ZF Capital > Thought Of The Day

Thought of the Day (December 1, 2009)

On December 1, 2009, In Thought of the Day, by ElfLord

The first goal of money management is to ensure survival. You need to avoid risks that can put you out of business. The second goal is to earn a steady rate of return, and the third goal is to earn high returns– but survival comes first.

“Do not risk thy whole wad” is the first rule of trading. Losers violate it by betting too much on a single trade. They continue to trade the same or even a bigger size during a losing streak. Most losers go bust trying to trade their way out of a hole. Good money management can keep you out of the hole in the first place.

– Alexander Elder, Trading for a Living

Thought of the Day (November 30, 2009)

On November 30, 2009, In Thought of the Day, by ElfLord

Market information is only threatening if you are expecting the market to do something for you. Otherwise, if you don’t expect the market to make you right, you have no reason to be afraid of being wrong. If you don’t expect the market to keep going in your direction indefinitely, there is no reason to leave money on the table. Finally, if you don’t to expect to be able to take advantage of every opportunity just because you perceived it and it presented itself, you have no reason to be afraid of missing out.

– Mark Douglas, Trading in the Zone

Thought of the Day (November 29, 2009)

On November 29, 2009, In Thought of the Day, by ElfLord

There is a definite cost of trading. The market maker has to get his edge. Your broker has to get her cost. And your profit is what remains, if anything, when these costs are deducted.

The cost per trade is really a part of the expectancy equation, but it is so important that I wanted to add a little more about cost reduction. The fewer trades you make, the less the cost per trade becomes a factor. Many long-term trend followers spend little time thinking about their trading cost. because it is so insignificant compared with the potential profit to be made. For example, if you are thinking about making $5,000 per trade, then you probably are not paying much attention to trade costs of $100.

However, if you are short term in your orientation and make lots of trades, then trade cost is a lot bigger consideration for you– at least it should be. For example, if your average profit per trade was $50, then you would pay much more attention to a $100 trading cost.

– Alexander Elder, Trading for a Living

Thought of the Day (November 28, 2009)

On November 28, 2009, In Thought of the Day, by ElfLord

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.

If you want to change your experience of the markets from fearful to confident, if you want to change your results from an erratic equity curve to a steadily rising one, the first step is to embrace the responsibility and stop expecting the market to give you anything or do anything for you. If you resolve from this point forward to do it all yourself, the market can no longer be your opponent. If you stop fighting the market, which in effect means you stop fighting yourself, you’ll be amazed at how quickly you will recognize exactly what you need to learn, and how quickly you will learn it. Taking responsibility is the cornerstone of a winning attitude.

– Mark Douglas, Trading in the Zone

Thought of the Day (November 27, 2009)

On November 27, 2009, In Thought of the Day, by ElfLord

Indeed, the market often does look easy in hindsight. Tops are made as everyone rushes to buy what has been profitable already. At that point, to the astonishment of those who’ve missed it, the cliche becomes: “The easy money has already been made.” But while it is happening no one realizes it; investors are caught up in the classic “wall of worry” instead. It never can be easy because the rule of the market is that you have to act before you know enough. Because it is a process, there is no one moment, or single point, at which one can make an obvious “sure” decision.

– Justin Mamis, The Nature of Risk

Thought of the Day (November 26, 2009)

On November 26, 2009, In Thought of the Day, by ElfLord

Why do most traders lose and wash out of the markets? Emotional and thoughtless trading are two reasons, but there is another. Markets are actually set up so that most traders must lose money.

The trading industry kills traders with commissions and slippage. Most amateurs cannot believe this, just as medieval peasants could not believe that tiny invisible germs could kill them. If you ignore slippage and deal with a broker who charges high commissions, you are acting like a peasant who drinks from a communal pool during a cholera epidemic.

You pay commissions for entering and exiting trades. slippage is the difference between the price at which you place your order and the price at which it gets filled. When you place a limit order, it is filled at your price or not at all. When you feel eager to enter or exit the market and give a market order, it is often filled at a worse price than prevailed when you placed it.

The trading industry keeps draining huge amounts of money from the markets. Exchanges, regulators, brokers, and advisers live off the markets while generations of traders keep washing out. Markets need a fresh supply of losers just as builders of the ancient pyramids of Egypt needed a fresh supply of slaves. Losers bring money into the markets, which is necessary for the prosperity of the trading industry.

– Alexander Elder, Trading for a Living

Thought of the Day (November 25, 2009)

On November 25, 2009, In Thought of the Day, by ElfLord

Having the will to execute means having the capability or power to carry through on a plan of action designed to achieve a specific goal.

It means having the ability to decide. The word decide comes from Latin roots that mean “to cut off.” When you really make a decision, your mind has concluded that no other alternative is either desirable or possible. When you achieve this state of mind, carring through your plan becomes less a matter of choice and more a matter of necessity.

The plan itself becomes a value, and if integrated into your subconscious, can actually be supported by your emotions. In this way, practicing emotional discipline not only enhances your ability to act, but also reduces the level and frequency of emotional conflict– it becomes a source of consistency in thought, actions, and feelings.

– Victor Sperandeo, Trader Vic — Methods of a Wall Street Master

ZF Capital

Thought of the Day (December 1, 2009)

Thought of the Day (November 30, 2009)

Thought of the Day (November 29, 2009)

Thought of the Day (November 28, 2009)

Thought of the Day (November 27, 2009)

Thought of the Day (November 26, 2009)

Thought of the Day (November 25, 2009)

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