Posts Tagged ‘emotion’

Get An Emotional Margin of Safety

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Get An Emotional Margin of Safety

emotional investing, stock market

Courtesy of Tim of The Psy-Fi Blog

Businesslike Investment

Warren Buffett states, quite frequently, that the most important investment statement ever made was that of his mentor, the father of value investing, Ben Graham:

"Investment is at its most intelligent when it is most businesslike"

Now if you’ve ever wondered exactly what that means you’re not alone. But it’s really one of the most important business lessons any of us can ever learn. It encapsulates the idea that investment isn’t about individual subjective feelings but about general objective rationale. To be good investors we need to learn to control our emotions. Unfortunately it’s got a bit more difficult since Graham first wrote those words.

Unemotional Investment

We find Graham’s statement difficult to understand because we don’t understand Graham’s – or Buffett’s – viewpoint. Although both men are amongst the best communicators the world of top-class investment has ever thrown up they still sit in the rarefied atmosphere of that elite group of investors who are able to step away from their own emotions when they come to investing.

By “businesslike” Graham meant “unemotional”. At the root of all good investment, he believed, was a focus on the underlying numbers. Graham, far more so than Buffett, was focused on the investment ratios and balance sheets of his investments. To be “businesslike” the individual investor needs to ruthlessly focused on the numbers, not the stories associated with them. Thus Graham and Buffett aim to remove the behavioural biases that affect most investors.

Of course, there’s no doubt that there are a select group of people who are more easily able to ignore the impact of group psychology than the rest of us. It’s possible – even probable – that the great investors of the world are simply psychologically unusual people who are capable of ignoring the impact of normal behavioural biases. These people are so rare that it would be interesting to take one of them and wire up their brain to a computer to see whether their responses are different from that of normal humans. Only trouble is they’re so rich that they can employ really big bodyguards and generally reckon their brains are their own concern.

Emotionless Delusions

Antonio Damasio has conducted lots of research
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Money Management: The Key To Survival

Excellent Money Management Advice, via Karl Denninger at The Market Ticker

Money Management: The Key To Survival

punishmentMany people have had some horrifying punishment meted out to their accounts the last couple of months (and especially in the last month), just like many did in late 2008 and early 2009 (on the other side of the trade.)

This is what happens when you don’t use sound money management:

As you know, during the crash of 2008 I was away from trading due to an accident and I was fortunate to have someone like Atilla to take care of my account which was worth about 350K at the end of August 08.

Market crashed and the person I trusted my account when I was away turned out to be one of the very few in financial world who called and traded the crash of 2008 timely. Later when I reviewed my statements I saw ES and option trades that made more than 70 points in less than 20 minutes on September 30 or October 1.

When I was back, I had an account worth near 4M and I decided to open a restaurant in NYC. I quickly found out that even Manhattan wasn’t immune from financial tsunami, so I was back to trading. With a larger than ever account. With a gross confidence, with a pride to be in the other class. A new player in a new game. However learning process became expensive.

When I switched from short term to intermediate term trading, I thought the only thing that matters is time frame. No I was wrong. This was completely a new game.

Yesterday was the day I could not hold on to my mistakes. I called the person who made me millions during the crash, who I tried to follow after the crash.

That’s $350,000 -> $4,000,000 -> $0

Look, we all take losses as traders.  I don’t care how right you are today, some day you will be wrong.  Badly wrong.

Leverage + too big of a bet + failure to segregate speculative accounts from core capital = you will eventually die.

Every time.

Not some times.

Every time.

Jesse Livermore blew himself up more than once, failing to protect fortunes he made trading that reached as high as $100 million during
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Zero Hedge

No, Robots Cannot Replace Us

Courtesy of ZeroHedge. View original post here.

Authored by Per Bylund via The Mises Institute,

Automation seems to be a never-ending source of fear-mongering. Judging from the commentary, robots will “replace us” and cause large-scale unemployment. With the entry of artificial intelligence (AI), and robots that make robots, the value of human beings as productive forces in the economy is simply zero. People then become value-less consumers, only “mouths to feed” while production is carried out by machines.

...



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Phil's Favorites

Breakout

 

Breakout

Courtesy of 

There’s a new kid on the block. Innovator’s IBD® Breakout Opportunities ETF, ticker BOUT.

The goal of this fund is to identify stocks before they break out. Basically, they’re delivering on a style of technical analysis via machine, which I find intriguing.

When I was trading stocks, I would often buy on the breakout and then sell on the retest. Over and over I would let my emotions get the best of me. Needless to say, it was not a profitable strategy.

Theoretically, an algorithm will eliminate some of these biases that all traders have to overcome. Below is ...



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Kimble Charting Solutions

Connect Series Webinar September 2018

Courtesy of Chris Kimble.

We cover dominating patterns in major global Indices, sectors, commodities and the metals markets.  We produce chart pattern analysis and empower people to improve entry and exit points.

To become a member of Kimble Charting Solutions, click here.

...

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ValueWalk

Global Return August 2018 Commentary: Thinking Differently

By Jacob Wolinsky. Originally published at ValueWalk.

Global Return Asset Management commentary for the month ended August 31, 2018; discussing Yahoo’s business model.

Dear Friends,

For the month of August, we generated a net return of 2.09%.1 We ended the month with 18% of assets in cash and had a net market exposure of 29%.

Q2 hedge fund letters, conference, scoops etc

Below is a new section we’re calling...

Think Differently

The purpose of this section is to...



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Insider Scoop

Discovery Communications' 20% Gain Difficult To Justify, Pivotal Says In Downgrade

Courtesy of Benzinga.

Related DISCA Benzinga's Top Upgrades, Downgrades For September 18, 2018 A Peek Into The Markets: US Stock Futur...

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Members' Corner

Nike, Colin Kaepernick and the pitfalls of 'woke' corporate branding

 

Adding this article to Members Corner, in case anyone wants to share their opinions on Nike and Kaep, or on divisiveness in general. Also see the article I mentioned in the comments section, "A Warning From Europe: The Worst Is Yet to Come" and What’s behind the current wave of ‘corporate activism’? ~ Ilene

Nike, Colin Kaepernick and the pitfalls of 'woke' corporate branding

Courtesy of Simon Chadwick, University of Salford...



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Biotech

Gene-editing technique CRISPR identifies dangerous breast cancer mutations

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

 

Gene-editing technique CRISPR identifies dangerous breast cancer mutations

Breast cancer type 1 (BRCA1) is a human tumor suppressor gene, found in all humans. Its protein, also called by the synonym BRCA1, is responsible for repairing DNA. ibreakstock/Shutterstock.com

By Jay Shendure, University of Washington; Greg Findlay, ...



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Chart School

Gold stocks, Elliot Wave and Volume

Courtesy of Read the Ticker.

Whom ever paints the chart with Elliot wave always has to try and sideline their bias. Elliot wave can work when it applied correctly and the chart is friendly to receive its application.

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Fundamentals are important, and so is market timing, here at readtheticker.com we believe a combination of ...

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Digital Currencies

A history of Bitcoin - told through the five different groups who bought it

 

A history of Bitcoin – told through the five different groups who bought it

GeniusKp/Shutterstock.com

Courtesy of Dave Elder-Vass, Loughborough University

The recent fluctuations in Bitcoin’s value are just the latest in a series of spectacular peaks and troughs since it was created in 2009. (Though its price has been falling recently, it remains five times higher than last April, before the l...



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Mapping The Market

Mistakes were Made. (And, Yes, by Me.)

Via Jean-Luc:

Famed investor reflecting on his mistakes:

Mistakes were Made. (And, Yes, by Me.)

One that stands out for me:

Instead of focusing on how value factors in general did in identifying attractive stocks, I rushed to proclaim price-to-sales the winner. That was, until it wasn’t. I guess there’s a reason for the proclamation “The king is dead, long live the king” when a monarchy changes hands. As we continued to update the book, price-to-sales was no longer the “best” single value factor, replaced by others, depending upon the time frames examined. I had also become a lot more sophisticated in my analysis—thanks to criticism of my earlier work—and realized that everything, including factors, moves in and out of favor, depending upon the market environment. I also realized...



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OpTrader

Swing trading portfolio - week of September 11th, 2017

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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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:

 

·       How 2017 Will Affect Oil, the US Dollar and the European Union

...

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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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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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About Ilene:

Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

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