Trader's Thread 04 (Feb 12 - Jan 20)

Re: Trader's Thread 04 (Feb 12 - Dec 19)

Postby winston » Sat Dec 07, 2019 8:41 pm

How to Master Smart Speculation

by Alexander Green

1. Timing the market - Dont
2. Investing in things you don't understand
3. Getting stuck in illiquid securities
4. Overestimating the potential of low-priced stocks


Source: The Oxford Club
It's all about "how much you made when you were right" & "how little you lost when you were wrong"
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Re: Trader's Thread 04 (Feb 12 - Dec 19)

Postby winston » Sun Dec 08, 2019 11:02 am

Disposition Effect: the tendency to sell winners too soon and hold on to losers for too long.
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Re: Trader's Thread 04 (Feb 12 - Dec 19)

Postby winston » Sat Dec 21, 2019 9:14 pm

Three Steps to Taking the Emotions Out of Your Investing

By Whitney Tilson

1. First, assume the market is right and you're wrong.
2. Then, you must figure out what you've missed and actively seek out disconfirming information.
3. Lastly, to make the right decision, you must pretend like you don't already own the stock.


Source: Empire Financial Research
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Re: Trader's Thread 04 (Feb 12 - Dec 19)

Postby winston » Tue Dec 24, 2019 8:19 am

Are You a Short-Term or Long-Term Trader?

by Marc Lichtenfeld

1. How much time do I want to commit?
2. What's my tolerance for risk?
3. What strategy makes the most sense for me?


Source: The Oxford Club
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Re: Trader's Thread 04 (Feb 12 - Dec 19)

Postby winston » Mon Dec 30, 2019 2:00 pm

5 Tips for More Profitable Trading in 2020

Among them is to be more aggressive and to trade incrementally.

By JAMES "REV SHARK" DEPORRE

1. Be more aggressive
2. Don't overreact to short-term volatility.
3. Trade incrementally.
4. Don't make predictions.
5. Keep accounts close to highs.


Source: Real Money

https://realmoney.thestreet.com/investi ... yptr=yahoo
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Re: Trader's Thread 04 (Feb 12 - Dec 19)

Postby winston » Mon Jan 06, 2020 10:18 pm

Obsession with Outcomes is Damaging

by Vishal Khandelwal

Most investment experts selling their services always highlight the outcome - so much return in so many months or years - and never the process they used to get this outcome.

This is simply because, while the outcome is there for everyone to see (availability bias), investors rarely ask the question whether that outcome was due to the skill of the expert (a proper investment process) or merely luck.

This is not to say that results don't matter; obviously they are extremely important in measuring success. But if the results have been largely thanks to luck, they may not come in as expected in the future.

What is more, if you focus only on the outcome, you are less likely to achieve it. Instead, if you focus on the process, the outcome will take care of itself.

But then, as published in here -

Despite the problems of using results as a barometer of decision quality, it remains endemic in investment. We use outcomes as a simple indicator and then weave narratives around these views.

We take a difficult problem, simplify it (are results good or bad?) and then create a story to justify the outcome.

This pattern of behaviour is evident in a range of poor investment decisions, such as: susceptibility to financial frauds, participation in investment bubbles, performance chasing and excessive short-term trading.

Source: Seeking Alpha
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Re: Trader's Thread 04 (Feb 12 - Dec 19)

Postby winston » Tue Jan 07, 2020 8:10 pm

Know Thyself

by Vishal Khandelwal

Taleb again from Fooled by Randomness -

It certainly takes bravery to remain skeptical; it takes inordinate courage to introspect, to confront oneself, to accept one's limitations - scientists are seeing more and more evidence that we are specifically designed by mother nature to fool ourselves.

One of the most underrated but among the most valuable skills required to succeed in stock market investing is resilience i.e., the ability to properly adapt to stress and adversity - either in the market or in the businesses one is owning.

How easily can you bounce back from a market crash? What would be your reaction to a sharp decline in your stocks' prices? How many 'surprises' can you withstand in quick succession? How safe are your overall finances in light of extreme stress on the equity component of your portfolio?

As Taleb says, we are anyways designed by mother nature to fool ourselves. But don't forget what the noted financial writer George J.W. Goodman - who used the pen name of Adam Smith - wrote in his wonderful book, The Money Game -
If you don't know who you are, this is an expensive place to find out.

Source: Seeking Alpha
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Re: Trader's Thread 04 (Feb 12 - Dec 19)

Postby winston » Tue Jan 07, 2020 8:32 pm

Being Prepared

by Vishal Khandelwal

In one of his lectures published in Poor Charlie's Almanack, Charlie Munger said this -

Our experience tends to confirm a long-held notion that being prepared, on a few occasions in a lifetime, to act promptly in scale, in doing some simple and logical thing, will often dramatically improve the financial results of the lifetime.

A few major opportunities, clearly recognizable as such, will usually come to one who continuously searches and waits, with a curious mind, loving diagnosis involving multiple variables.

And then all that is required is a willingness to bet heavily when the odds are extremely favourable, using resources available as a result of prudence and patience in the past.

What Charlie says here is that it pays to be prepared in your investing life - prepared not just for the risks that may be lurking around the corner, but also for opportunities that may appear anytime.

Ironically, we are often prepared for none, and that is what causes us grief during the market's ups (when we keep sitting on the sidelines) and downs (when we are enjoying the madness of the party).

Roman Stoic philosopher Seneca wrote in Letters from a Stoic -

Everyone faces up more bravely to a thing for which he has long prepared himself, sufferings, even, being withstood if they have been trained for in advance.

Those who are unprepared, on the other hand, are panic-stricken by the most insignificant happenings.

Source: Seeking Alpha
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Re: Trader's Thread 04 (Feb 12 - Dec 19)

Postby winston » Wed Jan 08, 2020 9:41 pm

Equanimity and Investing

by Vishal Khandelwal

When it comes to investing, making money in stocks when everyone is making money in stocks isn't a big deal.

Rather, it's the ability to handle good and bad times with equanimity, combined with courage and decisiveness, that really matters in the long run.

Of course, most of us simply aren't wired to be equanimous at most of the times, and it's terribly difficult to rid ourselves of the emotions of ecstasy (when things are looking up) and misery (when things are looking down).

And that's why ensuring that we avoid all of those ways that can cause us wealth destruction - trading, timing, high fee, inadequate diversification, and leverage - is paramount.

Everything, including our triumphs and disasters, anyways shall pass. But the equanimity with which we allow them to pass will keep us sane always.

As Lord Krishna taught Arjuna, as we wade through the ocean of life, it throws up all kinds of waves that are beyond our control.

If we keep struggling to eliminate negative situations, we will be unable to avoid unhappiness. But if we can learn to accept everything that comes our way, with equanimity and without sacrificing our best efforts, that will be true Yog.

So, give equanimity a shot, and see what happens.

Source: Seeking Alpha
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Re: Trader's Thread 04 (Feb 12 - Dec 19)

Postby winston » Wed Jan 08, 2020 9:53 pm

Avoid Stress

by Vishal Khandelwal

I recently read this passage from Nassim Taleb's Fooled by Randomness that tells something about why we must avoid stress -

…people who look too closely at randomness burn out, their emotions drained by the series of pangs they experience.

Regardless of what people claim, a negative pang is not offset by a positive one (some psychologists estimate the negative effect for an average loss to be up to 2.5 the magnitude of a positive one); it will lead to an emotional deficit.

…people in lab coats have examined some scary properties of this type of negative pangs on the neural system (the usual expected effect: high blood pressure; the less expected: chronic stress leads to memory loss, lessening of brain plasticity, and brain damage).

To my knowledge, there are no studies investigating the exact properties of trader's burnout, but a daily exposure to such high degrees of randomness without much control will have physiological effects on humans (nobody studied the effect of such exposure on the risk of cancer).

…wealth does not count so much into one's well-being as the route one uses to get to it.

Source: Seeking Alpha
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