Posts Tagged ‘money management’

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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The Three Phases of a Trader’s Education: Psychology, Money Management, Method

The following is an excerpt from Jeffrey Kennedy’s Trader’s Classroom Collection.  Elliott Wave International is offering a special 45-page Best Of Trader’s Classroom eBook, free.

The Three Phases of a Trader’s Education: Psychology, Money Management, Method

By Jeffrey Kennedy, courtesy of Elliott Wave International

Aspiring traders typically go through three phases in this order:

Methodology. The first phase is that all-too-familiar quest for the Holy Grail – a trading system that never fails. After spending thousands of dollars on books, seminars and trading systems, the aspiring trader eventually realizes that no such system exists.

Money Management. So, after getting frustrated with wasting time and money, the up-and-coming trader begins to understand the need for money management, risking only a small percentage of a portfolio on a given trade versus too large a bet.

Psychology. The third phase is realizing how important psychology is – not only personal psychology but also the psychology of crowds.

But it would be better to go through these phases in the opposite direction. I actually read of this idea in a magazine a few months ago but, for the life of me, can’t find the article. Even so, with a measly 15 years of experience under my belt and an expensive Ph.D. from S.H.K. University (i.e., School of Hard Knocks), I wholeheartedly agree. Aspiring traders should begin their journey at phase three and work backward.

I believe the first step in becoming a consistently successful trader is to understand how psychology plays out in your own make-up and in the way the crowd reacts to changes in the markets. The reason for this is that a trader must realize that once he or she makes a trade, logic no longer applies. This is because the emotions of fear and greed take precedence – fear of losing money and greed for more money.

Once the aspiring trader understands this psychology, it’s easier to understand why it’s important to have a defined investment methodology and, more importantly, the discipline to follow it. New traders must realize that once they join a crowd, they lose their individuality. Worse yet, crowd psychology impairs their judgment, because crowds are wrong more often than not, typically selling at market bottoms and buying at market tops.

Moving onto phase two, after the aspiring trader understands a bit of psychology, he or she can focus on money management. Money…
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Phil's Favorites

Pursuing Tesla's electric cars won't rev up VW's share price

 

Pursuing Tesla's electric cars won't rev up VW's share price

The 2015 diesel scandal resulted in a 40% drop in the company’s share price at the time. A. Aleksandravicius/Shutterstock

Courtesy of Hamza Mudassir, Cambridge Judge Business School

Volkswagen’s chairman, Herbert Deiss, has been struggling to bring the company’s stock price back to its previous heights since he took over the reins of the German car maker six years ago. The business has been emb...



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Biotech/COVID-19

What you need to know about the new COVID-19 variants

 

What you need to know about the new COVID-19 variants

B117, the SARS CoV-2 variant that was first detected in the U.K., has been found to be 30%-80% more transmissible. Juan Gaertner/Science Photo Library via Getty Images

Courtesy of David Kennedy, Penn State

Editor’s note: Two new strains of the coronavirus that causes COVID-19 called B.1.1.7 and B.1.351 have been found in the U.K. and South Africa and are thought to be more transmissible. In ...



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Zero Hedge

Trump's China Trade War Cost Up To 245,000 American Jobs: Study

By Dave DeCamp via AntiWar.com

(as published at ZeroHedge)

A new study estimates that President Trump’s trade war with China caused the loss of up to 245,000 American jobs.

The study from the US-China Business Council (USCBC) and Oxford Economics said a moderate reduction of tariffs on both sides could lead to an additional 145,000 US jobs and an increase in $160 billion GDP by 2025.

...



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ValueWalk

US Consumer Confidence Increases At Start Of 2021

By Refinitiv. Originally published at ValueWalk.

WASHINGTON, DC ‐ According to the Refinitiv/Ipsos Primary Consumer Sentiment Index, American consumer confidence for January 2021 is at 50.9, up 2.8 points from last month. The index fielded from December 25, 2020, to January 8, 2021.

Q3 2020 hedge fund letters, conferences and more

American Consumer Confidence Is Back Up In 2021

After a sharp 4‐point decline in December, American consumer confidence has returned to levels seen in September 2020 (50.6). The Current, Expectations, Investment, and Jobs sub‐indices all experienced ...



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Kimble Charting Solutions

Treasury Bond Yields At Make-Or-Break Decision Point Says Joe Friday

Courtesy of Chris Kimble

Treasury bond yields (and interest rates) have been falling for so long now that investors have taken it for granted.

But bond yields have been rising for the past several months and perhaps investors should pay attention, especially as we grapple with questions about inflation and the broader economy (and prospects for recovery).

Today we ask Joe Friday to deliver us the facts! Below is a long-term “monthly” chart of the 30 Year US Treasury Bond Yield.

Counter-Trend Rally In Yields Facing Strong Resistance!

As you can see, treasury bond yields have spent much of the past 25 years trading in a falling channel… but the coronavirus crash sent yields...



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Mapping The Market

The Countries With The Most COVID-19 Cases

 

The Countries With The Most COVID-19 Cases

By Martin Armstrong, Statista, Jan 12, 2021

This regularly updated infographic keeps track of the countries with the most confirmed Covid-19 cases. The United States is still at the top of the list, with a total now exceeding the 22 million mark, according to Johns Hopkins University figures. The total global figure is now over 85 million, while there have been more than 1.9 million deaths.

You will find more infographics at ...



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Politics

The Confederate battle flag, which rioters flew inside the US Capitol, has long been a symbol of white insurrection

 

The Confederate battle flag, which rioters flew inside the US Capitol, has long been a symbol of white insurrection

A historic first: the Confederate battle flag inside the U.S. Capitol. Saul Loeb/AFP via Getty Images

Courtesy of Jordan Brasher, Columbus State University

Confederate soldiers never reached the Capitol during the Civil War. But the Confederate battle flag was flown by rioters in the U.S. Capitol building for the first time ever on Jan. 6.

The flag’s prominence in the Capitol riot comes a...



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Chart School

Best Wyckoff Accumulation for 2020

Courtesy of Read the Ticker

Yes folks there has to be a winner. Price and volume in the right place. Very nice eye candy!


Introduction ...

Ethereum was posted on RTT Wyckoff Campaign blog for monitory and trade entry. To watch the RTT Wyckoff Campaign blog is part of the RTT Plus service. After all you only need one to two great accumulations in a year and returns will be fantastic.






Charts in the video ...


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PnF ...

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Digital Currencies

Bitcoin: why the price has exploded - and where it goes from here

 

Bitcoin: why the price has exploded – and where it goes from here

B is for blast-off (but also bubble). 3DJustincase

Courtesy of Andrew Urquhart, University of Reading

Bitcoin achieved a remarkable rise in 2020 in spite of many things that would normally make investors wary, including US-China tensions, Brexit and, of course, an international pandemic. From a year-low on the daily charts of US$4,748 (£3,490) in the middle of March as pandemic fears took hold, bitcoin rose to ju...



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The Technical Traders

Adaptive Fibonacci Price Modeling System Suggests Market Peak May Be Near

Courtesy of Technical Traders

Our Adaptive Fibonacci Price Modeling system is suggesting a moderate price peak may be already setting up in the NASDAQ while the Dow Jones, S&P500, and Transportation Index continue to rally beyond the projected Fibonacci Price Expansion Levels.  This indicates that capital may be shifting away from the already lofty Technology sector and into Basic Materials, Financials, Energy, Consumer Staples, Utilities, as well as other sectors.

This type of a structural market shift indicates a move away from speculation and towards Blue Chip returns. It suggests traders and investors are expecting the US consumer to come back strong (or at least hold up the market at...



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Lee's Free Thinking

Texas, Florida, Arizona, Georgia - The Branch COVIDIANS Are Still Burning Down the House

 

Texas, Florida, Arizona, Georgia – The Branch COVIDIANS Are Still Burning Down the House

Courtesy of Lee Adler, WallStreetExaminer 

The numbers of new cases in some of the hardest hit COVID19 states have started to plateau, or even decline, over the past few days. A few pundits have noted it and concluded that it was a hopeful sign. 

Is it real or is something else going on? Like a restriction in the numbers of tests, or simply the inability to test enough, or are some people simply giving up on getting tested? Because as we all know from our dear leader, the less testing, the less...



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Insider Scoop

Economic Data Scheduled For Friday

Courtesy of Benzinga

  • Data on nonfarm payrolls and unemployment rate for March will be released at 8:30 a.m. ET.
  • US Services Purchasing Managers' Index for March is scheduled for release at 9:45 a.m. ET.
  • The ISM's non-manufacturing index for March will be released at 10:00 a.m. ET.
  • The Baker Hughes North American rig count report for the latest week is scheduled for release at 1:00 p.m. ET.
...

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Promotions

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Feb. 26, 1pm EST

Click HERE to join the PSW weekly webinar at 1 pm EST.

Phil will discuss positions, COVID-19, market volatility -- the selloff -- and more! 

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Mike will show off the TradeExchange's new platform which you can try for free.  

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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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