if you think education is expensive-try ignorance II

[Entendance]

http://traderfeed.blogspot.com/2008/07/ ... urday.html
OR
http://tinyurl.com/6d2b46

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on Thu Dec 06, 2007 6:41 pm

Investing in the stock market is pretty much a zero-sum game: You're
either winning or losing. More stress-inducing is the market's
volatility — in the morning you're up a few million and by lunchtime
you could be out that and more. Investors feeling whipped by the
market's oscillations could find some serenity in Dr. Ari Kiev's
counsel. Kiev is a psychiatrist and coach who works with professional
money managers, including some hedge-fund managers whom he declined
to name, to help them overcome the emotional hurdles associated with
daily trading.

In his latest book, "Mastering Trading Stress," Kiev relies on case
studies and conversations with traders he's worked with to
illustrate, for example, "misapplied meditation and visualization
techniques," and the difference between confidence and arrogance and
how that can affect your trading.

Though it sounds a little touchy-feely, one of Kiev's pieces of
advice is to embrace the anxiety and discomfort associated with
uncertainty. In order to do that, he recommends some clients to
record in a journal their emotional responses (panic) to market
events (gold-mining stocks are tanking). That allows traders to, you
guessed it, get in touch with their feelings. Breaking down
overwhelming and complicated thoughts into their concrete parts makes
them more manageable. Experienced and successful traders, Kiev says,
learn to stand outside of their reactions and work hard to get
control over their stress.
http://tinyurl.com/3bg6b6
What are some of the most common mistakes traders make?

AK: The most common mistakes people make as a result of stress are to
fail to recognize that something that's happening to a stock may be
due to a real change in the stock or to the impact of the market. And
so they bought a stock at $20, it dropped down to $17, and instead of
analyzing the situation and saying the market is bad, this could get
worse and paring down the position, they rationalize the position. "I
loved it at $20, so I love it even more at $17."

They hold it or buy more. They say Warren Buffett looks for cheap
stocks. They find rationalizations to stay in it. The more
experienced guy says the market is telling me something. The smart
thing to do is cut my losses, wait until the market turns, and get
back into it at that point if the story is still a good one. The
panicked person thinks you'll lose the upturn. It's more difficult to
get back losses than to make money.

*I spoke to some [clients] today to ask how did things go in
November. One guy said, "I made the most money in my high-conviction
ideas," where he had done the work, where he knew something the rest
of the world didn't. He analyzed everything about the company. And he
lost money in low-conviction ideas; that's where he says it's only a
1% position, so I can't lose that much. That may be true, but if five
of those go down, that could be substantial. The individual is
governed by a desire to make money, by certain habits — not being as
disciplined, not being as systematic, not reviewing how he's been
successful in the past. All this sounds relatively easy to
understand, but in the face of stress people don't do what is the
most rational.

*I was talking to a guy who had been shorting the subprime mortgages,
and he made a killing this year. He had gotten to running a fairly
substantial fund over time.... He said in these tough markets what he
thinks differentiates winners and losers is that [the winners] have
practiced their fire drills over and over again. They have done
analyses of how they would play it for a variety of different
scenarios. So he practiced what he would do in the event of certain
circumstances. If you learn how to do lifeboat drills, you can
prepare yourself to know how to handle a situation when it comes.
*People need to be open to that kind of dialogue, open to self-
examination, so they begin to see successful performance in trading
has to do with managing yourself. Trading is very much a signature
activity; it's really a reflection of who you are. It's not just an
academic, intellectual exercise. The best portfolio traders are not
just smart; they have a combination of head, heart and guts. You have
to be a risk taker, you have to be thoughtful, you have to really
love what you're doing. The best guys do it in their own way, but
what they share in common is they are willing to make sacrifices to
make outsize gains.

*Destructive emotions could be greed, panic, envy, anxiety. It's
whatever you're feeling that takes you out of the game. It's no
different than what you feel in other walks of life. People in the
trading business, I think, are living many lives compared with
someone who leads a more sedentary life. Even in a private-equity
fund you're dealing with risk, but it's on a longer horizon. The
hedge-fund world is much shorter term than the Warren Buffett world.
So these people are dealing with volatility in their portfolios and
emotionality. You really need to learn to ride it out. The more
experienced people experience it, but can live with it and function
independently of it.

[Entendance]

The secret to winning big in the market is not to be right all the time but to lose the least amount of money possible when you are wrong. As long as you win larger than you lose, you will be a profitable trader at the end of each year. Pride, ego and stubbornness prevents a trader from reaching the levels that very few can master.

To become a profitable trader, you must:
• 1. Manage Risk: Learn to trade a manageable portion of you portfolio. Always establish a risk/reward ratio before making a trade. Without the ratio, how do you know your risk?
• 2. Understand Position Sizing: All traders must learn to know “how much” to trade on each position. Do not overtrade or you will runt he risk of ruin. Position sizing is rule number one of managing risk.
• 3. Cut Losses: Do not allow losses to run wild. You must learn to cut losses and understand that losses are a part of the game, a large part of the game. Check you ego of winning at the door. We are here to make money, not go undefeated. Play sports if you want to keep score with a record rather than your bankroll.
• 4. Learn when to Sell: You must learn when to sell. Selling is more important than buying as it ties directly to risk management. Use stops if you haven’t yet developed the discipline to get out at your predetermined stop or profit goal.
• 5. Average up in Price: I will never hesitate to add shares in a stock that is moving higher.
• 6. Have Patience: It takes years to master trading as an advanced skill; even then, you are never done learning or adapting.
• 7. Buy 52-week Highs or 52-Week Lows? Don’t be afraid to buy stocks making new highs. The garbage sits often at the bottom of the market along with poor earnings, weakness and further downward pressure. Buy strength and the momentum moving higher.
• 8. Ignore the Talking Heads: Do not listen to the stories, gossip and rumors flying around on network television, stock forums or the major financial newspapers. It a surefire route to bad information and clueless advice. Do your own research; you’ll come out much further ahead. This applies to crappy blogs and internet sites as well.
• 9. Understand Technical Analysis. Fundamental analysis tells me what and technical analysis tells me when, where and how.
• 10. Control Emotions: Enough said – You must control your emotions or the game is over! Understand you!

We are going to go into or we’re in the greatest transfer of wealth in world history. Everybody has a choice right now; they can either be rich five years from now or they can be poor five years from now. It’s entirely voluntary, and it depends on the decisions they make today.
"Who should I try to dissuade from trading?" This is the list that I came up with. It is not exhaustive. And some of my conclusions may be controversial. But nevertheless, here it is.
1. The Ill-prepared. This goes without saying. No one should commit their money to a trading career without thorough and rigorous preparation. I have been harping on this since the inception of this blog.
2. The Lazy. Like our anonymous trader who was so incensed because Woodie would not call out his entries or exits - and for free! If someone is unwilling to put in the work, then how can they really expect to reap any reward?
3. Substance Abusers. I've talked about this frequently. How alcohol and other drugs of abuse will deleteriously affect our judgment and ability to learn. That is, to modify our behaviors.
4. People with psychiatric disorders. The severely depressed or manic patient will view the market and, indeed, the world through his own distorted view. How can he objectively assess a complex market when he is nihilistic or wildly exuberant?
5. The Rigid Perfectionist. The market, no matter how good your indicator, is not amenable to rigid analysis. It is chaotic and even tempestuous. The perfectionist will demand 100% perfection in his indicator. Or worse, in his performance. Frustration at the inevitable inability to be perfect in a chaotic market will erode his self-confidence and emotional control. It will likely lead to emotional eruptions as the acute stress response arises when trades do not go as predicted.
6. The Gambler. This is kind of the opposite of The Perfectionist. The perfectionist demands predictable, reproducible results. The gambler knows that this is not the case. He throws his money into a trade and hopes to be rescued by "Lady Luck" or "The Gods of Chance." As they don't exist, his wins and losses are random events. The worst thing for a gambler is to hit a winning streak. His belief in his "luck" or his "winning system" will encourage him to rapidly escalate his "bets" and, therefore, his losses.
7. The Indecisive. This may, or may not be, a sub-category of The Perfectionist. He demands predictability, but knows that that is impossible. And so he hesitates. Or, he may be inadequately prepared, and so lacks confidence in his trading plan. Or he may have experienced a loss or series of losses and so that weighs on him. He may know that losses are a part of the game, but is unwilling to accept that fact.
8. The Under Capitalized. As noted above, losses are a part of the game. You may have an excellent indicator with an 80% win rate. But what if your first 20 trades are losers? Can you withstand the draw-down?
9. The Impulsive. I discussed this in my last series. Are you willing to wait for the proper circumstances. Are you willing to sit and wait? Can you follow your trading plan without modifying it on the fly? Can you say to yourself: "Wait. Be patient. Do the harder thing."
10. Those, who by training and education, becomes perfectionists. By this, I mean Doctors, Architects, Engineers, and, perhaps Lawyers. Many professionals are trained to go "beyond a reasonable doubt." They frequently demand absolute certainty in their decision-making. Would like an architect or engineer to design and build a skyscraper or bridge that would only be safe 55% or 65% of the time? Would you go to a doctor or trial lawyer who could accept losses; cut them short; and walk away saying: "Well, the next one will turn out better"? And yet, that is exactly what the trader must accept and do. It may thus become very difficult for these highly-trained professionals to mentally switch gears and do what, instinctively, goes contrary to their very nature.
Start your own training at
http://traderfeed.blogspot.com/2009/02/ ... st-of.html

[Entendance]

Here we go again!From the very beginning, Dlry joined our beach with synthetic posts and concise,always very focused, interesting and intriguing comments (...keep in mind his contribution is very appreciated in a famous "financial infotaiment"...).
He gets into the forum, he posts and if you don't pay enough attention, then you miss his gems* Our member Dlry is too modest: it often happens that *the links he provides Anse Intendance with deserve a better prominence
Last night Dlry provided us with a great Juan Enriquez**' video http://tinyurl.com/czj5vn
Enjoy it!
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* viewtopic.php?f=16&t=396&p=3582#p3582
viewtopic.php?f=17&t=638&p=3561#p3561
viewtopic.php?f=7&t=531&p=3196#p3196
viewtopic.php?f=7&t=657&p=3975#p3975

**Juan Enriquez http://www.ted.com/index.php/speakers/j ... iquez.html

[Entendance]

<A very experienced trader commented to me at the end of the day, "It's amazing how much opportunity there is if you just keep your focus." On a day like today, where we start strong out of the gate and end very close to the day's highs, it looks so easy in retrospect to just buy and hold for a killer day. What isn't apparent is all the counter moves and choppiness between the surges that can knock you off the bull that you're riding.
As any rodeo champ knows, you stay on that bull by moving with it, not by fighting it. Once you lose your center of gravity, you're in the dust, making sure the bull doesn't stomp on you.
So what are your centers of gravity as a trader?
One important one is price levels from trading ranges. There are many relevant levels and ranges during any particular day.
A useful rule is that, when we break out of a range--particularly on strong volume and volatility, with most sectors participating-- we don't fade that move unless and until we see prices move back into that range. In other words, if a breakout is genuine, we should not return to that prior range.
What that means in practice is that, once we vault above the price level corresponding to the upper edge of a range, we may consolidate and pull back a bit before continuing higher. If your aim is to ride a trending move, you don't view that normal profit taking as a threat. Indeed, it could even be an opportunity to add to a position.
To be sure, there will still be those times when the bull bucks and gyrates, knocking you on your seat.
Knowing where your ranges are helps you identify when you're rangebound, when you're breaking out of ranges in a trend, and when you're re-entering those ranges to reverse a trend.
In short, you don't try to predict the end of a move; you have to wait for the market to tell you it's over. Similarly, you don't lean one way trying to predict which way the rodeo bull will toss and turn; you keep yourself centered, maintain your feel for the movement, stay loose, and react. Everyone gets tossed at times, but it's amazing how, with your focus, you can find quite a bit of opportunity just by staying on that bull a little while longer.>
-Brett Steenbarger

[dlry]

If anyone is into learning, likes taking refresh courses, or wants to help the kids out take a look at this guys tremendous site...this is what we need more of:

http://www.khanacademy.org/

[dlry]

If people knew how hard I had to work to gain my mastery, it wouldn't seem so wonderful at all.

~ Michelangelo Quotes


Down deep in his heart he knew that we all have the same promise of the unlimited help of the Universal Intelligence that guides all things. If we want it, we only have to plug into it with the master keys of desire and trust.

~ Walter Russell Quotes from The Man Who Tapped the Secrets of the Universe

[dlry]

I read this quote today on another site and it basically is aimed at the masses:

"He who joyfully marches to music in rank and file has already earned my contempt. He has been given a large brain by mistake, since for him the spinal cord would fully suffice." --Albert Einstein

[dlry]

We're all Mississippian's now....Go John I mean Ben!

Everybody at this site should read Devil Take the Hindmost: A History of Financial Speculation by Edward Chancellor. Everything that happened today happened over 200 years ago and all the players and money that were there running things then and benefited are in place today.


Ponzi then:
http://en.wikipedia.org/wiki/John_Law_(economist)

Mississippi Company
View of the camp of John Law at Biloxi, December 1720

In May 1716 the Banque Générale Privée ("General Private Bank"), which developed the use of paper money, was set up by Law. It was a private bank, but three quarters of the capital consisted of government bills and government accepted notes. In August 1717, he bought the Mississippi Company, to help the French colony in Louisiana. In 1717 he also brokered the sale of Thomas Pitt's diamond to the regent, Philippe d'Orléans. In the same year Law floated the Mississippi Company as a joint stock trading company called the Compagnie d'Occident (of which Law was named as Chief Director) which was granted a trade monopoly of the West Indies and North America. The bank became the Banque Royale (Royal Bank) in 1718, meaning the notes were guaranteed by the king. The Company absorbed the Compagnie des Indes Orientales, Compagnie de Chine, and other rival trading companies and became the Compagnie Perpetuelle des Indes on 23 May 1719 with a monopoly of commerce on all the seas. The system however encouraged speculation in shares in 'The Company of the Indies' (the shares becoming a sort of paper currency) and inflation. The system was based on Law trading shares in the Mississippi Company in return for government debt. The Banque Royale was created by default as a result of Law attaining the majority of the government issued notes (debt). It effectively became the Central bank of France. In 1720 the bank and company were united and Law was appointed Controller General of Finances to attract capital. Law's pioneering note-issuing bank was extremely successful until it collapsed and caused an economic crisis in France and across Europe. The collapse was staved off by a constant trading off between national debt and shares of the Mississippi company. New shares were issued to dilute the value of each share, and the new capital was used to purchase more government notes.(Sound familiar?) The speculation continued to build, and the company's two branches, the trading arm and the bank arm, collapsed simultaneously.

Law exaggerated the wealth of Louisiana with an effective marketing scheme, which led to wild speculation on the shares of the company in 1719. In February 1720 it was valued for a very high future cash flow at 10,000 livres. Shares rose from 500 livres in 1719 to as much as 18,000 livres in the first half of 1720, but by the summer of 1720, there was a sudden decline in confidence, leading to a 97 per cent decline in market capitalization by 1721. Predictably, the 'bubble' burst at the end of 1720, when opponents of the financier attempted en masse to convert their notes into specie. By the end of 1720 Orleans dismissed Law, who then fled from France.

Ponzi now:
Bernanke's Wager With the US Bond and Dollar

http://jessescrossroadscafe.blogspot.co ... -bond.html

[Entendance]

"If you are losing a tug-of-war with a tiger, give him the rope before he gets to your arm. You can always buy a new rope."
- Max Gunther

[dlry]

If you think education is expensive-your right, and here's why:


Rensselaer’s Jackson Highest Paid College President, Study Says

Rensselaer, in Troy, New York, paid Jackson $1.6 million in salary and benefits in the year ending June 30, 2008, according to a survey released today by the Chronicle of Higher Education. Columbia University, in New York, paid Lee Bollinger $1.38 million. Bollinger, in sixth place, was the best paid president to lead one of the eight schools in the Ivy League.

Presidential compensation rose 6.5 percent to a median of $358,746 in fiscal 2008, according to the survey of tax data from 419 nonprofit institutions. That growth outstripped the 4.8 percent rise in the consumer price index. Median pay at the 32 biggest research universities grew 16 percent, the Washington- based Chronicle said. Some of Jackson’s compensation included deferred bonuses and other benefits, reflecting increased complexity in the pay packages, said Jeffrey Selingo, the editor.

http://www.bloomberg.com/apps/news?pid= ... RoFw&pos=9