Crossings - 10/12/2013 & Top 10 Contributors to Change ASPI
Following Stocks Reached New High / Low on 10/12/2013
Tuesday, 10 December 2013
The Twelve Habitudes of Highly Successful Traders
A successful trader:
- Has a commitment to trading and comes prepared to trade.
- Is detached from the results. He thinks in terms of process and believes in the validity of the process.
- Is willing to accept loss.
- Is at ease with controlled risk.
- Thinks in terms of probabilities.
- Is comfortable with uncertainty.
- Takes the long term view.
- Has an attitude of abundance.
- Is optimistic.
- Has an attitude of open-mindedness and clarity of thought and perception.
- Has an attitude of courage. She is willing to act in the face of uncertainty and possible loss.
- Is disciplined. Discipline is putting into action those behaviors which need to be done to get you to your goals.
Habitude 1: Preparedness
- A successful trader trains his mind for high power trading. If he needs a coach or mentor, he gets one. He takes the time for meditation, self-suggestion and positive visualization. He learns helpful questions to ask himself. He does whatever it takes to prepare himself mentally to trade.
- Set goals
- Put your goal into words. Form a sentence that is specific, simple, short, positive, in the present tense, and achievable.
- Make a mental movie of yourself with the goal achieved.
- Step into the movie and live it and feel it as if it is already true.
- Design the steps necessary to take to get to the goal.
- Commit yourself to doing the steps and make a timetable to do them.
Habitude 2: Detachment
- When you become fully and solely identified with a particular role (e.g. I am a trader), you can become depressed when it’s not going well. It’s hard to detach from trading results when you're fully identifying with the role, and only that role. So make a list of the other things you do and are. Identify with the whole scope of your being. You are so much more than your trading.
- Experiment with bringing different perceptual positions to your trading. Try placing a couple of chairs near your trading station. Let one represent a mentor. Let the other represent a neutral observer. Sit in the different chairs literally or in your imagination and look at the trading from those perspectives.
- You cannot use the trading arena to prove your worth or your capability. It will just bring your trading and your self-esteem to new lows. To build your self-esteem, ask yourself “what did I do today that I’m proud of?”, and “In what ways am I improving?”
- Anxiety is a forward looking emotion that tells you that there is something in your future for which you need to prepare. Ask yourself, “What can I do to prepare for this?” And do whatever you can. Then in your imagination, go out into the future to just after the successful conclusion of the event you were worried about. Imagine and visualize the successful conclusion of the event. Most people do just the opposite of this. Imagine instead that the trade goes where the probabilities tell you it will go.
Habitude 3: Willingness to Accept Loss
- Taking a loss does not make you a loser. If you are not willing to lose, you may not be able to actually trade.
- Traders who seek to avoid loss frequently end up losing and often losing big. Some miss opportunity by failing to pull the trigger. Some wait for confirmation only to enter when the trade is mostly over. Some lose because they refuse to recognize a losing situation when they're in it. Some, in a losing trade, will avoid taking that loss only to find it getting bigger and bigger.
- Losses are not failures. They are feedback. And feedback takes us forward.
Habitude 4: Taking Controlled Risk
- Probability is the mathematical center of wise risk. Successful traders risk to win. For the risk taker, this uncertainty between small loss or large profit is where the fun is.
- If you tend to over trade or over risk, you need to pull in your frame of safety. You need to establish trading guidelines that will protect you. You need to be alert to your propensity to over risk and step back every time you catch yourself over extending.
- If you tend to avoid risk, you need to expand your frame of safety. You need to slowly add risk to your trading so that you become emotionally inoculated. Decrease your trading size and / or change to a trading vehicle that is less volatile. When this is comfortable, slowly increase size and volatility.
Habitude 5: Thinking in Probabilities
- Successful traders put themselves in alignment with the probabilities.
- If you know a trade has a probability to make money, you’ll go ahead and put it on in a timely manner. Why would you not? It’s probably going to make money.
- If you know a trade is only probable, you'll put in a protective stop loss. Since it’s only probable, you're mindful of other possibilities. It could be a losing trade. Therefore, you protect yourself.
Habitude 6: Being Comfortable With Uncertainty
- Successful traders understand that the future of any trade is not knowable in advance. You are willing to act in a timely fashion because you understand that you will never have certainty until it’s history.
- Some people have an inordinate need to be right. First, such a trader cannot act quickly, she will hesitate before entering a trade and once in she may hesitate to get out because it would prove she was wrong. She’s always looking for confirmation because she needs to be right. By the time confirmation comes, however, it’s usually too late. Second, such a trader may be so overcome with the need to be right that she cannot receive information contrary to her position. If you need to be right, you'll build your case despite the overwhelming evidence to the contrary. And you’ll pay the price.
- The future is not knowable. A successful trader fully accepts the uncertainty and even enjoys the mystery. Herein lies the art and the excitement of trading.
Habitude 7: Taking the Long Term View
- Project your past and current trading strategy into the future. What will your trading be like if you keep trading like this? Change what needs to be changed.
- Find out what works. Verify that it does work. A trader who takes the long view won’t rush into trading a new method or system until she has fully checked it out to make sure she truly does have an edge.
- By taking the long view a trader ceases to define herself by today’s trading. The long view allows a trader to view a drawdown as a temporary situation. The long view enables a trader to be optimistic about the future even as he remains realistic in the present.
Habitude 8: Thinking in Terms of Abundance
- Successful people believe that life offers a cornucopia of opportunities and that they can identify and take advantage of some of them.
- If you miss a trade or leave a trade too soon, there’s no need to stress over it. Learn from it and vow to do better in the future. After all, there is an abundance of future opportunity waiting for you. The markets will continue to be there with plenty of movement and possibility. They provide us with unlimited possibility. Count on it.
Habitude 9: Optimism
- When good things happens to an optimist, he says it’s permanent, pervasive, and personal. When a bad thing happens to an optimist, she says it’s temporary, specific, and not personal.
- Because the optimistic trader looks with bright enthusiasm towards the future, she is able to be realistic about what has happened in the past and is happening in the present. A pessimistic trader who has limiting doubts about his future trading, may be unwilling to admit what has happened or is actually occurring.
Habitude 10: Open Mindedness and Clarity
- The successful trader stops telling himself stories that don't square with price action. He knows that if he hears himself saying, “I don't believe this,” he’d better believe it and act upon it.
- You need to develop some impartial indicator that will let you know whether or not your bias — your hunch — is in fact occurring. You need to create an unbiased set of rules for telling you whether a market is trending and what that trend is. You could call it your no-nonsense detector. Keep asking yourself, “what is my no-nonsense detector telling me now?”
Habitude 11: Courage
- The more you exercise courage in your trading, the easier it is to be courageous.
- Courage does not mean recklessness. Successful traders have respect for their capital. They know how hard they worked to create it and to grow it. They do not treat their capital as easy come, easy go.
- Successful traders have respect for their verified methods. If their method tells them the market is going down, they believe it, and abide by it. If their method tells them it’s time to enter the market, they do it promptly. If their method tells them to exit a trade, they do it. Because of their respect for their method, they would not dare trade on the opposite side of their methods.
Habitude 12: Discipline
- Discipline is doing whatever needs to be done to achieve your goals. You do what needs to be done whether or not you feel like it.
- If I have a goal, then my actions support that goal. If I don’t act upon my goal, then I’I'm just wishing. Successful traders know what needs to be done, and they do it. No excuses. No evasions. Simple, clean thought and action.
- If you're trying to do or not do something in your trading and you're not succeeding, you need to shift something. Ask yourself, “What would I need to believe in order to do or not do this?” “How would I have to interpret this event in order to handle it differently?” “What are my real underlying intentions in regard to this situation?” “How would I have to feel about myself in order to succeed at this?”.
- Don't try and try again. Do something different. Discipline is doing, not trying. Change your interpretations, modify a belief, alter your guidelines, allow yourself to feel differently about the consequences of the behavior you're trying to do or not to do.
Source: http://whatheheckaboom.wordpress.com
The three principles of Islamic finance explained
The principle that income can be derived from the time value of money (that is, by placing money at the disposal of another person and receiving an increased return at some stage in the future) has been a part of conventional financing for time immemorial. We know it as interest on loans and it has been as much part of our lives as earning a daily living.
Interest on a loan remains payable, irrespective of whether the cause or venture for which the money was advanced is successful or not. It means that a person can make money out of the mere fact that they have money and another has not. Some may say that there is an inherent injustice in a system where money is seen as a mere commodity to make more money. The old adage that the rich get richer while the poor get poorer certainly does seem to ring true in instances where debtors pay exorbitant interest rates during difficult financial times, while banks declare large profits in favour of a select few shareholders.
The concept that money is a commodity in itself that need not be invested into an underlying commodity to show a return has also played an important part in the development of a global financial system, where return on capital is measured on how well one can leverage positions as well as the application of derivative-based financial methodology. The art of making money out of nothing at all has been perfected in this regard but there is no doubt that the uncertainty, the highly leveraged exposures and the speculative nature of some of these financial tools have at times led to catastrophic results and devastating experiences for many.
These are some of the reasons that Muslims all over the world are turning in increasing numbers towards Islamic finance to provide them with a more reasonable and divinely moral approach to their financial affairs.
Background
Islam has a set of goals and values encompassing all aspects of human life, including social, economic and political issues. It is not a religion in the limited sense of the word, interested only in salvation in the hereafter, rather it is a religion that organizes one's life completely. The body of Islamic law is known as Sharia, literally meaning a clear path to be followed and observed.
The Sharia is not a codified body of law. It is an abstract form of law capable of adaptation, development and interpretation. The Sharia does not prescribe general principles of law, instead it purports to deal with specific cases or transactions and sets out rules that govern them.
The Sharia developed through four main Islamic juristic schools (Hanafi, Maliki, Shafi and Hanbali) and is derived from two primary sources, the Quran (the transcription of God's message to the prophet Mohammed) and Sunna (the living tradition of the prophet Mohammed), in addition to two dependent sources: ijma (consensus) and ijtihad /qiyas (individual reasoning by analogy).
Islamic banks must have a religious committee made up of high-calibre religious scholars. This Sharia board has both a supervisory and consultative duty to ensure that the bank's practices are in line with the Sharia.
The prohibition of all sources of unjustified enrichment and the prohibition of dealing in transactions that contain excessive risk or speculation are among the most important teachings of Islam in establishing justice and eliminating exploitation in business transactions.
Accordingly, Islamic scholars have deduced from the Sharia three principles that form the benchmark of Islamic economics and that distinguish Islamic finance from its conventional counterpart.
The prohibition of interest
The prohibition of usury or interest (riba) is the most significant principle of Islamic finance. Riba translates literally from Arabic as an increase, growth or accretion. In Islam, lending money should not generate unjustified income. As a Sharia term, it refers to the premium that the borrower must pay to the lender along with the principal amount, as a condition for the loan or for an extension in its maturity, which today is commonly referred to as interest.
Riba represents a prominent source of unjustified advantage. All Muslim scholars are adamant that this prohibition extends to all forms of interest and that there is no difference between interest-bearing funds for the purposes of consumption or investment, because Sharia does not consider money a commodity for exchange. Instead, money is a medium of exchange and a store of value.
Profit and loss sharing
Profit and loss sharing (PLS) financing is a form of partnership, where partners share profits and losses on the basis of their capital share and effort. Unlike conventional finance, there is no guaranteed rate of return. Islam supports the view that Muslims do not act as nominal creditors in any investment, but as partners in the business (that is, essentially an equity-based financing).
The justification for the PLS financier's share in profit is their effort and the risk they carry, because their profit would have been impossible without the investment. If the investment makes a loss, their money is lost.
Gharrar
Any transaction that involves gharrar (that is, uncertainty and speculation) is prohibited. Parties to a contract must have knowledge of the subject matter of the contract and its implications. An example of an agreement tainted with gharrar is an agreement to sell goods that have already been lost.
Financing techniques
Islamic scholars have approved certain basic types of contracts as being compliant with the principles of Islamic finance, which Islamic banks can use to attract funds and provide financing in an Islamic way.
Mudaraba (finance by way of trust)
Mudaraba is a form of partnership in which one partner (rab-ul-amal) provides the capital required for a project while the other party (mudarib) manages the investment using its expertise. Although similar to a partnership, a company need not be created, so long as the profits can be determined separately. Profits from the investment are distributed according to a fixed, pre-determined ratio. The capital provider carries the loss in a Mudaraba contract unless it was due to the mudarib's negligence, misconduct or violation of the conditions pre-agreed upon.
In a mudaraba, the management of the investment is the sole responsibility of the mudarib, and all assets acquired by the mudarib are the sole possession of the rab-ul-amal. However, the Mudaraba contract eventually permits the mudarib to buy out the rab-ul-amal's investment and become the sole owner of the investment.
Mudaraba may be concluded between an Islamic bank, as provider of funds, on behalf of itself or on behalf of its depositors as a trustee (this has a different meaning to the English law concept of trustee) of their funds, and its business-owner clients. In the latter case, the bank pays its depositors all profits from the investment, after deducting its intermediary fees. It may also be conducted between a bank's depositors as providers of funds and an Islamic bank as a mudarib.
Musharaka (finance by way of partnership)
Musharaka is often perceived as an old-fashioned technique confined in its application to small-scale investments. Although it is similar to the Mudaraba contract, it is different in that all parties involved in a partnership provide capital towards the investment.
Profits are shared between partners on a pre-agreed ratio, but losses are shared in exact proportion to the capital invested by each party. This gives an incentive to invest wisely and take an active interest in the investment. Moreover, in musharaka, all partners are entitled to participate in the management of the investment, but are not required to do so. This explains why the profit-sharing ratio is mutually agreed upon and may be different from the investment in the total capital.
Murabaha (cost-plus financing)
Murabaha is the most popular form of Islamic financing. Within a murabaha contract, the bank agrees to buy an asset or goods from a third party at the request of its client, and then re-sells the goods to its client with a mark-up profit. The client purchases the goods either against immediate payment or for a deferred payment.
This technique is sometimes considered akin to conventional interest-based finance. However, in theory, the mark-up profit is quite different. The mark-up is for the services the bank provides - seeking and purchasing the required goods at the best price. Furthermore, the mark-up is not related to time because, if the client fails to pay a deferred payment on time, the mark-up does not increase due to delay and remains as pre-agreed. Most importantly, the bank owns the goods between the two sales and so assumes the title and the risk of the purchased goods, pending their resale to the client. This risk involves all risks normally contained in trading activities, in addition to the risk of not making the mark-up profit, or if the client does not purchase the goods from the bank and whether they have a justifiable excuse for refusing to do so.
Ijara (leasing)
Ijara is defined as sale of manfa'a (that is, the right to use goods) for a specific period. It is similar to a conventional lease. Under Islam, leasing began as a trading activity and then much later became a mode of finance. Ijara is a contract under which a bank buys and leases out an asset or equipment required by its client for a rental fee.
During a pre-determined period, the ownership of the asset remains with the lessor (that is, the bank) who is responsible for its maintenance so that it continues to give the service for which it was rented. Likewise, the lessor assumes the risk of ownership, and in practice seeks to mitigate such risk by insuring the asset in its own name. Under an ijara contract, the lessor has the right to re-negotiate the quantum of the lease payment at every agreed interval. This is to ensure that the rental remains in line with market leasing rates and the residual value of the leased asset.
Under this contract, the lessee (that is, the client) does not have the option to purchase the asset during or at the end of the lease term because this is considered under the Sharia to be tainted with uncertainty. But this object may be achieved by means of a similar type of contract, known as an ijara wa iktina (hire-purchase). In a hire-purchase situation, the commitment on the part of the lessee to buy the asset at the end of the rental period, at an agreed price (with the rental fees paid up to the point of sale constituting part of the price), is established at the outset.
Salam (advance purchase)
Salam is defined as forward purchase of specified goods for full forward payment. This contract is regularly used for financing agricultural production.
Istisna'a (commissioned manufacture)
Istisna'a is a new concept in Islamic finance that offers future structuring possibilities for trading and financing. One party buys the goods and the other party undertakes to manufacture them, according to agreed specifications. Islamic banks frequently use Istisna'a to finance construction and manufacturing projects.
Source:www.iflr.com/Article/1984844/The-three-principles-of-Islamic-finance-explained.html
Interest on a loan remains payable, irrespective of whether the cause or venture for which the money was advanced is successful or not. It means that a person can make money out of the mere fact that they have money and another has not. Some may say that there is an inherent injustice in a system where money is seen as a mere commodity to make more money. The old adage that the rich get richer while the poor get poorer certainly does seem to ring true in instances where debtors pay exorbitant interest rates during difficult financial times, while banks declare large profits in favour of a select few shareholders.
The concept that money is a commodity in itself that need not be invested into an underlying commodity to show a return has also played an important part in the development of a global financial system, where return on capital is measured on how well one can leverage positions as well as the application of derivative-based financial methodology. The art of making money out of nothing at all has been perfected in this regard but there is no doubt that the uncertainty, the highly leveraged exposures and the speculative nature of some of these financial tools have at times led to catastrophic results and devastating experiences for many.
These are some of the reasons that Muslims all over the world are turning in increasing numbers towards Islamic finance to provide them with a more reasonable and divinely moral approach to their financial affairs.
Background
Islam has a set of goals and values encompassing all aspects of human life, including social, economic and political issues. It is not a religion in the limited sense of the word, interested only in salvation in the hereafter, rather it is a religion that organizes one's life completely. The body of Islamic law is known as Sharia, literally meaning a clear path to be followed and observed.
The Sharia is not a codified body of law. It is an abstract form of law capable of adaptation, development and interpretation. The Sharia does not prescribe general principles of law, instead it purports to deal with specific cases or transactions and sets out rules that govern them.
The Sharia developed through four main Islamic juristic schools (Hanafi, Maliki, Shafi and Hanbali) and is derived from two primary sources, the Quran (the transcription of God's message to the prophet Mohammed) and Sunna (the living tradition of the prophet Mohammed), in addition to two dependent sources: ijma (consensus) and ijtihad /qiyas (individual reasoning by analogy).
Islamic banks must have a religious committee made up of high-calibre religious scholars. This Sharia board has both a supervisory and consultative duty to ensure that the bank's practices are in line with the Sharia.
The prohibition of all sources of unjustified enrichment and the prohibition of dealing in transactions that contain excessive risk or speculation are among the most important teachings of Islam in establishing justice and eliminating exploitation in business transactions.
Accordingly, Islamic scholars have deduced from the Sharia three principles that form the benchmark of Islamic economics and that distinguish Islamic finance from its conventional counterpart.
The prohibition of interest
The prohibition of usury or interest (riba) is the most significant principle of Islamic finance. Riba translates literally from Arabic as an increase, growth or accretion. In Islam, lending money should not generate unjustified income. As a Sharia term, it refers to the premium that the borrower must pay to the lender along with the principal amount, as a condition for the loan or for an extension in its maturity, which today is commonly referred to as interest.
Riba represents a prominent source of unjustified advantage. All Muslim scholars are adamant that this prohibition extends to all forms of interest and that there is no difference between interest-bearing funds for the purposes of consumption or investment, because Sharia does not consider money a commodity for exchange. Instead, money is a medium of exchange and a store of value.
Profit and loss sharing
Profit and loss sharing (PLS) financing is a form of partnership, where partners share profits and losses on the basis of their capital share and effort. Unlike conventional finance, there is no guaranteed rate of return. Islam supports the view that Muslims do not act as nominal creditors in any investment, but as partners in the business (that is, essentially an equity-based financing).
The justification for the PLS financier's share in profit is their effort and the risk they carry, because their profit would have been impossible without the investment. If the investment makes a loss, their money is lost.
Gharrar
Any transaction that involves gharrar (that is, uncertainty and speculation) is prohibited. Parties to a contract must have knowledge of the subject matter of the contract and its implications. An example of an agreement tainted with gharrar is an agreement to sell goods that have already been lost.
Financing techniques
Islamic scholars have approved certain basic types of contracts as being compliant with the principles of Islamic finance, which Islamic banks can use to attract funds and provide financing in an Islamic way.
Mudaraba (finance by way of trust)
Mudaraba is a form of partnership in which one partner (rab-ul-amal) provides the capital required for a project while the other party (mudarib) manages the investment using its expertise. Although similar to a partnership, a company need not be created, so long as the profits can be determined separately. Profits from the investment are distributed according to a fixed, pre-determined ratio. The capital provider carries the loss in a Mudaraba contract unless it was due to the mudarib's negligence, misconduct or violation of the conditions pre-agreed upon.
In a mudaraba, the management of the investment is the sole responsibility of the mudarib, and all assets acquired by the mudarib are the sole possession of the rab-ul-amal. However, the Mudaraba contract eventually permits the mudarib to buy out the rab-ul-amal's investment and become the sole owner of the investment.
Mudaraba may be concluded between an Islamic bank, as provider of funds, on behalf of itself or on behalf of its depositors as a trustee (this has a different meaning to the English law concept of trustee) of their funds, and its business-owner clients. In the latter case, the bank pays its depositors all profits from the investment, after deducting its intermediary fees. It may also be conducted between a bank's depositors as providers of funds and an Islamic bank as a mudarib.
Musharaka (finance by way of partnership)
Musharaka is often perceived as an old-fashioned technique confined in its application to small-scale investments. Although it is similar to the Mudaraba contract, it is different in that all parties involved in a partnership provide capital towards the investment.
Profits are shared between partners on a pre-agreed ratio, but losses are shared in exact proportion to the capital invested by each party. This gives an incentive to invest wisely and take an active interest in the investment. Moreover, in musharaka, all partners are entitled to participate in the management of the investment, but are not required to do so. This explains why the profit-sharing ratio is mutually agreed upon and may be different from the investment in the total capital.
Murabaha (cost-plus financing)
Murabaha is the most popular form of Islamic financing. Within a murabaha contract, the bank agrees to buy an asset or goods from a third party at the request of its client, and then re-sells the goods to its client with a mark-up profit. The client purchases the goods either against immediate payment or for a deferred payment.
This technique is sometimes considered akin to conventional interest-based finance. However, in theory, the mark-up profit is quite different. The mark-up is for the services the bank provides - seeking and purchasing the required goods at the best price. Furthermore, the mark-up is not related to time because, if the client fails to pay a deferred payment on time, the mark-up does not increase due to delay and remains as pre-agreed. Most importantly, the bank owns the goods between the two sales and so assumes the title and the risk of the purchased goods, pending their resale to the client. This risk involves all risks normally contained in trading activities, in addition to the risk of not making the mark-up profit, or if the client does not purchase the goods from the bank and whether they have a justifiable excuse for refusing to do so.
Ijara (leasing)
Ijara is defined as sale of manfa'a (that is, the right to use goods) for a specific period. It is similar to a conventional lease. Under Islam, leasing began as a trading activity and then much later became a mode of finance. Ijara is a contract under which a bank buys and leases out an asset or equipment required by its client for a rental fee.
During a pre-determined period, the ownership of the asset remains with the lessor (that is, the bank) who is responsible for its maintenance so that it continues to give the service for which it was rented. Likewise, the lessor assumes the risk of ownership, and in practice seeks to mitigate such risk by insuring the asset in its own name. Under an ijara contract, the lessor has the right to re-negotiate the quantum of the lease payment at every agreed interval. This is to ensure that the rental remains in line with market leasing rates and the residual value of the leased asset.
Under this contract, the lessee (that is, the client) does not have the option to purchase the asset during or at the end of the lease term because this is considered under the Sharia to be tainted with uncertainty. But this object may be achieved by means of a similar type of contract, known as an ijara wa iktina (hire-purchase). In a hire-purchase situation, the commitment on the part of the lessee to buy the asset at the end of the rental period, at an agreed price (with the rental fees paid up to the point of sale constituting part of the price), is established at the outset.
Salam (advance purchase)
Salam is defined as forward purchase of specified goods for full forward payment. This contract is regularly used for financing agricultural production.
Istisna'a (commissioned manufacture)
Istisna'a is a new concept in Islamic finance that offers future structuring possibilities for trading and financing. One party buys the goods and the other party undertakes to manufacture them, according to agreed specifications. Islamic banks frequently use Istisna'a to finance construction and manufacturing projects.
Source:www.iflr.com/Article/1984844/The-three-principles-of-Islamic-finance-explained.html
Quote for the day
“There are two main risks in the investment world: the risk of losing money and the risk of missing opportunity. You can completely avoid one or the other, or you can compromise between the two, but you can't eliminate both.” - Howard Marks
Subscribe to:
Posts (Atom)