"There are a lot of elements of risk control: Always know exactly where you stand. Don't concentrate too much of your money on one big trade or group of highly correlated trades. Always understand the risk/reward of the trade as it now stands, not as it existed when you put the position on. Some people say, 'I was only playing with the market's money.' That's the most ridiculous thing I ever heard. I'm not saying that all these concepts crystallized in one day, but I think that experience with my own account set me off the track of considering these aspects much more seriously."
Bill Lipschutz, as quoted in: The New Market Wizards, by Jack Schwager
Independent Thinking Insight
Bill Lipschutz, as quoted in: The New Market Wizards, by Jack Schwager
Independent Thinking Insight
"But in the stock market, resistance to change - or inflexibility - is an investor's worst enemy, because change is constant. For example, when a stock goes from 10 to 30, a subsequent drop to 20 somehow makes it look underpriced ? that 20 is higher than 10 does not alter the bargain' aspect! A subsequent rise to 30 makes it look 'too high' . . . Variations from a fixed level or 'Reference Point' always look wrong, and are psychological derivants of the Anti-Change Concepts lodged in the Mass Mind.
James Dines, author: Mass Psychology
James Dines, author: Mass Psychology
"Fear is the most debilitating of emotions because is shrinks from confrontation with its object. This withdrawal lends itself to the formulation of fantasies which are difficult to disengage from. In its inability to confront reality, fear is the source of all chronic feelings of inadequacy and inner emptiness. The main problem with fear is that it is self-reinforcing. When we act upon the basis of fear, the fear increases."
F. J. Chu, author: The Mind of the Markets
F. J. Chu, author: The Mind of the Markets
"A man can't spend years at one thing and not acquire a habitual attitude towards it quite unlike that of the average beginner. The difference distinguishes the professional from the amateur. It is the way a man looks at things that makes or loses money for him in the speculative markets. The public has the dilettante's point of view toward his own effort. The ego obtrudes itself unduly and the thinking therefore is not deep or exhaustive. The professional concerns himself with doing the right thing rather than with making money, knowing that the profit takes care of itself if the other things are attended to. A trader gets to play the game as the professional billiard player does - that is, he looks far ahead instead of considering the particular shot before him."
Edwin Lefevre, author: Reminiscences of a Stock Operator
Edwin Lefevre, author: Reminiscences of a Stock Operator
Thought For THe Day
"Chief among the factors that lead to cycles of defeat is stress. In trading, one's money is always on the line, often on a tick-by-tick basis. One is always exposed to loss. The uncertainty of what will happen leads traders to "believe" certain things must happen and these beliefs often interfere with correct observation about what is happening. In this state, traders will make substantial errors in judgment and action."
Jea Yu, author: The Undergroundtrader.com Guide to Electronic Trading
"Chief among the factors that lead to cycles of defeat is stress. In trading, one's money is always on the line, often on a tick-by-tick basis. One is always exposed to loss. The uncertainty of what will happen leads traders to "believe" certain things must happen and these beliefs often interfere with correct observation about what is happening. In this state, traders will make substantial errors in judgment and action."
Jea Yu, author: The Undergroundtrader.com Guide to Electronic Trading
Thought For The day
"Mass psychology occurs when we all react instantaneously and similarly to such phenomena as rumor, contagion, Mass masochism and the secret desire of all gamblers to lose- or events such as war, or assassination - a 'horizontal' notion to which we all respond unknowingly. Mass psychology is the phenomenon ofsociety's reacting viscerally, and as one entity, such as in a lynch mob, or in any other strangely unifying event that produces an instant and uniform reaction in virtually all of us. We are not responding as separate individuals in such cases, but rather as a unit like a flock of birds, or a school of fish, wheeling at the same instant with or without an external stimulus, and for which no slow-motion camera has ever detected a signal- a flock of birds is united by an invisible Mass Mind, birdbrain though it might be! At a Mass moment we are not'ourselves,' and one might well ask who speaks when we use the phrase'my mind'? Are we really our minds, or are our minds a function of a pooledpre-humanness?"
James Dines, author: Mass Psychology
"Mass psychology occurs when we all react instantaneously and similarly to such phenomena as rumor, contagion, Mass masochism and the secret desire of all gamblers to lose- or events such as war, or assassination - a 'horizontal' notion to which we all respond unknowingly. Mass psychology is the phenomenon ofsociety's reacting viscerally, and as one entity, such as in a lynch mob, or in any other strangely unifying event that produces an instant and uniform reaction in virtually all of us. We are not responding as separate individuals in such cases, but rather as a unit like a flock of birds, or a school of fish, wheeling at the same instant with or without an external stimulus, and for which no slow-motion camera has ever detected a signal- a flock of birds is united by an invisible Mass Mind, birdbrain though it might be! At a Mass moment we are not'ourselves,' and one might well ask who speaks when we use the phrase'my mind'? Are we really our minds, or are our minds a function of a pooledpre-humanness?"
James Dines, author: Mass Psychology
"The essential element is having a core philosophy. Without a core philosophy you're not going to be able to hold on to your positions or stick with your trading plan during really difficult times. You must fully understand, strongly believe in, and be totally committed to your trading philosophy. In order to achieve that mental state, you have to do a great deal of independent research. A trading philosophy is something that cannot just be transferred from one person to another; it's something that you have to acquire yourself through time and effort."
Richard Driehaus, as quoted in The New Market Wizards, by Jack Schwager
Richard Driehaus, as quoted in The New Market Wizards, by Jack Schwager
"If you have never had your limits tested, should a big loss occur, how will you know you can reach deeply enough into yourself to find a sense of identity that transcends your financial status? Or are you just a 30 percent loss away from feeling like a 'failure' and ending up in my psychotherapy consulting room?
"This is why I argue for knowing your own personality tendencies and seriously considering them in your online investment decision making. If you already know that the terrible anxiety of financial loss would be more than you can mentally and emotionally tolerate, this concern must be weighed heavily in the risks you take."
The Disciplined Online Investor, by Steven Hendlin, Ph.D.
"This is why I argue for knowing your own personality tendencies and seriously considering them in your online investment decision making. If you already know that the terrible anxiety of financial loss would be more than you can mentally and emotionally tolerate, this concern must be weighed heavily in the risks you take."
The Disciplined Online Investor, by Steven Hendlin, Ph.D.
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