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
On May 15, 2010, In Thought of the Day, by ElfLord
On May 14, 2010, In Thought of the Day, by ElfLord
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
On May 14, 2010, In Good Articles, by ElfLord
A COCKTAIL PARTY, alas, is linguistically engineered to be equal parts cocktails and party. When I’m invited to such events, common courtesy compels me to both imbibe and converse. And while my policy on investment advice at such occasions is “don’t ask, don’t tell,” the unfortunate reality is that I’m often asked and I’m often told. Indeed, where there’s alcohol and adults, the discussion eventually turns to the market.
When I’m asked what I think of XYZ, I’ll gladly share my two cents, along with my perspective of how to best approach and, even more plainly, how to trade the particular investment. As I often point out, it’s technique, not simple security selection, that has the biggest impact on success. What lays between the folds of simple “buy, sell or hold” nostrums are the details of where money is actually made.
When asked about XYZ, some people analyze it on a micro level, offering their perspective on management, the company’s products or competitive pressures within the sector. Others peer through the macroeconomic lens, pontificating on how business cycle, interest rate or currency trends might affect the stock price in the future. (more…)
On May 13, 2010, In Thought of the Day, by ElfLord
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
On May 12, 2010, In Thought of the Day, by ElfLord
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
On May 12, 2010, In Good Articles, by ElfLord
AS THE SAYING GOES, there’s no such thing as being a little bit pregnant. When it comes to freedom, the same applies: People either are free, or they aren’t. Either they’re sovereign individuals who own their lives and the results of their productive efforts, or they’re servants to the state. If basic rights are always subject to a majority vote, it’s not liberty, but mob rule.
Free trade is one of those rights. As philosopher Ayn Rand wrote, “political freedom cannot exist without economic freedom; a free mind and a free market are corollaries.” People who aren’t free to trade their property, time or productive effort in accordance with their own values aren’t free at all.
Yet slowly, under the leadership of both major political parties, free trade has become systematically exorcized from civic life. Most citizens, the business community included, now completely accept that the government has a right to regulate, orchestrate and otherwise micromanage their affairs in any fashion it sees fit. (more…)
On May 11, 2010, In Thought of the Day, by ElfLord
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