Friday, 1 November 2013

Quote for the day

“Frank Zappa once said that rock journalism is people who can't write, interviewing people who can't talk, for people who can't read. Something similar can be said for stock markets. They are mostly myopic, unpredictable, crazily mispriced and followed by equally clueless investors.” - Lex (FT)

01-Nov-2013 CSE Trade Summary

Crossings - 01/11/2013 - Top 10 Contributors to Change ASPI

Following Stocks Reached New High / Low on 01/11/2013


Five Stages of Trader Evolution

This is the oldest trader’s ancestor. He was fairly naive, highly emotional and addicted gambler. The gambler perceived the market as his casino-like entertaining arena. He bet large and he bet often. His goal was to get rich quick. Most, if not all, of his capital was quickly distributed to more evolved traders.

He came to understanding that markets are not random, but quite predictable. His quest was to find a single technical indicator which will make him rich. The hunter spent countless hours back testing expensive software algorithms and other people’s methods. Unfortunately, most of his capital was promptly distributed to more evolved traders. A great deal of traders stayed stuck in this stage of development for a relatively long time.

He gave up the quest for “holly grail”. He came to understanding that the market is much more complex and dynamic place, so he applied his analytical skills to conquer it. The analyst developed better understanding of market interdependency and correlations. He was able to develop fairly sophisticated methods for identifying low risk/high reward trading opportunities. Unfortunately, he was not the master of his emotions. He would sell his winners too early and hang onto losers for too long. His capital was distributed over time, at relatively slow rate, to highly developed traders.

At this stage, our ancestors got grip of proper money management technique, which enabled them to control their emotions in the market place. The manager was extremely systematic in his decision making process. He fully understood importance of active account management, position sizing and capital preservation. Unfortunately, he was often under-capitalized, which affected his bottom line via high commissions and other cost of doing business. Also, he could not commit to trading full time. Although, he was not net loser, his results trailed those of professional traders.

Professional trader
The final stage of trader evolution. Properly capitalized, fully developed and highly motivated, the professional trader takes a full advantage of his predecessors. He is aware of his weaknesses, so he dedicates time and energy to work on them. He is humble, unemotional and self-sustaining. His only goal is to trade well.
Which stage are you at?