ZF Capital > Your guide to financial world

Tradecraft – Bending With the Wind

On December 9, 2009, In Good Articles, by ElfLord

WHAT MAKES THE Sears Tower able to withstand 60-mile-an-hour winds isn’t its strength, but its flexibility. Although the building soars 1,700 feet into the sky and weighs almost half-a-billion pounds, it’s designed to sway gracefully in high winds — by up to a foot at times.

And so it is with trading. Most often it isn’t the market that hurts us the worst, but our own stubbornness and pride. Nobody is bigger than the market, and when an irresistible force meets an immovable object, trust me: The force will win every time. The best traders aren’t the ones who can throw punches, but the ones who can roll with them.

Probably the most important yet deceptively simple aspect of trading flexibly is maintaining the ability to keep an open mind about the market. Just as the girl you had a crush on in high school looks different 10 years later, stocks are like living, breathing animals that change over time. Yesterday’s leaders are often tomorrow’s losers, and while I’m no raging bear, it’s amazing to see how many people believe that they should hold onto losing stocks for the long term in the belief that they have to come back. As WorldCom (WCOM) demonstrates they don’t have to do anything of the sort. (more…)

Thought of the Day (December 9, 2009)

On December 9, 2009, In Thought of the Day, by ElfLord

The question “Why does a chicken cross the road?” is no joke on the Street; when someone asks, “Why is that stock going down?” the objective answer is, “More sellers than buyers.”

Therefore, if the law of supply and demand– the one thing you can keep track of objectively, the one tool that is devoid of emotion– tells you you’re wrong, it’s wise to accept it. You may think Kodak is going still higher for all those “becauses,” but if that support level gives way in the marketplace and the price falls to 125, don’t fight it. “Can I bear to take yet another loss?” “Suppose I sell and the stock goes back up?” “How can I sell such a nice company?” Can’t you just hear those echoes? But the rule is as applicable to the stock market as it is to real life: Do not rationalize failure.

If you root for stocks in the market game, there is nothing wrong with being a fair-weather fan. The decisive act of selling may turn out , with hindsight, to be a mistake, but the indecisive act of not selling can turn out to be a disaster.

– Justin Mamis, When to Sell

Thought of the Day (December 8, 2009)

On December 8, 2009, In Thought of the Day, by ElfLord

Patience is one of the most valuable attibutes in investing. I liken it to a great baseball hitter such as Wade Boggs nowadays or Ted Williams [R.I.P.] in my youth. The key to their success is to wait for the fat pitch to hit and not to swing from the heels at just anything. The idea is to work the pitcher into a hole and to get the count to 2-and-0 or to 3-and-1. That forces the pitcher to throw strikes…often fastballs. In other words, if the hitter is patient, he tries to work the odds into his favor. Then, and only then, does he take a real rip at the ball.

It’s about the same in the stock market. I try to “work the count” in my favor by waiting for the indicators to get very one-sided before “swinging from the heels” with an aggressive strategy. If I don’t find the indicators producing very good odds in one direction ot the other I’m content to play defensively and just bide my time.

– Martin Zweig, Winning on Wall Street

Thought of the Day (December 7, 2009)

On December 7, 2009, In Thought of the Day, by ElfLord

Nothing new occurs in the business of speculating or investing in securities.

Years pass; bull markets come and go. Yet the basics are still the same: Price, volume, and crowd behavior set the stage for all else.

– Jesse Livermore, Reminiscences of a Stock Operator

Tradecraft – Let the Winners Run

On December 7, 2009, In Good Articles, by ElfLord

ODDSMAKERS WILL ALWAYS handicap the favorites. But at the start of every baseball season, all teams — even longtime losers — are contenders.

The same early-season optimism can be found in the stock market, where a new quarter brings opportunity in both new names and old favorites.

As the wheeling-dealing gets underway, investors should approach every trade with the confidence of Warren Buffett and the wisdom of a blackjack dealer, who knows that even the best players have plenty of losing hands. Although most people want to slap a “time horizon” on their trades, the truth is that the market should decide your holding period, not emotions or research. Every long-term investment starts out the same way — as a short-term trade.

In my view, an appropriately sized initial position is no more than 5% of your overall portfolio. Once you get your trade confirmation, all the analyst reports and newsletter recommendations become moot. As we’ve pointed out in the past, after the first trade is made, it’s all in the follow through. Your job isn’t to research, but react. (more…)

Thought of the Day (December 6, 2009)

On December 6, 2009, In Thought of the Day, by ElfLord

Many people make the mistake of thinking that market behavior is truly predictable. Nonsense. Trading in the markets is an odds game, and the object is to always keep the odds in your favor. Like any other odds game, in order to win, you’ve got to know the rules and stick to them. Unlike other games, however, the single biggest reason rules are necessary is to keep a check on your emotions. Assuming you have the knowledge you need to take a position with confidence, the hard part is executing the trade correctly. That’s what the rules are for.

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

Thought of the Day (December 5, 2009)

On December 5, 2009, In Thought of the Day, by ElfLord

Money cannot consistently be made trading every day or every week during the year.

In other words, overtrading is a great way to lose money. Standing aside is the right call more often than not.

– Jesse Livermore, Reminiscences of a Stock Operator

ZF Capital

Tradecraft – Bending With the Wind

Thought of the Day (December 9, 2009)

Thought of the Day (December 8, 2009)

Thought of the Day (December 7, 2009)

Tradecraft – Let the Winners Run

Thought of the Day (December 6, 2009)

Thought of the Day (December 5, 2009)

Your guide to financial world

Categories

Tags

Looking for something?

Visit our friends!

Archives