back what you’ve made. Ego will keep you in when you’re supposed to get out.

– John Nofsinger, Investment Madness

Thought of the Day (May 16, 2010)

ElfLord — Sat, 15 May 2010 21:24:14 +0000

A significant proportion of traders with whom I have talked make the lion’s share of their money from a relative handful of good market moves. Many of their trades are narrow winners, narrow losers, or total scratches. If, however, they fail to honor stops, those occasional big winners will be balanced by one or two large losers, which will undo many weeks of good trading. Although there may be room for a measure of discretion in entering trades, the use of discretion in honoring stops is a slippery slope that leads to trading ruin.

– Brett Steenbarger, The Psychology of Trading

Thought of the Day (May 15, 2010)

ElfLord — Fri, 14 May 2010 21:22:46 +0000

It is foolhardy to make a second trade, if your first trade shows you a loss. Never average losses. Let this thought be written indelibly upon your mind.

– Jesse Livermore, Reminiscences of a Stock Operator

Thought of the Day (May 14, 2010)

ElfLord — Thu, 13 May 2010 21:37:36 +0000

Don’t be a hero. Don’t have an ego. Always question yourself and your ability. Don’t ever feel that you are very good. The second you do, you are dead.

Jesse Livermore, one of the greatest speculators of all time, reportedly said that, in the long run, you can’t ever win trading markets. That was a devastating quote for someone like me, just getting into the business. The idea that you can’t beat the markets is a frightening prospect. That is why my guiding philosophy is playing great defense. If you make a good trade, don’t think it is because you have some uncanny foresight. Always maintain your sense of confidence, but keep it in check. I am more scared now than I was at any point since I began trading, because I recognize how ephemeral success can be in this business. I know that to be successful, I have to be frightened. My biggest hits have always come after I have had a great period and I started to think that I knew something.

– Paul Tudor Jones, Market Wizards by Jack Schwager

Thought of the Day (May 13, 2010)

ElfLord — Wed, 12 May 2010 21:20:16 +0000

Trading is a study of the market and oneself. The only limitation imposed on a trader is his or her own creativity and ability.

– Robert Rotella, The Elements of Successful Trading

Thought of the Day (May 12, 2010)

ElfLord — Tue, 11 May 2010 21:18:59 +0000

Most people react differently when they’re under pressure. They tend to be more emotional or reactive. They tense up and judgement is often impaired. Many talented athletes can’t cut it because they choke when the pressure’s on. You could be a brilliant analyst but a lousy trader. Consistency is far more important than brilliance. Just strive for consistency in what you do and let go of the performance expectations.

– Linda Bradford Raschke, The Mental Aspect of Trading

Thought of the Day (May 11, 2010)

ElfLord — Mon, 10 May 2010 21:17:00 +0000

If eight or ten people place their hands on your head and push you down, your knees will buckle, no matter how strong your are. The crowd may be stupid, but it is stronger than you. Crowds have the power to create trends. Never buck a trend. If the trend is up, you should only buy or stand aside. Never sell short because “the prices are too high” — never argue with the crowd. You do not have to run with the crowd — but you should never run against it.

Respect the strength of the crowd — but do not fear it. Crowds are powerful, but primitive, their behavior simple and repetitive. A trader who thinks for himself can take money from crowd members.

– Alexander Elder, Trading for a Living

Thought of the Day (May 10, 2010)

ElfLord — Sun, 09 May 2010 21:15:31 +0000

It is critical to choose a method that is consistent with your own personality and comfort level. If you can’t stand to give back significant profits, then a long-term trend-following approach– even a very good one– will be a disaster, because you will never be able to follow it. If you don’t want to watch the quote screen all day (or can’t), don’t try a day-trading method. If you can’t stand the emotional strain of making trading decisions, then try to develop a mechanical system for trading the markets. The approach you use must be right for you; it must feel comfortable.

– Jack Schwager, The New Market Wizards

Thought of the Day (May 9, 2010)

ElfLord — Sat, 08 May 2010 21:13:05 +0000

But we must remember that there are times when the market, or life itself, is incoherent, unclear, and/or conflicting; times when it isn’t us, it’s it.

– Justin Mamis, The Nature of Risk

Thought of the Day (May 8, 2010)

ElfLord — Fri, 07 May 2010 21:10:27 +0000

Most things done well are also done simply. Because the market operates on common sense [!!?], the best approaches to it are basically very simple. If an analyst must resort to complex computer programming and model building, the chances are that he or she has not mastered the basic techniques and therefore requires an analytical crutch.

– Martin Pring, Technical Analysis Explained

Thought of the Day (May 7, 2010)

ElfLord — Thu, 06 May 2010 21:09:11 +0000

Certainly one could argue that some traders lose because they don’t understand enough about the markets and therefore they usually pick the wrong trades. As reasonable as this may sound, it has been my experience that traders with losing attitudes pick the wrong trades regardless of how much they know about the markets. In any case, the result is the same– they lose. On the other hand, traders with winning attitudes who know virtually nothing about the markets can pick winners; and if they know a lot about the markets, they can pick even more winners.

– Mark Douglas, Trading in the Zone

Thought of the Day (May 6, 2010)

ElfLord — Wed, 05 May 2010 21:07:35 +0000

When you are doing nothing, those speculators who feel they must trade day in and day out, are laying the foundation for your next venture. You will reap benefits from their mistakes.

– Jesse Livermore, Reminiscences of a Stock Operator

Thought of the Day (May 5, 2010)

ElfLord — Tue, 04 May 2010 21:06:12 +0000

Patient traders obtain better prices than impatient traders do because they are willing to search longer and harder to arrange their trades at favorable terms. Impatient traders pay for the privilege of trading when they want to trade.

– Larry Harris, Trading & Exchanges

Thought of the Day (May 4, 2010)

ElfLord — Mon, 03 May 2010 21:04:19 +0000

All of us are in a position of having to pick and choose environmental information because we can’t be aware of everything at once. If you pick and choose market information on the basis of having to justify your beliefs, you are putting yourself at an extreme disadvantage. You will be excluding from your awareness information that may be more indicative of the consistency of the market and its potential to move in any given direction.

– Mark Douglas, The Disciplined Trader