tip in the pot to the top

all tips are not bad.


some are good

few are excellent.


but surprisingly

almost all

especially the ones mass circulated

seem to go in opposite direction

for some time

before they show their worth.


reason?


well,

the technical calls are based on

technicals.


good technical tips

are pro-rally

and more importantly

pro-fundamentals.


big-pocket operators

know it and see it all.


while they certainly can't ignore

the fundamentals and the rally for long

they definitely have the reason, intention and power

to rock the boat

in opposite direction

atleast for some time.


good "tipsters"

know all this.


they try to give tips

after some delay.


i.e. they don't pass on the tip

the moment one pops up!


but hold it

keep it in the "pots of ready tips"

till the tips season out

mature

age

get despirited

denatured

and

de-stinged!


once the operators are done with their tricks

the tippers

reach their golden "pots"

recheck

and release the tips!


a good tip

must go in the pot

before going to the top!

platinum rule of trading

have u ever been to pushkar?

it's famous globally
for its pushkar fair.

hundreds of shops are set up
to trade camels, horses, bulls, cows and much more.

very hard bargaining takes place.

prices as high as five times the correct price can be quoted initially!

many traders throng the place
spend a day or two
to trade the livestock.

everyone wants
the best
for the least.

every animal gets sold
except
(and this is what i want to underline)
....except
the sick ones
or the ones with some or the issue.

hardly any trader in his thinking cap
is interested in an animal
he is not sure of its survival.

but very very surprisingly
in stock market
everyday
thousands and lacs of traders
trade in (live)stocks
which are not only sick
but seriously sick.
some are
shockingly
terminally sick!

since nobody can see the stock
unlike a horse or a cow,
hardly any amateur retail trader
bothers to check the health
of the stock he or she
is going to trade.

the result?

operators play their tricks
and the innocent traders
get trapped
amidst sick stocks
with little or no chance
of returning to health
atleast not so soon!
they are left with no choice
except to either keep bleeding
or book loss.

so,
here is the lesson
a crucial critical one
- never trade in fundamentally weak stocks
always trade in fundamentally strong ones.

so that
even if the operators play their games
(which they will)
you will still be
amidst
healthy camels
with enough "water"
to survive any desert.

trading in sick stocks
(fundamentally weak)
is like
swinging on the circus ropes
without safety net.

trading in weak stocks
is like playing
the devils game
with the devil.

think medium, think small, look deep in the crowd

indian large caps have grown big
they are clueless about how to get next bout of big growth.
they can't grow bigger
unless they go global big time
or government unleashes next round of liberalisation.
none seems easy at this moment.
they seem to have fatigued.
they don't seem to be going anywhere.
--
this is the time
when
out of the big weary crowd
next largecaps pop out
from amidst the midcaps
and
next midcaps pop out
from amidst the small caps.
--
while existing sectors are not growing
only yo-yoing
newer segments
and niche segments
are about to greenshoot.
--
get ready
for the next big big wave
from the most unexpected quarters.
--
even i don't know what it will be
but i am ready
to recognize it
as it happens.

fundamental bites

---------------------

per capita consumption of paints in India is very low at 1.5 kgs/year compared to 15-20 kgs in developed countries.

when seen in context of india's population, the numbers are mind boggling.

big big long term upside in good paint companies. lot of growth opportunities.

11 laws of averaging declining stocks

1. average only the fundamentally strong stocks. never average the weak.

2. time the averaging on the basis of technical indicators.

3. never average blindly the losers. all losers are not worth averaging. fundamentally weak should be handled as per the law 4.

4. average the fundamentally strong losers by selling the fundamentally weak losers.

5. averaging is not bad. rather, it is an opportunity. you get an opportunity to accumulate more of the good stock at even lower price.

6. never average if you want quick results. don't average for the short term.

7. don't average if you can't digest the stock slipping further.

8. never average in one go. average in steps.

9. don't hesitate to average the fundamentally strong stocks even in bear markets.

10. there is no end to the number of times you can keep averaging a fundamentally strong stock. provided, ofcourse, your judgement of the fundamental strength of the stock is correct.

11. never average in f&o. average only in delivery.

point of smooth sailing

i constantly try to figure out
how the market can trick or fool
the majority of investors.

then after the majority have been fooled
i get in
at what i call
the 'pointof smooth sailing.'

a so-called failed signal
can actually be the beginning of
a more complex pattern
that is far more reliable
than the initial signal
based on a conventional pattern.

- mark minervini

1325 trading wisdom quotes

http://www.scribd.com/doc/59950770/Trading-Wisdom-Quotes

thinking like a trader

"trading
distilled down to its simplest form
is a pattern recognition numbers game.

we use analysis to identify patterns,
define risk
and determine profit targets.

the trade works or it doesn’t.

in either case we go on to the next trade.

this is simple to conceive difficult to do.

trading is hard
because you must operate in a state of
not having to know,
even though your analysis may at times
prove you to be correct. "

- trading in the zone
mark douglas

needless dog fight

you are walking thru the street
you see a dog
as the distance decreases
you feel threatened
you pick up a stone
on seeing the stone in your hand
the dog too feels threatened
he can't pick stone
he doesn't prefer running away
he doesn't need to
because he has got teeth
and you've got the fear.

you get nervous
and release the stone
the stone misses the dog
but the dog doesn't miss you.

same thing happens
between you
and the market.

what is never a threat
just a routine fluctuation
turns into a face-off
courtesy your inherent fears

with obvious result.

in the words of mark douglas

"any exceptions that exist in your mind
will be a source of conflict
and may cause you
to perceive market information as threatening.
....free-flowing carefree state of mind is ideal for trading"

technical patterns are probability edges not certainties

"at the most fundamental level
the market is simply a series of
up and down tics that form patterns.

using technical analysis
you can begin to define these patterns as edges.

any pattern defined as an edge
is simply an indication that there is a high probability
that the market will move in one direction or another.

the repeating patterns imply consistency
but the reality is that each pattern is unique.

the underlying force behind each pattern is traders,
and traders that contribute to the current pattern
are different from the traders that formed any previous pattern."

- trading in the zone
mark douglas

a professional trader's secret

- have a method, an edge

- keep taking every trade indicated by this "edge"

- since the trade is based on a proven seasoned "edge" and since you know that anything can happen in a given trade, and since you also know that irrespective of the outcome of this trade you are bound to make good money if you keep following your "edge" without anxiety in the long run, stay in the trade till it is "definitely wrong".

- take the next trade irrespective of the outcome of previous trade.

- if the edge is right, by probability, you will make good money in the long run.

- do all this with a trade size just right for sound sleep at night.

these formulae are based on the following five fundamental truths
given by mark douglas
in
trading in the zone

1. anything can happen.

2. you don’t need to know what is going to happen next in order to make money.

3. there is a random distribution between wins and losses for any given set of variables that define an edge.

4. an edge is nothing more than an indication of a higher probability of one thing happening over another.

5. every moment in the market is unique.  

predicting trading success amidst unpredictablility

"how does one produce
consistent results from an uncertain probabilistic outcome?  

this is another paradox of trading,
random outcome consistent results.  

first you have to believe
in the uncertainty and unpredictability
of the outcome of each individual trade.

second you have to believe
that the outcome over a series of trades
is relatively certain and predictable.  

this degree of certainty is a
function of how good the edge is.  

you must learn and completely accept the fact
that you don’t know what will happen next,
and in fact don’t need to know,
in order to be consistently profitable.

since you don’t have to know the outcome of each trade
you do not place any significance, emotional or otherwise,
on each individual trade."

- trading in the zone
mark douglas

the new trade

"consider the perspective
of a successful trader
observing a nervous beginner.

say a trader experiences a series of losing trades,
thus he is hesitant to take the next signal.

the professional trader would consider the novice traders fear
as irrational
as the “now moment” opportunity
has nothing to do with the last few trades.

each trade
is simply an edge
with a probable outcome
and is independent of every other trade."

- trading in the zone

mark douglas

no gain with pain

"top traders do not perceive anything about the markets as painful;
therefore no threat exists for them.

no threat means nothing to defend against.

nothing to defend against means
there is no reason for your conscious and subconscious defense mechanism
to be activated.

to obtain this mind set you have to redefine your relationship to market information
so that there is little or no potential to perceive anything as threatening.

this new mind set will allow you
to remain focused on the opportunities available
instead of tapping into emotional pain. "



- trading in the zone
mark douglas

the last bug in the trading software

(excerpts from Trading in the Zone)


"a state of mind, or perspective is like software code.

you may have several thousands of lines of perfectly written code
with only one flawed line or character.

this one flaw
in relation to the rest of the code
could ruin or alter the performance of an otherwise perfectly written system.

the solution appears simple:
fix the misplaced character and everything runs smoothly.

however, finding the error
or even knowing it exists
can take considerable time and expertise.

when it comes to the ideal trading mentality
everyone is a certain psychological distance away.

virtually everybody starts out with flawed software.

as your perspective shifts
and/or you integrate new beliefs regarding responsibility and risk,
this shift would be the equivalent of finding
the flawed line or character in your mental software
and replacing it with something that works.

this internal shift is often described as the “ah ha” experience......

typically you might think

“it was right in front of me the whole time, i just didn’t see it”,

or

“it was so simply why couldn’t i see it?”

you are trapped !

"most traders believe
that the best way to avoid losses and emotional pain
is to learn more about the markets.

this bit of logic is a trap and presents another paradox.

the more you learn about the markets
the more you realize there are too many variables,
often conflicting.

in addition, there are no limits to the market’s behavior.
it can do anything at any moment.

this means that no matter how much you learn about the market’s behavior,
no matter how brilliant an analyst you become,
you will never anticipate every possible way
the market can make you wrong
or cause you to lose money.

if you are afraid of being wrong or losing money
you will never learn enough
to compensate for the negative effects
these fears will have on your ability to trade objectively and without hesitation.

the hard cold fact of trading is that every trade has an uncertain outcome.

unless you learn to completely accept the possibility of an uncertain outcome
you will try consciously or unconsciously
to avoid any possibility you define as painful."


- mark douglas
(trading in the zone)

fears of height, fear of drowning

these observations may need further study
but
i have noticed
that those traders who have "fear of height"
in their lives
book bull-side profit early
and take pre-mature short positions.
they find it extremely difficult
to enter at higher "altitudes" of markets
and chicken out
even at the slightest correction.

similarly,
those trades
who don't know swimming
and have fear of drowning
or
those who have fear of being left alone behind
or
those who fear darkness
in their lives,
book bear-side profit early
and take pre-mature short positions.
they find it extremely difficult
to enter short positions
at lower depths
and chicken out
even at the slightest bounce-backs!

confront your fears
and trade normal.

shut it, forget it

if
after entering a trade
you feel nervous
or scared
or unsure
or tense
pl come out.

on the contrary,
if
after entering the trade
you truly feel like
"shut it, forget it"
irrespective of what the market immediately does
you have
what it takes
to be a pro!

show some attitude

what is 'attitude'?


it is an individual's degree of like or dislike for something.


attitude is an individual's emotional response to a thing or situation.


attitude shows up in behaviour.


--


when a trader has taken a considered long position


and the market starts slipping


his attitude shows


what real stuff he is


and how successful a trader he is!


--


attitude of fear, suspicion or self-doubt is a sure sign of trouble


attitude of knowledgeable smiling indifference is magical !


more than technicals or fundamentals


successful trading is  primarily a psychological struggle.


--


when the market shows "attitude"


show some of it back!!!

who is scared?

"papa, why is the market behaving like this?

"to catch our attention, kid!"

"why does the market want our attention, papa?"

"because it can't scare us till we pay attention?"

"why does it want to scare us?"

"because it is itself scared?"

"why is it scared?"

"because it knows we are right!"

war and peace

"you are losing money!"

"see, you are losing money!"

"you are losing!"

"you are wrong!"

"wrong, wrong, wrong!!!"

"loss, loss, loss!!!"

"losing money!"

"you have left money on the table"

"you have missed out"

"you are left out"

"left out! left out"

"money, money, money"

........some of the noises

that play in the head of an unstable trader

but are absent

from that of a professional.

how to kill fear of trade!

fear blocks knowledge

so, operators use fear.

--

as aristotle said,

"nobody loves the man whom he fears."

same is true for trading also

"nobody loves the trade which he fears."

--

but the reverse is also brutally true

"nobody fears the man whom he loves"

and

"nobody fears the trade which he loves"

--

the biggest risk

"if you are not able to put on a trade
without the least bit of emotional discomfort
then you have not learnt
how to accept the risks inherent in trading.

this creates a major paradox because
to whatever degree you have not accepted the risk
is the same degree to which you will avoid risk

trying to avoid something that is unavoidable
will have disastrous effects
on your ability to trade successfully.

when you have learned the skill of risk acceptance,
the market will not be able to generate information
that you define or interpret as painful.

learning to accept risk is a trading skill, the
most important skill you can learn."

- (trading in the zone)

================================

not taking risk can be the biggest risk a trader takes!

accepting risk

trading is risky.

so, all traders, by that definition, can claim to have taken risk.

but there is difference between

'taking' risk

and 'accepting' risk.

if you 'take' risk without 'accepting' what all can come with it

you are fake

and destined to be knocked out

by market forces.

but, on the contrary

if you enter a trade

while 'accepting' the risk and hence the likelihoods

you can withstand the market stress

and survive its bluffs.

consistency

you can't be 

consistently profitable

in trading!

but you can

definitely be

consistently net-profitable

in trading!!!

and that

should be

your aim.

trading in the zone (summary of ebook)

http://tradersbase.com/backup/ebooks/summarytradinginthezone.pdf

trading commandments from a samurai

trading is a lonely war
fought by we traders
everyday!

given below are some select precepts
from
The Dokkodo ("The Path of Aloneness" or "The Way to be Followed Alone")
written by Miyamoto Musashi
a great sumurai warrior
a week before he died in 1645.

after every commandment
i have given my interpretation/adaptation of it
for trading.

==

1. “Accept everything just the way it is.”
= accept the market reality in front of you.

2. “Do not seek pleasure for its own sake.”
= don't trade for pleasure

3. “Do not, under any circumstances, depend on a partial feeling.”
= don't jump or out of trade on shallow half-baked impulsive feelings.

4. “Think lightly of yourself and deeply of the world.”
= don't take your trading skills too seriously, take the ability of market to surprise seriously.

5. “Be detached from desire your whole life long.”
= make money, but don't let money make you.

6. “Do not regret what you have done.”
= smile at your mistake, laugh off your profit.

7. “Never be jealous.”
= what you've got is good and enough and incomparable

8. “Never let yourself be saddened by a separation.”
= a loss is never final. it either stays back as lesson or returns as profit.

9. “Resentment and complaint are appropriate neither for oneself or others.”
= accept the reality, keep the power with yourself by not complaining.

10. “In all things have no preferences.”
= don't measure your profit or loss, just measure them by the lesson or experience.

11. “Do not act following customary beliefs.”
= dare to think!

12. “Do not collect weapons or practice with weapons beyond what is useful.”
= a handful of tools are enough if you are willing to submit.

13. “Do not fear death.”
= do not fear unforeseen loss.

14. “Do not seek to possess either goods or fiefs for your old age.”
= don't trade under pressure to accumulate profit. if you remain alive, markets will always be there. just keep learning the game.

15. “Respect Buddha and the gods without counting on their help.”
= respect luck, acknowledge god's blessing, but don't drag them in the market.

16. “You may abandon your own body but you must preserve your honour.”
= loss is honourable if the fighter is worthy.

17. “Never stray from the Way.”
= rise again!

mental-trading

"successful traders possess rich mental maps

- all successful trading boils down to

pattern recognition

and the development of mental maps

that help us translate our perceptions of patterns

into concrete trading behaviors.

without such mental maps,

traders become lost in complexity."


Brett N Steenbarger, Ph.D.

japanese candlestick charting techniques (ebook)

http://www.4shared.com/get/yOLV1cNR/Japanese_Candlestick_Charting_.html

how mindset effects understanding and action

http://media.wiley.com/product_data/excerpt/33/15766037/1576603733-97.pdf

cheetahs and sparrows

(excerpts from interview with mark weinstein)

"........i have a real fear of the markets.

i have found that the greatest traders are the ones

who are most afraid of the markets.

my fear of the markets has forced me

to hone my timing with great precision.

when I am trading properly,

it is like a pool player running racks.

if my gut feel of market conditions is not right,

i don't trade.

my timing is a combination of experience

and my nervous system.

if my nervous system tells me to get out of the position,

it is because the market action triggers something in my knowledge

and experience that I have seen before.

i also don't lose much on my trades,

because I wait for the exact right moment.

most people will not wait for an environment to tip itself off.

they will walk into the forest when it is still dark,

while I wait until it gets light.

although the cheetah is the fastest animal in the world

and can catch any animal on the plains,

it will wait until it is absolutely sure it can catch its prey.

it may hide in the bush for a week,

waiting for just the right moment.

it will wait for a baby antelope,

and not just any baby antelope,

preferably one that is sick or lame.

only then, when there is no chance it can lose it's prey,

does it attack.

that, to me, is the epitome of professional trading.

when I trade at home, I often watch the sparrows in my garden.
when feed them bread, they take just a little piece at a time

and fly away.

they keep on flying back and forth, taking small bits of bread.

they may have to make a hunderd stabs at a piece of bread to get what a
pigeon gets at one time,

but that is why a pigeon is a pigeon.

you will never be able to shoot a sparrow,

it is just too fast.

that is the way I day trade."

(the cheetah is the analogy to position trading
and the sparrow for day trading.
both animals will wait for the can't-lose circumstances.)

trading essentials - I

"being wrong is acceptable.

but staying wrong is totally unacceptable.

being wrong isn’t a choice,

but staying wrong is.

to play any game successfully,

you have to have some skill,

an edge,

but beyond that it is money management.

good traders manage the downside;

they don’t worry the upside."


- mark minervini

who bought whom?

traders lie

when they say

"i have bought so and so shares"

or

"i have shorted so and so stock"

in reality

the trader has not bought the shares

the shares have bought the trader.


the trader has not shorted the stock

the stock has shorted the trader.



this is the only explanation that can be given

to justify the trader behaviour

when he keeps clinging on to

a sinking stock

unless ofcourse,

like the captain of a sinking ship

he is the promoter of the company.

(even promotors these days

are found to have "pledged out"

their stake!)

psychology of tippers - II

(reminiscences of stock operator)



"tips! how people want tips!

they crave not only to get them

but to give them.

there is greed involved, and vanity.

it is very amusing, at times, to watch really intelligent people

fish for them.

and the tip-giver need not hesitate about the quality,

for the tip-seeker is not really after good tips,

but after any tip.

if it makes good, fine!

if it doesn't, better luck with the next.

..........tip-seekers and tip-takers are invariably tip-passers,

tip-broadcasting becomes a sort of endless chain advertising."

psychology of tippers

(reminiscences of stock operator)



"i sometimes think

that tip-takers are like drunkards.

there are some who can't resist the craving

and always look forward to those jags

which they consider indispensable to their happiness.

it is so easy to open your ears

and let the tip in.

to be told precisely what to do to be happy.

it is not so much greed made blind by eagerness

as it is hope bandaged by the unwillingness to do any thinking."

opening and closing ceremonies

the olympics

start with a opening ceremony

and

end with a closing ceremony.



but bull runs

and bear runs

don't start or end

with any such ceremonies.



in the words of jesse livermore



"market does not culminate

in one grand blaze of glory.

neither does it end

with a sudden reversal of form.

a market can and does often cease to be a bull market

long before prices generally begin to break."



why does this happen?



this particularly suits the oeprators.

any sharp start

or end

would rob them of the opportunity

to distribute and accumulate.

not a friend in need

"what does a man do

when he sets out to make the stock market

pay for a sudden need?

......he merely hopes.

.....he gambles.

he, therefore, runs much greater risks

than he would

if he were speculating intelligently,

in accordance with opinions or beliefs

logically arrived at

after a dispassionate study of underlying conditions.



to begin with,

he is after an immediate profit.

he cannot afford to wait.

the market must be nice to him at once, if at all.

he flatters himself............

.............it certainly is no way to trade. "



- reminiscences of a stock operator

die early, die rich!

recently

i came across a phrase

which initially disturbed me.

"trader who died rich

is the one who dies early."

even livermore died broke!

--

what's the logic behind the above
seemingly un-nerving phrase?

should we not trade?

is trading useless?

i don't think so.

i searched for a suitable answer.

and after some deliberation

i found one.....

---------

if one makes millions from trading

and keeps trading like jesse livermore

he is bound to succumb to

some unguarded moment

and lose it all.

but

on the other hand

if a successful trader

after making millions

was to turn into an investor

he is assured of dying rich

(if at all he ever dies).

never buy too cheap too easily

while going thru

"reminiscences of a stock operator"

i came across a line

"i don't buy any stock too cheap too easily".

i was surprised!

i tried but couldn't digest it.

how can someone say no to buying something too cheap and too easily?

the more i tried to understand the reason behind this

the more it eluded me!

had the statement come from a modern-day business-channel expert

i would have moved on long ago.

but since it came from

"boy plunger"

after traversing some 100 years

i was desperate to get behind the veil of the statement.

i kept wrestling with the question

and finally cracked it.

--

why do we buy a stock?

so that it goes up

and we finally sell it at a higher price

and make profit.

--

what livermore wanted to say was

that till the falling stock actually stopped falling

consolidated

and started to climb again

there was little chance that it wouldn't fall more!

and hence, no point buying it.

and when it finally showed strength

and started to move up

it would be a worth buying.

but by then

it wouldn't be at its cheapest price

besides being less comforting a buy

than when at its lowest!

--------

to quote livermore further

"stocks are never too high to buy or too low to sell."

and

"it is surprising

how many experienced traders there are

who look incredulous

when i tell them

that when i buy stocks for a rise

i like to pay top prices

and when i sell i must sell low or

not at all."

fed-up with trading mistakes?

fed-up with trading mistakes?

read this

"if a (trader) is both wise and lucky,
he will not make the same mistake twice.
but he will make
any one of the
ten thousand brothers or cousins
of the original (mistake).

the mistake family
is so large
that there is always one of them around........."

- reminiscences of a stock operator

----------

forget about unintentional mistakes

just like

great tennis players forget about

unforced errors.

even champions tennis stars can't eliminate unforced errors

just like champion traders can't eliminate mistakes.

focus, instead,

on forced winners

and triumph!

thank god, they are not like traders!

have you ever tasted
himachal apples?

juicy, crisp, tasty!!!

it is july
and by the end of this month
first batches of apples
will start arriving in the markets.

the other day
i was wondering
what would happen
if apple orchardists
behaved like amatuer stock traders?

let me explain.

flowers appear on apple trees
by april end.
gradually
buds pop out of these flowers
and start growing into apples.

during this four month journey
from flowering to full grown apples
there is always a danger of the tiny fruits
getting knocked down
by hail storms.

on an average
four to five serious hailstorms come
in these four months.

everytime
it appears
that the upcoming fruits will be destroyed by the hail bullets
and yet
almost always
they survive
and finally grow into
red or golden balls of juice
having weathered many a storms!

i wonder
what would happen
if out of fear of hailstorms (corrections amidst secular trends)
the orchardists
like amateur traders under panic
were to pluck (square-off)
all their apples
while they were still
of size less than lemons!

they would obviously be left with
apples fit only for
pickles!

trader hallucinations

abraham maslow said

"if all you have is a hammer, everything looks like a nail"

in stock market

if continuation triangle is all you've got

every price formation will tend to be forming one.

if rsi is what you've worked hard at

every dot on the paper seems like a failure swing point.

--

how many times does it happen

that we try to force see a price pattern

which is "not there"!

how many times does it happen

that we jump to a conclusion

or decode "what the pattern is trying to tell us"

only to be left looking like a fool!

we see what is not there.

we see what we want to see

we want to see what we know.

we don't want to see what we don't recognize!

--

in the words of livermore

"it is never wise for a speculator to fit his facts to his theories."

instead of fitting the facts to theories

or extracting new theories out of facts

it is better to ask just one thing

whether the undercurrent is

up or down or sideways?

if it is sideways

remain on the sidelines.

otherwise, go with the flow.

--

in the words of livermore

".......determine the speculative line of least resistance.....
prices, like everything else, move along the line of least resistance. they will do whatever comes easiest, therefore they will go up if
there is less resistance to an advance than to a decline; and
vice versa."

a strange way of stock picking - II

"it was an old trading theory of mine

that when a stock crosses 100 or 200 or 300

for the first time

the price does not stop at the even figure

but goes a good deal higher,

so that if you buy it as soon as it crosses the line

it is almost certain to show you a profit.


timid people don't like to buy a

stock at a new high record.

But I had the history of such

movements to guide me."



- reminiscences of a stock operator

when to buy the declining stocks?

"first they sink to the bottom.

then they come up;

but not right away.

they've got to be good and dead a couple of days.

it isn't time for these corpses to rise to the surface.

they are not quite dead yet."


- reminiscences of a stock operator

judgment day

be it the selection of stock

be it the entry point

or the exit point

be it the trade size....

everything related to the trades we take

is dictated by the pressures all around us.

sudden volume surge....

conflicting expert opinions.......

peer pressure........

euphoria.....

panic.....

logics...

etc.

everything

except

our own judgement.

--

result is in front of us.

--

fortunately

here is a sane advise from

'Reminiscences of a Stock Operator'



"a man must believe in himself

and his judgment

if he expects to make a living at this game.

without faith in his own judgment

no man can go very far in this game!"

don't expect big money from trading if

do you want big money from your stock market endeavour?

seems a silly question!

but somehow, i don't think so.

reason?

because, while it seems that every "trader" in the market

"desires" big money

but is perfectly ok with whatever he or she gets

if at all.

desiring something and actually working consciously for it

are two totally different things.

market doesn't owe you any money.

--

in the words of jesse livermore

"it is the big swing that makes
the big money for you."

but big moves are nothing

but a series on medium size moves

punctuated with intermittent corrections

and pauses.

majority traders get-off at these scary points

and hence never get that big move.

--

10 one centimeter long trades

don't give the same result

as 1 ten centimeter long trade

marked with corrections and pauses.

why?

first, 10 one centimeter long trades never happen

because of the 'one centimeter' mindset.

second, a lot happens in-between

when you get-off the train.

either you are unable to catch it again

or do it all at wrong time, at wrong cost.

--

almost all the traders i meet, see, hear, read and know

have all been strugglers since years

because they somehow never got the big swings under their belt.

either they didn't plan to look for big swings

or they simply couldn't ride them due to fear or greed or trading ability.

--

big time trading success

is nothing but

successfully acquiring the ability

to ride

big trend swings.

what's your mindset?

scalping
= pocket money mindset

day trading
= salary mindset

entering trade without checking the trend
= gambler mindset

entering trade anticipating a trend / trend change
= shopkeeper mindset

entering trade after confirming trend and remaining in the trade till first correction
= trader mindset

remaining in the trade till the trend continues despite intermittent correction
= businessman mindset

remaining with the stock till the business keeps growing
= wealth creator mindset

should technical traders be bothered about fundamentals?

yes and no.

yes, because you come to know which tantrum of indicator to react to

and which to ignore.

you know the broader logic and winds.

--

no, because the fundamentals

(including the perception of the fundamental

and the unknown, unrevealed, hidden causes)

are priced in the chart.

any further weighing in of the fundamentals

over and above what the indicators are saying

can cause

overemphasis

and hence

over-reaction.

--

technical traders should trade

purely on the basis of the technicals

read under the light of broader fundamental currents.

fundamental sense will help you identify

which indicator indications to ignore.

--

in the words of

lawrence livingstone

in

Reminiscences of a Stock Operator



"there is always a reason for fluctuations,

but the tape does not concern

itself with the why and wherefore.

It doesn't go into explanations.

I didn't ask the tape why when I was fourteen, and

I don't ask it today, at forty.

The reason for what a certain stock does today

may not be known for two or three days,

or weeks, or months.

But what the dickens does that matter?

Your business with the tape is now -- not tomorrow.

The reason can wait.

But you must act instantly or be left.

Time and again I see this happen.

You'll remember that Hollow Tube went down

three points the other day

while the rest of the market rallied sharply.

That was the fact.

On the following Monday you saw that the directors passed the dividend.

That was the reason.

They knew what they were going to do,

and even if they didn't sell the stock themselves they at least didn't buy it.

There was no inside buying;

no reason why it should not break. "

slow motion, fast forward

investing is
trading
in slow motion.

trading is
investing
in fast froward.

if you keep this in mind
you will be
relaxed
and can make
better decisions
in both these games.

right, but not profitable enough?

"although i often was 100 per cent right on the market
that is, in my diagnosis of conditions and general trend
i was not making as much money as my market "rightness" entitled me to.

why wasn't i?

there was as much to learn from partial victory as from
defeat.

for instance,
i had been bullish from the very start of a bull market,
and i had backed my opinion by buying stocks.

an advance followed,
as I had clearly foreseen.

so far, all very well.
but what else did i do? why?

i listened to the elder statesmen
and curbed my youthful impetuousness.

i made up my mind to be wise and play carefully, conservatively.

everybody knew
that the way to do that
was to take profits
and buy back your stocks on reactions.

and that is precisely what i did,
or rather what i tried to do;

for i often took profits
and waited for a reaction that never came.

and i saw my stock go kiting up ten points more
and i sitting there with my four-point profit
safe in my conservative pocket.

they say you never grow poor
taking profits.
no, you don't.
but neither do you grow rich
taking a four-point profit
in a bull market."

--


Reminiscences of a Stock Operator
by Edwin Lefèvre