I Love These Five Trading Books

16 Oct
October 16, 2014

 

 

Reminiscences of a Stock Operator

Reminiscences of a Stock Operator

Reminiscences of a Stock Operator has stood the test of time. You know that you are talking to a trader when they love this book and have read it over and over again. It teaches principles that successful traders will be using for many years to come. Like all classic texts, this book doesn’t feel dated, despite being in print for nearly a hundred years.

Market Wizards

Market Wizards

Market Wizards was a landmark trading book. Jack Schwager wanted to write a book like Reminiscences of a Stock Operator, so he followed the yellow brick road lined with profitable trading returns, and interviewed the most successful trading wizards. Schwager did an amazing job of interviewing the right people, asking the right questions, and editing the book flawlessly. The wizards were generous with their time and wisdom, providing a fascinating glimpse into the mind of a successful trader. 

Trend Following

Trend Following

Trend Following was another landmark book that brought professional futures management trend following to the masses. This book was a game changer for me as it explained how trend followers operate their business. It explains in great detail, how reactive technical analysis and risk management can dramatically help a struggling trader attain profitability.

Trade Like a Casino

Trade Like a Casino

Trade Like a Casino  will create a paradigm shift in thinking for new traders, as they will have a difficult time continuing to gamble in the markets with the odds against them. It will cause its readers to realize that having a statistical edge and managing risk is paramount to their success. Traders want to be the casino taking the money from the gamblers and not gambling themselves. This book will change the way traders think.

Trading for a Living

Trading for a Living

Trading for a Living does a great job of bringing together the three M’s: money management, method, and mindset of trading, and explaining how they are all needed for trading success. Without all three legs on a stool, it tips over regardless of the strength of any one leg.

These five trading books are a great foundation for the journey ahead. I still recommend “New Trader, Rich Trader” as a new traders very first book, but of course I am biased.

 

The Flow Of Money Explained

15 Oct
October 15, 2014

 

Money and investment capital are very picky things. They are constantly flowing from those who know how to manage it, to those who do not. Money is not static, it is in constant flux. This is why a person that starts out poor in America can end up wealthy, and also why generational wealth can dissolve in one generation due to bad management. The flow of money is why a lottery winner that wins a jackpot and does not know how to manage it can quickly find themselves in bankruptcy. No amount of money will overcome consistently bad decisions. In a free market, capitalistic system, money flows continually to those that create value and away from those who do not.

  • Money leaves those who risk it’s loss too many times, and ends up with those that protect it and make it grow.
  • Money flows from consumers of goods and services to the owners of the businesses that provide the right products.
  • Money flows to entrepreneurs when they create desirable goods and services. Money flows away from consumers that do not have self control.
  • Money flows to employees that develop skills that employers will pay a premium for. Little money flows to employees that lack skills, or the work ethic to attain them.
  • Money flows from customers to businesses.
  • Money flows to innovators and away from outdated, stagnant businesses.
  • Money flows to well managed businesses and away from mismanaged ones.
  • Money flows from bad traders to good traders.

 

12 Principles that Lead To My Long Term Trading Profitability

14 Oct
October 14, 2014

 

 

Trading is not about one day, one week, or even one year. Trading is about taking money out of the markets over and over again, consistently, and keeping it to spend on other things.

When I have bad days, I look at my long term track record over multiple markets, and that gives me confidence in myself as a trader, and my trading methodology.

I have been a fortunate member of the 10% of profitable traders for the majority of the past 20 years in the markets. From investor, to stock trader, and option trader, I have made consistent returns and kept the capital to spend outside the markets. Here are ten principles that made me profitable in the long term as a trader.

  1. I trade in the direction of the long term trend. I am primarily long in up trends and short or in cash in down trends.
  2. I trade based on quantifiable facts, not my own emotions. I react based on price action, not based on my feelings.
  3. I have spent thousands of hours studying the financial markets. I did my homework before I began trading.
  4. I read several hundred trading books and tried to learn from other people’s experiences, instead of losing my own money and learning the hard way.
  5. I studied historical charts of monster stocks and different extreme time periods. I back tested what I thought would work to see if it would before I traded my ideas.
  6. I followed great traders on twitter to see how they operated.
  7. I learned from professional traders in facebook groups.
  8. I developed a trading plan to give me rules to follow to instill discipline in my trading.
  9. I developed a trading methodology that fits my own personalty and risk tolerance parameters.
  10. I have a passion for trading.
  11. I love the game of trading and the markets.
  12. I never gave up.

A Trader’s Job Description:

13 Oct
October 13, 2014

 

 

The financial markets are looking for applicants that fit these qualifications:

  1.  Expect long hours of study and research. Assume you will lose money in the beginning.
  2. A person interested in becoming a trader must have the mindset of an entrepreneur. Risk, irregular income, and spending money to make money, are all part of the business.
  3. You must trade like a business person and not a gambler. Gamblers need not apply; go to Vegas instead.
  4. Risk management will be your priority. Too much risk exposure will eventually lead you to be an unemployed trader with no trading capital.
  5. You are your own human resource department. Be prepared to manage your own greed and fear.
  6. To keep your morale up, you must keep all your losses small, and allow your winning trades to be as large as possible.
  7. You must have enough trading capital. The minimum is $25,000 in risk capital, or close to half a million to trade for a comfortable living. Small trading accounts are eaten up by percentage commissions and end up being unprofitable. When trading for a living, you must be able to live off your returns and not touch your initial trading principle.
  8. Jesse Livermore’s quote for potential candidates: “The game of speculation is the most uniformly fascinating game in the world. But it is not a game for the stupid, the mentally lazy, the person of inferior emotional balance, or the get-rich-quick adventurer. They will die poor.”

If you are interested in this position please apply at your favorite broker. Financial markets are an equal opportunity employer, and do not discriminate based on wins or losses.

Ten Fast Facts On The $SPY Chart 10/12/14

12 Oct
October 12, 2014

 

Chart courtesy of StockCharts.com

  1. The long term up trends last level of support is at the 200 day sma. A close under the 200 day will have me shifting to shorting rallies from buying the dips I have been doing since January of 2013.
  2. The long term oscillator support of the 30 RSI is going to correlate closely with the 200 day sma, giving a double probability of  a bounce as two schools of “buy the dip” will be looking to get long at this level.
  3. We are also getting close to a 5% pull back which has been normal for the past two years. If the 200 day fails, then a 10% correction is on the table, followed by a possible 20% drop into a bear market. The odds still favor a bounce at the 5% pullback, which aligns with the 30 RSI and 200 sma.
  4. Price is far extended from the 10 day sma, like a rubber band stretched to its limit. This results in an eventual snap back, which will likely happen this week. Whether it holds or not is the question.
  5. The expanding volatility is not bullish and needs to resolve before we can confidently go long and attempt to ride the long elevator back to all time highs.
  6. The 200 day sma is where all eyes will be when the markets opens. Bulls are alive and safe above, but below it is the land of the bears. Many long term trend following systems will be selling on the next open if the 200 day is breached at close. It will be dangerous to be long below the 200 day.
  7. The bearish MACD still says momentum is dead. Buying strength is not working currently and momo is a no-go.
  8. Markets in these kinds of small corrections and volatility  have very violent short covering rallies that are dangerous to be caught in. It is better to have a safety margin by shorting strength instead of shorting into the market after the price has already fallen into a hole and is due for a bounce.
  9. I will be looking for long plays this week as the risk/reward is now skewed in the favor of longs.
  10. The more bearish you see the psychology grow on social media, the more bullish I will become for a bounce. Once the majority of sellers are driven out through fear and they are safely on the sidelines, then the market can bounce.

 

 

 

 

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