Posts Tagged ‘lessons’

Six Huge Lessons From 2009 We Still Haven’t Learned

Six Huge Lessons From 2009 We Still Haven’t Learned

By Joseph Stiglitz, courtesy of Clusterstock

students listeningThe best that can be said for 2009 is that it could have been worse, that we pulled back from the precipice on which we seemed to be perched in late 2008, and that 2010 will almost surely be better for most countries around the world. The world has also learned some valuable lessons, though at great cost both to current and future prosperity – costs that were unnecessarily high given that we should already have learned them.

The first lesson is that markets are not self-correcting. Indeed, without adequate regulation, they are prone to excess. In 2009, we again saw why Adam Smith’s invisible hand often appeared invisible: it is not there. The bankers’ pursuit of self-interest (greed) did not lead to the well-being of society; it did not even serve their shareholders and bondholders well. It certainly did not serve homeowners who are losing their homes, workers who have lost their jobs, retirees who have seen their retirement funds vanish, or taxpayers who paid hundreds of billions of dollars to bail out the banks.

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Seven Trading Lessons from a Legend

Seven Trading Lessons from a Legend

51T1mODeqSL._SL160_Courtesy of Quint Tatro of Tickerville, writing at Minyanville

The late Jesse Livermore is considered one of the best traders of all time. His exploits have been chronicled in several books, with the most widely read being Reminiscences of a Stock Operator (Wiley Investment Classics)by Edwin Lefevre, originally published in 1923.

Livermore was wealthy and broke several times over during his tumultuous life, which ended in his suicide. His ability to make and lose millions garnered him many lessons which the trading community have enshrined over the decades since his death. Yet these lessons and rules remain as pertinent today as they were in the early twentieth century.

We’ll take a look at several of his trading rules to remind us why we must have a plan in place before trading a dollar of our hard-earned money.

(I must give credit to the Lefevre book mentioned above, as well as Jesse Livermore: World’s Greatest Stock Trader by Richard Smitten, for the following ideas.)

Lesson Number One: Cut your losses quickly.

Nowhere is this rule more apparent than in the modern-day crash our markets experienced in the fall of 2008. For those market participants who “bought, held, and hoped,” the gut-wrenching drop left them paralyzed, disillusioned, and angry at the market. They felt like they had no control and no choice as the losses spiraled down the rabbit hole. The primary culprits of this death trap are hopeful thinking and fearful paranoia.

As a market slides lower, a trader will rationalize his losing position by either doubling down (buying more at these now-cheaper prices) or at the very least, holding on because “there’s just no way this market can go lower.” If merely this one simple rule was implemented to “cut your losses,” the vast majority of traders would be light years ahead of the crowd.

As soon as a trade is contemplated, a trader must know at what point in time he’ll be proven wrong and exit a position. If a trader doesn’t know his exit before he takes the entry, he might as well go to the racetrack or casino where at least the odds can be quantified. Trading without an exit plan is like driving a car without insurance. You might go years without a major crash, but when the crash occurs (and…
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The importance of investment process

Vitaliy: "This article I’ve shared before and will share it again; it is by far my favorite article I’ve ever written as it really highlights what investing is about – the investment process.  It is a true story, with very few magnifications on my part.  I hope you enjoy it."

The importance of investment process

investing, gamblingCourtesy of Vitaliy Katsenelson at Contrarian Edge

“Any time you make a bet with the best of it, where the odds are in your favor, you have earned  something on that bet, whether you actually win or lose the bet. By the same token, when you make a bet with the worst of it, where the odds are not in your favor, you have lost something, whether you actually win or lose the bet.” – David Sklansky, ‘The Theory of Poker’

Over a lifetime, active investors will make hundreds, often thousands of investment decisions. Not all of those decisions will work out for the better. Some will lose and some will make us money. As humans we tend to focus on the outcome of the decision rather than on the process.

On a behavioral level, this makes sense. The outcome is binary to us – good or bad, we can observe with ease. But the process is more complex and is often hidden from us.

One of two things (sometimes a bit of both) can unite great investors: process and randomness (luck). Unfortunately, there is not much we can learn from randomness, as it has no predictive power. But the process we should study and learn from.

casinoTo be a successful investor, all you need is a successful process and the ability (or mental strength) to stick to it.  Several years ago, I was on a business trip. I had some time to kill so I went to a casino to play blackjack. Aware that the odds were stacked against me, I set a $40 limit on how much I was willing to lose in the game.

I figured a couple hours of entertainment, plus the free drinks provided by the casino, were worth it. I was never a big gambler (as I never won much). However, several days before the trip I had picked up a book on blackjack on the deep discount rack in a local bookstore. All the dos and don’ts from the book were still fresh in…
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Zero Hedge

Germany Working On Deutsche Bank Rescue Plan As Lender Sells Unit To Shore Up Liquidity

Courtesy of ZeroHedge. View original post here.

Update: In an emailed statement, the German finance ministry told Bloomberg that the report on Deutsche Bank by German weekly Die Zeit “is incorrect" adding that "the federal government isn’t preparing any rescue plans. There are no grounds for such speculation.

  • GERMAN FINANCE MINISTRY DENIES DIE ZEIT REPORT ON DEUTSCHE BANK
  • GERMAN GOVERNMENT ISN'T WORKING ON BANK RESCUE PLAN: MINISTRY

Only two more denials until it is unof...



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Phil's Favorites

Robots Will Soon Take Over Building London Skyscrapers Says CEO of Large UK Construction Firm

Courtesy of Mish.

Alison Carnwath, chairman of one of the UK’s largest construction firms says the Era of Robots is at hand.

Thousands of builders will lose jobs as machines take over building London skyscrapers.

Skyscrapers in the City of London could soon be built by robots rather than by people, according to the boss of one of the UK’s biggest construction firms.

The result would be huge productivity gains as more work could be done by fewer people – but also mass layoffs as traditionally labour-intensive construction projects hire fewer and fe...



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Market News

News You Can Use From Phil's Stock World

 

Financial Markets and Economy

Japan Shares Drop as More Than Half the Topix Trades Ex-Dividend (Bloomberg)

Japanese shares fell as more than half the companies on the benchmark Topix index traded without the right to the next dividend payment.

The Story of Post-Brexit Britain, In Charts (Bloomberg)

The surprise vote in favor of the U.K. leaving the European Union on June 23 unleashed shockwaves across the global economy, wiping trillions off the value of global assets. The referendum reshaped the British political landscape, and genera...



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ValueWalk

Choosing Your Candidate: There's an App for That

By Knowledge Wharton. Originally published at ValueWalk.

Voter App

While most of people have already decided whom to vote for in the presidential election, there are still quite a few undecideds. A new app, called ‘Voter,’ promises to help bring more clarity about candidates based on their stances on issues and one’s own beliefs. The app developers say it also automates what could otherwise be a laborious process of determining candidates’ credentials and positions, and reduces human bias in the selection process.

Hunter Scarborough, the creator of the Voter app, says plans call for extending the app beyond the November presidential elections to candidates in races for Senate, House of Representatives and governors’ seats. Next, he plans to take it further to local elections such as for city councils, and may also go international. He discusses th...



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Kimble Charting Solutions

Silver facing "bunch" of resistance, sentiment lofty

Courtesy of Chris Kimble.

Below looks at a chart on Silver, dating back to the early 1970’s. Silver created an important top at $50 in 1980, did it create another important top at the same price in 2011?

CLICK ON CHART TO ENLARGE

Silver hit $50 in 2011, which was the highs back in 1980 and since then, has created a series of lower highs and lower lows.

Silver is now testing a bunch of resistance lines and its Fibonacci 61% retracement level at (1), wi...



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Chart School

RTT browsing latest..

Courtesy of Read the Ticker.

Please review a collection of WWW browsing results.



Date Found: Saturday, 26 March 2016, 02:36:15 PM

Click for popup. Clear your browser cache if image is not showing.
Comment: ZH: Its a BULLARD market, the FED jaw boning is keeping the market up!



Date Found: Sunday, 27 March 2016, 02:31:30 PM

Click for popup. Clear your browser cache if image is not showing.
Comment: RTT: World trade near 2008/09 lows. SP500 near all time highs. PLACE YOUR BETS! Roll up! Roll up!



Date Found: Tuesday, 29 March 2016, 02:42:11 PM

Click for popup. Clear your browser cach...



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OpTrader

Swing trading portfolio - week of September 26th, 2016

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Members' Corner

Market Liquidity and Macroeconomic Bullshit

 

Market Liquidity and Macroeconomic Bullshit

Courtesy of The Nattering Naybob

STJL - "Apparently macroeconomics is all bullshit – ROFL! Paging Naybob now… Famous Economist Paul Romer Says Macroeconomics Is All Bullshit."

The Nattering One muses... Macroeconomics as practiced by academics and those in charge is pure voodoo. Better to chant over goat blood, bird feathers and scattered entrails...

As for reality, overnight CNH HIBOR (...



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Mapping The Market

Here's a Cautionary Tale of Pension Privatization From Chile

Via Jean-Luc:

"When you let the free market take over, the little people get screwed and bankers get rich. Chile tried privatizing retirement plans and surprise, surprise, fund manager ate the profits… Pretty sure the results would be the same here..."  ~ Jean-Luc

Here's a Cautionary Tale of Pension Privatization From Chile

By KEVIN DRUM, Mother Jones

Among free-market fans, Chile's privatized pension plan has long been held up as a model for us to follow. The problem, as the Financial Times notes today, is ...



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Digital Currencies

Gold, Silver and Blockchain - Fintech Solutions To Negative Rates, Bail-ins, Currency Debasement and Cashless

Courtesy of ZeroHedge. View original post here.

By Jan Skoyles

I was so pleased yesterday by the announcement that I have joined the Research team at GoldCore as it meant that I could finally start talking about it and was back in a role that lets me indulge in my passion by researching and geeking out on all things gold, silver and money.

...



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Biotech

Epizyme - A Waiting Game

Reminder: Pharmboy is available to chat with Members, comments are found below each post.

Epizyme was founded in 2007, and trying to create drugs to treat patient's cancer by focusing on genetically-linked differences between normal and cancer cells. Cancer areas of focus include leukemia, Non-Hodgkin's lymphoma and breast cancer.  One of the Epizme cofounders, H. Robert Horvitz, won the Nobel Prize in Medicine in 2002 for "discoveries concerning genetic regulation of organ development and programmed cell death."

Before discussing the drug targets of Epizyme, understanding epigenetics is crucial to comprehend the company's goals.  

Genetic components are the DNA sequences that are 'inherited.'  Some of these genes are stronger than others in their expression (e.g., eye color).  Yet, some genes turn on or off due to external factors (environmental), and it is und...



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All About Trends

Mid-Day Update

Reminder: Harlan is available to chat with Members, comments are found below each post.

Click here for the full report.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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Promotions

PSW is more than just stock talk!

 

We know you love coming here for our Stocks & Options education, strategy and trade ideas, and for Phil's daily commentary which you can't live without, but there's more!

PhilStockWorld.com features the most important and most interesting news items from around the web, all day, every day!

News: If you missed it, you can probably find it in our Market News section. We sift through piles of news so you don't have to.   

If you are looking for non-mainstream, provocatively-narrated news and opinion pieces which promise to make you think -- we feature Zero Hedge, ...



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