Sunday, 30 November 2014

Trade Like a Casino by Richard L. Weissman

  1. The Casino Paradigm
    1. Developing Positive Expectancy Models
      • Price has memory – traders experienced pain, pleasure, and regret associated with a linear price level
      • Kahneman & Tversky found the reflection effect proved that people were risk-averse regarding choices involving prospects of gains and risk-seeking over prospects involving losses
      • We can NEVER know all the reasons why the market rose or why it fell, but we can develop various rules for entry, exit, and risk management based upon objective, mathematically derived technical formulas
    2. Price Risk Management Methodologies
      • In higher volatility environments we need to place our stops further from our entry price so we can avoid being needlessly stopped out of trades; in lower volatility place stops closer to entry
      • Any idiot can take a profit.  Professionals know how to take losses
    3. Maintaining Unwavering Discipline
      • All humans have a psychological bias against taking losses -Kahneman & Tversky
      • We abandon discipline in risk management because we do not want to admit that we are wrong
  2. Trader Tools and Techniques
    1. Capitalizing on the Cyclical Nature of Volatility
    2. Trading the Markets and Not the Money
      • That which is psychologically natural and comfortable leads to failure
      • We need to think about profits in terms of probabilities instead of personal monetary needs
    3. Minimizing Trader Regret
      • Unrealized gains are your money and need to be treated in the same casino paradigm manner as all monies in your trading account
      • Regret minimization helps a trader be even-minded, take partial profits and move stops to break-even on the remainder
      • Never let a statistically significant unrealized gain turn into a statistically significant realized loss
    4. Timeframe Analysis
    5. How to Use Trading Models
    6. Anticipating the Signal
      • Don’t anticipate, just participate
  3. Trader Psychology
    1. Transcending Common Trading Pitfalls
      • All market behaviour is multifaceted, uncertain, and ever changing.
      • “I am employing a robust, positive expectancy trading model and am appropriately managing risk on each and every trade.  Losses are an inevitable and unavoidable aspect of executing all models.  Consequently, I will confidently continue trading.”
      • Denial of loss and uncertainty is extremely destructive because it prevents us from thinking in terms of probabilities, planning for the possibility of loss, and consequently from the necessity of consistently managing risk.
      • If we view markets as adversarial we cut ourselves off from emotionally tempered, objective solutions to speculation (opportunities to profit)
      • Blind faith is no substitute for research, methodical planning, stringent risk management, playing the probabilities, and unwavering discipline
      • Depression is a suboptimal emotional state because it allows past losses or missed opportunities to limit our ability to perceive information about the markets in the present
      • We are not our trades; they are merely an activity in which we are engaged
      • Greed is linked to fear of regret, which is the greatest force impeding a trader’s performance outside of fear of loss
      • Market offers limitless opportunities for abundance
      • Trading biases prevent us from objectively perceiving reality, thereby limiting our ability to capitalize on various opportunities in the markets.
    2. Analyzing Performance
      • Do you have other professional time commitments?
      • What prevents you from giving up during draw downs or from becoming reckless during a winning streak?
      • Have you deviated from your methodologies and if so, why?
      • After deviating from your methodologies, what specific steps do you take to prevent deviation in the future?
      • What threshold of AUM will impede your ability to trade specific instruments?
      • How many strategies are you currently trading?
      • Did you develop these models?
      • Is your performance real or hypothetical?
      • What assets are currently traded?
      • Does typical number of trades executed change during winning or losing periods?
      • Describe your various methodologies?
      • Are the models always in or do they allow for neutrality?
      • Same methodologies in all markets?
      • Are trade entry and exit criteria different?
      • Do the methods work better on a specific time horizon?
      • Are the methods more robust in specific types of market environments?
      • What are the strengths and weaknesses of the methods used?
      • Do the methods use diversification?
      • How do you determine assets traded?
      • How do you determine entry, exits, and stops?
      • How do you determine position size and leverage?
      • Do you add to or reduce exposures on winning positions?
      • Is fundamental information used?
      • How do you deal with price shock events?
      • Describe indicators used and how they form your methodologies?
      • Long or short biases?
      • What is the rate of return and worst peak-to-valley equity drawdown objectives?
      • How do you account for correlations between assets traded?
      • Type of stops used?
      • Do you adjust position size following significant profits or losses?
      • What percentage draw down would result in closure of your account?
      • Do you use a trading journal?
    3. Becoming an Even-Tempered Trader
      • Temper emotionalism

Quote for the day

“By far the biggest problem for professionals in investing is dealing with career and business risk: protecting your own job as an agent. The second curse of professional investing is over-management caused by the need to be seen to be busy, to be earning your keep. The individual is far better-positioned to wait patiently for the right pitch while paying no regard to what others are doing, which is almost impossible for professionals.” - Jeremy Grantham

Saturday, 29 November 2014

7 Habits Of Highly Destructive Traders

As traders, we try to do constructive things that build faith in ourselves, and confidence in our trading systems. We want to stay on the right path and not wander into the wilderness of destruction. Here are the seven things that we must be cautious of for the sake of profitability.

1. Blaming outside forces for poor trading results is an incredibly destructive behavior. High frequency traders, market makers, and irrational markets, give an undisciplined trader license to make reckless trades. The less responsibility taken for results, the more destructive they can be with an account.

2. Trading with no plan and making decisions based on feelings, is a really bad idea. Letting opinions and predictions be a guide to entries, and emotions be a guide to exits, guarantees maximum destruction of trading capital.

3. Trade first and learn how to trade later. Traders who don’t spend time educating themselves before trading will learn the hard way, and give their trading capital to other traders as tuition.

4. Focusing on ego and the desire to be right, instead of profitability and big losses, will quickly destroy a trader’s account.

5. Traders that fight the trend and disagree with the actual price action will give their trading capital to those that follow the trend.

6. Trade without discipline and risk management and a trader will be destroyed regardless of their trading system or method.

7. If a trader doesn't diversify their life with strong relationships, fun, peace, and health, their trading results become too entangled with their self worth. This can lead to mental and emotional ruin.

The path to profitability leads away from these seven habits. In the end, traders are consistently rewarded for their good habits, and punished financially for their destructive habits. This is our stop list.

Where in the World Are Top Tech Billionaires From?

The tech world is full of smart entrepreneurs, more than just the familiar names of Bill Gates and the late Steve Jobs. Many tech billionaires have found their way to the Silicon Valley. But where did they come from? Check out the infographic below.

Where in the World Are Top Tech Billionaires From? #infographic


Quote for the day

“The market does reflect the available information, as the professors tell us. But just as the funhouse mirrors don’t always accurately reflect your weight, the markets don’t always accurately reflect that information. Usually they are too pessimistic when it’s bad, and too optimistic when it’s good.” - Bill Miller

Friday, 28 November 2014

CSE - Percentage wise Top 20 Gainers and Losers in November 2014 & YTD

Top Gainers in November 2014

Top Losers in November 2014

Top Gainers YTD (Year-to-date)

Top Losers YTD (Year-to-date)

28-Nov-2014 CSE Trade Summary

Quote for the day

"If you don’t understand why you are in a trade, you won’t understand when it is the right time to sell, which means you will only sell when the price action scares you. Most of the time when price action scares you, it is a buying opportunity, not a sell indicator." - Martin Taylor

Thursday, 27 November 2014

27-Nov-2014 CSE Trade Summary

Quote for the day

“Risk, then, comes in two flavours: "shallow risk," a loss of real capital that recovers relatively quickly... and "deep risk," a permanent loss of real capital.” -  William Bernstein

Wednesday, 26 November 2014

26-Nov-2014 CSE Trade Summary

Quote for the day

“Although nature commences with reason and ends in experience, it is necessary for us to do the opposite—that is, to commence with experience, and from this proceed to investigate the reason.” -  Leonardo da Vinci

Tuesday, 25 November 2014

25-Nov-2014 CSE Trade Summary

Quote for the day

“If the unusual never happened there would be no difference in people and then there wouldn't be any fun in life. The game would become merely a matter of addition and subtraction. It would make of us a race of bookkeepers with plodding minds.” - Reminiscences of a Stock Operator

Monday, 24 November 2014

24-Nov-2014 CSE Trade Summary

Quote for the day

“Be your own person. Think against the herd, as they must lose in time.” - Mark Weinstein

Sunday, 23 November 2014

Starting a Trading Business

If a new trader wants to be a successful, they will need to treat their trading like they would operate a profitable business. Many traders lose a lot of money by approaching trading like it is a hobby. In trading, making money is the goal, and must be kept at the forefront of a trader’s mind if they are to be successful. Fun and excitement in trading can be expensive entertainment. The reality is that most of the time, trading is boring. A trader must treat the market like they would any other business, utilizing discipline and great care to grow their capital and be successful.
  1. You can’t open your trading business until you have a full business plan.
  2. Your inventory is your current positions; you have to buy them for less than you intend to sell them.
  3. Your customers are who you sell to; they have to be willing to pay more than you bought your positions for.
  4. Your mind is the manager of your business; you can’t let pride, fear, or greed lead to an unprofitable mistake.
  5. Your business must have insurance to manage risk. Stop losses and hedges are your insurance against big losses.
  6. Location is everything. You must conduct your business where there are ample buyers and sellers so you don’t get stuck with positions that no one wants.
  7. Your current positions are your employees. You have to keep the ones that produce gains, and fire the ones that lose. 
  8. Expansion of your business can only happen after your first location is successful. Once you have mastered a system of entries and exits you can add new markets and systems.
  9. Your trading capital and your positions are your inventory. Lose that and you are out of business.
  10. The only reason to be in business is to make money. If you don’t make money, you need a new business plan.

If you Want to be Rich, First Stop Being so Frightened

# If you are unwilling to fail, sometimes publicly, and even catastrophically, you stand little chance of ever getting rich.

# If you care what the neighbours think, you will never get rich.

# If you cannot bear the thought of causing worry to your family, spouse or lover while you plough a lonely, dangerous road rather than taking the safe option of a regular job, you will never get rich.

# If you have artistic inclinations and fear that the search for wealth will coarsen such talents, you will never get rich. (Because your fear, in this instance, is well justified.)

# If you are not prepared to work longer hours than almost anyone you know, despite the jibes of colleagues and friends, you are unlikely to get rich.

# If you cannot convince yourself that you are “good enough” to be rich, you will never get rich.

# If you cannot treat your quest to get rich as a game, you will never be rich.

# If you cannot face up to your fear of failure, you will never be rich.

Source: Extracted from

Quote for the day

“To get profit without risk, experience without danger, and reward without work, is as impossible as it is to live without being born.” - A. P. Gouthev 

Saturday, 22 November 2014

Quote for the day

“I know that to be successful, I have to be frightened. My biggest hits have always come after I have had a great period and I started to think that I knew something.” -  Paul Tudor Jones

Friday, 21 November 2014

Biggest Domain Sales in History

Here are the top deals for the most desired domain names and a comparison of how would their rank change adjusted to modern inflation.

Biggest Domain Sales in History #infographic

21-Nov-2014 CSE Trade Summary

Quote for the day

“The left holds that because markets are stupid models should be smart; the right believes that because models are stupid markets should be smart. Alas, it never hit both sides that both markets and models are very stupid.” -  Nassim Taleb

Thursday, 20 November 2014

20-Nov-2014 CSE Trade Summary

Quote for the day

“The intuitive mind is a sacred gift and the rational mind is a faithful servant. We have created a society that honours the servant and has forgotten the gift.” -  Albert Einstein

Wednesday, 19 November 2014

19-Nov-2014 CSE Trade Summary

Quote for the day

“Rather than targeting a desired rate of return, even an eminently reasonable one, investors should target risk.” -  Seth Klarman

Tuesday, 18 November 2014

18-Nov-2014 CSE Trade Summary

Quote for the day

“I would put it this way: I do not play according to a given set of rules; I look for changes in the rules of the game.” - George Soros

Monday, 17 November 2014

17-Nov-2014 CSE Trade Summary

Quote for the day

“Good trading is a peculiar balance between the conviction to follow your ideas and the flexibility to recognize when you have made a mistake. You need to believe in something, but at the same time, you are going to be wrong a considerable number of times. The balance between confidence and humility is best learned through extensive experience and mistakes.” -  Michael Steinhardt

Sunday, 16 November 2014

Habits of Unsuccessful People Vs Successful People

Check the habits of successful people that distinguish them from the unsuccessful people. Discover them in the infographic below.

Habits of Unsuccessful People Vs Successful People #infographic

Trading Rules From A Professional Trader

Professional trader Richard Weissman was generous enough to post his trading rules in my facebook trading group and also gave me permission to share them with my blog readers. I have grown in my trading this year interacting with Richard and watching how he trades. He is also very generous in sharing his wisdom with other traders The following are lessons he has learned over many years of hard earned experience and turned into rules that could really help traders at all levels of development:

• Trade the market, not the money
• Always trade value, never trade price
• The answer to the question, “What’s the trend?” is the question, “What’s your timeframe?”
• Never allow a statistically significant unrealized gain to turn into a statistically significant realized loss (ATR)
• Don’t tug at green shoots
• When there’s nothing to do, do nothing
• Stop adjustments can only be used to reduce risk, not increase it.
• There are only two kinds of losses: big losses and small losses, given these choices – always choose small losses.
• Risk no more than 1% of AUM on any single position
• Never risk less than 1% of asset under management on any single position (as long as your models are performing well)
• Don’t Anticipate, Just Participate
• Buy the strongest, sell the weakest (RSI)
• Sideways markets eventually resolve themselves into trending markets and vice versa
• Stagger entries & exits – Regret Minimization techniques
• Look for low risk, high reward, high probability setups
• Correlations are for defense, not offense
• Drawdowns are for underleveraged trading and research
• Develop systems based on the kinds of “pain” (weaknesses) endured when they aren’t working or you’ll abandon them during drawdowns.
• Be disciplined in risk management & flexible in perceiving market behavior
• It’s not about the best RAROR, it’s about the best RAROR for your trading personality

Richard L. Weissman is a trader, trading system developer, and educator on trading and risk management. Weissman is a former member and trader at the New York Futures Exchange. He has written articles on trading and technical analysis for a variety of industry publications and provides independent consulting services to traders and risk managers on technical analysis, derivatives, and trading system development. Weissman is also the author of the Wiley titles Trade like a Casino and Mechanical Trading Systems.


Quote for the day

“Systems trading is ultimately discretionary. The manager still has to decide how much risk to accept, which markets to play, and how aggressively to increase and decrease the trading as a function of equity change. These decisions are quite important — often more important than trade timing.” -  Ed Seykota

Saturday, 15 November 2014

Sitting Is Killing You

Before the invention of television and the computer, humans spent a lot more time on their feet. Now many people spend most of their days sitting down whether its working away at the computer or relaxing in front of the television. All this inactivity is slowly killing us. This infographic shows why it is important for people to get off their bums and get active.

Sitting Is Killing You

Why Trading is Like a Triathlon

“A triathlon is a multiple-stage competition involving the completion of three, continuous, and sequential endurance disciplines. While many variations of the sport exist, triathlon, in its most popular form, involves swimming, cycling, and running in immediate succession over various distances.” - Wikipedia

Trading is a three-dimensional competition that requires the management of three continuous, simultaneous, endurance disciplines. While a variety of trading methodologies and systems exist, profitable trading involves management of the trader’s psychology, attention to risk control, and dedication to trading a robust system over an extended time period.

Many traders make the mistake of thinking that simply knowing the right methodology will guarantee their success. In actuality, it is a three event marathon consisting of more than just entries; psychology and risk management have much more influence over longterm success. Entries have no meaning without the right exits, and no system is a winning system without the discipline to follow it.

Here are the three events in the trading race:

A trader’s psychology has to be one of confidence in order to trade it with discipline. Confidence comes from doing homework, back testing, chart studies, and experience. A trader has to trade position sizes that turn down the volume on their emotions. They must have the mental discipline to follow the plan that they carefully crafted when the market was closed, when the market is open. When a trader drifts into greed, fear, and ego, they will likely wreck on the rocks of reality. A successful trader needs the psychology of an entrepreneur, cultivating the fortitude to get through the small losses so they can make it to the big wins.

A trader’s risk management will determine their short term and long term success. Trade too big and the trader will give back all past profits with just a few losing trades. Trading huge position sizes insures that a trader will eventually give their whole trading account away to disciplined risk managers. If risk is not managed, no trading method will lead to profitability because some string of losses will eventually be too much to bear.

A trader’s methodology should be robust enough to have an edge over the markets and other traders. High probability entries and set ups based on historical price action is a good place to start. Planned exits to lock in profitable trades when right, and knowing where to get out if proven wrong, is critical to success. A good trading methodology is trading with a plan that defines entries, exits, and position sizing. Implementing a strong methodology increases the likelihood that a trader’s overall wins will exceed their overall losses within the time frame for expected profitability.

If you want to win the trading race, you must train for all three events.

Quote for the day

“Most investors have a remarkable and deeply fascinating ability to blame others for their mistakes whilst giving themselves credit for all the correct investment decisions.” -  Niels Jensen

Friday, 14 November 2014

The World’s Wealth in 2014


14-Nov-2014 CSE Trade Summary

Quote for the day

“Speculation is a hard and trying business, and a speculator must be on the job all the time or he'll soon have no job to be on.” - Reminiscences of a Stock Operator

Thursday, 13 November 2014

13-Nov-2014 CSE Trade Summary

Following Stocks Reached New High / Low on 13/11/2014

Crossings - 13/11/2014 & Top 10 Contributors to Change ASPI

Top 10 Gainer / Loser / Turnover / Volume for the day

Top 10 Foreign Activity for the Day

Quote for the day

“The trading experience is so intense that there is a natural tendency to want to avoid thinking about it once the day is over. I am that way when things are working. But, when they are not, it spurs me to want to think about what I'm doing and how I might do better. When things go bad, traders shouldn't stick their heads in the sand and just hope it gets better.” - Richard Dennis

Wednesday, 12 November 2014

12-Nov-2014 CSE Trade Summary

How Mark Zuckerberg Started

How Mark Zuckerberg really started is not how the movie The Social Network showed it. Read on to find out the actual story of Mark Zuckerberg.

How Mark Zuckerberg Started #infographic

Quote for the day

“The difference between successful people and very successful people is that very successful people say \'no\' to almost everything.” - Warren Buffett

Tuesday, 11 November 2014

11-Nov-2014 CSE Trade Summary

Quote for the day

“If you are distressed by anything external, the pain is not due to the thing itself, but to your estimate of it; and this you have the power to revoke at any moment.” - Marcus Aurelius

Monday, 10 November 2014

10-Nov-2014 CSE Trade Summary

Quote for the day

“A clear vision, backed by definite plans, gives you a tremendous sense of confidence and power.” -  Brian Tracy

Sunday, 9 November 2014

The Evolution of the IT Professional

The ongoing technology evolution has hastened the necessity for more skilled IT professionals. The sector's rapid progress has been astounding. By tracing the past, we can see how it has molded the modern professional.

The Evolution of the IT Professional #infographic

Quote for the day

"I bought a company in the mid-'90s called Dexter Shoe and paid $400 million for it. And it went to zero. And I gave about $400 million worth of Berkshire stock, which is probably now worth $400 billion. But I've made lots of dumb decisions. It's part of the game." - Warren Buffett

Saturday, 8 November 2014

Who's Tracking Your Smartphone?

Companies, government organizations and criminal hackers use intrusive methods to harvest data from smartphones. Worst of all, many of these tactics occur without the smartphone user's knowledge and consent. By following these steps, you can limit the amount of data that can be accessed and travel without your movements being tracked.