Monday, 25 January 2016
Quote for the day
"Acquisition of skills requires a regular environment, an adequate opportunity to practice, and rapid and unequivocal feedback about the correctness of thoughts and actions." - Daniel Kahneman
Sunday, 24 January 2016
Some Corrections Turn into Bear Markets
By Ivanhoff
“A bull market is when you check your stocks every day to see how much money you’ve made. A bear market is when you don’t bother to look anymore.” – Bruce Kamich
In her excellent book “Bull”, journalist Maggie Mahar interviews Richard Russell on the three psychological stages of a bear market:
“The earliest stage is characterized by denial, increased anxiety, and fear. The second stage is panic. People suddenly say, ‘I’ve got to sell.’ The third phase is despair.” In the third phase, investors are so tired of the stock market that they don’t want to hear about stocks any more, at any price”
Most corrections will remain just that – corrections. They won’t turn into bear markets. They will last a few weeks or few months. In the end, indexes will recover to new highs.
And yet, some corrections turn into bear markets. They are rare, but over 30-40 years of investing or trading, you will probably experience at least two or three of them – if market patterns continue to repeat. As long as there are humans involved, you can count on it. Markets always overshoot to the upside and the downside, because people’s psychology is cyclical and people tend to underreact to new information, then panic and overreact. Overreactions create the foundations for mean-reversions. Booms eventually lead to busts and busts to booms.
My definition of a bear market – spending a long time (more than a year) under a declining 200-day moving average, leading to 50% or bigger decline in a major, wide-encompassing index, like the S & P 500 for example.
You can imagine if an index is down 50%, what can happen to many individual stocks. No stock is insured against a bear market. Apple and Google lost 60% during the bear market in 2008. Amazon lost 95% during the bear market of 2000-2002. Priceline lost 99% in the same period. All of them managed to recover and hit new all-time highs afterward, but do you really think that you could have stomached the drawdowns that you had to go through? Do you really think that you could have put $1 million into PCLN and watch it turn into 10,000 and ride it all the way back without spooking at some stage and selling everything? Think again.
Are you familiar with the 50/30/20 concept? It states that 50% of a stock’s move is defined by the general market direction; 30% – by its industry; and only 20% is impacted by the individual merits of the underlying company. In a bear market, the 50/30/20 rule of thumb become something like the 90/10 rule, where 90% of a stock’s move is defined by the general direction of the market and only 10% – by the individual characteristics of that stock.
Traders should trade. Investors should invest. Whether you are a trader or an investor, if you deal with individual stocks, you always have to have an exit strategy. Some stocks never come back from their big drawdowns during market corrections.
This is a small excerpt from my book CRASH: How to Protect and Grow Capital during Corrections
Source: http://ivanhoff.com/
“A bull market is when you check your stocks every day to see how much money you’ve made. A bear market is when you don’t bother to look anymore.” – Bruce Kamich
In her excellent book “Bull”, journalist Maggie Mahar interviews Richard Russell on the three psychological stages of a bear market:
“The earliest stage is characterized by denial, increased anxiety, and fear. The second stage is panic. People suddenly say, ‘I’ve got to sell.’ The third phase is despair.” In the third phase, investors are so tired of the stock market that they don’t want to hear about stocks any more, at any price”
Most corrections will remain just that – corrections. They won’t turn into bear markets. They will last a few weeks or few months. In the end, indexes will recover to new highs.
And yet, some corrections turn into bear markets. They are rare, but over 30-40 years of investing or trading, you will probably experience at least two or three of them – if market patterns continue to repeat. As long as there are humans involved, you can count on it. Markets always overshoot to the upside and the downside, because people’s psychology is cyclical and people tend to underreact to new information, then panic and overreact. Overreactions create the foundations for mean-reversions. Booms eventually lead to busts and busts to booms.
My definition of a bear market – spending a long time (more than a year) under a declining 200-day moving average, leading to 50% or bigger decline in a major, wide-encompassing index, like the S & P 500 for example.
You can imagine if an index is down 50%, what can happen to many individual stocks. No stock is insured against a bear market. Apple and Google lost 60% during the bear market in 2008. Amazon lost 95% during the bear market of 2000-2002. Priceline lost 99% in the same period. All of them managed to recover and hit new all-time highs afterward, but do you really think that you could have stomached the drawdowns that you had to go through? Do you really think that you could have put $1 million into PCLN and watch it turn into 10,000 and ride it all the way back without spooking at some stage and selling everything? Think again.
Are you familiar with the 50/30/20 concept? It states that 50% of a stock’s move is defined by the general market direction; 30% – by its industry; and only 20% is impacted by the individual merits of the underlying company. In a bear market, the 50/30/20 rule of thumb become something like the 90/10 rule, where 90% of a stock’s move is defined by the general direction of the market and only 10% – by the individual characteristics of that stock.
Traders should trade. Investors should invest. Whether you are a trader or an investor, if you deal with individual stocks, you always have to have an exit strategy. Some stocks never come back from their big drawdowns during market corrections.
This is a small excerpt from my book CRASH: How to Protect and Grow Capital during Corrections
Source: http://ivanhoff.com/
Quote for the day
"A reliable way to make people believe in falsehoods is frequent repetition, because familiarity is not easily distinguished from truth. Authoritarian institutions and marketers have always known this fact." - Daniel Kahneman
Saturday, 23 January 2016
10 Hard Things You Need To Do For Success (While Many People Are Unaware)
By Aleksander Ilic
The road to success is a long and winding one, with plenty of obstacles just waiting to trip up a careless traveller. Apart from the privileged few who are given everything on a silver platter, most of the people who make their dreams come true put in a lot of hard work and make sacrifices behind the scenes, constantly improving themselves. Shaping yourself into a smarter, faster, stronger and better version takes time, and there are a number of things that you need to do for success, even though you may not realize it yet.
1. Stay calm and composed during conflict situations
One of the first things to look for in a good leader is the ability to keep his or her composure during a high pressure situation. We can look at lions for a good example of effective leadership – the male lion is the leader of the group, even though the females do most of the hunting while he just lies around, but as soon as a large animal threatens the group the lion remains calm and deals with the threat, even if it means sacrificing his life to keep everyone safe.
Now, you shouldn't just sit there and wait for an opportunity to show off your conflict management skills, but you have learn to stay calm during arguments and crisis situations.
2. Practice good manners and always be polite
You never know when a great opportunity will present itself – you might be at a party, at a parking lot or buying groceries when you meet someone who may have a job opportunity or an interesting business proposition for you. Practising good manners will significantly improve the way other people perceive you, and by constantly reinforcing a polite and composed demeanour in your daily life, you will actually prepare yourself for professional and courteous behaviour during business meetings and negotiations.
It’s easy to allow yourself to explode at every little thing that irks you or resort to sarcasm and rudeness, but the true greats will never let their frustration or insecurities show. If everyone sees you as a reasonable, trustworthy and polite individual, many doors will open for you.
3. Be incredibly punctual and consistently productive
The main thing that separates successful people from the rest of the crowd is their ability to organize their life down to the last second and always be on time, clocking in a number of highly productive hours each day. Unfortunately, consistency is not something many people are good at.
This is why companies go to great lengths to ensure that their employees stay punctual, but if you want to build a successful career, you’ll have to find a way to develop these positive habits on your own. Even if the company has a strict attendance policy and the right software in place, you still need to go to bed on time, wake up early and stay focused throughout the day. Learning to motivate yourself to get things done when you really don’t feel like it and have a number of obstacles in your way is the most important career lesson you can learn.
4. Acknowledge your mistakes
Refusing to accept that you’ve made a mistake is not only counter-productive, but quite childish. A grown man or woman should have a firm grasp of reality and be aware of their own imperfections. Even though we can never be completely objective, we can at least admit that we have made a mistake and try not make similar mistakes next time. Accepting that you are flawed and trying to improve things about yourself that have become major character traits over time is incredibly difficult, which is why most people keep shifting blame and never grow.
5. Work hard on improving yourself in all aspects of life
While focusing on a single aspect of your life and even a single skill can help you master it faster before moving on to the next issue that needs improvement, being good at a couple of things is not going to be enough to attain true success. Communication and negotiation skills are important in practically any line of work, while dressing with style and confident body language can help you take your career to the next level regardless of skill and experience.
Taking care of your body and getting all the nutrients you need, as well as exercising, is going to boost focus, give you more energy and make you feel very confident. As you can see, reading, exercising, dieting, people skills and many other good habits all come together to create a winning mentality, and successful people strive to improve in different ways.
6. Push through failure with supreme confidence
A lot of people mistakenly assume that those rare few who achieve excellence simply have a unique combination of incredible talent and luck, which helps them get to the top without ever making any mistakes. However, while talent plays a big role, it’s actually the courage to try new things, tons of hard work and supreme confidence in yourself that are going to catapult you out of mediocrity. You have to believe that what you are doing is the best possible option if you want to be able to shrug off failures and keep moving forward.
A smart man once said: “We either win or we learn” – there is no “fail” in the vocabulary of a winner, all those minor setbacks are just lessons in the school of hard knocks. This confidence doesn’t come easy – it must be nurtured daily, by positive phrases repeated in front of the mirror and by truly believing that all the goals you have set can and will be accomplished sooner or later.
7. Come up with your own answers through tons of research and practice
Information is often served to us on a silver platter, but practical experience has shown that the easier it is to attain information, the more you should question its validity. There are tons of myths and misinformation out there, and a quick 3 minute Google search is not going to help you master any topic. You can never just take someone's word for it, it's important to read, read, and read some more.
Read from several different sources, find experts who most people in the field respect, and always try and see if the theory works in practice – your unique set of circumstances may require a slightly modified approach, and some tips might not apply to you.
8. Force yourself to take on as much work as you can handle, and then some
Making it big is not something you can do from your couch. Well, I guess you can if you spend countless hours working on your laptop on a cozy couch, but it’s still work. Entrepreneurs have it worst, but even if you work for a company, climbing the corporate ladder is no easy task.
You have to bring in lots of money or improve the efficiency at the office,become a brand ambassador on social media, work on impressing the bosses, navigate the murky waters of office politics, convince the higher-ups that promoting you will benefit them personally in some way, and find any way you can to stand out. This takes a lot of work, and a good chunk of it is not directly related to your field of expertise, so most people either crumble under the pressure or just give up and stay in the same place for years.
9. Cover all the minute details when making a plan
A regular Joe will ask a few questions about a project and create a plan of action in a few broad strokes, but a smart businessman will want to cover all the bases. Jumping head first into the deep end isn’t going to yield the greatest of results, and even if you manage to handle a situation, chances are there was a better way of doing things that you’ve missed because you failed to prepare.
10. Invest your time, effort and money into a great opportunity, even if there is no guarantee it will pay off
This is the ultimate test of willpower and passion – the willingness to go with your gut feeling and jump on opportunities, even if there is no guarantee that you will succeed. There will be plenty of high-risk, high-reward opportunities along the way, and you need to learn how to distinguish diamonds in the rough from plain old rubble, so to speak. In the beginning you'll be playing the numbers game, and for every 2-4 misses you'll hit one big project, but as you become wiser and more successful you'll be able to make calculated risks. Believing in yourself and taking chances is what will help you advance in your career.
We admire powerful and successful people, but we often fail to realize just how much work goes into making it big. All of the things in this article need to come together to pave the road to success, and it's hard to manage it all, but no one said that it was going to be easy.
www.lifehack.org
The road to success is a long and winding one, with plenty of obstacles just waiting to trip up a careless traveller. Apart from the privileged few who are given everything on a silver platter, most of the people who make their dreams come true put in a lot of hard work and make sacrifices behind the scenes, constantly improving themselves. Shaping yourself into a smarter, faster, stronger and better version takes time, and there are a number of things that you need to do for success, even though you may not realize it yet.
1. Stay calm and composed during conflict situations
One of the first things to look for in a good leader is the ability to keep his or her composure during a high pressure situation. We can look at lions for a good example of effective leadership – the male lion is the leader of the group, even though the females do most of the hunting while he just lies around, but as soon as a large animal threatens the group the lion remains calm and deals with the threat, even if it means sacrificing his life to keep everyone safe.
Now, you shouldn't just sit there and wait for an opportunity to show off your conflict management skills, but you have learn to stay calm during arguments and crisis situations.
2. Practice good manners and always be polite
You never know when a great opportunity will present itself – you might be at a party, at a parking lot or buying groceries when you meet someone who may have a job opportunity or an interesting business proposition for you. Practising good manners will significantly improve the way other people perceive you, and by constantly reinforcing a polite and composed demeanour in your daily life, you will actually prepare yourself for professional and courteous behaviour during business meetings and negotiations.
It’s easy to allow yourself to explode at every little thing that irks you or resort to sarcasm and rudeness, but the true greats will never let their frustration or insecurities show. If everyone sees you as a reasonable, trustworthy and polite individual, many doors will open for you.
3. Be incredibly punctual and consistently productive
The main thing that separates successful people from the rest of the crowd is their ability to organize their life down to the last second and always be on time, clocking in a number of highly productive hours each day. Unfortunately, consistency is not something many people are good at.
This is why companies go to great lengths to ensure that their employees stay punctual, but if you want to build a successful career, you’ll have to find a way to develop these positive habits on your own. Even if the company has a strict attendance policy and the right software in place, you still need to go to bed on time, wake up early and stay focused throughout the day. Learning to motivate yourself to get things done when you really don’t feel like it and have a number of obstacles in your way is the most important career lesson you can learn.
4. Acknowledge your mistakes
Refusing to accept that you’ve made a mistake is not only counter-productive, but quite childish. A grown man or woman should have a firm grasp of reality and be aware of their own imperfections. Even though we can never be completely objective, we can at least admit that we have made a mistake and try not make similar mistakes next time. Accepting that you are flawed and trying to improve things about yourself that have become major character traits over time is incredibly difficult, which is why most people keep shifting blame and never grow.
5. Work hard on improving yourself in all aspects of life
While focusing on a single aspect of your life and even a single skill can help you master it faster before moving on to the next issue that needs improvement, being good at a couple of things is not going to be enough to attain true success. Communication and negotiation skills are important in practically any line of work, while dressing with style and confident body language can help you take your career to the next level regardless of skill and experience.
Taking care of your body and getting all the nutrients you need, as well as exercising, is going to boost focus, give you more energy and make you feel very confident. As you can see, reading, exercising, dieting, people skills and many other good habits all come together to create a winning mentality, and successful people strive to improve in different ways.
6. Push through failure with supreme confidence
A lot of people mistakenly assume that those rare few who achieve excellence simply have a unique combination of incredible talent and luck, which helps them get to the top without ever making any mistakes. However, while talent plays a big role, it’s actually the courage to try new things, tons of hard work and supreme confidence in yourself that are going to catapult you out of mediocrity. You have to believe that what you are doing is the best possible option if you want to be able to shrug off failures and keep moving forward.
A smart man once said: “We either win or we learn” – there is no “fail” in the vocabulary of a winner, all those minor setbacks are just lessons in the school of hard knocks. This confidence doesn’t come easy – it must be nurtured daily, by positive phrases repeated in front of the mirror and by truly believing that all the goals you have set can and will be accomplished sooner or later.
7. Come up with your own answers through tons of research and practice
Information is often served to us on a silver platter, but practical experience has shown that the easier it is to attain information, the more you should question its validity. There are tons of myths and misinformation out there, and a quick 3 minute Google search is not going to help you master any topic. You can never just take someone's word for it, it's important to read, read, and read some more.
Read from several different sources, find experts who most people in the field respect, and always try and see if the theory works in practice – your unique set of circumstances may require a slightly modified approach, and some tips might not apply to you.
8. Force yourself to take on as much work as you can handle, and then some
Making it big is not something you can do from your couch. Well, I guess you can if you spend countless hours working on your laptop on a cozy couch, but it’s still work. Entrepreneurs have it worst, but even if you work for a company, climbing the corporate ladder is no easy task.
You have to bring in lots of money or improve the efficiency at the office,become a brand ambassador on social media, work on impressing the bosses, navigate the murky waters of office politics, convince the higher-ups that promoting you will benefit them personally in some way, and find any way you can to stand out. This takes a lot of work, and a good chunk of it is not directly related to your field of expertise, so most people either crumble under the pressure or just give up and stay in the same place for years.
9. Cover all the minute details when making a plan
A regular Joe will ask a few questions about a project and create a plan of action in a few broad strokes, but a smart businessman will want to cover all the bases. Jumping head first into the deep end isn’t going to yield the greatest of results, and even if you manage to handle a situation, chances are there was a better way of doing things that you’ve missed because you failed to prepare.
10. Invest your time, effort and money into a great opportunity, even if there is no guarantee it will pay off
This is the ultimate test of willpower and passion – the willingness to go with your gut feeling and jump on opportunities, even if there is no guarantee that you will succeed. There will be plenty of high-risk, high-reward opportunities along the way, and you need to learn how to distinguish diamonds in the rough from plain old rubble, so to speak. In the beginning you'll be playing the numbers game, and for every 2-4 misses you'll hit one big project, but as you become wiser and more successful you'll be able to make calculated risks. Believing in yourself and taking chances is what will help you advance in your career.
We admire powerful and successful people, but we often fail to realize just how much work goes into making it big. All of the things in this article need to come together to pave the road to success, and it's hard to manage it all, but no one said that it was going to be easy.
www.lifehack.org
Worst Day Ever? - All Traders must read this poem
By Chanie Gorkin
Now read it from bottom to top, the other way,
And see what I really feel about my day.
Today was the absolute worst day ever
And don't try to convince me that
There's something good in every day
Because, when you take a closer look,
This world is a pretty evil place.
Even if
Some goodness does shine through once in a while
Satisfaction and happiness don't last.
And it's not true that
It's all in the mind and heart
Because
True happiness can be attained
Only if one's surroundings are good
It's not true that good exists
I'm sure you can agree that
The reality
Creates
My attitude
It's all beyond my control
And you'll never in a million years hear me say
Today was a very good day
And see what I really feel about my day.
http://www.poetrynation.com/
Quote for the day
"We are prone to overestimate how much we understand about the world and to underestimate the role of chance in events." - Daniel Kahneman
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