"Awareness" Quotes and Snippets

"Your losing trades do not diminish you as a person. You are not your losing trades. You are also not your winning trades either. They are simply by-products of the business that you're in." - Larry Levin

"I'm only half as smart as I like to think I am."

Me

this is my favorite!

brilliant post man, i read it twice.

I would agree Merlin. If I had to guess the one most dominant factor to why traders fail, this would be it. Until one can come to terms with admitting mistakes, not even mistakes, but things like closing a position that's moving against them, they would be in the winners circle.

I know that people like to spend the majority of their time focusing on perfect entries, and timing their exits... usually to early. However, here's a nice challenge for those who are struggling, and feel helpless with their current situation.

Pick from one of the hundreds of systems on this site (if you don't already have one of your own), and focus on losing trades. That's right... focus, hope, and wish for losing trades. Picture in your mind the trade that you just put on turning into a loser. Imagine that when it gets to a certain price level, you see yourself closing it, or your stop loss getting triggered. Anticipate it, build a desire for it to occur. Basically make yourself believe that the aim of you method is to close out small loses. Now, I'm not saying go short when your system signals a long, I'm saying go long and forget that there is a profit to be made. Simply focus on how great it's going to feel to close out the position with a small/reasonable loss. I think within a week or two most will realize that their account equity has mysteriously grown!!! How ironic?

Every day I go to the market. There are crowds of traders clamored together arguing over price. I stand from a distance and watch in amazement as they push and shove each other in the blistering heat. At times this goes on for hours on end, at other times it ends as quickly as it began. I can never actually hear enough of the details to figure out whether the price will go up or down… so I continue to observe patiently. It always ends the same way; a silence falls over the market like the calm before a storm. Then, of course, all hell breaks loose. They agree on the value of the goods and I jump on for the ride, only to wake the next day and do it all over again.

"Most, probably, of our decisions to do something positive, the full consequences of which will be drawn out over many days to come, can only be taken as the result of animal spirits - a spontaneous urge to action rather than inaction, and not as the outcome of a weighted average of quantitative benefits multiplied by quantitative probabilities."
The General Theory of Employment Interest and Money

Quote from John Maynard Keynes refering to the stock market

And of course

"In the long run, we're all dead. "

"Successful investing is anticipating the anticipations of others. "

John Maynard Keyne

The 3 Reasons why traders fail:

1. Not closing out losing positions.

A trade that is closed at a predefined "loss" level is not called a "loss", but rather a business expense. One of the hardest challenges in trading is to bury one's ego. The ego will never admit to wrong doing, however, this becomes very expensive. When you have a set limit (maximum expense amount) affixed to every trade, you train your ego to accept small losses as "expenses". This allows for closing out of money positions and makes it the "right thing" to do. This action creates a positive reinforcement for the ego, and allows the trader to preserve their account capital without having to do battle with the "self".

2. Picking tops and bottoms (trading against the trend).

For some unexplainable reason, most individuals look at a 100 pip move and say to themselves,"the move must be over, I'm placing an order in the opposite direction". However, they quickly come to realize that the move is not over, as the price extends another 150 pips. Trends can be relentless. If you fight them... they will destroy you. A quick solution to this is to have a definition of a trend. By this I mean, select a time frame and define the exact specifics of the trend. Never trade against your definition. An example would be:

30 min TF, when 5 and 10 EMA is crossed.

So if by definition you happen to be in a down trend, then you may only sell. If by chance, you feel that the trend is coming to an end after that 100 pip move... that's fine, just don't take a trade until you have an up trend (as defined by your definition). This is what they mean by the saying "stand on the sideline if you do not see an opportunity to trade".

3. Money Management.

The fact is that price action is as random as a woman's mood swings. If a trader is convinced that they can guess these changes most of the time, they may have a tendency to up their risk exposure per each trade. This is a losing proposition. If one does in fact find that their predictability factor is high, then that's great. There is no need to risk 50% of your account on a single trade. You will still become rich, it will take a bit longer, but you'll still get there. Any strategy/trader will find themselves in situations where their 85% accurate method starts looking more like 35% accurate. It's at these times that over sized positions will quickly claim your previous profits. One must understand that the earning potential in the markets has no ceiling, but it take years to build an empire. Slow down, size down, and enjoy the journey.

When the above 3 issues are resolved you become profitable - simple, right.

Great thread, found this while reading Merlin's old posts. Here's a few:

Ed Seykota:

Short-Term Trading
The elements of good trading are cutting losses, cutting losses, and cutting losses.

Outcomes
Win or lose, everybody gets what they want out of the market. Some people seem to like to lose, so they win by losing money.

I think that if people look deeply enough into their trading patterns, they find that, on balance, including all their goals, they are really getting what they want, even though they may not understand it or want to admit it.

Market Trends
The trend is your friend except at the end where it bends.

Trading
To avoid whipsaw losses, stop trading.

Here's the essence of risk management: Risk no more than you can afford to lose, and also risk enough so that a win is meaningful. If there is no such amount, don't play.

Pyramiding instructions appear on dollar bills. Add smaller and smaller amounts on the way up. Keep your eye open at the top.

It can be very expensive to try to convince the markets you are right.

System Trading
Systems don't need to be changed. The trick is for a trader to develop a system with which he is compatible.

I don't think traders can follow rules for very long unless they reflect their own trading style. Eventually, a breaking point is reached and the trader has to quit or change, or find a new set of rules he can follow. This seems to be part of the process of evolution and growth of a trader.

Casino operator during an interview:

"Most people would leave here with a lot more if they came in expecting a little less."

there is trading
and then there's all the wishes, all the hopes and all the fears that we "add" to trading
trading success does not require "additives" for success to occur

This is from Chapter 4 of this book by BBC Business Editor
Robert Peston.

http://static.guim.co.uk/sys-images/...britain195.jpg


Below is a quote from self-made multi-millionaire
Paul Myners, one-time board member of the venerable London-based
retailer Marks & Spenser. In the early 1970s he had trained to be a
teacher and taught mathematics and business but "didn't really
enjoy it," in Myners' own words.The important parts have been enlarged:


So at least all of us with live accounts are on the right track.
We're in the trenches, working with money -- our money.
Maybe we only trade piddling amounts of money, but it's better
than some being some delirious joker who thinks he's going it's
"all going to work itself out somehow."

THE SKEWNESS ISSUE:

"It does not matter
how frequently something succeeds
if failure is too costly to bear."

-- Nassim Nicholas Taleb, Fooled by Randomness, Part 1, pg. 4

Nice to see that the thread got revived... I really miss having Merlin around. I wonder if the old chap still comes around these days.

Anyway, in the spirit of the thread here are a few more (apologies for any duplicates)

______________________________________

Trading Technicals
� "I haven't met a rich technician" - Jim Rogers.

� "I always laugh at people who say "I've never met a rich technician" I love that! Its such an arrogant, nonsensical response. I used fundamentals for 9 years and got rich as a technician" -Marty Schwartz.

Diversification
� "Diversify your investments" - John Templeton.

� "Diversification is a hedge for ignorance" - William O'Neil.

Picking bottoms and tops

� "Don't bottom fish" - Peter Lynch.

� "Don't try to buy at the bottom or sell at the top" - Bernard Baruch

� "Maybe the trend is your friend for a few minutes in Chicago, but for the most part it is rarely a way to get rich" - Jim Rogers.

� "I believe the very best money is made at the market turns. Everyone says you get killed trying to pick tops and bottoms and you make all your money by playing the trend in the middle. Well for twelve years I have been missing the meat in the middle but I have made a lot of money at tops and bottoms." - Paul Tudor Jones.

Money Management
� "My basic advise is don't lose money" - Jim Rogers.

� "I'm more concerned about controlling the downside. Learn to take the losses. The most important thing about making money is not to let your losses get out of hand." - Marty Schwartz.

� "I'm always thinking about losing money as opposed to making money. Don't focus on making money, focus on protecting what you have" - Paul Tudor Jones.

� "Rule number one of investing is never lose money. Rule number two is never forget rule number 1" - Warren Buffet.

� "If you have an approach that makes money, then money management can make the difference between success and failure... ... I try to be conservative in my risk management. I want to make sure I'll be around to play tomorrow. Risk control is essential." - Monroe Trout

� "If you personalize losses, you can't trade." - Bruce Kovner

� "The best traders have no ego. You have to swallow your pride and get out of the losses." - Tom Baldwin

� "Never risk more than 1% of your total equity in any one trade. By risking 1%, I am indifferent to any individual trade. Keeping your risk small and constant is absolutely critical." Larry Hite.

the market does not care if yours is a $1000/pip trade or a 10c/pip trade
- nor should i

Sell in May, and go away; don't come back until St Leger day.
-Anonymous

It's not whether you're right or wrong that's important, but how much money you make when you're right and how much you lose when you're wrong.
-George Soros

Markets are constantly in a state of uncertainty and flux and money is made by discounting the obvious and betting on the unexpected.
-George Soros

Stock market bubbles don't grow out of thin air. They have a solid basis in reality, but reality as distorted by a misconception.
-George Soros

The financial markets generally are unpredictable. So that one has to have different scenarios... The idea that you can actually predict what's going to happen contradicts my way of looking at the market.
-George Soros

Markets are designed to allow individuals to look after their private needs and to pursue profit. It's really a great invention and I wouldn't under-estimate the value of that, but they're not designed to take care of social needs.
-George Soros

October: This is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.
-Mark Twain

The time of maximum pessimism is the best time to buy and the time of maximum optimism is the best time to sell.
-John Templeton

I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years.
-Warren Buffett

If past history was all there was to the game, the richest people would be librarians.
-Warren Buffett

Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.
-Warren Buffett

Wall Street is the only place that people ride to in a Rolls Royce to get advice from those who take the subway.
-Warren Buffett

The stock market is filled with individuals who know the price of everything, but the value of nothing.
-Philip Fisher

If you have trouble imagining a 20% loss in the stock market, you shouldn't be in stocks.
-John (Jack) Bogle

A market is the combined behavior of thousands of people responding to information, misinformation and whim.
-Kenneth Chang

I hate weekends because there is no stock market.
-Rene Rivkin

Only buy something that you'd be perfectly happy to hold if the market shut down for ten years.
-Warren Buffett

Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it.
-Warren Buffett

Only buy something that you'd be perfectly happy to hold if the market shut down for 10 years.
-Warren Buffett

The only time to buy these is on a day with no "y" in it.
-Warren Buffett

The first rule is not to lose. The second rule is not to forget the first rule.
-Warren Buffett

The key to making money in stocks is not to get scared out of them.
-Peter Lynch

Diversify your investments.
-John Templeton

The four most dangerous words in investing are "This time it's different".
-John Templeton

Put not your trust in money, but put your money in trust.
-Oliver Wendell Holmes

Money is like manure. You have to spread it around or it smells.
-J. Paul Getty

Investors have very short memories.
-Roman Abramovich

Experience taught me a few things. One is to listen to your gut, no matter how good something sounds on paper. The second is that you're generally better off sticking with what you know. And the third is that sometimes your best investments are the ones you don't make.
-Donald Trump

I am opposed to millionaires, but it would be dangerous to offer me the position.
-Mark Twain

Money can't buy you happiness but it does bring you a more pleasant form of misery.
-Spike Milligan

Money couldn't buy friends, but you got a better class of enemy.
-Spike Milligan

Taken from Speculation As A Fine Art by Dickson G. Watts - written over a century ago... still applies today.

Essential Qualities of the Speculator

1. Self-Reliance. A man must think for himself,
must follow his own convictions. George
MacDonald says: “A man cannot have another
man’s ideas any more than he can another
man’s soul or another man’s body.” Self-trust
is the foundation of successful effort.

2. Judgment. That equipoise, that nice
adjustment of the faculties one to the other,
which is called good judgment, is an essential
to the speculator.

3. Courage. That is, confidence to act on the
decisions of the mind. In speculation there is
value in Mirabeau’s dictum: “Be bold, still be
bold; always be bold.”

4. Prudence. The power of measuring the
danger, together with a certain alertness and
watchfulness, is very important. There should be
a balance of these two, Prudence and Courage;
Prudence in contemplation, Courage in execution.
Lord Bacon says: “In meditation all dangers
should be seen; in execution one, unless very formidable.”
Connected with these qualities,
properly an outgrowth of them, is a third, viz:
promptness. The mind convinced, the act should
follow. In the words of Macbeth; “Henceforth the
very firstlings of my heart shall be the firstlings
of my hand.” Think, act, promptly.

5. Pliability. The ability to change an opinion,
the power of revision. “He who observes,”
says Emerson, “and observes again, is always
formidable.”

The qualifications named are necessary to the
makeup of a speculator, but they must be in well-balanced
combination. A deficiency or an overplus of one
quality will destroy the effectiveness of all. The possession
of such faculties, in a proper adjustment is, of
course, uncommon. In speculation, as in life, few succeed,
many fail.

Laws Absolute

1. Never Overtrade. To take an interest larger than
the capital justifies is to invite disaster. With such an
interest a fluctuation in the market unnerves the
operator, and his judgment becomes worthless.

2. Never “Double Up”; that is, never completely and
at once reverse a position. Being “long,” for instance,
do not “sell out” and go as much “short.” This may
occasionally succeed, but is very hazardous, for should
the market begin again to advance, the mind reverts
to its original opinion and the speculator “covers up”
and “goes long” again. Should this last change be
wrong, complete demoralization ensues. The change
in the original position should have been made moderately,
cautiously, thus keeping the judgment clear
and preserving the balance of the mind.

3. “Run Quickly,” or not at all; that is to say, act
promptly at the first approach of danger, but failing
to do this until others see the danger, hold on or close
out part of the “interest.”

4. Another rule is, when doubtful, reduce the amount
of the interest; for either the mind is not satisfied with
the position taken, or the interest is too large for
safety. One man told another that he could not sleep
on account of his position in the market; his friend
judiciously and laconically replied: “Sell down to a
sleeping point.”

My favourite Warren Buffet quote is, "In this game the market has to keep pitching, but you don't have to swing. You can stand there with the bat on your shoulder for six months until you get a fat pitch."

It keeps waiting a few days or a week for a good entry into perspective!

Dennis Gartman's 22 Rules of Trading

1. Never, under any circumstance add to a losing position.... ever! Nothing more need be said; to do otherwise will eventually and absolutely lead to ruin!


2. Trade like a mercenary guerrilla. We must fight on the winning side and be willing to change sides readily when one side has gained the upper hand.


3. Capital comes in two varieties: Mental and that which is in your pocket or account. Of the two types of capital, the mental is the more important and expensive of the two. Holding to losing positions costs measurable sums of actual capital, but it costs immeasurable sums of mental capital.


4. The objective is not to buy low and sell high, but to buy high and to sell higher. We can never know what price is "low." Nor can we know what price is "high." Always remember that sugar once fell from $1.25/lb to 2 cent/lb and seemed "cheap" many times along the way.


5. In bull markets we can only be long or neutral, and in bear markets we can only be short or neutral. That may seem self-evident; it is not, and it is a lesson learned too late by far too many.


6. "Markets can remain illogical longer than you or I can remain solvent," according to our good friend, Dr. A. Gary Shilling. Illogic often reigns and markets are enormously inefficient despite what the academics believe.


7. Sell markets that show the greatest weakness, and buy those that show the greatest strength. Metaphorically, when bearish, throw your rocks into the wettest paper sack, for they break most readily. In bull markets, we need to ride upon the strongest winds... they shall carry us higher than shall lesser ones.


8. Try to trade the first day of a gap, for gaps usually indicate violent new action. We have come to respect "gaps" in our nearly thirty years of watching markets; when they happen (especially in stocks) they are usually very important.


9. Trading runs in cycles: some good; most bad. Trade large and aggressively when trading well; trade small and modestly when trading poorly. In "good times," even errors are profitable; in "bad times" even the most well researched trades go awry. This is the nature of trading; accept it.


10. To trade successfully, think like a fundamentalist; trade like a technician. It is imperative that we understand the fundamentals driving a trade, but also that we understand the market's technicals. When we do, then, and only then, can we or should we, trade.


11. Respect "outside reversals" after extended bull or bear runs. Reversal days on the charts signal the final exhaustion of the bullish or bearish forces that drove the market previously. Respect them, and respect even more "weekly" and "monthly," reversals.


12. Keep your technical systems simple. Complicated systems breed confusion; simplicity breeds elegance.


13. Respect and embrace the very normal 50-62% retracements that take prices back to major trends. If a trade is missed, wait patiently for the market to retrace. Far more often than not, retracements happen... just as we are about to give up hope that they shall not.


14. An understanding of mass psychology is often more important than an understanding of economics. Markets are driven by human beings making human errors and also making super-human insights.


15. Establish initial positions on strength in bull markets and on weakness in bear markets. The first "addition" should also be added on strength as the market shows the trend to be working. Henceforth, subsequent additions are to be added on retracements.


16. Bear markets are more violent than are bull markets and so also are their retracements.


17. Be patient with winning trades; be enormously impatient with losing trades. Remember it is quite possible to make large sums trading/investing if we are "right" only 30% of the time, as long as our losses are small and our profits are large.


18. The market is the sum total of the wisdom ... and the ignorance...of all of those who deal in it; and we dare not argue with the market's wisdom. If we learn nothing more than this we've learned much indeed.


19. Do more of that which is working and less of that which is not: If a market is strong, buy more; if a market is weak, sell more. New highs are to be bought; new lows sold.


20. The hard trade is the right trade: If it is easy to sell, don't; and if it is easy to buy, don't. Do the trade that is hard to do and that which the crowd finds objectionable. Peter Steidelmeyer taught us this twenty five years ago and it holds truer now than then.


21. There is never one cockroach! This is the "winning" new rule submitted by our friend, Tom Powell.


22. All rules are meant to be broken: The trick is knowing when... and how infrequently this rule may be invoked!

Here's a video of Gartman discussing his #1 rule:

http://video.google.com/videoplay?do...77267078611049

This was posted courtesy of Skynet on the FF cinema thread.

Great stuff.