The secret of trading is that there is no secret. There is no magic password to profits. Beginners keep looking for a gimmick, and plenty of crafty vendors sell them. In truth, trading is about work– and a bit of flair. It is no different from any other field of human endeavor. Whether you do surgery, teach calculus, of fly an airplane, it all boils down to knowing the rules, having the discipline, putting in the work, and having a bit of flair.
– Alexander Elder, Come Into My Trading Room
MORE THAN 14 months ago, I pointed out how, despite the weakness in the familiar market averages, many lesser-followed and smaller-capitalized companies weren’t just outperforming index favorites, but posting solid results in their own right.
These days, many investors are starting to understand that it’s not the entire market that has been weak, but rather a relatively narrow (albeit widely watched) contingent of large-cap stocks.
Yet, as irrational as it may seem, large-cap U.S. stocks remain the “go-to” investment for both institutional and individual investors. Whether it be large-cap ETFs like the Nasdaq-100 Trust (QQQ) or the good old Vanguard 500 index fund (VFINX), most people’s assets are tied to one or another of the major indexes. But as we’ve pointed out over the last few months, the “broad” indexes aren’t really that broad at all, since they’re focused on large-cap U.S. stocks. (more…)
Managing the trade is only part of it. Managing the mind is vastly more important.
– DbBurrows, TMF Boards
Have no public opinions of your own, when asked; and ask for none. If you get into the habit of giving opinions you are inviting an argument at once. You may talk yourself out of a decision which was correct; you will become wishy-washy in your conclusions, because you will be afraid of giving an opinion which may turn out wrong. Soon you will be straddling the fence in your own mind; and you cannot make money in trading unless you can come to a decision.
– Humphrey Neill, Tape Reading & Market Tactics
I MUST ADMIT to being a bit of a pack rat. Even if I can’t remember why I owned it in the first place, I’m loath to part with any prized possession, from concert T-shirts to stacks of Clinton-era copies of Wired magazine.
These days, however, I’m giving some spring cleaning a try. And with your portfolio, just as with your closets, you should always start with the old and broken junk that you never use. In short, let your winners run, but cut your losses.
It’s a common misconception that the best traders always pick winning stocks. Every portfolio will have a healthy share of losing trades. And while nothing satisfies the ego like cashing in some chips, the correct way to cleanse your portfolio means starting with the losers.
Buying a stock is easy the real skill comes in having the ability to get out. Tell yourself it’s a tax loss if you must, but the real reason to “toss the loss” is that losing trades tend to stay losing trades, and usually for much longer than anyone ever expects. The best move isn’t to keep the faith with long-term losers, but discard them altogether. (more…)
What you believe about value and your reasons for believing it may be of highest quality, but if the market doesn’t share your belief, it doesn’t really matter how “right” you are based on your superior reasoning process or what you believe to be the quality of your information, because prices are going to go in the direction of the greatest force.
The point here is that right and wrong as you may traditionally think of them don’t exist in the market environment. Academic credentials, degrees, reputations, even a high I.Q. don’t make you right in this environment as they would in society. Traders, acting on their belief in the future by putting on a trade, are the only force that can act on prices to make them move. Movement creates opportunity to make money, and making money is what trading is all about.
– Mark Douglas, The Disciplined Trader
Don’t fall into the complexity trap. Some participants buy expensive chart systems to test, back-test, and optimize complex trading systems. While this process works well with specific tactics, it often reflects an inability to take personal responsibility for one’s results. The best opportunities always sit right under the trader’s nose. They set up now the same way they did 50 years ago and will likely book profits for our grandchildren in another 50 years.
– Alan Farley, The Master Swing Trader
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