"Speculation is an effort, probably unsuccessful, to turn a little money into a lot. Investment is an effort, which should be successful, to prevent a lot of money from becoming a little." - Fred Schwed Jr.
Tuesday, 15 October 2013
15-Oct-2013 CSE Trade Summary
Crossings - 15/10/2013 - Top 10 Contributors to Change ASPI
Following Stocks Reached New High / Low on 15/10/2013
Why Are You Playing The Markets?
Is it entertaining, educational, or do you mean business?
I've been thinking about which of these things -- education, amusement, or enrichment -- is the prime motivator for those of us who play the markets. To put it another way, are we market mavens because we find the markets entertaining (whether we admit it or not), because it's educational (i.e. intellectually stimulating), or do we really mean business when it comes to making money?
Investing is Entertaining
Don't laugh, but many of us do find market-watching entertaining, or "amusing". It's just that most of us don't admit it. And while I wouldn't advocate treating your investment portfolio purely as a pleasurable "hobby", as hobbies go it need not be that expensive compared with other hobbies. The £1,000 fall (for example) in your portfolio value this year may well be less than you would have spent on the alternative of golf club membership fees or windsurfing equipment.
I don't play golf and I don't windsurf, so I watch the markets instead. And unlike those alternative hobbies that are guaranteed to drain my cash, my mastery of the markets could lead to a profitable outcome. Speaking of my "mastery of the markets" (I told you not to laugh) leads me to the fact that...
Investing is Educational
Watching the markets, and more specifically pitting your wits against them, can be very educational. Not only in terms of learning about balance sheets and technical indicators, but also in terms of learning about ourselves and what makes us tick. How do you react psychologically when your investments rise... or fall? What can you do to take the emotion out of investing?
What have you learned so far at the "Investment School of Hard Knocks", and how are you making sure that you don't make the same mistakes again? If you're doing well, have you codified the "rules of the game" in some kind of trading or investment plan so that you can continue or repeat your success?
Playing the markets -- by which I mean "investing sensibly", of course -- can be as intellectually stimulating as watching your favourite quiz show on TV or doing the crossword in The Times, but potentially more rewarding. Which leads me to...
...but we really mean business!
There's no shame in admitting that you you find market-watching and participation entertaining and fun. In fact, many great businessmen (and women) have said that they got rich by setting up a business to do exactly what they would have done "for nothing" purely as a hobby. If you can make your hobby your business, it's a potential route to riches.
There's nothing wrong with treating investment as the ultimate educational game of "strategy" (and, let's admit it, "chance") -- you versus Mr Market. Many successful people go on running their businesses or playing the markets way beyond economic necessity, out of sheer love of the game. I'm sure Warren Buffett would prefer to stay intellectually stimulated by minding his investment interests rather than by singing nursery rhymes in an old peoples' home. (No offence intended to Mr. Buffett, who -- as far as I know -- is nowhere near ready for the alternative fate.)
So playing the markets can keep us amused and educated, and there's nothing wrong with either of those things as long as we're careful, but if we're being brutally honest most of us are (or should be) playing this game in order to become enriched. We really mean business, and just like any other business, the whole point is to make a profit -- either through capital appreciation, dividend income, or (ideally) both.
Bottom line
I've argued that watching and playing the markets can be entertaining and educational as well as business-like. But which is the primary motivator for you? Are you doing this for fun, for the intellectual challenge, to make money, or all three? Be honest!
Edited Article of Tony Loton
Published in Investing on 11 April 2012
http://www.fool.co.uk
I've been thinking about which of these things -- education, amusement, or enrichment -- is the prime motivator for those of us who play the markets. To put it another way, are we market mavens because we find the markets entertaining (whether we admit it or not), because it's educational (i.e. intellectually stimulating), or do we really mean business when it comes to making money?
Investing is Entertaining
Don't laugh, but many of us do find market-watching entertaining, or "amusing". It's just that most of us don't admit it. And while I wouldn't advocate treating your investment portfolio purely as a pleasurable "hobby", as hobbies go it need not be that expensive compared with other hobbies. The £1,000 fall (for example) in your portfolio value this year may well be less than you would have spent on the alternative of golf club membership fees or windsurfing equipment.
I don't play golf and I don't windsurf, so I watch the markets instead. And unlike those alternative hobbies that are guaranteed to drain my cash, my mastery of the markets could lead to a profitable outcome. Speaking of my "mastery of the markets" (I told you not to laugh) leads me to the fact that...
Investing is Educational
Watching the markets, and more specifically pitting your wits against them, can be very educational. Not only in terms of learning about balance sheets and technical indicators, but also in terms of learning about ourselves and what makes us tick. How do you react psychologically when your investments rise... or fall? What can you do to take the emotion out of investing?
What have you learned so far at the "Investment School of Hard Knocks", and how are you making sure that you don't make the same mistakes again? If you're doing well, have you codified the "rules of the game" in some kind of trading or investment plan so that you can continue or repeat your success?
Playing the markets -- by which I mean "investing sensibly", of course -- can be as intellectually stimulating as watching your favourite quiz show on TV or doing the crossword in The Times, but potentially more rewarding. Which leads me to...
...but we really mean business!
There's no shame in admitting that you you find market-watching and participation entertaining and fun. In fact, many great businessmen (and women) have said that they got rich by setting up a business to do exactly what they would have done "for nothing" purely as a hobby. If you can make your hobby your business, it's a potential route to riches.
There's nothing wrong with treating investment as the ultimate educational game of "strategy" (and, let's admit it, "chance") -- you versus Mr Market. Many successful people go on running their businesses or playing the markets way beyond economic necessity, out of sheer love of the game. I'm sure Warren Buffett would prefer to stay intellectually stimulated by minding his investment interests rather than by singing nursery rhymes in an old peoples' home. (No offence intended to Mr. Buffett, who -- as far as I know -- is nowhere near ready for the alternative fate.)
So playing the markets can keep us amused and educated, and there's nothing wrong with either of those things as long as we're careful, but if we're being brutally honest most of us are (or should be) playing this game in order to become enriched. We really mean business, and just like any other business, the whole point is to make a profit -- either through capital appreciation, dividend income, or (ideally) both.
Bottom line
I've argued that watching and playing the markets can be entertaining and educational as well as business-like. But which is the primary motivator for you? Are you doing this for fun, for the intellectual challenge, to make money, or all three? Be honest!
Edited Article of Tony Loton
Published in Investing on 11 April 2012
http://www.fool.co.uk
Monday, 14 October 2013
Quote for the day
“A great company could be a terrible investment if its price rise has already more than discounted the bullish fundamentals. Conversely, a company that has been experiencing problems and is the subject of negative news could be a great investment if its price decline has more than discounted the bearish information.” - Jack Schwager
14-Oct-2013 CSE Trade Summary
14/10/2013 - Top 10 Contributors to Change ASPI
Following Stocks Reached New High / Low on 14/10/2013
What's Your Investing Style?
"To Thine Own Self Be True!" - Shakespeare Hamlet/Polonius
This old advice rings true for modern-day investors!
Your temperament, your inner spirits should guide you in making investments. If you are a conservative, risk-averse person, then don't kid yourself. Face up to it, and invest accordingly, which means conservatively. No one can put a price tag on your ability to sleep soundly at night!
On the other hand, if you're more venturesome, more willing to accept higher risk in return for the potential of higher reward, you should be able to act more aggressively in the market.
Most people invest for different reasons at different times and use various methods. Whatever approach, or approaches, you take, the most important thing is to know why you bought a particular stock.
If you bought a stock on the recommendation of your neighbor or your broker, be happy about it and recognize that this is why you bought it!
Then you will be more likely to avoid the "investor imperative," namely the following behavior:
If your stock rises, claim it as your ability ...
If it falls, pass on the blame!
Friend Investor:Your friend phones. He has the perfect story on a great stock but you will have to act quickly! If you are likely to buy in this situation, then you are a friend investor. Friend investors rely on the advice of other people to make their decisions.
Technical Investor:Moving averages, candlestick patterns are the sort of things the technical investor deals with. Technical investors were once called "chartists" because their central activity was making and studying charts of stock prices.
Nowadays this is usually done on a computer where advanced mathematics combines with grunt power to unlock past patterns and correlations. The hope is that they will carry into the future.
Economist Investor:This type of investor bases his decisions on forecasts of economic parameters. Typical statements are unemployment will decrease, interest rates will climb etc.
Random Walk Investor:I have no idea whether stock XYZ will go up or down, but it has a high beta! Since I don't mind the risk, I'll buy it since I will, on the average, be compensated for this risk.
The current price of a stock is what you should buy, or sell, it for. This is the fair price and no amount of analysis will enable you to do any better.
Informal Information Investor:This approach to investing consists of piecing together information on companies obtained informally through wide-ranging conversations, interviews, press-reports and, simply, gossip.
Value Investor:This investor attempts to value a stock independently of its current market price. This independent value has many names such as intrinsic, investment, reasonable, fair, and appraised value.
An intrinsic value would be the value which is justified by the facts: assets, earnings, dividends, definite prospects, including the factor of management. Value investing is the method of deciding on individual investments on the basis of their intrinsic value as contrasted with their market price.
Growth Investor:They are looking for stocks with high price to book value or a high price-earnings ratio. Growth is always a component in the calculation of value, constituting a variable of high importance and positive impact.
Conscious Investor:This type of investor overlaps the types just mentioned. Increasingly investors are respecting their own beliefs and values when making investment decisions. Many others are following their own paths to clarify their investment values and act on them.
The process of bringing as much honesty as possible into investment decisions we call conscious investing.
Source:http://www.greekshares.com
This old advice rings true for modern-day investors!
Your temperament, your inner spirits should guide you in making investments. If you are a conservative, risk-averse person, then don't kid yourself. Face up to it, and invest accordingly, which means conservatively. No one can put a price tag on your ability to sleep soundly at night!
On the other hand, if you're more venturesome, more willing to accept higher risk in return for the potential of higher reward, you should be able to act more aggressively in the market.
Most people invest for different reasons at different times and use various methods. Whatever approach, or approaches, you take, the most important thing is to know why you bought a particular stock.
If you bought a stock on the recommendation of your neighbor or your broker, be happy about it and recognize that this is why you bought it!
Then you will be more likely to avoid the "investor imperative," namely the following behavior:
If your stock rises, claim it as your ability ...
If it falls, pass on the blame!
Friend Investor:Your friend phones. He has the perfect story on a great stock but you will have to act quickly! If you are likely to buy in this situation, then you are a friend investor. Friend investors rely on the advice of other people to make their decisions.
Technical Investor:Moving averages, candlestick patterns are the sort of things the technical investor deals with. Technical investors were once called "chartists" because their central activity was making and studying charts of stock prices.
Nowadays this is usually done on a computer where advanced mathematics combines with grunt power to unlock past patterns and correlations. The hope is that they will carry into the future.
Economist Investor:This type of investor bases his decisions on forecasts of economic parameters. Typical statements are unemployment will decrease, interest rates will climb etc.
Random Walk Investor:I have no idea whether stock XYZ will go up or down, but it has a high beta! Since I don't mind the risk, I'll buy it since I will, on the average, be compensated for this risk.
The current price of a stock is what you should buy, or sell, it for. This is the fair price and no amount of analysis will enable you to do any better.
Informal Information Investor:This approach to investing consists of piecing together information on companies obtained informally through wide-ranging conversations, interviews, press-reports and, simply, gossip.
Value Investor:This investor attempts to value a stock independently of its current market price. This independent value has many names such as intrinsic, investment, reasonable, fair, and appraised value.
An intrinsic value would be the value which is justified by the facts: assets, earnings, dividends, definite prospects, including the factor of management. Value investing is the method of deciding on individual investments on the basis of their intrinsic value as contrasted with their market price.
Growth Investor:They are looking for stocks with high price to book value or a high price-earnings ratio. Growth is always a component in the calculation of value, constituting a variable of high importance and positive impact.
Conscious Investor:This type of investor overlaps the types just mentioned. Increasingly investors are respecting their own beliefs and values when making investment decisions. Many others are following their own paths to clarify their investment values and act on them.
The process of bringing as much honesty as possible into investment decisions we call conscious investing.
Source:http://www.greekshares.com
Sunday, 13 October 2013
Focus on You
It is never the system or author writing the trading book that fails.
Trading is at least 98% psychological. It’s a mental state of mind based upon your beliefs of what may happen. Books, systems and technical indicators can only take you so far! You must accept and understand that the market is all in your head. It is you versus the other trader. If you don’t understand YOU, how will you ever understand other traders; thus taking advantage of market moves based on their mental state of mind and their underlying beliefs.
Many investors, both novice and experienced, drift from book to book to book and system to system to system, never understanding why they produce inconsistent profits. They are confused, looking at too many things, complicating the entire process while ignoring the essentials to success.
Keep it simple.
Why complicate things when simplicity works; especially when it comes to trading? We know that trading may be the most difficult endeavor that any human may attempt to undertake.
Thousands of different systems work in the stock market so we can conclude that it is the user that ultimately fails because of lack of concentration and motivation to stay the course. Wall Street is not for drifters and most people can’t play the game profitably because they never sharpen their own mental skills while applying basic money management techniques. They focus on the wrong set of skills.
We all see people come and go every day: rags to riches to rags. They are motivated for weeks, months and sometimes years but most fizzle away after they fail and can’t figure out what they are doing wrong. Some investors copy a system from a so-called guru and may find success for a while but they don’t tailor it to their personality, integrate it with their investing style and focus on their mental state of mind, therefore, it will become obsolete and they will fail. Working hard to become successful in the market is fine but understand that working smarter will always take you further.
Our goal as traders and investors is to understand the crowd and anticipate how they will act and react based on the thoughts we had, prior to focusing on the proper skills, when we were just one of the sheep (waiting to be slaughtered)!
Focus on what is important and the success will follow.
Stop focusing on iffy stochastics, Bollinger bands, MACD, ADX, earnings releases and bogus news stories. Yes they can aid you to success but the main focus is on you!
Personally speaking, I require specific fundamentals, price, volume and basic daily and weekly charts to succeed but they are secondary tools. They can help me make money as long as I am focusing on the overall picture which is my mental focus and my emotional balance.
I know I am getting all “Dr. Perruna” on you but it is true.
Once your conscious mind understands how the beliefs of the crowd work, your subconscious mind takes over and intuition kicks in and you start making some of the best decisions of your life by flawlessly following your system.
As Jesse Livermore said: “Wall Street never changes, the pockets change, the stocks change, but Wall Street never changes, because human nature never changes”
Why? Because humans never change!
Once you understand this and learn to trade other humans, you will become successful. Yes, you will need some of the tools mentioned above but don't focus your attention in this area. Focus when investing by mastering the beliefs of the crowd and you will always be one step ahead.
By Christopher Perruna
http://www.chrisperruna.com
It is YOU! It is your lack of focus.
Focus on yourself and then you can focus on trading successfully.
Trading is at least 98% psychological. It’s a mental state of mind based upon your beliefs of what may happen. Books, systems and technical indicators can only take you so far! You must accept and understand that the market is all in your head. It is you versus the other trader. If you don’t understand YOU, how will you ever understand other traders; thus taking advantage of market moves based on their mental state of mind and their underlying beliefs.
Many investors, both novice and experienced, drift from book to book to book and system to system to system, never understanding why they produce inconsistent profits. They are confused, looking at too many things, complicating the entire process while ignoring the essentials to success.
Keep it simple.
Why complicate things when simplicity works; especially when it comes to trading? We know that trading may be the most difficult endeavor that any human may attempt to undertake.
Thousands of different systems work in the stock market so we can conclude that it is the user that ultimately fails because of lack of concentration and motivation to stay the course. Wall Street is not for drifters and most people can’t play the game profitably because they never sharpen their own mental skills while applying basic money management techniques. They focus on the wrong set of skills.
We all see people come and go every day: rags to riches to rags. They are motivated for weeks, months and sometimes years but most fizzle away after they fail and can’t figure out what they are doing wrong. Some investors copy a system from a so-called guru and may find success for a while but they don’t tailor it to their personality, integrate it with their investing style and focus on their mental state of mind, therefore, it will become obsolete and they will fail. Working hard to become successful in the market is fine but understand that working smarter will always take you further.
Our goal as traders and investors is to understand the crowd and anticipate how they will act and react based on the thoughts we had, prior to focusing on the proper skills, when we were just one of the sheep (waiting to be slaughtered)!
Focus on what is important and the success will follow.
Stop focusing on iffy stochastics, Bollinger bands, MACD, ADX, earnings releases and bogus news stories. Yes they can aid you to success but the main focus is on you!
Personally speaking, I require specific fundamentals, price, volume and basic daily and weekly charts to succeed but they are secondary tools. They can help me make money as long as I am focusing on the overall picture which is my mental focus and my emotional balance.
I know I am getting all “Dr. Perruna” on you but it is true.
Once your conscious mind understands how the beliefs of the crowd work, your subconscious mind takes over and intuition kicks in and you start making some of the best decisions of your life by flawlessly following your system.
As Jesse Livermore said: “Wall Street never changes, the pockets change, the stocks change, but Wall Street never changes, because human nature never changes”
Why? Because humans never change!
Once you understand this and learn to trade other humans, you will become successful. Yes, you will need some of the tools mentioned above but don't focus your attention in this area. Focus when investing by mastering the beliefs of the crowd and you will always be one step ahead.
By Christopher Perruna
http://www.chrisperruna.com
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