Out of sheer curiousity - if I asked you to put R500 down for a R50 return would you do it?
What if I could do it 8 out of 10 times?
I can't make those promises so I am not going to try but I think it is quite interesting exercise to conduct in terms of trader mentality.
Personally I get the sense that a lot of traders would far rather hit one or two spectacular trades but don't keep score of their smaller losses which add up very quickly.
A lot of people have all of these questions about trading vs gambling - my personal opinion - trading is about building wealth. You build wealth by having a score card which reads more wins than losses and you preserve the capital that you generate.
Gambling involves going out and partying it up when you win well and complaining when you lose.
Saturday, August 29, 2009
Saturday, August 22, 2009
I like this!
Courtesy of PSG Online - I like this as it gives some interesting insight into what it takes to be a good trader...
Winning traders execute and monitor their trades in a peak performance state. They are not worried about past mistakes or future profits. All their attention is focused resolutely on the ongoing trade. But it is hard to focus on your ongoing experience when you are worrying about losses, or some other trading problem. It may sound easy to take losses in stride, and avoid letting them interfere with your ongoing experience, but when you are in a severe drawdown, and worried about how you will get out of it, it is hard to avoid letting it get to you. You may become consumed with guilt and anxiety. It is natural. Your future may actually be at stake. But you cannot trade at your best when you are worried. Somehow you must train your mind to put the losses out of your awareness. One way to train your mind to temporarily forget about losses is to schedule worry time.
The natural human tendency to worry about problems protects us. If we did not worry, we might take dangerous risks, and pay a steep price. But worrying can be a problem for successful trading. If you are the kind of person who worries uncontrollably, it may interfere with your ability to pay attention to executing your trading plan. Not only can it distract you when you try to execute a trade, excessive worrying can prevent you from getting a restful sleep at night, or keep you so uptight that you cannot relax. Without proper rest and relaxation, you will find it difficult to mobilise your psychological resources for optimal trading performance.
Worrying becomes a problem when you do it too often and for no good reason. For example, if you have mounted losses and worry about it, you tend to think the same thoughts over and over again. It does not help much. You are likely to just let it interfere with your ability to make back the money you have lost. You need to put such thoughts out of your mind while you trade. When you worry too much, you feel out of control. One way to regain control is to schedule worry time. The basic idea is to set aside a certain part of the day, say seven o'clock, for example, and only worry for 30 minutes during that time. The goal is to worry only at a specific time for a fixed length of time. When you catch yourself worrying during the day, you can tell yourself to stop with the knowledge that you can worry about whatever is bothering you later. Knowing that you can worry during the "worry session" will help you control your worrying.
It may sound a little simplified, but it works for many people who have trouble controlling their worrying. Try it. See if it works. If you are like most people, you will find that you worry less, and can control it. So do not let worrying interfere with your ability to trade successfully. Worrying seems like a natural response to a setback, but it usually gets you nowhere. Rather than hopelessly worry, it is vital that you take an active problem solving approach. If you can control your worrying by scheduling regular worry sessions, you will be able to recover from a setback fast and return to profitability.
"In a crisis, don't hide behind anything or anybody. They're going to find you anyway." - Bear Bryant
Winning traders execute and monitor their trades in a peak performance state. They are not worried about past mistakes or future profits. All their attention is focused resolutely on the ongoing trade. But it is hard to focus on your ongoing experience when you are worrying about losses, or some other trading problem. It may sound easy to take losses in stride, and avoid letting them interfere with your ongoing experience, but when you are in a severe drawdown, and worried about how you will get out of it, it is hard to avoid letting it get to you. You may become consumed with guilt and anxiety. It is natural. Your future may actually be at stake. But you cannot trade at your best when you are worried. Somehow you must train your mind to put the losses out of your awareness. One way to train your mind to temporarily forget about losses is to schedule worry time.
The natural human tendency to worry about problems protects us. If we did not worry, we might take dangerous risks, and pay a steep price. But worrying can be a problem for successful trading. If you are the kind of person who worries uncontrollably, it may interfere with your ability to pay attention to executing your trading plan. Not only can it distract you when you try to execute a trade, excessive worrying can prevent you from getting a restful sleep at night, or keep you so uptight that you cannot relax. Without proper rest and relaxation, you will find it difficult to mobilise your psychological resources for optimal trading performance.
Worrying becomes a problem when you do it too often and for no good reason. For example, if you have mounted losses and worry about it, you tend to think the same thoughts over and over again. It does not help much. You are likely to just let it interfere with your ability to make back the money you have lost. You need to put such thoughts out of your mind while you trade. When you worry too much, you feel out of control. One way to regain control is to schedule worry time. The basic idea is to set aside a certain part of the day, say seven o'clock, for example, and only worry for 30 minutes during that time. The goal is to worry only at a specific time for a fixed length of time. When you catch yourself worrying during the day, you can tell yourself to stop with the knowledge that you can worry about whatever is bothering you later. Knowing that you can worry during the "worry session" will help you control your worrying.
It may sound a little simplified, but it works for many people who have trouble controlling their worrying. Try it. See if it works. If you are like most people, you will find that you worry less, and can control it. So do not let worrying interfere with your ability to trade successfully. Worrying seems like a natural response to a setback, but it usually gets you nowhere. Rather than hopelessly worry, it is vital that you take an active problem solving approach. If you can control your worrying by scheduling regular worry sessions, you will be able to recover from a setback fast and return to profitability.
"In a crisis, don't hide behind anything or anybody. They're going to find you anyway." - Bear Bryant
Sunday, August 9, 2009
Interesting market to be in
It is a tough market to be in at the moment. Every sense is screaming that equity prices are looking increasingly expensive but the market seems to be disagreeing and there is more green in Asia today after increasingly "bullish" economic data out of the US on the jobs front.... I have no comment on this data beyond saying that you cannot have an economic recovery while the number of unemployed continue to rise.
In terms of open trading positions I have a long on Gold from US$955 and Platinum from US$1250. Also taken a bit of a dirty little punt on sugar having read that there is a global shortage which is likely to fuel prices in the coming months.
The sugar one I can't comment on - it really was just a flutter and having looked around the reality of of sugar supply-side shortfall seems to be credible.
Platinum I think will see some increased demand going into the second half of 2009 with some re-stocking in the auto sector (the so called "cash-for-clunkers" programme) and maybe some jewellery demand as the economy stabilises. My guess is we could see platinum testing $1285 again this week.
Gold - The yellow metal has worked hard to get back above the $950 an ounce mark. There have been a couple of stomach curdling $10 - $15 drops on action in the dollar market - which have hurt me on stop losses a couple of times - but the metal seems to be behaving a little better after the sell-off last week. I think we could realistically see gold test $980 this week and I would be tempted to take some part profits at $975 if it gets a bit of wind under its sails.
On the equity front I've continued the habit of accumulating a mixture of ALSI constituents and the exchange traded funds (ETFs) that have been mentioned on this blog before.
In terms of open trading positions I have a long on Gold from US$955 and Platinum from US$1250. Also taken a bit of a dirty little punt on sugar having read that there is a global shortage which is likely to fuel prices in the coming months.
The sugar one I can't comment on - it really was just a flutter and having looked around the reality of of sugar supply-side shortfall seems to be credible.
Platinum I think will see some increased demand going into the second half of 2009 with some re-stocking in the auto sector (the so called "cash-for-clunkers" programme) and maybe some jewellery demand as the economy stabilises. My guess is we could see platinum testing $1285 again this week.
Gold - The yellow metal has worked hard to get back above the $950 an ounce mark. There have been a couple of stomach curdling $10 - $15 drops on action in the dollar market - which have hurt me on stop losses a couple of times - but the metal seems to be behaving a little better after the sell-off last week. I think we could realistically see gold test $980 this week and I would be tempted to take some part profits at $975 if it gets a bit of wind under its sails.
On the equity front I've continued the habit of accumulating a mixture of ALSI constituents and the exchange traded funds (ETFs) that have been mentioned on this blog before.
Saturday, July 25, 2009
Saturday mumblings
I haven't posted in a while but I've got a couple of observations around trading, wealth management and strategy that have occurred to me which I thought I would stick up here on the blog and see if others had some thoughts.
Trade vs. buy-and-hold
I know many traders turn up their noses at old fashioned buy and hold strategies (not "hold and hope" stuff - quality buy and hold). I was looking at the performance of my two respective portfolios since September 2008 and interestingly my buy and hold (wealth) portfolio has outperformed my day-trading portfolio.
I found that quite interesting considering the volatility in the market at the moment.
Does it mean I am a kak trader? The record says I've made consistent money day-trading so I'd like to think I have some skills but I think it does show that a consistent system aimed at wealth and money management will trump short term trading gains.
Trading personality
Have you ever done a personality test? Do you think there is room for one in your trading strategy?
A mate of mine took this What's Stopping You test run by Global Trader and it came out with some interesting results.
The evaluation basically tests some of your knowledge about financial products and your risk profile which is all good and well. Most interestingly for me - the test looked at his personality and it discovered something of an impulsive streak in him. It's something I agree with and something I've also seen in my own trading. Sometimes you find yourself constantly looking for positions to trade or you find yourself picking out a quick and easy "punt".
In his case, I have regularly seen him drop money when it wasn't necessary to take a position and the test actually highlighted for him a problem with his trading personality. If he wants to punt, he can do it on the horses.
Point being that he was made to think about what he was doing and hopefully it improves his trading strategy.
Nothing wrong with asking an expert
I think there are quite a few traders who want to "do it their way".
By following advice from other traders they feel like they are cheating a bit. I haven't traded much recently and when I have it has been very haphazardly and not been good for the wallet.
I stepped back and took one of the recommended "house" views from one of my service providers and BOOM I was back on the scoreboard within 6 hours.
Sometimes you don't have to go against the grain to pick good positions.
Just some thoughts - use 'em don't use 'em....
Trade vs. buy-and-hold
I know many traders turn up their noses at old fashioned buy and hold strategies (not "hold and hope" stuff - quality buy and hold). I was looking at the performance of my two respective portfolios since September 2008 and interestingly my buy and hold (wealth) portfolio has outperformed my day-trading portfolio.
I found that quite interesting considering the volatility in the market at the moment.
Does it mean I am a kak trader? The record says I've made consistent money day-trading so I'd like to think I have some skills but I think it does show that a consistent system aimed at wealth and money management will trump short term trading gains.
Trading personality
Have you ever done a personality test? Do you think there is room for one in your trading strategy?
A mate of mine took this What's Stopping You test run by Global Trader and it came out with some interesting results.
The evaluation basically tests some of your knowledge about financial products and your risk profile which is all good and well. Most interestingly for me - the test looked at his personality and it discovered something of an impulsive streak in him. It's something I agree with and something I've also seen in my own trading. Sometimes you find yourself constantly looking for positions to trade or you find yourself picking out a quick and easy "punt".
In his case, I have regularly seen him drop money when it wasn't necessary to take a position and the test actually highlighted for him a problem with his trading personality. If he wants to punt, he can do it on the horses.
Point being that he was made to think about what he was doing and hopefully it improves his trading strategy.
Nothing wrong with asking an expert
I think there are quite a few traders who want to "do it their way".
By following advice from other traders they feel like they are cheating a bit. I haven't traded much recently and when I have it has been very haphazardly and not been good for the wallet.
I stepped back and took one of the recommended "house" views from one of my service providers and BOOM I was back on the scoreboard within 6 hours.
Sometimes you don't have to go against the grain to pick good positions.
Just some thoughts - use 'em don't use 'em....
Friday, June 26, 2009
Trading thought
Day-trading can be a lonely past-time - which is why I suspect traders love to flit between various internet message boards.
But the problem with that is that bad habits can creep into your trading if you don't have somebody watching over you or making sure you stick to your system.
I can see it in my own trading - I've been losing discipline and been chasing around silly little punts that have cost me a few bucks in the last few days.
I found myself scalping for silly little profits and then tossing them away on speculative positions a few minutes later. Yesterday I did no fewer than 30 trades and went backwards!!!
30 trades is ridiculous and the stupid part of it was that if I had let my first trade run it would have been more profitable than all my other winning trades on the day put together.
Time to step back and get out of the scalping game and get back to fewer but more profitable trades...
... live and learn.
But the problem with that is that bad habits can creep into your trading if you don't have somebody watching over you or making sure you stick to your system.
I can see it in my own trading - I've been losing discipline and been chasing around silly little punts that have cost me a few bucks in the last few days.
I found myself scalping for silly little profits and then tossing them away on speculative positions a few minutes later. Yesterday I did no fewer than 30 trades and went backwards!!!
30 trades is ridiculous and the stupid part of it was that if I had let my first trade run it would have been more profitable than all my other winning trades on the day put together.
Time to step back and get out of the scalping game and get back to fewer but more profitable trades...
... live and learn.
Monday, June 22, 2009
But but but....
A sea of red greets traders today with Asia kicking us off. Had a couple of overnight shorts in place on both the Hang Seng and Nikkei which I've cashed out... Still reckon there is more downside to this leg but nobody ever went broke taking a profit.
The only thing I've got open now is a short on the Dow with a downward trend back in place as the rally fizzles out after the World Bank came out yesterday with some negative comments about future growth potential... which was in contrast to comments attributed to George Soros who said "The worst was behind us"
I am by no means a perma-bear and I think there are some nice value opportunities in the market at the moment - particularly in the South African market - but we need to appreciate how skittish investors are.
The bid by Xstrata for Anglo American gave the local market a bit of a boost but having chatted to a few people I get the sense that the bid is not going to get the support needed and if the "transaction premium" gets yanked out from Anglo then the JSE Top40 could take a smack.
Commodity futures are down as well. I thought there might be a bit more support for gold at 920 and oil at US$68 (particularly after its recent strength) but I guess next areas of interest for me are gold at around US$910 and oil at US$65.
(On that - I noticed an interesting story on Bloomberg about Japanese banks threatening to pull some funding from Venezuelan oil assets in response to non-payment and nationalisation threats... could this be a short term catalyst?)
Down still seems to be the only direction.
The only thing I've got open now is a short on the Dow with a downward trend back in place as the rally fizzles out after the World Bank came out yesterday with some negative comments about future growth potential... which was in contrast to comments attributed to George Soros who said "The worst was behind us"
I am by no means a perma-bear and I think there are some nice value opportunities in the market at the moment - particularly in the South African market - but we need to appreciate how skittish investors are.
The bid by Xstrata for Anglo American gave the local market a bit of a boost but having chatted to a few people I get the sense that the bid is not going to get the support needed and if the "transaction premium" gets yanked out from Anglo then the JSE Top40 could take a smack.
Commodity futures are down as well. I thought there might be a bit more support for gold at 920 and oil at US$68 (particularly after its recent strength) but I guess next areas of interest for me are gold at around US$910 and oil at US$65.
(On that - I noticed an interesting story on Bloomberg about Japanese banks threatening to pull some funding from Venezuelan oil assets in response to non-payment and nationalisation threats... could this be a short term catalyst?)
Down still seems to be the only direction.
Saturday, June 20, 2009
Some fundamental calls
There are no shortage of opportunities to scalp around the commodities but finding deep value investments are a little tougher given the economic outlook.
Markets may have rallied and there may have been some stimulus in the system prompting some improved data but I get the sense we're starting a second downward leg.
Previously on this blog I've mentioned that I like the agriculture and food sectors as good bets over the next year or so. I've had my holdings in Zeder (plus followed the rights issue) and added to my shares in Country Bird Holdings (CBH) on the back of the directors dealings.
Another sector I hadn't given much consideration to was education in South Africa. Specifically private sector education.
Your main listed entry point for education at the moment is via Advtech which owns the Crawford schools. The share has run hard but they have an important area that AdvTech has is scale... You need scale and infrastructure to make a success of education for obvious reasons.
The second unknown entry point which I had only heard about quite recently was through Paladin Capital (a soon to be listed subsidiary of the PSG group). They've apparently got a fairly sizeable investment in a new education player which might be of interest....
** Author holds shares in ZED, CBH, PSG
Markets may have rallied and there may have been some stimulus in the system prompting some improved data but I get the sense we're starting a second downward leg.
Previously on this blog I've mentioned that I like the agriculture and food sectors as good bets over the next year or so. I've had my holdings in Zeder (plus followed the rights issue) and added to my shares in Country Bird Holdings (CBH) on the back of the directors dealings.
Another sector I hadn't given much consideration to was education in South Africa. Specifically private sector education.
Your main listed entry point for education at the moment is via Advtech which owns the Crawford schools. The share has run hard but they have an important area that AdvTech has is scale... You need scale and infrastructure to make a success of education for obvious reasons.
The second unknown entry point which I had only heard about quite recently was through Paladin Capital (a soon to be listed subsidiary of the PSG group). They've apparently got a fairly sizeable investment in a new education player which might be of interest....
** Author holds shares in ZED, CBH, PSG
Subscribe to:
Posts (Atom)
Posts
