“The best way I know to learn discipline and patience is to think through a trade thoroughly before putting it on. You need to develop a plan of your strategies for various contingencies. That way, you won't get swayed by every news item that hits the market and causes prices to move up or down.” - Gary Bielfeld
Saturday, 31 January 2015
Friday, 30 January 2015
Quote for the day
"I've learned that people will forget what you said, people will forget what you did, but people will never forget how you made them feel." - Maya Angelou
Thursday, 29 January 2015
Quote for the day
“Good judgement comes from experience, and experience comes from bad judgement.” - Fred Brooks
Wednesday, 28 January 2015
Quote for the day
“There is a very good investor I speak to frequently who said, 'All I bring to the party is twenty-eight years of mistakes.' I really believe he is right. When you make a mistake, there is some subconscious phenomenon that makes it less likely for you to make that same mistake again.” - Michael Steinhardt
Tuesday, 27 January 2015
Quote for the day
“Good traders have a special talent for trading just as good musicians and good athletes have talents for their fields. Great traders are ones who are absorbed by the talent. They don't have the talent — the talent has them.” - Ed Seykota
Monday, 26 January 2015
Sunday, 25 January 2015
Performance anxiety for traders
Performance anxiety for traders is the fear, or persistent phobia which may arise in a trader by the requirement to take a real trade, in real time, with real money whether actually or potentially.
There are many causes of this anxiety which many times leave a new trader with too much fear to really trade. Fear sends them out of the markets to go join the 90% that did not make it. This fear can arise from past losses that were so big and traumatizing that a trader can’t bear the potential of repeating a mistake like that with all the emotions tied to the previous failure. A new trader can even get a valid entry signal but focus on the real money in the trade and the potential for loss and lose sight of the potential for gain.
A trader that is afraid to lose can’t trade because even the best traders spend a good part of their time being wrong and cutting losses. The good losses in trading are either tuition in your early years or the cost of doing business inside a robust system in your later years. The bad losses are big and are usually the result of the new trader not doing adequate homework so the markets take that new trader to school. These big losses not only hurt the new trader financially but can be traumatizing mentally and emotionally causing a loss of faith in themselves and their system.
More than anything trading is a mental game and if your thoughts are not right then none of this will work. If you have your mindset right about trading then nothing can stop you. A trader must have the ability to point at the target and pull the trigger in the moment when it is time. We must accept the risk and reach for the reward. Here are five tips to make that a possibility.
1. A trader can only build confidence to take a real time trade entry after they have done the necessary homework in back testing through multiple market environments to know the probabilities of success and the possibilities of failure. Understanding how the markets have behaved with past price patterns can give the trader the boldness they need to push the submit button on their broker’s screen.
2. Understanding the price level where your stop loss on a trade will be and also your potential price target will give you a good idea of the risk and reward dynamics of a trade set up. It is easier to trade when you know that you are risking $100 for a chance to make $300 and the odds are on your side with a great entry.
3. Structuring your position sizing so that if your stop is hit you will only lose 1% of your total trading capital will eliminate much of your fear of failure. The urgency and importance of any one trade should be converted into the calm assurance of knowing that the current trade is just one of the next one hundred trades. You can overcome the majority of anxiety around trading when you simply trade small enough so that any one trade or a string of trades will not affect your long term trading success.
4. Trading what you know and are familiar with is low stress trading. Trading a chart pattern, stock, or index that you have traded for years is familiar territory. Also trading markets inside your circle of competence creates confidence. Only trade futures, options, stocks, bonds, forex, and indexes that you understand. Many traders drown chasing unfamiliar waterfalls.
5. A lot of performance confidence comes from having a detailed trading plan on what you will do before the market opens and the faith in yourself to execute that plan after the market opens. Knowing that your decisions will be based on the facts and the reality of price action and that you will not be swept away with emotions and ego while trading can allow you to rise above anxiety and instead operate with faith in yourself and your system.
Source: newtrader.com
There are many causes of this anxiety which many times leave a new trader with too much fear to really trade. Fear sends them out of the markets to go join the 90% that did not make it. This fear can arise from past losses that were so big and traumatizing that a trader can’t bear the potential of repeating a mistake like that with all the emotions tied to the previous failure. A new trader can even get a valid entry signal but focus on the real money in the trade and the potential for loss and lose sight of the potential for gain.
A trader that is afraid to lose can’t trade because even the best traders spend a good part of their time being wrong and cutting losses. The good losses in trading are either tuition in your early years or the cost of doing business inside a robust system in your later years. The bad losses are big and are usually the result of the new trader not doing adequate homework so the markets take that new trader to school. These big losses not only hurt the new trader financially but can be traumatizing mentally and emotionally causing a loss of faith in themselves and their system.
More than anything trading is a mental game and if your thoughts are not right then none of this will work. If you have your mindset right about trading then nothing can stop you. A trader must have the ability to point at the target and pull the trigger in the moment when it is time. We must accept the risk and reach for the reward. Here are five tips to make that a possibility.
1. A trader can only build confidence to take a real time trade entry after they have done the necessary homework in back testing through multiple market environments to know the probabilities of success and the possibilities of failure. Understanding how the markets have behaved with past price patterns can give the trader the boldness they need to push the submit button on their broker’s screen.
2. Understanding the price level where your stop loss on a trade will be and also your potential price target will give you a good idea of the risk and reward dynamics of a trade set up. It is easier to trade when you know that you are risking $100 for a chance to make $300 and the odds are on your side with a great entry.
3. Structuring your position sizing so that if your stop is hit you will only lose 1% of your total trading capital will eliminate much of your fear of failure. The urgency and importance of any one trade should be converted into the calm assurance of knowing that the current trade is just one of the next one hundred trades. You can overcome the majority of anxiety around trading when you simply trade small enough so that any one trade or a string of trades will not affect your long term trading success.
4. Trading what you know and are familiar with is low stress trading. Trading a chart pattern, stock, or index that you have traded for years is familiar territory. Also trading markets inside your circle of competence creates confidence. Only trade futures, options, stocks, bonds, forex, and indexes that you understand. Many traders drown chasing unfamiliar waterfalls.
5. A lot of performance confidence comes from having a detailed trading plan on what you will do before the market opens and the faith in yourself to execute that plan after the market opens. Knowing that your decisions will be based on the facts and the reality of price action and that you will not be swept away with emotions and ego while trading can allow you to rise above anxiety and instead operate with faith in yourself and your system.
Source: newtrader.com
Quote for the day
"Technical analysis relies upon the idea that smart money will move into a market and give advance warning that a position should be taken. This often occurs when the true major fundamentals are unknown." – Jerry Parker
Saturday, 24 January 2015
44 Years of Email: A Breif History
In 2015 email will officially turn 44 years old making it nearly middle aged. Email is used so widespread that it is hard to imagine that the first electronic mail was sent only 44 years ago by Ray Tomlinson. Reachmail has put together a very comprehensive infograhpic that covers major milestones in the 44 years of electronic email. Can you even imagine what it was like before email existed? In your opinion what is the biggest milestone in the history of email?
Source: http://www.visualistan.com/
Quote for the day
“If you can dream — and not make dreams your master; If you can think — and not make thoughts your aim; If you can meet with Triumph and Disaster; And treat those two impostors just the same...” - Rudyard Kipling
Friday, 23 January 2015
Quote for the day
“Given the uncertain nature of the future, and thus the difficulty of being confident your position is the right one—especially as price moves against you—it's challenging to be a lonely contrarian.” - Howard Marks
Thursday, 22 January 2015
Quote for the day
“The important and difficult job is never to find the right answers, it is to find the right question.” - Peter Drucker
Wednesday, 21 January 2015
Quote for the day
“Gut feel is important. If ignored, it may come out in subtle ways by coloring your logic. It can be dealt with through meditation and reflection to determine what's behind it. If it persists, then it might be a valuable subconscious analysis of some subtle information. Otherwise, it might be a dangerous sublimation of an inner desire for excitement and not reflect market conditions.” - Ed Seykota
Tuesday, 20 January 2015
Hot Stock Picks Make Super Gains
One year on, model portfolios built by top fund managers for Echelon Magazine outperforms market
By devan daniel.
The returns blew us away: Echelon Magazine was not prepared for the superlative returns one year after top fund managers built hypothetical stock portfolios for the January 2013 edition in an exercise to understand how long term portfolio investments worked. Ramesh Schaffter of Janashakthi Insurance, Indika Rajakaruna of Ceybank Asset Management and Sumith Perera of Guardian Acuity Asset Management were each asked to create a model portfolio valued at Rs10 million. One year on the Rs30 million combined portfolio has grown to a little over Rs46 million for a combined growth of 53%, outperforming the overall market which grew at 24%. We take a look at how each portfolio performed and present reallocated portfolios which will be reviewed again next year.
Disclaimer: This story is not meant to represent advice or to suggest transactions in securities referred to in it. It is not a substitute for the exercise of independent judgment and readers should consult independent investment advisers in making investments. Neither Echelon magazine nor the investment funds mentioned in this story accept any liability whatsoever for any loss arising from the use of the information presented here.
Comfort zones challenged: Sumith Perera
By devan daniel.
The returns blew us away: Echelon Magazine was not prepared for the superlative returns one year after top fund managers built hypothetical stock portfolios for the January 2013 edition in an exercise to understand how long term portfolio investments worked. Ramesh Schaffter of Janashakthi Insurance, Indika Rajakaruna of Ceybank Asset Management and Sumith Perera of Guardian Acuity Asset Management were each asked to create a model portfolio valued at Rs10 million. One year on the Rs30 million combined portfolio has grown to a little over Rs46 million for a combined growth of 53%, outperforming the overall market which grew at 24%. We take a look at how each portfolio performed and present reallocated portfolios which will be reviewed again next year.
Disclaimer: This story is not meant to represent advice or to suggest transactions in securities referred to in it. It is not a substitute for the exercise of independent judgment and readers should consult independent investment advisers in making investments. Neither Echelon magazine nor the investment funds mentioned in this story accept any liability whatsoever for any loss arising from the use of the information presented here.
Comfort zones challenged: Sumith Perera
Guardian Acuity Asset Management (GAAM) is a joint venture, equally owned by Ceylon Guardian Investment Trust, a subsidiary of Carson Cumberbatch, and Acuity Partners, the investment banking arm of DFCC and HNB. Sumith Perera, Fund Manager at GAAM, discusses the performance of his model portfolio and reasons for reallocation.
How did the market perform during the past year and how did your model portfolio fare?
The stock market had a great run over the last year with my portfolio providing a return of 56.41%. The All Share Price Index has given a return of 23.99% for the same time period. Foreign inflows into the CSE continue to be strong and are invested in a wider-than-usual selection of stocks. Declining interest rates has pushed retail investors out of their fixed deposit comfort zones and into higher prospective returns in the CSE. Earnings growth is more encouraging relative to last year and interest rates remaining low will help the stock market along. Softer commodity and energy prices have also brought down costs for many of the listed companies.
What was the best performing stock and what drove its performance?
Hemas Holdings performed the best with a share price growth of 115%. The share price performance was a result of significant foreign and local institutional demand based on strong performance in its FMCG and healthcare sectors and a positive outlook for leisure. As a value investor, I will only buy into a stock if there is a suitable upside based on its intrinsic value. The strong share price movement of Hemas has resulted in the stock closing in on its intrinsic value. As a result, I have reduced my allocation in Hemas for the new portfolio of stocks to 7% from 13% last year.
What factors prompted you to reallocate your model portfolio?
My top weight in the portfolio this year will be Access Engineering. This company is a great proxy for the thriving construction sector. The large scale ongoing infrastructure projects in Sri Lanka have resulted in companies like Access having a healthy project pipeline to maintain its ongoing earnings momentum. I have increased my allocation this year to the stock by 4% to 14%. Last year my exposure to the banking sector was 26% through NTB and Sampath Bank. Sampath Bank’s share price has recovered well as expected after its exposure to gold pawning affected earnings. NTB has delivered strong results with a high ROE stemming from higher margins and good loan growth relative to peers. I see further upside in both these stocks and have included them back in the portfolio with slightly different allocation based on expected share price upside. I have also included HNB Non-voting in the portfolio due to the bank’s strength in the SME segment and anticipated loan growth recovery in the overall sector. To ensure the portfolio benefits from the growth in the leasing industry, I have included a 10% allocation into Central Finance. Hayleys MGT, one of the largest players in Sri Lanka’s knit fabric manufacturing industry is a new entrant to my list of shares for 2015. Management challenges in 2011-13 saw its share price crash but the new management is expected to herald a strong turnaround. I have also taken a portfolio exposure of 11% to Lanka Tile for 2015. The tile manufacturer is expected to do well with demand increasing as a result of lower interest rates.
Room for more growth: Indika Rajakaruna
How did the market perform during the past year and how did your model portfolio fare?
The stock market had a great run over the last year with my portfolio providing a return of 56.41%. The All Share Price Index has given a return of 23.99% for the same time period. Foreign inflows into the CSE continue to be strong and are invested in a wider-than-usual selection of stocks. Declining interest rates has pushed retail investors out of their fixed deposit comfort zones and into higher prospective returns in the CSE. Earnings growth is more encouraging relative to last year and interest rates remaining low will help the stock market along. Softer commodity and energy prices have also brought down costs for many of the listed companies.
What was the best performing stock and what drove its performance?
Hemas Holdings performed the best with a share price growth of 115%. The share price performance was a result of significant foreign and local institutional demand based on strong performance in its FMCG and healthcare sectors and a positive outlook for leisure. As a value investor, I will only buy into a stock if there is a suitable upside based on its intrinsic value. The strong share price movement of Hemas has resulted in the stock closing in on its intrinsic value. As a result, I have reduced my allocation in Hemas for the new portfolio of stocks to 7% from 13% last year.
What factors prompted you to reallocate your model portfolio?
My top weight in the portfolio this year will be Access Engineering. This company is a great proxy for the thriving construction sector. The large scale ongoing infrastructure projects in Sri Lanka have resulted in companies like Access having a healthy project pipeline to maintain its ongoing earnings momentum. I have increased my allocation this year to the stock by 4% to 14%. Last year my exposure to the banking sector was 26% through NTB and Sampath Bank. Sampath Bank’s share price has recovered well as expected after its exposure to gold pawning affected earnings. NTB has delivered strong results with a high ROE stemming from higher margins and good loan growth relative to peers. I see further upside in both these stocks and have included them back in the portfolio with slightly different allocation based on expected share price upside. I have also included HNB Non-voting in the portfolio due to the bank’s strength in the SME segment and anticipated loan growth recovery in the overall sector. To ensure the portfolio benefits from the growth in the leasing industry, I have included a 10% allocation into Central Finance. Hayleys MGT, one of the largest players in Sri Lanka’s knit fabric manufacturing industry is a new entrant to my list of shares for 2015. Management challenges in 2011-13 saw its share price crash but the new management is expected to herald a strong turnaround. I have also taken a portfolio exposure of 11% to Lanka Tile for 2015. The tile manufacturer is expected to do well with demand increasing as a result of lower interest rates.
Room for more growth: Indika Rajakaruna
Ceybank Asset Management Limited manages five open-ended Unit Trust funds, two of which are directly in the stock market, namely Ceybank Unit Trust and Ceybank Century Growth Fund. Indika Rajakaruna, Fund Manager at Ceybank Asset Management, discusses the performance of his model portfolio and prospects for 2015.
How did your model portfolio perform?
My model portfolio made a return of 47% during the one year period, growing nearly twice as much as the 24% overall market return during this period. The stock that performed the best was Tokyo Cement with a total return of 137.1%. Its performance was primarily driven by its financial performance and construction industry prospects; improving profitability was not factored into the price at the time of selection and was grossly undervalued.
What are the prospects for 2015?
I am bullish on the construction sector, especially Access, due to the business model they adopt (backward and forward integration). I have selected IOC in my reallocated model portfolio because I feel the tumble in oil prices which would give room for the company to improve its profitability. I believe banking, construction, manufacturing and export sectors’ stocks will have room for further growth and with improved econo activities, we may expect higher earnings growth from listed companies which may improve broader market valuations.The outcome of the Presidential elections may have some implications over investor sentiments. Global oil prices are expected to hover below US$ 70 a barrel and would favourably impact on oil exporting countries such as Sri Lanka. The US, EU and China are likely to benefit from lower oil prices and the recovery in the US and EU would benefit our exports, however there could be some setbacks to exports to Russia and the Middle East.Lower oil prices are likely to reduce the pressure on imports, however a rise in domestic demand on the back of lower interest rates may stimulate import demand and offset the benefit from lower oil prices. Lower inflation and interest rates would prop up credit growth, and improve private consumption and investment. If capital flows in to the country are sustained at current levels, we could reasonably anticipate the exchange rate to stabilize at present levels. However the growing demand for credit may exert slight pressure on interest rates.
I am bullish: Ramesh Schaffter
How did your model portfolio perform?
My model portfolio made a return of 47% during the one year period, growing nearly twice as much as the 24% overall market return during this period. The stock that performed the best was Tokyo Cement with a total return of 137.1%. Its performance was primarily driven by its financial performance and construction industry prospects; improving profitability was not factored into the price at the time of selection and was grossly undervalued.
What are the prospects for 2015?
I am bullish on the construction sector, especially Access, due to the business model they adopt (backward and forward integration). I have selected IOC in my reallocated model portfolio because I feel the tumble in oil prices which would give room for the company to improve its profitability. I believe banking, construction, manufacturing and export sectors’ stocks will have room for further growth and with improved econo activities, we may expect higher earnings growth from listed companies which may improve broader market valuations.The outcome of the Presidential elections may have some implications over investor sentiments. Global oil prices are expected to hover below US$ 70 a barrel and would favourably impact on oil exporting countries such as Sri Lanka. The US, EU and China are likely to benefit from lower oil prices and the recovery in the US and EU would benefit our exports, however there could be some setbacks to exports to Russia and the Middle East.Lower oil prices are likely to reduce the pressure on imports, however a rise in domestic demand on the back of lower interest rates may stimulate import demand and offset the benefit from lower oil prices. Lower inflation and interest rates would prop up credit growth, and improve private consumption and investment. If capital flows in to the country are sustained at current levels, we could reasonably anticipate the exchange rate to stabilize at present levels. However the growing demand for credit may exert slight pressure on interest rates.
I am bullish: Ramesh Schaffter
Janashakthi Insurance has the fifth largest composite market share in both life and general premium in a highly competitive market of 22 players. Ramesh Schaffter, a Director of Janashakthi Insurance, discusses how his model portfolio fared in 2014 and prospects for 2015.
How did your model portfolio perform?
My portfolio made a 57% return, which was pretty good given that the overall market gained 24% during the same period. Janashakthi Insurance, Lanka Indian Oil Company and Access Engineering performed exceptionally well.
What was the best performing stock and what drove its performance?
I was particularly confident that Janashakthi Insurance would perform well given that the stock was undervalued and financial results continued to improve, it was a no brainer really.
What factors prompted you to reallocate your model portfolio?
Whatever the election outcome may be, the stock exchange will have a buoyant year. Even if interest rates were to increase, there would be a lag so the market would still be an attractive place. So overall, I am bullish for 2015. I have reallocated more funds to Access Engineering and included Kelsey Developments to the portfolio, because the construction sector will continue to drive GDP growth. It is unfortunate that there are not enough stocks in this sector.
ACL Plastics is another inclusion which has promise. The stock is undervalued and growth prospects are good. Citizens Development Bank has continued to outperform the sector in terms of financial performance, so this is another stock I want to be exposed to.
I will exit Lanka Indian Oil Company because falling global fuel prices will affect its profitability because regardless of whoever comes to power, there will be a reduction in domestic prices. I have exited from Expo Lanka and United Motors Lanka as well.
www.echelon.lk
How did your model portfolio perform?
My portfolio made a 57% return, which was pretty good given that the overall market gained 24% during the same period. Janashakthi Insurance, Lanka Indian Oil Company and Access Engineering performed exceptionally well.
What was the best performing stock and what drove its performance?
I was particularly confident that Janashakthi Insurance would perform well given that the stock was undervalued and financial results continued to improve, it was a no brainer really.
What factors prompted you to reallocate your model portfolio?
Whatever the election outcome may be, the stock exchange will have a buoyant year. Even if interest rates were to increase, there would be a lag so the market would still be an attractive place. So overall, I am bullish for 2015. I have reallocated more funds to Access Engineering and included Kelsey Developments to the portfolio, because the construction sector will continue to drive GDP growth. It is unfortunate that there are not enough stocks in this sector.
ACL Plastics is another inclusion which has promise. The stock is undervalued and growth prospects are good. Citizens Development Bank has continued to outperform the sector in terms of financial performance, so this is another stock I want to be exposed to.
I will exit Lanka Indian Oil Company because falling global fuel prices will affect its profitability because regardless of whoever comes to power, there will be a reduction in domestic prices. I have exited from Expo Lanka and United Motors Lanka as well.
www.echelon.lk
Quote for the day
“Most people view the future as likely to repeat past patterns, which it may or may not do. They tend to think of the future in terms of a single scenario, whereas it really consists of a wide range of possibilities.” - Howard Marks
Monday, 19 January 2015
Quote for the day
“The single most crucial factor in trading is developing the appropriate reaction to price fluctuations. Investors must learn to resist fear, the tendency to panic, when prices are falling, and greed, the tendency to become overly enthusiastic when prices are rising.” - Seth Klarman
Sunday, 18 January 2015
Traditional vs Collaborative Leaders: 8 Key Indicators
What is collaborative leadership? Collaborative leadership is a philosophy of leadership where the leader becomes a facilitator instead of an authority figure and allows the team or a group of people to collectively discuss problems, make decisions and innovate solutions.
Source: http://visual.ly
Source: http://visual.ly
Quote for the day
“Economics theory tried to imitate physics. Classical economists took Newton as their model — forgetting that Newton lost a fortune in the South Sea Bubble. The only way they could imitate physics was by eliminating reflexivity from their subject. Hence the assumption of perfect knowledge, which was later amended to perfect information.” - George Soros
Saturday, 17 January 2015
Important Milestones of Modern Technology
Technology has grown and changed at an incredible rate since the early 1960s when the first form of internet came into play.
The popular software, Microsoft Windows, made its first appearance in 1985.
Recordable CDs were available in 1988, followed by MP3 five years later.
The Playstation came out in 1994 followed by Pixar in 1995 with Toy Story.
In 1999, Napster became popular but was shortly after shutdown, followed by the ILOVEYOU virus in 2000 creating a need for fighting against cybercrime (cjonline.uc). Wikipedia was created in 2001 along with the announcement of the iPod.
In 2003, Facemash was created and the next year turned into Facebook. In 2006, the revolutionary Nintendo Wii made video games interactive.
2011 brought the Bitcoin, a fully-digital currency. With the advancement of smartphones and mobile apps, by 2017 it is anticipated that there will be over $77 billion in app sales.
Source: http://www.visualistan.com/
Quote for the day
“It's difficult identifying someone who is a good trader versus someone who is a good analyst because the two don't always mesh. There are some people who are really good thinkers but can't make money and there are other people who aren't the greatest thinkers but who end up making tons of money trading.” - Jim Leitner
Friday, 16 January 2015
Quote for the day
“To enjoy the advantages of a free market, one must have both buyers and sellers, both bulls and bears. A market without bears would be like a nation without a free press. There would be no one to criticize and restrain the false optimism that always leads to disaster.” - Bernard Baruch
Thursday, 15 January 2015
Quote for the day
"An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return. Operations not meeting these requirements are speculative." - Benjamin Graham
Wednesday, 14 January 2015
Quote for the day
“In a nutshell, if you're too conservative, you won't do any trades, and if you're too aggressive, you're going to get picked off a lot. The trick is to try to strike a balance between the two.” - Jeff Yass
Tuesday, 13 January 2015
Quote for the day
“You can have many great ideas in your head, but what makes the difference is the action. Without action upon an idea, there will be no manifestation, no results, and no reward” - Miguel Ruiz
Monday, 12 January 2015
Quote for the day
“The way to make money is to make it. The way to make big money is to be right at exactly the right time. In this business a man has to think of both theory and practice. A speculator must not be merely a student, he must be both a student and a speculator.” - Reminiscences of a Stock Operator
Sunday, 11 January 2015
Saturday, 10 January 2015
Quote for the day
“I constantly try to figure out how the market can trick or fool the majority of investors. Then after the majority have been fooled I get in at what I call the 'point of smooth sailing.' A so-called failed signal can actually be the beginning of a more complex pattern that is far more reliable than the initial signal based on a conventional pattern.” - Mark Minervini
Friday, 9 January 2015
Quote for the day
“Think. Prepare. Plan in advance when there's no time pressure. Then, in real life, do what you said.” - Mike Bloomberg
Thursday, 8 January 2015
Wednesday, 7 January 2015
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