The IRREFUTABLE LAWS of the MARKET
November 30, 2009 · By Adam ·
SIX STEPS that every trader needs to know to succeed in the markets.
Step 1: A move begins with the sponsors (smart traders) who have insider knowledge as it relates to a particular stock or market. This information will move a market up or down depending on the insiders’ information. These buyers are smart, very smart, and recognize trading/investment opportunities very early in the markup cycle.
Step 2: Days, weeks, or sometimes months after a move has started, there is a brief mention in the electronic media (radio, cable, TV) or on one of the internet chat boards that a market has moved. The public hears for the first time and begins to get interested, but does not buy.
Step 3: A blurb of information appears in print media. The move also begins getting more exposure on blogs and internet message boards. The public starts paying a little more attention, and will buy a little bit.
Step 4: Wall Street and LaSalle Street brokers go into full hype mode and hawk the market to their customers. The public begins buying in greater volume.
Step 5: A full-blown front-page article appears about the particular stock or market in one of the major financial newspapers, magazines, or financial websites. This is often six months after the fact and after a market has shown its greatest appreciation. There is often heavy public buying, even a possible frenzy, as all media, brokers, and so-called “gurus” start to tout the market.
Step 6: As step 5 gets underway, the sponsors or smart traders begin to move out of the market and take their profits off the table.
The Final Step: The move ends, the market falls, and investors lose money.
Does any of this sound familiar to you? If it does then you know the key rules of engagement in the market. If none of this is familiar to you then learn to recognize these six step asap. Your financial life depends on it!!
This is how the markets have worked since the beginning. I hope this insider market tip is of help to you.
http://club.ino.com/trading/2009/11/the-irrefutable-laws-of-the-market-3/
Monday, November 30, 2009
Avoid These Three Investment Mistakes
Avoid These Three Investment Mistakes
By Christopher Davis
On 7:00 am EST, Tuesday November 24, 2009
http://finance.yahoo.com/news/Avoid-These-Three-Investment-ms-1812220823.html?x=0
By Christopher Davis
On 7:00 am EST, Tuesday November 24, 2009
http://finance.yahoo.com/news/Avoid-These-Three-Investment-ms-1812220823.html?x=0
Friday, November 27, 2009
Dance Of The Money Bees
Dance Of The Money Bees
Friday, November 27th, 2009
Nobody goes there anymore. It’s too crowded – YOGI BERRA
It continues to amaze me to watch the Wall Street Gurus apply scientific and fundamental logic to an illogical game. Not only does this cause traders, who buy into these scenarios, to underestimate risks, it also draws a crowd into the scenario, increasing risk further. As John Train said in his book Dance of the Money Bees, “The herd instinct seems to be the strongest human emotion, one that the race is constantly breeding off as the mavericks are liquidated. Happiness is running with the crowd.”
PictureIf we place too much emphasis on the “quantifiable”, we run the risk of being blindsided by a changing world and changing markets. This upsets the balance between left brained analysis and the right brain instincts, both of which we should employ to be good traders. When we get sold on sophisticated models, that tell the future from past data, by very qualified and believable scholars, we underestimate what can go wrong.
Bennett Goodspeed in his book The Tao Jones Averages points out, “Analysis can be equated with poker. Security analysts carefully follow the table talk of the game and examine the up-cards. Although analysts effectively follow and communicate these two aspects of the game, they either ignore or ineffectively guess at the other major element-the down-cards.”
“On Wall Street what is known tends to get glorified at the expense of the unknown. We have become so caught up in our scientific methodology, that if something cannot be measured or counted, it will not be believed. As a result, we tend to adapt the world to our belief systems, rather than try to understand as it is.”
This is not to say that one should underestimate their trading plan. It means don’t buy into it. Stay flexible, and always think in terms of what can go wrong. This is especially true these days, where momentum trades and “bubbles” have become commonplace. And when the crowd shifts, be assured that the controlled logic will give way to uncontrolled emotion.
I think it pays to assume this can, and at some point, will happen. Your approach should have a “worst case” scenario, no matter how right you think you are. What if all my trades correlate and go bad all at once? What will happen to my account?
Paul Tudor Jones in Market Wizards said “the most important rule of trading is to play good defense, not great offense. Every day I assume every position I have is wrong. I know where my stop risk points are going to be. I do that so I can define my maximum possible draw down.”
“Don’t be a hero, don’t have an ego. Always question yourself and your ability. Don’t ever feel that you are very good. The second you do, you are dead.”
http://viewpointsofacommoditytrader.com/1262/dance-of-the-money-bees/
Friday, November 27th, 2009
Nobody goes there anymore. It’s too crowded – YOGI BERRA
It continues to amaze me to watch the Wall Street Gurus apply scientific and fundamental logic to an illogical game. Not only does this cause traders, who buy into these scenarios, to underestimate risks, it also draws a crowd into the scenario, increasing risk further. As John Train said in his book Dance of the Money Bees, “The herd instinct seems to be the strongest human emotion, one that the race is constantly breeding off as the mavericks are liquidated. Happiness is running with the crowd.”
PictureIf we place too much emphasis on the “quantifiable”, we run the risk of being blindsided by a changing world and changing markets. This upsets the balance between left brained analysis and the right brain instincts, both of which we should employ to be good traders. When we get sold on sophisticated models, that tell the future from past data, by very qualified and believable scholars, we underestimate what can go wrong.
Bennett Goodspeed in his book The Tao Jones Averages points out, “Analysis can be equated with poker. Security analysts carefully follow the table talk of the game and examine the up-cards. Although analysts effectively follow and communicate these two aspects of the game, they either ignore or ineffectively guess at the other major element-the down-cards.”
“On Wall Street what is known tends to get glorified at the expense of the unknown. We have become so caught up in our scientific methodology, that if something cannot be measured or counted, it will not be believed. As a result, we tend to adapt the world to our belief systems, rather than try to understand as it is.”
This is not to say that one should underestimate their trading plan. It means don’t buy into it. Stay flexible, and always think in terms of what can go wrong. This is especially true these days, where momentum trades and “bubbles” have become commonplace. And when the crowd shifts, be assured that the controlled logic will give way to uncontrolled emotion.
I think it pays to assume this can, and at some point, will happen. Your approach should have a “worst case” scenario, no matter how right you think you are. What if all my trades correlate and go bad all at once? What will happen to my account?
Paul Tudor Jones in Market Wizards said “the most important rule of trading is to play good defense, not great offense. Every day I assume every position I have is wrong. I know where my stop risk points are going to be. I do that so I can define my maximum possible draw down.”
“Don’t be a hero, don’t have an ego. Always question yourself and your ability. Don’t ever feel that you are very good. The second you do, you are dead.”
http://viewpointsofacommoditytrader.com/1262/dance-of-the-money-bees/
Tuesday, November 10, 2009
Skills, Time And Choice
Skills, Time And Choice
Tuesday, November 10th, 2009
The race is not always to the swift nor the battle to the strong, but that’s the way to bet - DAMON RUNYON
According to Wikipedia, “A game of chance is a game whose outcome is strongly influenced by some randomizing device, and upon which contestants may or may not wager money or anything of monetary value. Common devices used include dice, spinning tops, playing cards, roulette wheels or numbered balls drawn from a container. Any game of chance that involves anything of monetary value is gambling. Thus, every gamble is a game of chance, but not every game of chance is a gamble.”
So, not all games of chance are alike?
First there’s skill.
images2Well, unlike dice or the roulette wheel there are some games of chance that require a skill, like handicapping horses or trading. In essence, the roulette wheel is ultimately fate, where trading is a choice. A game where a person can polish their skills and make choices has a great advantage over a person who places a bet against certain odds, and waits for fate. After all, there are a number of professionals that make a living as card players or traders, yet few make a career out of throwing dice.
Then there’s time.
All games of chance are dominated by time. As Peter Bernstein puts it in his book “Against The Gods- The Remarkable Story Of Risk,” “Gamblers think they are betting on red or seven but in reality they are betting on the clock. The loser wants a short run to look like a long run so the odds will prevail. The winner wants a long run to look like a short run so the odds will be suspended.”
He goes on to say, “Insurance companies conduct their affairs in the same fashion. They set their premiums to cover the losses they will sustain in the long run; but when earthquakes and fires and hurricanes all happen around the same time, the short run can be very painful.”
imagesWell, that sounds familiar to a trader. Good traders know they must also be properly capitalized for the short run surprises to insure long run success. As Bernstein says, “Time is the dominant factor in gambling. Risk and time are opposite sides of the coin, for if there were no tomorrow there would be no risk. Time transforms risk, and the nature of risk is shaped by the time horizon: the future is the playing field.”
Then there’s choice.
In those games of chance where fate prevails, decisions are irreversible. We place the bet down on red and that’s it. There’s no going back. In trading however, we can sell something we just bought if we feel we made a mistake. Bernstein points out that Hamlet once said too much hesitation in the face of uncertainty is bad, “yet once we act, we forfeit the option of waiting until new information comes along. As a result, not-acting has value. The more uncertain the outcome, the greater may be the value of procrastination. Hamlet had it wrong: he who hesitates is half way home.”
Hone your skills, respect time in the game and use your ability to choose, or use the rabbits foot. Remember however, that didn’t work out so well for the rabbit.
http://viewpointsofacommoditytrader.com/1125/skills-time-and-choice/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+ViewpointsOfACommodityTrader+%28VIEWPOINTS+OF+A+COMMODITY+TRADER%29&utm_content=Yahoo!+Mail
Tuesday, November 10th, 2009
The race is not always to the swift nor the battle to the strong, but that’s the way to bet - DAMON RUNYON
According to Wikipedia, “A game of chance is a game whose outcome is strongly influenced by some randomizing device, and upon which contestants may or may not wager money or anything of monetary value. Common devices used include dice, spinning tops, playing cards, roulette wheels or numbered balls drawn from a container. Any game of chance that involves anything of monetary value is gambling. Thus, every gamble is a game of chance, but not every game of chance is a gamble.”
So, not all games of chance are alike?
First there’s skill.
images2Well, unlike dice or the roulette wheel there are some games of chance that require a skill, like handicapping horses or trading. In essence, the roulette wheel is ultimately fate, where trading is a choice. A game where a person can polish their skills and make choices has a great advantage over a person who places a bet against certain odds, and waits for fate. After all, there are a number of professionals that make a living as card players or traders, yet few make a career out of throwing dice.
Then there’s time.
All games of chance are dominated by time. As Peter Bernstein puts it in his book “Against The Gods- The Remarkable Story Of Risk,” “Gamblers think they are betting on red or seven but in reality they are betting on the clock. The loser wants a short run to look like a long run so the odds will prevail. The winner wants a long run to look like a short run so the odds will be suspended.”
He goes on to say, “Insurance companies conduct their affairs in the same fashion. They set their premiums to cover the losses they will sustain in the long run; but when earthquakes and fires and hurricanes all happen around the same time, the short run can be very painful.”
imagesWell, that sounds familiar to a trader. Good traders know they must also be properly capitalized for the short run surprises to insure long run success. As Bernstein says, “Time is the dominant factor in gambling. Risk and time are opposite sides of the coin, for if there were no tomorrow there would be no risk. Time transforms risk, and the nature of risk is shaped by the time horizon: the future is the playing field.”
Then there’s choice.
In those games of chance where fate prevails, decisions are irreversible. We place the bet down on red and that’s it. There’s no going back. In trading however, we can sell something we just bought if we feel we made a mistake. Bernstein points out that Hamlet once said too much hesitation in the face of uncertainty is bad, “yet once we act, we forfeit the option of waiting until new information comes along. As a result, not-acting has value. The more uncertain the outcome, the greater may be the value of procrastination. Hamlet had it wrong: he who hesitates is half way home.”
Hone your skills, respect time in the game and use your ability to choose, or use the rabbits foot. Remember however, that didn’t work out so well for the rabbit.
http://viewpointsofacommoditytrader.com/1125/skills-time-and-choice/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+ViewpointsOfACommodityTrader+%28VIEWPOINTS+OF+A+COMMODITY+TRADER%29&utm_content=Yahoo!+Mail
Sunday, November 8, 2009
Interview With Alice Schroeder: One Big Misconception About Buffett
Interview With Alice Schroeder: One Big Misconception About Buffett
By Mac Greer
November 6, 2009
http://www.fool.com/investing/general/2009/11/06/interview-with-alice-schroeder-one-big-misconcepti.aspx
By Mac Greer
November 6, 2009
http://www.fool.com/investing/general/2009/11/06/interview-with-alice-schroeder-one-big-misconcepti.aspx
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