Be Flexible. My philosophy has necessarily changed form time to time because of events and because of mistakes. My views change as economic, political, and technological changes occur both on and now off our planet. It is imperative that you be willing to change your thoughts to meet new conditions.
– Charles Ellis, The Investor’s Anthology
Trading is so exciting that it often makes amateurs feel high. A trade for them is like a ticket to a movie or a professional ballgame. Trading is a much more expensive entertainment than the cinema.
Nobody can get high and make money at the same time. Emotional trading is the enemy of success. Greed and fear are bound to destroy a trader. You need to use your intellect instead of trading on gut feeling.
A trader who gets giddy from profits is like a lawyer who starts counting cash in the middle of a trial. A trader who gets upset at losses is like a surgeon who faints at the sight of blood. A real professional does not get too excited about wins or losses.
The goal of a successful professional in any field is to reach his personal best — to become the best doctor, the best lawyer, or the best trader. Money flows to them almost as an afterthought. You need to concentrate on trading right —and not on the money. Each trade has to be handled like a surgical procedure —seriously, soberly, without sloppiness or shortcuts.
– Alexander Elder, Trading for a Living
I have two basic rules about winning in trading as well as in life: (1) If you don’t bet, you can’t win. (2) If you lose all your chips, you can’t bet.
– Larry Hite, Market Wizards by Jack Schwager
LET’S SAY YOU want to buy XYZ. Maybe it announced better-than-expected earnings or crossed a key moving average. Perhaps you are watching a similar company or index move and expect XYZ to follow along. Maybe you used the company’s products or read some compelling research. As Rod Stewart sang, we all need a reason to believe. Whatever your reason, you believe. Fine. Two sides make a market, and nobody knows the future. If you are bullish on XYZ, then it’s time to buy XYZ.
What messes most people up isn’t what to buy, but how. Having a good investment idea is a start, but putting it into practice is another thing altogether. And while a sound trading technique won’t prevent you from losing money, it will keep your losses small and the majority of your capital focused on the most profitable ideas. No trade is without risk, but the difference between risk and recklessness is proper procedure. Trading is like any fine art: There is such thing as objectively good form.
The oldest — and the only surviving — of the ancient Seven Wonders of the World are the Egyptian Pyramids. Their longevity is due, in part, to inherently strong design. The majority of a pyramid’s mass rests at its base, closest to the ground. A much smaller portion of the material is used near the top. The setup creates a uniquely stable architectural footprint. (more…)
If you want to improve your trading, what you need to do is very simple. Before you enter any trade, think that you will have to explain this trade to the world in a case study format. You have to explain the reason for entry, your risk management guidelines, and why you exited the trade. Trade as if the world was standing behind your shoulders.
– Tony Oz, The Stock Trader
A stock market operator must be as hard-boiled as a five-minute egg; cold-blooded as a fish; deaf to all gossip; blind to news; and dumb as a door knob when it comes to discussing the market with others.
– Richard Wyckoff
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