Hypothesis; Exit discipline and money management are more important to trading than TA, tape reading or execution skill.
Proof; If you had to choose one, would you rather make your own entries and have a monkey manage your exits, or would you rather have the monkey make your entries and manage exits yourself?
Conclusion; When in a position, always assume that a monkey made your entry.
Proof; If you had to choose one, would you rather make your own entries and have a monkey manage your exits, or would you rather have the monkey make your entries and manage exits yourself?
Conclusion; When in a position, always assume that a monkey made your entry.
"The truth is that most individual investors follow no investing plan and are very much prey to their emotions. Buy decisions are often made impulsively, and sell decisions are frequently made out of superstition, fear, anxiety, guilt, and masochism. A very common example of this is the investor who does just the opposite of Wall Street's maxim: Cut your losses, let your winners run. My research shows that investors who violate this maxim tend to have many obsessive personality traits. Obsessive people have a tendency to become so anxious when they own a stock rising in price that they impulsively sell at the first weakness, often rationalizing, 'You never go broke taking a profit.' On the other hand, when such an obsessive person owns a stock dropping in price, they keep saying to themselves, 'When it gets back to what I paid for it, I will sell it.'"
The Psychology of Investing, edited by Lifson and Geist
The Psychology of Investing, edited by Lifson and Geist
"I am very open-minded. I am willing to take in information that is difficult to accept emotionally, but which I still recognize to be true. For example, I have seen others make money much faster than I have only to wind up giving everything back, because when they started losing, they couldn’t stop. When I have had a bad losing streak, I have been able to say to myself, ‘You just can’t trade anymore.‘ When a market moves counter to my expectations, I have always been able to say, ‘I have hoped to make a lot of money in this position, but it isn’t working, so I’m getting out."
Michael Marcus as quoted in Market Wizards, by Jack Schwager
Michael Marcus as quoted in Market Wizards, by Jack Schwager
Thought For the Day
" Unlike Warren Buffett or John Templeton, who treat market declines as buying opportunities, the average investor panics and throws reason to the winds. Richard Thaler's research has shown that people value a dollar lost twice as much as a dollar gained. The emotional over-weighting of money lost probably accounts for a lot of the bear market panic. When people begin to lose, all kinds of fantasies are mobilized, for example, "I never should have bought any stock, People like me don't belong in the stock market, I knew this would happen, God is punishing me." These typify the ideas gripping people in a bear market."
The Mind of a Trader, by Alpesh B. Patel
" Unlike Warren Buffett or John Templeton, who treat market declines as buying opportunities, the average investor panics and throws reason to the winds. Richard Thaler's research has shown that people value a dollar lost twice as much as a dollar gained. The emotional over-weighting of money lost probably accounts for a lot of the bear market panic. When people begin to lose, all kinds of fantasies are mobilized, for example, "I never should have bought any stock, People like me don't belong in the stock market, I knew this would happen, God is punishing me." These typify the ideas gripping people in a bear market."
The Mind of a Trader, by Alpesh B. Patel
Professional traders may do some very intelligent things, but they have a tendency not to think systematically about what they are doing. For example, most traders who do a trade that works will not think: Why did it work? What did I do here that I might be able to do in another market, at another time? There is not a lot of reflection on the process of trading. In contrast, I think I always have been analytical about trading, even before I ever researched a mechanical system.
“On the opposite extreme, you have academic types who research before they have ever traded. They lack the seat-of-the-pants knowledge necessary to develop good trading systems. Mercifully, I did the trading first. Therefore, the research we do is more applicable to the real world.” [Richard Dennis]
Market Wizards, by Jack Schwager, p.98
“On the opposite extreme, you have academic types who research before they have ever traded. They lack the seat-of-the-pants knowledge necessary to develop good trading systems. Mercifully, I did the trading first. Therefore, the research we do is more applicable to the real world.” [Richard Dennis]
Market Wizards, by Jack Schwager, p.98
"Early in life, to avoid painful experiences like fear, rejection, or criticism, we each adopted a set of beliefs and responses - such as being good, not making mistakes, fitting in, taking it slow, or not taking risks . . . These defenses manifest themselves in behavior patterns that become permanent aspects of our personality."
"Every time you try to break out of these patterns, you experience fear and anxiety, and usually resign yourself to conforming to the life principle without taking significant risks."
"I hold the view that to achieve trading mastery, you must learn to live your life by interacting more directly with reality, rather than through the filter of your life principle. To do this, you have to relinquish those patterns that both create and perpetuate your underlying fears."
Trading to Win, by Ari Kiev, M.D.
"Every time you try to break out of these patterns, you experience fear and anxiety, and usually resign yourself to conforming to the life principle without taking significant risks."
"I hold the view that to achieve trading mastery, you must learn to live your life by interacting more directly with reality, rather than through the filter of your life principle. To do this, you have to relinquish those patterns that both create and perpetuate your underlying fears."
Trading to Win, by Ari Kiev, M.D.
"Most of the top traders have a child-like fascination with the game. Whether it’s the psychological elements of the game, the technical elements of the game, whether it’s the nameless, faceless aspect of a market, or them as single individuals against the market, or beating their brains against everyone else’s. Long-term traders have a depth of fascination with the most arcane things. For example, talk to top fixed-income traders. They will understand and muse upon nuances of delivery details or requirements that would not even occur to you."
The Mind of a Trader, by Alpesh B. Patel
The Mind of a Trader, by Alpesh B. Patel
THought For the Day
"Traders, like athletes and artists, need to create a certain state of mind in which to successfully practice their craft. The best traders recognize the psychological paradoxes inherent in trading. The trading environment is quite different from the environment of our everyday lives. In life, our fears help teach us to avoid painful experiences. But in trading, the fear of losing money or making a mistake can actually create the very circumstances one tries to avoid. To the trading mind, the pursuit of trading opportunities is a continuous challenge. One can be comfortable with the risk of loss if the trade was based on a good idea but nevertheless turned out badly due to unforeseen circumstances or a sudden move in the market. From this perspective, missing a good opportunity is mentally and financially equal to being on the wrong side of a trade."
The Mind of the Markets, by F. J. Chu
"Traders, like athletes and artists, need to create a certain state of mind in which to successfully practice their craft. The best traders recognize the psychological paradoxes inherent in trading. The trading environment is quite different from the environment of our everyday lives. In life, our fears help teach us to avoid painful experiences. But in trading, the fear of losing money or making a mistake can actually create the very circumstances one tries to avoid. To the trading mind, the pursuit of trading opportunities is a continuous challenge. One can be comfortable with the risk of loss if the trade was based on a good idea but nevertheless turned out badly due to unforeseen circumstances or a sudden move in the market. From this perspective, missing a good opportunity is mentally and financially equal to being on the wrong side of a trade."
The Mind of the Markets, by F. J. Chu
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