FROM AN EXPERIENCE
1. HOPE IS A FOUR-LETTER WORD
Hope is a dirty word for a trader, not only in regards to
procrastinating in a losing position, hoping the market will come
back, but also in terms of hoping for a reaction that will allow for a
back, but also in terms of hoping for a reaction that will allow for a
better entry in a missed trade.
If such trades are good, the hoped-for
If such trades are good, the hoped-for
reaction will not materialize until it is too late.
Often the only way to enter such trades is to do so as soon as a
reasonable stop-loss point can be identified.
Often the only way to enter such trades is to do so as soon as a
reasonable stop-loss point can be identified.
2. DON’T DO THE COMFORTABLE THING
Eckhardt offers the rather provocative proposition that the human
tendency to select comfortable choices will lead most people to
experience worse than random results. In effect, he is saying that
natural human traits lead to such poor trading decisions that most
people would be better off flipping coins or throwing darts. Some
of the examples Eckhardt cites of the comfortable choices people
tend to make that run counter to sound trading principles include:
gambling with losses, locking in sure winners, selling on strength
and buying on weakness, and designing (or buying) trading systems
that have been overfitted to past price behavior. The implied
message to the trader is: Do what is right, not what feels comfortable.
3. YOU CAN’T WIN IF YOU HAVE TO WIN
There is an old Wall Street adage: “Scared money never wins.”
The reason is quite simple: If you are risking money you can’t afford
to lose, all the emotional pitfalls of trading will be magnified.
Druckenmiller’s “betting the ranch” on one trade, in a last-ditch
effort to save his firm, is a perfect example of the above aphorism.
Even though he came within one week of picking the absolute
bottom in the T-bill market, he still lost all his money. The need to
win fosters trading errors (e.g., excessive lever-age and a lack of
planning in the example just cited). The market seldom tolerates the
carelessness associated with trades bom of desperation.
4. THINK TWICE WHEN THE MARKET LETS YOU OFF
THE HOOK EASILY
Don’t be too eager to get out of a position you have been worried
at out if the market allows you to exit at a much better price than
anticipated. If you had been worried about an adverse overnight
(or over-the-weekend) price move because of a news event or a
technical price failure on the pre-vious close, it is likely that many
other traders shared this concern. The fact that the market does not
follow through much on these fears strongly suggests that there must
be some very powerful underlying forces in favor of the direction
of the original position. This concept, which was first pro-posed by
Marty Schwartz in Market Wizards, was illustrated in this volume
by the manner in which Lipschutz exited the one trade he admitted
had scared him. In that instance, he held an enormous short dollar
position in the midst of a strongly rallying market and had to wait f
or the Tokyo
When the dollar opened weaker than expected in Tokyo
just dump his position m relief; rather, his trader’s instincts told him
to delay liquidation-a decision that resulted in a far better exit price.
5. A MIND IS A TERRIBLE THING TO CLOSE
Open-mindedness seems to be a common trait among those who
excel at trading. For example, Blake’s entry into trading was actually
an attempt to demonstrate to a friend that prices were random.
When he realized he was wrong, he became a trader. Driehaus says
that the mind is like a parachute; it’s good only when it’s open.
6. THE MARKETS ARE AN EXPENSIVE PLACE TO LOOK
FOR EXCITEMENT
Excitement has a lot to do with the image of trading but nothing to
do with success in trading (except in an inverse sense). In Market
Wizards, Larry Hite described his conversation with a friend who
couldn't under-stand his absolute adherence to a computerized
trading system.
His friend asked, “Larry, how can you trade the
way you do. Isn’t it boring?”
Larry replied, “I don’t trade for
excitement; I trade to win.”
This passage came to mind when Faulkner described the trader
who blew out because he found it too
boring to be trading in the way that produced profits.
(to be contd)TODAY’S TRADING STRATEGY
OF NIFTY FUTURES – JULY 25th
WATCH 5643 today
If trades above 5643 for 10 minutes,
If trades above 5643 for 10 minutes, see a sure hike upto 5682-92
Resistance @ 5692
If trades below 5642 for 15 minutes, a slide upto
5622 and if breaks this non-stop slide upto 5604 is expected
Good support @ 5604 and 5597 today
SHARE TIPS TODAY (JULY 25)
1) Sell GTL @ 76.10
T – 73.20
2) Sell SGJHL @ 174.50
T - 166.25
Disclosure:
1.Stoploss levels, reverse trades are given exclusively to the subscribers.
2. Solely I have all the rights to reduce or completely
stop this free tips at any moment abruptly.
Subscribe as soon as possible and earn more.
The Market Emotions Cycle - how we feel as the markets fluctuate
| Trimark Analysis of this cycle of boom and bust and the feelings that go along with it. The internet, the stock market boom and CNN all led people to believe that wealth creation was easy and everyone could do it cheaply and effortlessly. The truth is, there is no easy way to accumulate assets and there is no “new paradigm” that eliminates the possibility of a recession or stock market crash. |
This chart shows the cycle of emotions people go through when investing in the markets. Long term thinking is key! Understanding not only the cycle but the emotions that go with it can help equip investors to tolerate and benefit from market fluctuations.
The Cycle of Market
Emotions “Maybe the markets just aren’t for me.”
- Optimism
- Thrill
- Excitement
- Denial
- Fear
- Euphoria
- Anxiety
- Desperation
- Panic
- Capitulation
- Despondency
- Depression
- Relief
- Optimism
Hope
“Wow, I feel great about this investment.” “Temporary setback. I’m a long-term investor.” Maximum Opportunity Maximum Risk
Expectations are high
• Optimism drives every investment
• Your expectations become reality; excitement, thrill
and euphoria take over
• You reach the point of maximum financial risk:
Your confidence is very high
Nothing lasts forever
• Soaring markets will level off, bringing on feelings of anxiety,
denial and outright fear
• As markets fall, next up are desperation, panic, capitulation
and despondency
• Depression sets in: You begin to question your place in the
investment world
Long-term thinking is key
• Review your original objectives and remember that you’re
investing for the long term
• Keep in mind that market downturns can result in maximum
financial opportunity
A brighter future
• Markets begin to normalize: Hope and relief emerge
• Prospects for a brighter future encourage optimism once again
Investing can be a highly emotional experience. This outline of market emotions can help you take a rational approach to maximizing
market fluctuations. Now’s the time to build a long-term investment strategy with your financial advisor – a strategy that will carry you
through the cycle of market emotions.
In the end, by anticipating and understanding the series of emotions that you may experience, you’ll be better equipped to tolerate andbenefit from market fluctuations.
MESSAGE TODAY
Fear is the parent of cruelty.
-JAMES ANTHONY FROUDE
(Refer to ‘OUR POLICIES’ in blog archives
in case of any queries)
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