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Thought of the Day (December 24, 2009)

On December 24, 2009, In Thought of the Day, by ElfLord

My objective as a trader has always been to obtain and maintain the freedom secured by financial independence: consequently, my goal has been to make money consistently, month in and month out, year after year. I have always approached my career as a business, and a prudent businessman wants to first cover his overhead each month and then concentrate on achieving a steady growth in earnings. Rather than striving for the big hit, I protect capital first and work for consistent returns, and take more aggressive risk with a portion of profits. Not accidentally, the big hits still come along; but they come along without excessive risk.

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

Thought of the Day (December 23, 2009)

On December 23, 2009, In Thought of the Day, by ElfLord

Brokers, exchanges, and advisors run marketing campaigns to attract more losers to the markets. Some mention that futures trading is a zero-sum game. They count on the fact that most people feel smarter than average and expect to win in a zero-sum game.

Winners in a zero-sum game make as much as losers lose. If you and I bet $10 on the direction of the next 100-point move in the Dow, one of us will collect $10 and the other will lose $10. The person who is smarter should win this game over a period of time.

People buy the trading industry’s propaganda about the zero-sum game, take the bait and open trading accounts. They do not realize that trading is a minus-sum game. Winners receive less than what losers lose because the industry drains money from the market.

– Alexander Elder, Trading For A Living

Tradecraft – The Triumph of Free Markets

On December 23, 2009, In Good Articles, by ElfLord

GIVEN THE PERFORMANCE of most Americans’ investments over the last few years, big business makes an easy target for the ratings-hungry news media and a bloated government eager to prove it does more than take up two channels on my local cable system.

But while the media relish the chance to spin the recent scandals at WorldCom (WCOME), Enron (ENRNQ), Xerox (XRX) and the rest into splashy “trend pieces,” and while some pols shake their heads with righteous indignation, the real story behind the recent financial scandals isn’t the failure of the free market, but rather its triumph.

Fraud isn’t a way of life — it’s a fact of life. Go to any grocery store and you’ll see a handful of bounced checks taped on the wall. In business large and small, there will always be a tiny minority intent on not playing by the rules. In fact, I would even suggest that there’s less fraud in American business than there is sexual abuse in the clergy or embezzlement in politics, largely because American business is by far the most transparent and honestly analyzed of the three. (more…)

Thought of the Day (December 22, 2009)

On December 22, 2009, In Thought of the Day, by ElfLord

I set protective stops at the same time I enter a trade. I normally move these stops in to lock in a profit as the trend continues. Sometimes, I take profits when a market gets wild. This usually doesn’t get me out any better than waiting for my stops to close in, but it does cut down on the volatility of the portfolio, which helps calm my nerves. Losing a position is aggravating, whereas losing your nerve is devastating.

– Ed Seykota, Market Wizards

Tradecraft – When the Buyers’ Strike Becomes a Fire Sale

On December 21, 2009, In Good Articles, by ElfLord

A FEW MONTHS back, we outlined some of the basic logical fallacies that can lead your investment thinking astray. One that I’ve been hearing quite a bit of lately is that of false attribution. In trader talk, it’s putting the ass in assume.

Even among experienced professionals, there’s a rather surprising ignorance of the factors that really move markets. Every high-school economics class starts with the basic law of supply and demand, but pundits, media commentators and even market professionals who should know better choose to focus on just one side of that irrefutably important concept.

Turn on any newscast and you’ll hear the same shockingly ignorant analysis: If the market drops, it’s because investors sold their shares. If the market rallies, it’s because everybody bought. After all, buyers make a stock go up; sellers force a stock’s price down, right?

But while most commentators are quick to interpret a market trend as the result of some action of investors, it’s often their inaction that’s ultimately responsible for the move. (more…)

Thought of the Day (December 21, 2009)

On December 21, 2009, In Thought of the Day, by ElfLord

Tips! How people want tips! They crave not only to get them but to give them. There is greed involved, and vanity. It is very amusing, at times, to watch really intelligent people fish for them. And the tip-giver need not hesitate about the quality, for the tip-seeker is not really after good tips, but after any tip. If it makes good, fine! If it doesn’t, better luck with the next.

– Jesse Livermore, Reminiscences of a Stock Operator

Thought of the Day (December 20, 2009)

On December 20, 2009, In Thought of the Day, by ElfLord

You must dedicate a certain amount of time to the markets each day. Amateurs and gamblers make a typical mistake. When markets are inactive, they stop watching and lose touch. They wake up after hearing the news of a runaway move. By that time, the markets are running– the amateurs have missed yet another train and now they chase it, hoping to hop aboard a runaway trend.

An organized trader tracks his markets, whether he trades them at the moment or not. He notices when a listless range starts, rubbing against a resistance, buys early, and when amateurs start piling into the rally, he takes profits, selling to lazy latecomers. a serious trader is ahead of the game because he does his homework day in and day out.

– Alexander Elder, Come Into My Trading Room

ZF Capital

Thought of the Day (December 24, 2009)

Thought of the Day (December 23, 2009)

Tradecraft – The Triumph of Free Markets

Thought of the Day (December 22, 2009)

Tradecraft – When the Buyers’ Strike Becomes a Fire Sale

Thought of the Day (December 21, 2009)

Thought of the Day (December 20, 2009)

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