A trader may put too much energy into trying to protect a losing position, hoping that it will turn around, rather than saving energy by getting out of the trade. The unwillingness to face the truth and readjust to the new requirements of today’s market is a good example of the psychological defenses of denial and rationalization that lock the losing trader into repeating yesterday’s errors with yesterday’s strategy.
– Ari Kiev, Trading to Win
When a beginner puts on a trade too big for his account, and it starts to swing, it floods him with adrenaline. A upswing gives him enough money to dream about moving to easy street. Feeling elated, he misses the signals of a top and gets caught in a downside reversal. A downswing puts him into such a state of fear that he misses the signals of a bottom and sells out right near the lows. Beginners pay more attention to their emotions than to the reality of the markets.
– Alexander Elder, Come Into My Trading Room: A Complete Guide to Trading
When I ask traders at a seminar, “What is price?” some answer, “Price is perceived value.” Others say, “Price is what a person at one particular point in time is willing to pay another person for a commodity.” Someone says, “Price is what the last person paid for it. That’s the price right now.” Another suggests, “No, it’s what the next person will pay.”
Traders who cannot give a clear definition of price do not know what they are analyzing. Your success or failure as a trader depends on handling prices — and you had better know what they mean!
– Alexander Elder, Trading For A Living
ON THE MORNING of Jan. 28, 1986, the Space Shuttle Challenger lifted off from Kennedy Space Center. Just over a minute into the flight, the shuttle exploded, after a malfunctioning O-ring allowed highly combustible gas to leak from the right booster rocket. The upshot? A $900 piece of plastic managed to annihilate seven brave souls and a $1.2 billion spacecraft.
It’s the little things — those seemingly insignificant, everyday housekeeping details — that often make the most significant impacts on people’s lives. So I manage what catastrophic risks I can and, in short, I sweat the small stuff.
Most investment discussions inevitably turn to big events like a presidential election, earnings announcements or the economic cycle. But the truth is, it’s the small stuff — the nitty-gritty of how I actually allocate assets — that ultimately matters most. And while I can’t control who wins in November or how many diapers Wal-Mart (WMT) will sell in the second quarter, portfolio technique is under my complete discretion. No matter the size of a portfolio, there are some basic concepts from which everyone can benefit. (more…)
Just as the most important aspect of real estate is “location, location, location,” the most important aspect of the stock market is price, price, price. Price is the bottom line, the end result, the last word. All analyses, whether fundamental or technical, all guru proclamations, all market movements, whether ruled by greed or fear or even uncertainty, boil down to a single element: price. Simply put, price rules.
– Toni Turner, A Beginner’s Guide to Day Trading Online
The stock market by its very nature is designed for you to lose money. The rallies and reactions within any trend ensures this process is at work constantly. It is created automatically. The market behaves this way because it has to! The weak have to perish so that the strong can survive. Professional traders are fully aware of weaknesses in traders under stress and will capitalize on this at every opportunity.
– Tom Williams, The Undeclared Secrets that Drive the Stock Market
Never forget that markets are made up of people. Think constantly about what others are doing, what they might do in the current circumstances, or what they might do when those circumstances change. Remember that whenever you buy and hope to sell higher, the person you sell to will have to see some opportunity at that higher price in order to be induced to buy.
– Peter Steidlmayer, Steidlmayer on Markets
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