Why Scared Money Don’t Make Money

The phrase ‘Scared money don’t make money’ is used in many ways by diverse people from the Hip Hop community to the trading and investing world but what does it really mean?

People that are too afraid to take on risks in business, life, and financial markets are unlikely to make money because rewards only come from taking risks. If you take no risk on your capital there will be no returns on your capital.

Even if a person wants to invest or trade their money they can be very afraid of losing it. A person has to be able to put their money on the line for their beliefs in a company or a trading position to even have a chance to make any money.

Ten reasons why ‘Scared money don’t make money’:

1. The fear of taking action can cause you to do nothing, you can’t make money through inaction.

2. Being afraid to buy a dip during an uptrend will cause you to miss the opportunity to enter at a good risk/reward ratio and catch a swing trade back up.

3. Being too scared to buy a breakout in price at the beginning of a new trend will cause you to miss a trend.

4. The fear of having an open winning trade turn into a losing trade will make you lock in a small profit instead of letting your winner run for a big profit. Most winning systems need big wins to be profitable.

5. Too much fear of losing money will lead you to not put any money at risk for the opportunity to make money.

6. Ironically, FOMO or the fear of missing out can cause you to enter a trade too late near the end of a trend and lose money because of your timing. This is one of the only fears that cause action that makes you lose money.

7. The fear of being wrong about a trade or investment can paralyze you into not doing anything. This is an ego problem focusing on yourself and not on a process of system.

8. A fear of a large drawdown in your capital can leave you staying too conservative to make much money.

9. Most fears arise from a lack of faith in your method or a lack of faith in yourself to execute your process with discipline.

10. Too much fear of failure can lead to never starting any profitable venture to make money. You have to risk what you have for a chance to get something you want more.

Source:www.newtraderu.com

Quote for the day

"There is nothing so disastrous as a rational investment policy in an irrational world." - John Maynard Keynes

Quote for the day

"To invest successfully, you need not understand beta, efficient markets, modern portfolio theory, option pricing or emerging markets. You may, in fact, be better off knowing nothing of these. That, of course, is not the prevailing view at most business schools, whose finance curriculum tends to be dominated by such subjects. In our view, though, investment students need only two well-taught courses - How to Value a Business, and How to Think About Market Prices." - Warren Buffett

It's not your fault that you are losing - 17 Biases that explain why traders make mistakes

The human brain is a fascinating machine. It allows us to do many things simultaneously without having to think about doing them. You can drive a car, have a conversation about a complex topic on the phone, eating a sandwich, observing your daughter on the back seat, while all your inner organs and body mechanisms do their thing; this all happens effortlessly and humans wouldn’t be able to consciously control what is going on anyways.

This is only possible because our brain uses shortcuts to process data and information automatically. Unfortunately, those shortcuts don’t always work in our advantage and especially trading and investing require a different skill set and way of thinking.

The automation of thinking and making decisions is done through psychological biases or heuristics. We compiled a list of the 17 most common biases and heuristics and show how they influence trading decisions.

“This is the essence of intuitive heuristics: when faced with a difficult question, we often answer an easier one instead, usually without noticing the substitution.” – Kahnemann

Source: http://www.tradeciety.com/

Quote for the day

"Money is usually attracted, not pursued." - Jim Rohn

Pundit or Professional?

Are you a Pundit or a Professional?

***

The Pundit spends their days making subjective predictions.

The Professional spends their days making objective assessments.

***

The Pundit seeks self-promotion.

The Professional seeks self-improvement.

***

The Pundit exudes hubris.

The Professional exudes humility.

***

The Pundit is forever calling for the next big melt-up or crash.

The Professional is forever focused on avoiding the next big mistake.

***

The Pundit seeks out only opinions that confirm their views.

The Professional seeks out all evidence, even if it runs contrary to their views.

***

The Pundit believes they know everything.

The Professional knows they know nothing.

***

The Pundit makes a living selling fear and greed.

The Professional makes a living helping to control these emotions.

***

The Pundit has a sense of entitlement.

The Professional has a sense of gratitude.

***

The Pundit seeks to inform.

The Professional seeks to educate.

***

The Pundit makes extreme forecasts to gain attention.

The Professional forecasts wide ranges of possible outcomes to gain respect.

***

The Pundit thinks in terms of long or short, this market or that market.

The Professional thinks in terms of asset allocation and the entire portfolio.

***

The Pundit believes in certainty, conviction, and precision.

The Professional believes in uncertainty, reservation, and probabilities.

***

The Pundit reads the news and listens to financial TV.

The Professional reads books and listens to podcasts.

***

The Pundit sees everything in markets as black or white.

The Professional understands there is often a gray area.

***

The Pundit makes the simple sound complex.

The Professional makes the complex sound simple.

***

The Pundit has a prophecy.

The Professional has a plan.

***

The Pundit has an answer for every question.

The Professional is often saying “I don’t know.”

***

The Pundit is an entertainer.

The Professional is an educator.

***

The Pundit gives recommendations.

The Professional offers guidance.

***

The Pundit provides a reason for every wiggle in the market.

The Professional provides evidence of randomness and noise.

***

The Pundit believes their success is a result of their exceptional talent.

The Professional understands their success is a result of hard work and luck.

***

The Pundit lectures.

The Professional listens.

***

The Pundit is thinking about the next day.

The Professional is planning for the next decade.

***

Pundit or Professional? The choice is yours.

Source: www.pensionpartners.com

Quote for the day

"Success is getting what you want. Happiness is wanting what you get." - Dale Carnegie

Things I Learned After 30 Years of Trading

Here are 65 lessons I learned after spending thirty years trading and investing in the stock market from 1991-2021.

01. A trend can go farther and longer than I ever expect.

02. The best traders are open-minded and flexible in their trades.

03. For most traders less trades is better than more trades, focus only on the best set ups and stocks.

04. Be opened minded to the potential of new stocks and markets.

05. Price action is the only truth in the stock market.

06. Never add more capital to a trade that is already losing money, that is trend fighting with more size and hope.

07. Never enter a trade unless you know where you are getting out with a stop loss, trailing stop, or profit target.

08. I prefer end to day stops over hard set stops in the market.

09. Volume in the market is like votes being cast at different price levels.

10. Breakouts usually retest back to old resistance that will be new support.

11. A time stop out of a trade not going anywhere can free up capital to trade on better setups.

12. The best trades work right from the start.

13. Some of the best trading systems are simple, it is the trader’s psychology that creates the biggest edge.

14. You only need a few technical indicators and price action to trade, more indicators can add confusion.

15. Fundamentals do not equal technical price action, emotions and beliefs drive most price trends.

16. The economy and the stock market are two very different things.

17. Trade smaller during losing streaks and bigger during winning streaks.

18. Self destruction starts when a trader refuses to accept being wrong about a trade.

19. The bigger the position size the louder your emotions will be.

20. Self confidence comes over time as you prove your system is valid and that you are disciplined in following it.

21. Focus on just making one good trade at a time.

22. Breaking your own trading rules can be expensive.

23. Long positions in the stock market are the path of least resistance the majority of the time.

24. The faster you admit you were wrong about a trade the smaller the loss will be.

25. You must limit your total risk exposure of positions at any one time.

26. Stocks are more like a beauty contest in the short term and a cash flow contest in the long run.

27. Moving averages are my favorite technical indicator because they quantify trends.

28. A chart patterns best use is to quantify entries and exits in the direction of the momentum.

29. A candlestick pattern just gives better odds of one thing happening over another.

30. Many times a bull market will be lead by the financial sector going higher.

31. The market doesn’t know you exist or care about your opinion.

32. Opinions and predictions are worth nothing. A system with an edge is priceless.

33. There are seasonal patterns to the market, understand them.

34. High short interest on a stock can be bullish.

35. You must have a quantified system with an edge if you hope to be profitable over the long term.

36. The market is always pricing in the future not the present.

37. Short selling is a much more difficult game than going long in the stock market.

38. Downtrends are much more volatile than uptrends.

39. Volatility can lead to a lot of false signals, you must manage for this.

40. Short sellers have to overcome the effort of CEOs, dip buyers, congress, the president, and the Federal Reserve to keep the stock market prices up.

41. Most big moves start with a strong momentum signal.

42. Many times, the most difficult trade to take is the right trade.

43. Other traders are better used as examples on how to trade not copying their trades.

44. The best trades are many times difficult to enter.

45. Taking a stop loss is more difficult for new traders than holding a losing trade.

46. The best traders do all their research when the market is closed so entering or exiting when the market is open is automatic.

47. A good trader must have a positive mindset.

48. Hard work is only rewarded in trading when it is the right type of effort.

49. Trading will teach you about yourself.

50. All traders are eventually humbled.

51. Let trades come to you, don’t chase a trade.

52. A good trading process can help you get lucky.

53. You must survive losing streaks.

54. Markets usually take time to make a top or a bottom before reversing.

55. All stocks go through cycles of accumulation, distribution, and range trading.

56. Conviction on a trade can lead to big wins or big losses, it is neutral as a benefit to a trader.

57. Trend following makes money, trend fighting loses money.

58. You can build a watchlist of stocks based on fundamentals but you still have to trade the price action on the chart.

59. Most bottoms in price come with a confluence of other oversold indicators and bullish divergences.

60. Maximum pessimism is at market bottoms, maximum optimism is at market tops.

61. Leverage in trading can cut both ways, use it with caution and good risk management.

62. The big money usually tips their hand for their sentiment by the end of the day.

63. There are no perfect trades only good risk/reward ratios on entry.

64. Perma bears make money only during downtrends, perma bulls make money only during uptrends, perma pigs blow up their account when they end up on the wrong side of any trend.

65. Trade like a casino, not a gambler.

Source: www.newtraderu.com

Quote for the day

"Friends and good manners will carry you where money won't go." - Margaret Walker

Things People Say During a Bull Market

Here are some things you've probably been hearing during the current bull market from a wide range of investors including some tongue-in-cheek translations about what they really mean.

On Fair Value:

Bears: We think the market’s fair value is much lower than current levels. (Translation: We have to say it’s way lower than the level where we called for a crash four years ago.)

Bulls: We think the market is fairly valued at current levels. (Translation: I have no idea what the fair value of the market is and neither does anyone else.)

Investment Strategists: If earnings grow at a consistent rate forever into the future and you slap a P/E ratio of 16x on the market we think stocks will rise 8-10% this year. (Translation: Stocks are up 3 out of every 4 years so if I keep predicting this I’m bound to be right eventually.)

Value Investors: The market is overvalued but our stocks are trading at a 30-40% discount to fair value.

Growth Investors: The monthly active user numbers are off the charts for this 3 person company that’s worth $50 billion.

On Market Gains:

Bears: It’s all artificial. (Translation: I didn’t participate.)

Bulls: We’re constructive from here and see a period of consolidation. (Translation: Please don’t fall, we’re all in).

On Sentiment:

Bears: Everyone is all in on the market. These people are delusional. No one sees the risks building up under the surface.

Bulls: Everyone is still bearish. Stocks climb the wall of worry.

On Interest Rates:

Everyone: Rates are going higher.

On Reading Material:

Bears: Did you read Hussman’s latest piece?

Bulls: Did you see what Siegel wrote today?

How it All Ends:

Bears: This will end badly (Translation: I will be gloating during the next bear market but will be too scared to buy).

Bulls: We predict a soft landing with a healthy correction that will make for a nice buying opportunity. (Translation: I will be too scared to buy during the next bear market.)

Private Equity: We have plenty of dry powder for the distressed opportunities that will arise from the next crisis. (Translation: All of that money will be used to shore up current investments that run into trouble.)

On Corrections:

Bulls: A 3% loss is the new 10% correction.

On Bubbles:

Bears: Biotech? Bubble. U.S. stocks? Bubble. Bonds? Bubble. Gold? Not a bubble. It’s going to $5,000 an ounce.

Bulls: This is not a bubble. The technology boom and bust of the 1990s, now that was a bubble.

Venture Capitalists: It’s a new era, not a bubble. We’re changing the world one app at a time.

On Strategies:

Index Investors: I’m a long-term investor through thick and thin (Translation: I become a long-term investor during bull markets.)

Active Investors: Yes, we’ve underperformed, but we will protect you during the next bear market (Translation: A few of us will and we really hope it’s us.)

Source:http://awealthofcommonsense.com/

Quote for the day

"Great minds have purposes; others have wishes." - Washington Irving

Quote for the day

"Opportunities are usually disguised as hard work, so most people don't recognize them." - Ann Landers

Quote for the day

"Weak people revenge. Strong people forgive. Intelligent People Ignore." - Albert Einstein

The Ego (False Self) Versus The Soul (True Self)

Source: http://livelifehappy.com/

Quote for the day

"All successful people, men and women, are big dreamers. They imagine what their future could be, ideal in every respect, and then they work every day toward their distant vision, that goal or purpose." - Brian Tracy

Quote for the day

"The meaning of life is to find your gift. The purpose of life is to give it away." - Pablo Picasso

7 Personal Growth Steps Even When Everything Is Falling Apart

By Hannah Hutyra

Growth is especially difficult when everything around you is in decay. A bad environment and negative influences are hard to break away from. It can be done, though.

A gardener follows some specific steps to see their garden bloom. You should follow similar advice to enable yourself to grow, even while everything in your vicinity is withering away.

1. Have Strong Roots

When everything around you is crumbling, your roots matter more than ever.

The best case scenario is that you already have strong roots to hold on to so that you barely waver in the first place. If your roots need some work, however, there are measures you can take to deepen them. Start by recommitting yourself to your core values and principals.

If you’re feeling defeated, remind yourself of all that you have going for you. If you’re struggling to be a good Christian, study the Bible. If you’re an addict in danger of relapsing, read the Big Book and walk the twelve-step program one more time.

Return to the resources, whatever they are, that gave you your power, so that they can empower you once again.

2. Pull Out The Weeds

Weeds are defined as plants with virtually no redeeming value. They grow fast and leave seeds to keep expanding and infiltrating. They’re often poisonous if eaten, leave a bad taste in your mouth and are tough to remove from your garden.

Weeds are very similar to the negative influences in your life. Like weeds compete for nutrients, bad influences stand in your way when you’re trying to thrive. Make sure your relationships aren’t holding you back.

Excise the weeds from your life as quickly as possible, but with the least amount of damage to the surrounding foliage. If you cut out the things holding you back too haphazardly, you risk severing some of the ties that can prove useful later. So be careful when doing something like ending a romantic relationship or breaking up with a friend.

Carefully, precisely remove what you don’t need in your life while keeping everything else intact. If you do, you open yourself up to new possibilities.

3. Live With The Thorns

Every rose has its thorns; you just need to avoid getting pricked.

There are always obstacles and inconveniences in our lives, especially when everything surrounding us is in decay, but we don’t have to be defeated by them. Instead of giving up when things aren’t perfectly smooth, make your way up the stem until you reach something beautiful.

4. Give Your Life Careful Attention

A good gardener doesn’t leave their garden unattended for long. Likewise, someone who wants to grow carefully monitors their progress.

Every so often you need to analyse where you’re at and where you can go next. Goals are a cornerstone to success, so set, meet and surpass them as often as you can.

Make sure you’re not becoming complacent and growing too slowly. Be positive that you’re not slipping out of your roots. Know how to set the right goals so that you can keep those kinds of things in mind.

Also regularly give yourself the nutrition you need such as self-affirmation, healthy habits and plenty of rest. With that kind of care and a constant eye on the headway you’re making, you’ll be that much closer to blooming.

5. Let Yourself Grow At A Natural Pace

While you want to grow fairly quickly, if you start forcing it artificially then you risk undoing all that you’ve already accomplished.

You might see some temporary progress if you, for example, push yourself too far and try to get to that next milestone too fast. But doing that will deplete you of your energy, and you will suffer a long period of stagnation or even start to wither away yourself.

Grow at a reasonable and steady rate. That way, you’ll know that the progress you’ve made is going to stick.

6. Watch Yourself Bloom

Once you’ve made significant progress you should look in a mirror and take pride in the reflection. You’ve earned this, so enjoy it before moving on to the final stage of growth.

7. Lay Down New Soil

Don’t settle for being successful once. Move on to another patch of soil where you can grow again. Follow the same steps until you bloom, and then move on to yet another goal.

Or better yet, help the people you love bloom as well. Helping others is a reward unto itself, and you shouldn’t deprive yourself of it if you’re at a place in life where you can afford to turn your attention on the less fortunate.

Life is what we make of it, and it means more if we keep giving ourselves fresh challenges. Expand your garden, and you’ll find yourself simultaneously ever-active and increasingly at peace.

Source: www.keepinspiring.me

Quote for the day

"There are two ways to be happy: improve your reality, or lower your expectations." - Jodi Picoult

These 4 Questions Will Keep You From Making Trading Mistakes

By Rolf

Often, as traders we have periods where everything seems to go well and we have one winning trade after another. And then, there are these times when nothing seems to work and you give back all your profits, and then some. Or how often has one bad trade wiped out all your previous gains? Often, these periods of ‘bad luck’ could have been avoided by asking the right questions about your own trading and risk management.

In the following article we give you 4 questions that you should always ask yourself when your trading seems to deviate from the norm.

Are you impeccable?

Question 1: What’s the motive behind increasing your position? Are you really a better trader? Is failing really impossible?

We are starting with one of the biggest amateur mistakes traders make. In winning streaks, traders tend to increase their position size because they believe that their trading strategy is all of sudden unfillable or they believe that their ‘gut’ feeling is telling them what the right thing is to do.

“In a storm, even turkeys can fly.”

Winning streaks are normal and they will happen to all traders. The worst thing you can do in a winning streak is to increase your position size because sooner or later, you will have a losing trade. Traders who increase their position size will give back an unnecessary large amount of their trading profits when their streak ends.

Should you be aggressive?

Question 2: Are you playing catch-up? Do you want to get your money back?

The second reason why traders increase their position size is because they just had a few losing trades and they want to get their account back to where it was. Again, trading behavior, especially when it comes to risk and money management, which deviates from the norm is very dangerous.

There are two principles that all traders have to accept and live by to overcome this bias:

1) You cannot force winning trades.

2) The distribution between winning and losing trades is random. The outcome of your last trade will provide no information about what is likely to happen next.

Therefore, your risk management should always follow the same principles, even if it means that recovering from a few losses takes a bit longer. In previous articles we said that you do not have to risk the same amount on any trade, but suddenly risking an unusual high amount does not fall into this category.

Frequency of trades

Question 3: Are your trades justified? Do you really see more signals and valid setups?

Increasing trade frequency is another common mistake that leads to avoidable losses. Traders should carefully observe their trading behavior and ask themselves whether they are really seeing more valid trading opportunities or if they are entering a status of overtrading.

Having a trading plan and a trade checklist can prevent overtrading because you will consciously and actively have to break your trading rules. Even better, print out your trading plan and checklist and put them next to your screen where you can see them at all times.print out your trading plan and checklist and put them next to your screen where you can see them at all times.



Leave your ego at the door

Question 4: Is adding to your position really what you should be doing? Why are you widening your stop loss? What if price does not turn around?

Traders have to be confident in their abilities and about their strategy, but you cannot let your ego get in the way of a trade. Pride and taking losses personally are two traits that do not go well with trading.

Adding to a losing position or widening stop loss orders are two of the most common reasons why traders blow up their accounts with just a few trades. At the same time, they are clear indicators that you can’t accept to be proven wrong and that you personalize losses. If you fail to overcome these negative trading patterns, becoming a profitable trader is impossible.

The 4 Ps to establish a professional trading approach

Preparation

We can’t stress the importance of having a solid trading plan and a trade checklist enough. If you plan your trades in advance, you are less likely to make impulsive trading decisions or violate your rules.

Purpose

As a trader, nothing should come as a surprise. You plan your trades in advance, you define your risk and the worst-case scenario, you know when to get out, when to take profits and you process all available information. If you find yourself in a situation where you have to deal with the unexpected, something went wrong.

Progress

To overcome negative trading patterns, tracking and analyzing your performance is the only way you can improve as a trader. Most traders make the mistake that they will never look at a trade again after they close their position and, therefore, leave out an important learning effect.

Protection

Protection does not only include having a stop loss in place, but it goes much further. Once in a trade, traders often act like a deer staring into headlights, unable to make rational decisions. Where and when do you lock in profits? Do you move your stop loss order to protect your position? When will you take profits ahead of your target? What are the criteria that will make you close your trade early?

Conclusion

A structured approach and a pre-defined game plan will keep you out of trouble. Trading should be a repetitive profession; each day you follow the same routine, you look for the same setups and just repeat your process over and over again. If you recognize that your behavior and actions deviate from the usual routine, something is going wrong and you have to counteract.

www.tradeciety.com/

Quote for the day

"High achievement always takes place in the framework of high expectation." - Charles Kettering

Quote for the day

"I'm not in this world to live up to your expectations and you're not in this world to live up to mine." - Bruce Lee

Quote for the day

"Learn to express, not impress." - Jim Rohn

The 9 Characteristics of a Good Decision

By Jeff Boss

The choices you make as an entrepreneur can have powerful impacts. The “chance of a lifetime” can appear out of nowhere only to turn into something painful. Conversely, there are those opportunities that don’t seem worthy of a second glance at the time but eventually wriggle their way on to your missed opportunity list. Bartender, I think I’ll have another.

You don’t want to seize just any opportunity -- you want the right opportunity. After all, this is your precious entrepreneurial-baby-of-an-idea that you want to succeed, and that means seeing the light of day tomorrow based on the decision(s) you make today.

Decision-making can be the single-greatest weight upon your shoulders if you don’t know how to manage stress or if the consequences are less than ideal. So, how do you know what a good decision looks like? Here are nine characteristics of a good decision:

1. Good decisions positively impact others.

This statement may seem obvious, but if it were, bad decisions wouldn’t exist. After all, anybody who is adversely affected by a decision immediately classifies that decision as bad. Of course, now you just need to find a common definition of "positive."

2. Good decisions are replicable.

People want to mimic a bad decision like a case of herpes. Enough said (and feel free to tweet that).

3. Good decisions foster opportunity.

An effective decision empowers others to act.

4. Good decisions include others.

Arriving at a conclusion that serves the company is a process. There are boxes to check off that ensure accountabilities are established and authorities are met.

5. Good decisions are executable.

Integral to any decision is clarity around what that decision is. If there’s ambiguity about what to do next then that decision isn’t clear enough. Clarity minimizes uncertainty, and although this may sound like an obvious statement, remember that what’s apparent to you may be new found insight to others.

6. A good decision is systematic.

Ruling out the good criteria from the bad requires time, resources, clear (there’s that word again) requirements as to what the goal is and judgement to estimate the probability of success.

7. Good decisions are accountable.

With clarity also comes accountability. It’s not easy hiding behind something that outlines, in detail, the roles, responsibilities or expectations associated with a new decision. Tack on the timeline, assets necessary and the conditions that define success and you’re pretty much on a one-way highway to execution without any U-turns (my metaphor for accountability avoidance).

8. Good decisions are pragmatic.

Humans are creatures of emotion, which means eliminating emotion from a decision isn't feasible. However, what can be eliminated are self-serving emotional biases. In the SEAL Teams, for example, there were three criteria upon which decisions were made: The mission, the team, the individual. Namely, who does the decision serve? Hint: The individual comes last.

When you're faced with another difficult decision, ask yourself, "Whom does it serve?"

9. Good decisions involve self-awareness.

If you’re tasked with deciding how to outline your company’s strategy for the next 10 years but you’ve never made a strategic outline, chances are you should defer to the next subject-matter expert. The point is, for a decision to positively impact others, foster opportunity or any of the aforementioned characteristics, you need to be cognizant of when you’re operating within your circle of influence and when you’re pushing its boundaries. Don’t be that person who clutches to decision-making authority because it makes you feel important -- defer to the person closest to the problem.

Decision-making is both an art and a science. Incorporate the above nine characteristics into your choice architecture to feel more confident, and watch others do the same.
Source: www.entrepreneur.com

Quote for the day

"If you really want to do something, you'll find a way. If you don't, you'll find an excuse." - Jim Rohn

Quote for the day

"If you can't change it.. change the way you think about it" - Mary Engelbreit

Quote for the day

"Play the game for more than you can afford to lose... only then will you learn the game." - Winston Churchill

Sherlock Holmes on How to Be a Better Investor

Wisdom from a detective.

By Morgan Housel

"All knowledge comes useful to the detective," said Sherlock Holmes.

The fictional detective understood that no person has a monopoly on wisdom. The closest you get to the truth is by weaving together as much relevant information from the widest web of various topics and fields as you can.

That's also true in investing.

Investing isn't the study of finance. That's only part of it. Investing is really the study of human behavior, which incorporates everything from psychology, to sociology, to statistics, to history and math. There is so much to learn about investing from fields and people who, at first glance, have nothing to do with investing.

People like Sherlock Holmes.

Holmes novels are filled with quotes and anecdotes that are directly relevant to investing and economics.

On confirmation bias: "The fatal mistake which the ordinary policeman make is this: He gets his theory first, and then makes the facts fit it, instead of getting his facts first and making all his little observations and deductions until he is driven irresistibly by them into an elucidation in a direction he may never have originally contemplated."

On theory versus fact: "It is a capital mistake to theorize before one has data. Insensibly one begins to twist facts to suit theories, instead of theories to suit facts."

On simple ideas being so obvious no one takes them seriously: "The world is full of obvious things which nobody by any chance ever observes."

On the tendency to overcomplicate: "Perhaps, when a man has special knowledge and special powers like my own, it rather encourages him to seek a complex explanation when a simpler one is at hand."

On pundits: "It may be that you are not yourself luminous, but that you are a conductor of light. Some people without possessing genius have a remarkable power of stimulating it."

On having an open mind: "We approached the case with an absolutely blank mind, which is always an advantage. We had formed no theories. We were there simply to observe and to draw inferences from our observations."

On doing nothing when nothing needs to be done: "You have a grand gift for silence, Watson. It makes you quite invaluable as a companion."

On debates: "If falsehood, like truth, had only one face, we would be in better shape. For we would take as certain the opposite of what the liar said. But the reverse of truth has a hundred thousand shapes and a limitless field."

On the most powerful theories being the most boring: "It's quite exciting,' said Holmes, with a yawn."

On calm analysis rather than quick judgements: "Having gathered these facts, Watson, I smoked several pipes over them, trying to separate those which were crucial from others which were merely incidental."

On respecting the role of luck: "Ah, that is good luck. I could only say what was the balance of probability. I did not at all expect to be so accurate."

On even temperament: "Observe that rule laid down by Chilo, 'Nothing to excess, Not to believe too rashly, Not to disbelieve too easily.'"

On forecasts: "When Dr. Mortimer had finished reading he pushed his spectacles up on his forehead and stared across at Mr. Sherlock Holmes. The latter yawned and tossed the end of his cigarette into the fire.
"Well?" said he.
"Do you not find it interesting?"
"To a collector of fairy-tales."

On quickly drawing false conclusions: "There is nothing more deceptive than an obvious fact."

On complexity: "It seems, from what I gather, to be one of those simple cases which are so extremely difficult."

"That sounds a little paradoxical."

"But it is profoundly true. The more featureless and commonplace a crime is, the more difficult it is to bring it home."

On due diligence: "You're like a surgeon who wants every symptom before he can give his diagnosis?"

"Exactly. That expresses it."

On performance vs. marketing: "What you do in this world is a matter of no consequence. The question is what can you make people believe you have done."

On overloading with useless information: "I consider that a man's brain originally is like a little empty attic, and you have to stock it with such furniture as you choose. A fool takes in all the lumber of every sort that he comes across, so that the knowledge which might be useful to him gets crowded out, or at best is jumbled up with a lot of other things so that he has a difficulty in laying his hands upon it."

On con men: "My horror at his crimes was lost in my admiration at his skill."

On prioritizing: "It has long been an axiom of mine that the little things are infinitely the most important."

On seeking advice from outside council: "Nothing clears up a case so much as stating it to another person."

On respecting opposing views: "You'll get results, Inspector, by always putting yourself in the other fellow's place, and thinking what you would do yourself. It takes some imagination, but it pays."

On being suspect of promises and invariability: "We must look for consistency. Where there is a want of it we must suspect deception."

On information vs. emotion: "Data! Data! Data!' he cried impatiently. 'I can't make bricks without clay."

On analysis: "The first thing was to look at the facts and separate what was certain from what was conjecture."

On the deception of well-dressed, smooth-talking salesmen: "It is of the first importance not to allow your judgment to be biased by personal qualities. The emotional qualities are antagonistic to clear reasoning. I assure you that the most winning woman I ever knew was hanged for poisoning three little children for their insurance-money, and the most repellant man of my acquaintance is a philanthropist who has spent nearly a quarter of a million upon the London poor."

On alternative explanations: "I ought to know by this time that when a fact appears to be opposed to a long train of deductions it invariably proves to be capable of bearing some other interpretation."

One being open to new ideas: "You have a theory?"

"Yes, a provisional one. One forms provisional theories and waits for time or fuller knowledge to explore them."

On little things compounding: "It is just these very simple things which are extremely liable to be overlooked.

On information and opinion: "An investigator needs facts, and not legends or rumors."

On trying to prove yourself wrong: "One should always look for a possible alternative and provide against it. It is the first rule of criminal investigation."

On the emotions of investing: "I am afraid Joseph's character is a rather deeper and more dangerous one than one might judge from his appearance. From what I have heard from him this morning, I gather that he has lost heavily in dabbling with stocks, and that he is ready to do anything on earth to better his fortunes."

On luck: "Simply by having the good fortune to get the right clue from the beginning."

On planning: "You never learn that the gravest issues may depend upon the smallest things."

Source: www.fool.com

Quote for the day

"In life, if you don't risk anything, you risk everything." - John Spence

Quote for the day

"Often the difference between a successful man and a failure is not one's better abilities or ideas, but the courage that one has to bet on his ideas, to take a calculated risk - and to act." - Maxwell Maltz

Quote for the day

"t's better to hang out with people better than you. Pick out associates whose behavior is better than yours and you'll drift in that direction." - Warren Buffett

Quote for the day

"If you spend your life trying to be good at everything, you will never be great at anything." - Tom Rath

Quote for the day

"Don’t allow your wounds to transform you into someone you are not." - Paulo Coelho

Traders Must Bend But Not Break

By Stephen Burns

Today I would like to explore three concepts in trading that many traders have never thought about. Fragility, robustness, and anti-fragility are concepts that describe a trader’s psychology, risk management, and method.

Here are some general definitions:

Fragility is a word used to describe something that is easily broken, shattered, or damaged. It means very delicate or brittle.

Robustness is a system’s ability to operate without failure under a variety of conditions. Being robust means a system can handle variability and remain effective in challenging environments.

Anti-Fragility can be described as high-impact events or shocks that can be beneficial to certain kinds of investment methodologies. It is a concept invented by professor, millionaire trader, bestselling author, and former hedge fund manager Nassim Nicholas Taleb. He invented the term “anti-fragility” because the existing words used to describe the opposite of “fragility,” such as “unbreakable” and “robustness,” were not really accurate. Anti-fragility goes beyond these concepts; it means that something does not merely withstand a shock, but actually benefits from an outlying Black Swan event.

Fragile Traders are new traders that struggle to survive the first year. Their psychology is fragile; they don’t make it through the learning curve because they expect to immediately make money. Learning to trade takes time, just like any other professional pursuit. Fragile traders lack the mental strength and perseverance to stick with trading until they are successful. They make decisions based on their pride, fear, and greed which eventually break their accounts.

A fragile trader has poor risk management. They risk a lot to make a little. Big position sizing leads to fragility because all it takes in one big adverse move to seriously damage an account.

A fragile trading methodology is one based purely on opinion that really has no edge. It is counter-trend, where a trader thinks the logical thing to do is to short uptrends, and go long downtrends, instead of going with the flow. Shorting bull markets and catching falling knives is a fragile trading methodology.

Robust Traders are usually, but not always, trend following traders. There are many different types of robust trading methodologies that put the odds on their side.

Part of what makes traders successful is that they don’t put too much weight on any one trade. The most successful traders limit their total account risk on any one trade to 1%-2% of total trading capital. They carefully look at a market’s volatility and logical support levels to position size effectively and set appropriate stop losses.

Their risk management principles make every trade just one of the next 50-100 trades. This brings down their stress level, and turns down the volume on their emotions. They risk a little over and over again for the chance to make many times their risk.

A Robust Trader has completed the homework on their methodology, system, and principles. They know why their system works, and they understand their edge. They keep the faith in their systems, even during losing streaks, because they understand the realities of changing market environments. They know what kind of trader they are, so there is little internal dialogue of doubt or confusion; they just trade.

Because robust systems are generally trend trading systems, they can profit in both bull and bear markets. These traders need trends to make money, and don’t do well in choppy, trend-free markets or range bound markets. Their systems are robust because the trends come back around eventually, and the profitability of those periods, make up for the smaller losses in trend-free markets.

The Anti-Fragile Trader is someone that puts on very small position sizes in low probability trades, but shifts huge amounts of risk to the trader on the other side of the trade. The methodology of the anti-fragile trader is to bet on the eventual blowup of the traders making high risk trades for a small premium.

The favorite tool of the Anti-Fragile Trader is the out-of-the-money option contract. For pennies on the dollar, they can control huge amounts of assets. While they expire worthless the majority of the time, when a random Black Swan event hits the market affecting the option contract, they can return thousands of percent on capital at risk, and makeup for all the past losses.

The creator of the anti-fragile concept, Nassim Nicholas Taleb, traded long option strangles, betting on both directions to capture any huge trend event up or down. A company being purchased and rocketing up, or a disaster and a company stock sent crashing, was hugely profitable for Taleb. He also bought option contracts on futures markets. The key is very tiny bets on these trades versus total account equity. Tiny losses and tremendous wins was what made the system profitable.

Anti-fragile traders grow stronger through losing trades by learning instead of quitting. Rough market environments don’t break them; it educates them on what to do different in the future. A trader who is mentally anti-fragile has no doubt that they will be a successful trader, and that only time separates them from their goal.

The anti-fragile trader wins in volatile markets and random Black Swan events, outside the bell curve of normal price movements. Taleb made a fortune in the Black Monday crash of 1987, and many other instances over the past 25 years.

What kind of trader do you want to be?

Source: www.newtraderu.com

Quote for the day

"We cannot solve our problems with the same thinking we used when we created them." - Albert Einstein

Quote for the day

"For every obstacle there is a solution. Persistence is the key. The greatest mistake is giving up!" - Dwight D. Eisenhower

4 Habits That Make Wealthy Traders

It’s some rather simple qualities—like being decisive and managing risk effectively—that ultimately separate the traders who succeed from those who don’t.

The mental part of trading is as important as the systems and indicators you use. Today, we’ll touch on some insights from an excellent book for traders, Larry Williams’ Long-Term Secrets to Short-Term Trading.

Insight #1: “Why do most traders lose most of the time? Markets can spin on a dime and most traders cannot.”

Even the best traders (or the best trading systems) are going to be frequently wrong. That doesn’t negate the trader or the system; that’s just part of trading.

The challenge for traders is accepting that the trade signal was errant. In a case such as this, Williams’ correctly points out that we’ve been trained to “hang in there” and “have faith in our initial insight,” even if it’s clearly the wrong course of action.

That’s just our ego needing to be right so badly that it will often ignore the exit signals that warn the trader of the impending problem.

His analogy may help you work through this issue. He compares trading to robbing a bank. A bank robber may successfully break into a bank and start scooping up the money, but when the lookout guy warns the man in the safe that the cops are on the way, the robber drops the money and runs.

If the robber were like too many traders, he might stay in the bank and hope the warning about cops being on the way was a false warning. As Williams says, “The instant you learn to trade reality, not wishes, you will break through the wall of fire to become a successful trader.”

Insight #2: “It’s not the trade, it’s the battle.”

Too many traders believe that their last trade is a reflection of just how good a trader they are (but they are the only ones who feel that way about themselves). This boils down to one word: expectation. If you expect to win all the time, or even the vast majority of the time, you’re setting yourself up for a lot of heartache.

That frustration, though, is the very same force that will truly make your negative perception of yourself a reality. And even a good trade can be damaging if you let it warp your disciplined approach.

The fact of the matter is that this is a game of odds and should be played over a long period of time. Focus on the war, not the battle.

Insight #3: “The amount of (or lack of) evidence for a market move does not make the move any more or any less likely.”

All traders, but especially new traders, have one of two problems. They either buy too soon, or buy too late (and in reality, when it comes down to it, those are the only two problems in trading).

The first problem of buying too soon is a sign of not wanting to miss out of any part of a move. Of course, if you jump in and the move never becomes a reality, the trade suffers.

The second problem is the opposite. The trader wants to make sure the move is going to happen, so he or she will wait for all the right signals to verify that the move is for real. Of course, by that time, most of the move is behind you. While it’s easier said than done, one has to find a balance between the two extremes. In this case, the best teacher is experience.

Insight #4: “What’s the difference between winning traders and losing traders?”

Well, first, there are a few similarities. Both are completely consumed by the idea of trading. The winners and the losers have committed to doing this, and have no intention of going back. This same black and white mentality was evident in their personal lives, too. But what about the differences?

Here’s what Williams observed:

The losing traders have unrealistic expectations about the kind of profits they can make, typically shooting too high. They also debate with themselves before taking a trade, and even dwell on a trade well after it’s closed out. But the one big thing Williams noticed about this group was that they paid little attention to money management (i.e. defense).

And the winners? This group has an intense focus on money management, and will voluntarily exit a trade if it’s not moving—even if it’s not losing money at that time!
There is also very little internal dialogue about trade selection and trade management. This group just takes action instead of suffering “analysis paralysis.”

Finally, the winning traders focused their attention on a small niche in the market, or a few techniques, rather than trying to be able to do everything. Hopefully the second description fits you a little better, but if the first one seems a little too familiar, you now at least know how to start getting past that barrier.

Source: www.moneyshow.com/

Quote for the day

"Our capacity for fulfillment can come only through faith and feelings. But our capacity for survival must come from reason and knowledge." - Heinz Pagels

Quote for the day

"If everyone is thinking alike, then no one is thinking." - Benjamin Franklin

10 Qualities That Successful Traders Have And You Need

In tough times like 2016, traders often feel as though things can never go their way. This feeling typifies how stock trading can be incredibly emotional. We all want to make money, and that can mean chasing a stock on its way up or calling a bottom on its way down. Everyone has bought a stock at one point or another because they felt like it “just can’t go any lower” or “this rally is just getting started.” But the traders who consistently beat the market are those who realise that emotion has nothing to do with the performance of a stock. These successful traders also obtain many other qualities; today’s article highlights 10 of their most lucrative traits and their implications on your portfolio.

1. Remove Emotion From The Equation

As I mentioned above, successful traders are those who have removed emotion from the equation. A stock does not increase in value because people think it will go higher; rather, it does so because traders and investors have made the conscious decision to allocate capital toward it. We all know this, but often forget it in the heat of the moment. Before you submit your order, reflect on why you’ve decided to enter the trade. Is it because you “just have a feeling that it will go higher” or that you conducted thorough technical or fundamental analysis?

2. Don’t Chase Anything, Ever

Seems simple, right? Buy low and sell high, they say. But this is much easier said than done due to the interference of emotions. Everyone wants to make money, but more experienced traders know that more often than not, chasing a stock will result in losses. In theory, this makes sense. Take the scenario of people sitting at their monitors, just like you, and watching the same stock spike right before their eyes. Before they can even enter the trade, thousands of share have traded hands and the stock spikes even more. By the time your trade goes through, it is likely that much of the air has deflated and the stock begins to rapidly descend from its high, as money managers are ripping the carpet out from under you before you can even realise it. Learning not to chase a stock higher (or lower, if you’re on the other side of the trade) comes with experience. If you’ve fallen victim to the scenario I just played out, use it as a learning experience.

3. Be Patient, Young Grasshopper

The previous two points go hand-in-hand with patience. It is advantageous to wait for a stock to show signs of a bottom before attempting to catch a falling knife. Likewise, it is smart to deal with the short-lived pain of seeing a stock spike before your eyes for the rewarding feeling of purchasing shares after its descent. Moreover, make sure you wait until your prospective trade has fully setup to your specifications, and don’t assume that any indicator will produce a buy/sell signal. Always confirm before you earn.

4. Bulls Make Money, Bears Make Money, And Pigs Get Slaughtered

So don’t get greedy. If you’ve used technical analysis to project a price target and the stock is currently trading at that level, place the sell order and do not change it. This applies to both long and short positions. He who believes that they can squeeze more return out of their trade — the inexperienced trader — is often compelled to sell at a smaller gain. Remember that any profit is a good profit.

5. A Penny Saved Is A Penny Earned

Losing money sucks. No trader is in the industry of losing money. If you’re looking at a lacklustre trade setup for the hope of making up for yesterday’s bad day, you’re breaking rule number 3 and not realising that money saved is money earned. It hurts more to lose money than it feels good to make money. Remember to be diligent and be content with earning and losing no money.

6. Know Your Risk Tolerance

Every trader is different, and only you know your risk tolerance. Are you the type of trader who can risk 20% to make 20%, or do you feel the need to have a much higher risk/reward payout in order to enter a trade? Be sure to define your risk before placing any trade orders. Doing so helps ensure that you have an exit strategy, which is arguably just as important as your entrance strategy. A little extra work in the beginning can make all the difference in the end.

7. You Won’t Be Right All The Time

Even the best traders aren’t right 100% of the time. But to be a good trader, you just have to be right more often than you’re wrong. Think of it like baseball: the Hall of Fame hitters are those who got out 7 out of 10 times. While this would correlate to a lot of red in a stock portfolio, the idea remains the same. You won’t, and don’t have to be perfect. If you follow in the footsteps of the successful Wall Street traders, then being right more than you’re wrong will come easily.

8. Learn From And Cut Your Losses

Because you won’t always be right, you’ll undoubtedly experience some losses. The stock market is incredibly humbling, and a long stretch of winning trades can instantly be cut short by devastating losses. But losing trades are healthy in the long run of your trading career, so long as you learn from them. Ask yourself why the trade went awry, and learn how to minimise similar mistakes in the future. Also, make sure that you exit a position as soon as your risk is fulfilled or a technical barrier — such as support, resistance, volume, etc — has been broken.

9. Don’t Turn A Trade Into An Investment

If you’ve entered a trade, it’s most likely due to a technical or fundamental catalyst that caught your eye. For example, you may have bough-ten a stock because you thought its earnings would beat estimates. Even more, let’s say the technical setup is incredibly bullish and signals that the stock will exhibit upward moment. Unfortunately for you, though, the company’s earnings are lacklustre and the stock falls sharply. What do you do now? Do you hope that the stock rebounds in the near future, giving you a better exit point? Hopefully not, because once a trade goes the opposite direction and you decide to hold onto it, you’ve turned that position into an investment. If you created a position with one intention, make sure you exit it with the same and don’t change your thesis to justify the price movement.

10. Take Technical Analysis With A Grain Of Salt

The thing about technical analysis is that it works until it doesn’t. As illustrated by the example above, a stock may have a bullish technical setup that isn’t supported by its fundamentals. Even though traders can cross out the name of a stock, conduct technical analysis, and make a decision regarding its future price movement, the best traders recognise that a fundamental hiccup can trump even the best technical story. Make sure you take the time to research the sector and industry of prospective stock, and make note of any sector-, industry-, or stock-specific catalysts before outlaying any capital.
Source: www.stockethos.com/

Quote for the day

"The world is full of foolish gamblers and they will not do as well as the patient investors." - Charlie Munger

Quote for the day

"It is possible to make money — and a great deal of money — in the stock market. But it can't be done overnight or by haphazard buying and selling. The big profits go to the intelligent, careful and patient investor, not to the reckless and overeager speculator." -  J Paul Getty

Quote for the day

"We urge the beginner in security buying not to waste his efforts and his money in trying to beat the market. Let him study security values and initially test out his judgment on price versus value with the smallest possible sums." - Benjamin Graham

Traits of Top Traders/Investors

Top Traders/Investors -- Putting It All Together -- Developing Excellent Skills!

By Ian Harvey

Introduction

It is important to understand, and if possible, emulate the qualities that most top traders/investors have, to profit from the stock market! Many of these qualities can be developed if there is a willingness to succeed. With a commitment to improvement in oneself, and adhering to certain business stratagems, profiting from the stock market, in which ever form you feel comfortable in, is feasible.

While there are many, many traits that are noticeable in top traders, this article concentrates on only four of major importance.

1: Personal Responsibility

This is probably the most important trait that all top traders have (or top people in any field) is the ability to assume total responsibility for what happens to them. And for top traders and investors, this means that they assume total responsibility for their investments results.

This means that if you lose money it’s not the market’s fault, it’s not your advisor’s fault, it’s not your system’s fault, or the fault of anything else. Instead, it is a direct result of what you did. When you assume this attitude, you can learn directly from your mistakes and trading becomes a major learning curve, setting a scenario which allows for constant improvement. When you don’t assume this attitude, then you get to repeat your mistakes over and over again because you believe that you were a victim of some external forces. 

Therefore, it becomes quite obvious that the ability to learn from your mistakes is much more sensible and profitable then the tendency to repeat mistakes over and over again.

Trait 2: Commitment

Becoming a successful investor/trader requires hard work. You must get to know yourself intimately because you are the source of your trading performance. You must develop a business plan to guide your trading. You must develop and test three or four strategies that fit within the big picture (as you see it) and then become part of your business plan. You must do your homework constantly. You must set routines and follow certain disciplines during the day on a constant basis. And all of this requires a lot of time and energy -- and it is only the people who are really committed who will put in the work necessary to become successful.

Trait 3: Mental State Control

There are many tasks to be adhered to when trading but the key to following those tasks is mental state control.

Each task requires a particular mental state in order to execute it properly and you must have the skill to step into that state and perform the task.

There are many required some of which are -- daily self-analysis, daily mental rehearsal, developing a low-risk idea, following the lead, taking action, monitoring, terminate bad positions, taking profits, daily debriefing, periodic review, etc.

For example -- one of the tasks of trading is the action step of terminating or taking profits. The mental state required is 100% commitment to action. There is no thinking involved, just 100% action. You should already know what to do when you get this signal because you’ve already developed a system that works. Thus, your job is simply to act. Think about when the tiger starts to leap on the antelope. He doesn’t suddenly think to himself, “Is this a good idea?” If he did that, he’d probably miss the antelope and break his back. No, his mental state is 100% commitment. Well, each essential task of trading requires a particular mental state and you must have the ability to step into that state.

Trait 4: Top-Down Discipline

In developing this sort of discipline, you must go through the following steps:

• Write out your dream life. What would you like to be, do, see, experience, and have in your lifetime in order for it to be ideal? Write this out completely.

• Write down the purpose behind that dream life. Write down your mission, your purpose and all of the whys behind that dream life. This step helps you get excited about achieving it.

• Write down your goals for the next year.

• Write down the purpose for each goal.

• Write down a series of action steps for each goal.

• And each action step (if it takes longer than a week for you to finish) could be considered another goal with a purpose behind it and a series of action steps behind that.

The net result of following these steps is that you develop a top-down discipline that helps you develop commitment and achieve almost anything you set your mind to achieving.

Conclusion

Now let’s look at what we have in these four qualities: -


• First you have a top down discipline that really helps you achieve almost anything you set your mind to achieving.

• Next you have the ability to get yourself into the appropriate mental state to do whatever you need to do with excellence.

• Third, you have the commitment to see your goals through to the finish.

• And lastly, but remember this was mentioned first -- you believe that you are personally responsible for what happens to you – which means that you can learn from your mistakes.

Therefore, with the right type of mind-set and with these four traits, you could achieve peak performance as a trader/investor or almost anything else you set your mind to doing!

"Success is simple. Do what's right, the right way, at the right time." - Arnold.H.Glasow

Source: www.stock-options-made-easy.com

Quote for the day

"It is always easiest to run with the herd; at times, it can take a deep reservoir of courage and conviction to stand apart from it. Yet distancing yourself from the crowd is an essential component of long-term investment success." - Seth Klarman

Quote for the day

"The market is a pendulum that forever swings between unsustainable optimism (which makes stocks too expensive) and unjustified pessimism (which makes them too cheap). The Intelligent Investor is a realist who sells to optimists and buys from pessimists." - Jason Zweig