ZF Capital > Your guide to financial world

Thought of the Day (December 19, 2009)

On December 19, 2009, In Thought of the Day, by ElfLord

Before you make any trade, it is absolutely essential that you know your objective and how you intend to reach it. This means not only identifying the risk/reward, but also defining all possible courses the market might take and then defining your response. In other words, you have to know, before you ever enter the trade, all possible outcomes. Confusion is your biggest enemy during a trade; it will cause you anguish and emotional turmoil as the trade progresses. But confusion, by definition, comes from ignorance, from not understanding what is going on or how to respond to it.

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

Tradecraft – Don’t Be a Fashion Victim

On December 18, 2009, In Good Articles, by ElfLord

I’M A CHILD OF the 1980s, and while I’m no Mr. Blackwell, I can safely say that the mullet haircut, Izod shirts and The New Kids on the Block aren’t terribly representative of today’s popular style.

Knowing that styles come in and out of fashion over time, most of us buy clothes on a rolling basis. We don’t get a whole new wardrobe every year, but rather a garment or two every few months that reflect the contemporary look. The same approach should be taken within an investment portfolio, where asset allocation should be viewed as an ongoing process, not a one-time affair.

Come January of each year, media outlets from Business Week to Barron’s publish their “Where to Invest” issues. And although the past few years have demonstrated just how much the world can change in a short amount of time, many people go right ahead and dump their assets into the hot strategist du jour’s top 10 picks come Jan. 1. One year later, they see how they’ve done and roll the dice again.

That isn’t investing it’s a carnival ride. (more…)

Thought of the Day (December 18, 2009)

On December 18, 2009, In Thought of the Day, by ElfLord

The first step on the road toward getting your mind and the market in sync is to understand and completely accept the psychological realities of trading. This step is where most of the frustrations, disappointments, and mysteriousness associated with trading begin. Very few people who decide to trade ever take the time or expend the effort to think about what it means to be a trader. Most people who go into trading think that being a trader is synonymous with being a good market analyst.

As I have mentioned, this couldn’t be further from the truth. Good market analysis can certainly contribute to and play a supporting role in one’s success, but it doesn’t deserve the attention and importance most traders mistakenly attach to it.

– Mark Douglas, Trading in the Zone

Thought of the Day (December 17, 2009)

On December 17, 2009, In Thought of the Day, by ElfLord

The best trading systems are crude and robust. They are made of a few elements. The more complex the systems, the more elements that can break. Traders love to optimize their systems using past data. The trouble is, your broker won’t let you trade the past. Markets change, and the ideal parameters from the past may be no good today. Try to de-optimize your system instead– check how it would have performed under bad conditions. A robust system holds up well when markets change. It is likely to beat a heavily optimized system in real world trading.

– Alexander Elder, Trading for a Living

Tradecraft – Incoming!

On December 16, 2009, In Good Articles, by ElfLord

MENTION A STOCK to my 97-year-old (and still shrewd) grandmother, and the first question she’ll ask is, “Does it pay a good dividend?” It’s only in recent years we’ve become so obsessed with capital gains. But although income-oriented investing is usually associated with retirees set on preservation of capital, it’s actually a strategy employed by professional investors, many of whom will often keep the majority of their assets in cash while focusing on a small number of more risky situations. Investing with an income focus is a portfolio approach we first outlined a few months back.

Yet income remains the Rodney Dangerfield of the investment world, and among many traders, dividends, interest and other income-oriented returns are often dismissed altogether. It’s much more adrenaline-pumping to buy XYZ at $50 and sell it at $55 than buy a 10% bond and wait patiently for a year.

The real advantage of hedge funds or other advisers focused on absolute return is that they realize real money is made over time — and is made by the effect of compound interest, not capital appreciation. (more…)

Thought of the Day (December 16, 2009)

On December 16, 2009, In Thought of the Day, by ElfLord

The market is like a courtroom where you are the accused– innocent until proven guilty. That is, when you initiate a trade, you have to assume that you are right until the market proves you wrong. It proves you wrong when the price hits your stop or your mentally chosen exit point, which is as absolute as a Supreme Court ruling– no appeal is possible, your freedom to act is gone, you must close out the position.

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

Thought of the Day (December 15, 2009)

On December 15, 2009, In Thought of the Day, by ElfLord

The general market should be studied closely every day, since reverses in trends can begin on any one day. I emphasize this practical method rather than that of interpreting other subsidiary indicators that are supposed to tell you exactly what the market should be doing or listening to the many stock market letter writers or technical analysts that pore over twenty indicators and tell you what they think the market should be doing. Market letters sometimes may create doubt, uncertainty and confusion in an investor’s mind. Markets tend to go up when people are skeptical and disbelieving.

Learn to interpret a daily price and volume chart of the general market averages. If you do, you can’t get too far off the track. You really won’t need much else unless you want to argue with the trend of the market.

Experience teaches you that continually arguing with the market can be very expensive, That’s how people go broke!

– William O’Neil, How the Make Money in Stocks

ZF Capital

Thought of the Day (December 19, 2009)

Tradecraft – Don’t Be a Fashion Victim

Thought of the Day (December 18, 2009)

Thought of the Day (December 17, 2009)

Tradecraft – Incoming!

Thought of the Day (December 16, 2009)

Thought of the Day (December 15, 2009)

Your guide to financial world

Categories

Tags

Looking for something?

Visit our friends!

Archives