ZF Capital » Victor Sperandeo

Thought of the Day (June 20, 2010)

ElfLord — Sat, 19 Jun 2010 21:57:15 +0000

Before I began my trading career, I played a lot of poker. I read every book I could find on the subject and learned that poker isn’t a game of luck, but one of both risk and odds management. Leaving bluffs aside, if you bet or call only when the odds are in your favor and plan your bets so that you stay at the table, you will make money over time. That doesn’t mean you’ll win every hand, far from it. But if you always keep the odds in your favor and scale your bets accordingly, you will come out a winner in the long run.

– Victor Sperandeo, Trader Vic II: Principles of Professional Speculation

Thought of the Day (June 1, 2010)

ElfLord — Mon, 31 May 2010 21:46:56 +0000

Dieting provides an apt analogy for trading. Most people have the necessary knowledge to lose weight– that is, they know that in order to lose weight you have to exercise and cut your intake of fats. However, despite this widespread knowledge, the vast majority of people who attempt to lose weight are unsuccessful. Why? Because they lack the emotional discipline.

– Victor Sperandeo, The New Market Wizards by Jack Schwager

Thought of the Day (April 18, 2010)

ElfLord — Sat, 17 Apr 2010 21:52:29 +0000

What are the personality traits of a successful trader? In outward style, there seem to be two opposites. One is quiet, reserved, and not normally noticed at a gathering. The other is an extrovert, flamboyant, fun-loving eccentric: something of a renegade. But inwardly, they are alike.

In college both types spent a lot of time at extracurricular interests, and both had irregular grades – A’s in some subjects, and C’s in others. Usually they are neither loved nor hated., and they adapt to new people and events with ease. They are extremely determined and extremely individual, never asking for favors or help. They may ask your opinion and read many forecasters’ views, but rarely act on anything but their own decisions.

They are honest to the bone, living by their own wits and courage. Some are vocal and curse at losses or themselves, and sometimes yell and scream at executions; but generally, this is just an outlet for tension. All view profits and losses as their own responsibility, not anyone else’s problem. The best ones are usually internal; they hold hurts within and force a smile when taking losses. Most pros talk about their losses, not their profits. They brag not about their winners, but how they lost.

– Victor Sperandeo, Principles of Professional Speculation

Thought of the Day (March 27, 2010)

ElfLord — Fri, 26 Mar 2010 21:18:05 +0000

The market is, by its nature, a most merciless judge. Every day, the efficiency of your judgment goes on trial, and when the gavel comes down with the closing bell, your sentence is automatically reflected on your ledger sheets. If your judgment is good, then you’ll consistently make money. But if your judgment is bad, then your survival depends on lady luck who, at best, will usually serve you for only a little while.

Being under such relentless and continual pressure can be an enormous psychological and emotional burden. The constant stress and tension of trading can take a tremendous toll on you, both physically and emotionally. But only if you let it. To avoid paying the price of mental and/or physical exhaustion requires an exceptional level of integrity in thought, emotions, and actions.

– Victor Sperandeo, Trader Vic II: Principles of Professional Speculation

Thought of the Day (March 22, 2010)

ElfLord — Sun, 21 Mar 2010 21:10:04 +0000

The most important reason to analyze your mistakes is that mistakes and failures are always the best teachers; they reinforce the fact that you should always follow the rules. If you can truly and honestly identify the reasons you make a mistake, then your chances of making it again are much less.

Most often, mistakes are rooted not in ignorance, but fear: fear of being wrong, fear of feeling humiliated, and so forth. To trade well, you have to conquer fear; and to conquer fear, you first have to admit having it, which means admitting your mistakes and analyzing them.

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

Thought of the Day (March 16, 2010)

ElfLord — Mon, 15 Mar 2010 21:55:38 +0000

The principle of preservation of capital implies that before you consider any potential market involvement, risk should be the prime concern. Only within the context of the potential risk should the potential reward become the determining factor in taking a position. This is the true meaning of risk/reward analysis. Properly applied, it sets the standard for evaluating not only whether to be involved in a trade or investment, but also to what degree. Thus, preservation of capital– “Don’t lose any”– becomes the basis for prudent money management.

Approaching market participation with risk as your prime concern forces you to look at performance from an absolute standpoint rather than a relative one. For many investors and money managers, this is not the case. Their goal is to “outperform the averages.” If the market is down 15 percent, but their portfolio is down only 10 percent, they think they are a success. Not only is this approach a poor excuse for bad performance, it distorts the money manager’s ability to engage in appropriate risk management.

In terms of performance, there is only one valid question: “Have I made money, or not?” If so, then it is appropriate to increase the percentage of capital at risk. If not, then it is time to cut back. Any other approach will ultimately lead to capital consumption.

– Victor Sperandeo, Trader Vic II: Principles of Professional Speculation

Thought of the Day (February 14, 2010)

ElfLord — Sat, 13 Feb 2010 21:50:19 +0000

There is no freedom from risk. There is no freedom from fear. There is no freedom from pain. There is no freedom from the possibility of failure. But there is freedom in acceptance of all of these as part of life, and moreover, as the least important part of life.

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

Thought of the Day (February 9, 2010)

ElfLord — Mon, 08 Feb 2010 23:09:09 +0000

To be a successful trader, you have to be able to admit mistakes. The person who can easily admit to being wrong is the one who walks away a winner.

– Victor Sperandeo, The New Market Wizards by Jack Schwager

Thought of the Day (February 1, 2010)

ElfLord — Sun, 31 Jan 2010 21:51:57 +0000

Consistent profitability is a corollary of the preservation of capital. Now what do I mean by a corollary? A corollary is an idea or a principle which is a direct consequence of another more fundamental principle. In this case, consistent profitability is a corollary of the preservation of capital because capital isn’t a static quantity-it is either gained or lost. To gain capital, you have to be consistently profitable; but to be consistently profitable, you have to preserve gains and minimize losses. Therefore, you must constantly balance the risks and rewards of each decision, scaling your risk according to accumulated profits or losses, thereby increasing the odds of consistent success.

– Victor Sperandeo, Methods of a Wall Street Master

Thought of the Day (January 21, 2010)

ElfLord — Wed, 20 Jan 2010 21:57:17 +0000

Lorenzo Ghiberti, the fifteenth-century sculptor, had all the character traits necessary to be a great day trader: dedication, focus, concentration, determination, and willpower to complete a task. Ghiberti spent 48 years sculpting four bronze doors for the Baptistery of San Giovanni in Florence, Italy. Imagine working on a single project for 48 years. With no one to talk to for most of the day, the painstaking work would seem endless.

In many respects, the willpower and mind-set of a trader is not too different from that master sculptor. Both work alone, in focus, concentrating on minor detail, forming the details in their minds, then bring it forth. They are both very individual, solemn businesses, and the results are rather slow and plodding, yet they can add up to a masterpiece.

– Victor Sperandeo, Trader Vic II: Principles of Professional Speculation

Thought of the Day (January 14, 2010)

ElfLord — Wed, 13 Jan 2010 21:46:11 +0000

A doctor can evade the truth that he or she made a mistake and tell the relatives of a deceased patient, “I did my best, but….” A lawyer can drink too much the night before his final address to the jury, and when he loses, convince himself and his client that the jury was biased. But a trader has no one to convince, no one to lie to. The market is the final judge, and it issues its verdict every day. I therefore think that understanding how the false pride system works can be crucially important to a successful and lasting career as a trader, speculator or investor.

– Victor Sperandeo, Methods of a Wall Street Master

Thought of the Day (December 29, 2009)

ElfLord — Mon, 28 Dec 2009 21:07:48 +0000

Neurotic traders use trading for the “high” it gives them. These people have a need to be always on the edge. They trade during the day, bet on professional sports at night, go to the racetrack on weekends, and even plan their vacations around gambling. For them, the thrill is in the bet, not the outcome. Their mind is always on the next game, the next trade, wherever money can be won or lost. They have no goal beyond the moment…That is the underlying psychology of impulsive behavior, and it is the exact opposite of the healthy psychology of successful traders.

– Victor Sperandeo, Trader Vic II: Principles of Professional Speculation

Thought of the Day (December 24, 2009)

ElfLord — Wed, 23 Dec 2009 21:59:25 +0000

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 19, 2009)

ElfLord — Fri, 18 Dec 2009 21:47:53 +0000

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

Thought of the Day (December 16, 2009)

ElfLord — Tue, 15 Dec 2009 21:42:36 +0000

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 6, 2009)

ElfLord — Sat, 05 Dec 2009 21:54:45 +0000

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 (November 25, 2009)

ElfLord — Tue, 24 Nov 2009 21:40:05 +0000

Having the will to execute means having the capability or power to carry through on a plan of action designed to achieve a specific goal.

It means having the ability to decide. The word decide comes from Latin roots that mean “to cut off.” When you really make a decision, your mind has concluded that no other alternative is either desirable or possible. When you achieve this state of mind, carring through your plan becomes less a matter of choice and more a matter of necessity.

The plan itself becomes a value, and if integrated into your subconscious, can actually be supported by your emotions. In this way, practicing emotional discipline not only enhances your ability to act, but also reduces the level and frequency of emotional conflict– it becomes a source of consistency in thought, actions, and feelings.

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

Thought of the Day (November 4, 2009)

ElfLord — Tue, 03 Nov 2009 22:10:09 +0000

A compulsive desire to be rich may indeed drive you to learn about the markets and make money, but only at tremendous personal cost. A driving desire for fame usually has at its root a fundamental lack of self-confidence and self-respect, and any fame achieved on that basis will be empty and meaningless. The extent to which you are motivated solely by the desire for money and fame is the extent that you will fail as a person, and usually as a businessperson as well.

– Victor Sperandeo, Methods of a Wall Street Master

Thought of the Day (October 13, 2009)

ElfLord — Mon, 12 Oct 2009 22:28:06 +0000

The Alligator Principle is based on the way an alligator eats: the more the victim tries to struggle, the more the alligator gets. Imagine an alligator has you by the leg; it clamps your leg in its mouth and waits while you struggle. If you put one of your arms in the vicinity of its mouth while fighting to get your leg free, it lunges and then has your arm and leg in its clutches. The more you struggle, the more the alligator takes you in.

So if an alligator ever gets you by the leg, remember that your only chance is to sacrifice the leg and drag yourself away. Translated to market terms, the principle is when you know you are wrong, close your position! Don’t rationalize, hope, pray, or anything else, just get out. Don’t change your position, hedge it, or anything else; just take the loss and get out!

– Victor Sperandeo

Trader Vic: Methods of a Wall Street Master by Victor Sperandeo

ElfLord — Fri, 09 Oct 2009 14:57:24 +0000

Victor Sperandeo says that if there were a Hall of Fame for trading he wouldn’t be in it but he sees himself as a career pro who consistently performs at an elite level year after year. In fact consistent performance is his central theme, which he says requires not only a successful approach to trading but to life itself. He delves into this in the second part of the book that is dedicated to the psychological approach.

The main topics in this book include: Preservation of capital, consistent profitability, technical analysis and trading rules. He tells how to spot a trend and discusses technical analysis. How to spot the tops and bottoms in any market. There is also a lot of detail about economics and what makes the system tick, which as he says he didn’t learn in school. Moving averages, booms and busts, and how to manage risk and have a good business philosophy for consistant success are also part of this well written book of trader knowledge. He covers a great deal of useful information in a very compact form that is actually easy to read and understand.

His methods are a mixture of fundamental and technical analysis. He uses economics as a forecasting tool and says that cycle analysis actually just gets in the way. If you can understand the fundamentals of economics you can interpret government intervention in the market and profit from it. University taught economics is useless for this. All booms and busts are a result of credit expansion in an effort to lower interest rates, whereas Keynesian economics attempts to use interventionalist policy to smooth out the peaks and troughs but in fact is the predominant cause. Surplus production, savings and innovation create wealth as much for the individual as the economy on the whole. Wealth is actually consumed by government created prosperity via deficit spending. You can’t get something for nothing. By understanding these cycles, you can speculate profitably.

Technical tools can then be used for timing entry. He demonstrates how trendlines can be drawn objectively to determine a change in trend using his 123 and 2B rules. A unique approach in this book is an approach to measuring risk by calculating market life expectancy profiles which he says has been instrumental to his success along with his business philosophy of protecting capital, consistent profitability and the pursuit of superior gains.

This book is as much a confession of the soul as a guide on trading methods, which I’ve found most of the best trading books are. He clarified a number of issues in my own mind and extended my thinking in critical areas.

Thought of the Day (October 1, 2009)

ElfLord — Wed, 30 Sep 2009 22:27:45 +0000

As a trader, and as a person, you have a choice. You can let emotions born of the search for glory determine your behavior while ignoring the facts; or you can recognize that you have to learn in order to grow, and with learning come mistakes. You are going to make mistakes—you’re going to win sometimes, and you’re going to lose sometimes, too. When you make a mistake, you can grow by analyzing the mistake and changing your behavior according to what you learn. This process leads to constant improvement of your skills and to a positive estimate of yourself. Practiced consistently, it will lead to self-esteem, not to mention more, and more consistent, profits from trading.

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

Thought of the Day (September 6, 2009)

ElfLord — Sun, 06 Sep 2009 07:52:55 +0000

To be a successful trader, you have to obtain the mind set that following the rules is pleasurable and breaking the rules is painful.

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

Thought of the Day (August 13, 2009)

ElfLord — Thu, 13 Aug 2009 11:11:43 +0000

A thorough understanding of yourself is essential in trading. How you think, what you believe, and how you act out your life are critical parts of winning in trading and winning in life. Very few people understand, or are aware of, this subtlety in the trading profession. In other careers, you can get by; but in trading, you are quickly eliminated. The sad part is, most people have no idea why they have failed.

– Victor Sperandeo, Principles of Professional Speculation

Thought of the Day (July 23, 2009)

ElfLord — Thu, 23 Jul 2009 07:55:20 +0000

Impulsive people have a way of understanding, and a mode of action, that, in comparison with normal deliberations and intentions, we would consider impaired. This impaired way of behavior shows itself as lack of control – acting on whim, giving in to temptation, doing what you have told yourself not to do. A person who decides to trade 10 contracts and then trades a 100 lot and says ‘I just did it – I don’t know why’ is acting impulsively.

All varieties of impulse, whim, or urge are essentially the same: a distortion of normal desires and wants, a sort of seizure that overrides good sense. Impulsive people are not self confident but simply hope and wish for results. They have no long-term goals, only immediate urges. Their behavior is abrupt, immediate, and unplanned; the time between thought and execution is very brief. This is not to suggest that quickness in trading is a negative. To the contrary, it is essential to good traders, but the difference is in the size of commitment the person takes on the spur of the moment, and the existence (or absence) of an underlying plan.

The net outcome of unplanned behavior is that when failure occurs, the integrated process malfunctions and the person cannot accrue effective lessons from the loss. Without a plan, impulsive people can’t develop sustained methods to determine what works and what doesn’t. They can’t understand why they failed, and they can’t understand, as good traders do, that a failed plan is beneficial because it leads to avoiding the same mistakes in the future.

– Victor Sperandeo, Principles of Professional Speculation

Thought of the Day (July 13, 2009)

ElfLord — Mon, 13 Jul 2009 07:25:25 +0000

One of the hardest things in life is that mistakes and pain are inevitable and essential part of it.

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