Thursday’s Crash Audio of The S&P Pit

Sunday, May 9th, 2010

This is the a great audio clip of the S&P Pit during the crash:

Below is the link to a TV interview with Ben Lichtenstein who is the S&P pit commentator in the above audio clip during the crash:

Ben Lichtenstein Interview with BNN

Here is a graphic of the crash:

Posted in Emotions, Market Psychology | No Comments »

Magazine Cover Indicator

Saturday, April 17th, 2010

A host of magazine covers lately are filled with hope and glee. Typically, when this happens it signals a top in the market. These types of magazine covers tend to show up after a trend has long been in place and the odds are its nearing exhaustion. While its not an exact science it is a useful indicator to pay attention to…

Here are a few of the covers:

The broad market indices are up more than 75% from their lows and only in the last two weeks have these covers showed up.

Posted in Educational, Emotions, Market Psychology | No Comments »

Flexibility…No I’m Not Talking About Stretching

Sunday, March 28th, 2010

Successful trading is very much a counter intuitive game. It often requires you to be extremely mentally flexible and rigid in that flexibility. Yes, I did just use the words flexible and rigid in the same sentence. On top of that, I said you need to be rigidly flexible to be successful in trading.

The markets ebb and flow and are constantly changing and evolving. In order to be successful you must learn to move with the markets, rather than resist them. Traders that try to fight the markets or impose their will on them lose, lose quickly, and badly.

Being flexible is often much easier said than done and the reason is because most of us are mentally inflexible. This mental inflexibility often stems from our ego’s need to be right and defend itself. If you haven’t already experienced this, you will and it won’t end well. Think about stubborn people you know, do they live with ease or resistance?

So, the question becomes, how do we become more flexible? While I could go into all kinds of trading semantics about how to do this or that, the real answer is to surrender your ego. How do you do that? By reading Eckhart Tolle’s The Power of Now and A New Earth among other eastern spiritual books. Why eastern spiritual books? Because most of them all have to do with the ego and the mind. They have to do with embracing and accepting life as it is rather than resisting it. This is not about religion, its about human functioning. Humans make up markets and last time I checked we are all human.

These books will teach you so much more about the organic nature of life and the markets than the lame western psychology books and teachings. Western psychology is largely based on how to coddle, repair, and trick the ego rather than to move beyond it. I am not interested in playing with the ego at all, been there done that…

The concept that most of us have yet to grasp is that “CHAOS IS THE NORM,” not the other way around. Once you really understand what that means only then will the markets begin to make sense to you. That still doesn’t mean that you’ll understand what is happening you’ll just resist it less.

While a lot of this may sound esoteric to many people, I can assure it is not. Trade for as many years as I have and go through the ups and downs in life and in the market as I have and you’ll understand. I am not putting myself on a pedestal, I am trying to wake you up and show you how to succeed in life and in trading. My point is that I have already had to learn the hard way, so why should you try to reinvent the wheel?

You probably won’t hear what I am saying from many people. In fact, I have read about and heard a few market psychologists that say many of the best traders are often egoic, totally out of control, over emotional, and that gives them their edge. Don’t waste your time with this non-sense!

I would counter their argument by saying, I was once one of those traders and while it worked for a while, it doesn’t work long term. I have lived it and experienced it firsthand and I can tell you definitively, that personality type will crash and burn. There are so many great traders that have crashed and burned because of exactly this type of personality.

I am not afraid to say I was once one of them and after riding the roller coaster one too many times…I said enough is enough. Einstein once said, doing the same thing over and over and expecting different results is the definition of insanity. While, I learned that one the hard way…

Now, my trading is better than its ever been and its because I am not fighting with myself, the markets, my strategy, or any goals or expectations. I am mostly, completely free of all that mental noise and I just let the markets, in their great wisdom, lead me and show me what to do rather than let my ego try to prove to them who is right or wrong.

If you want proof…just refer to my track records page…

Posted in Educational, Emotions, Market Psychology, Trading, Trend Following | No Comments »

The More Things Change, the More They Stay the Same

Thursday, March 11th, 2010

This is a great video about how the markets operate in the framework of human behavior:

Posted in Emotions, Risk Management | No Comments »

Mental Noise and The Importance of Exercise and Fresh Air

Saturday, February 27th, 2010

Trading can be an all encompassing endeavor that is hard to shut off. Your mind just keeps going on and on and on. The mental noise can often be a distraction and extremely detrimental to your trading.

If you are a discretionary trader the mental noise tends to sound like this, I could have done better, I could have made more money, my stop was in the wrong place, or It should have had a tighter stop, my position size was too small, no it was too big, I left a lot on the table, I can’t get a winner if my life depended on it.

If you are a systematic trader its more like how long am I going to have to sit through this drawdown, the market looks like its going to go against my positions for a few more days should reduce my size, I have a ton of profits that I don’t want to give back should I get out, all these other system traders are making money and I’m not.

If you are trading for clients its more like how much more money am I going to lose, my clients are gonna freak out, what do I tell them, its coming up on the end of the month and its time to report my results and this is my third losing month in a row, how do I raise more money, how can I improve my system, my system isn’t working, do I need to make changes, the market environment is changing and that may be bad for the system I am trading.

The cycle goes on and on and the best way to make it end is to take a break and get some exercise and some fresh air. No matter what is going on with your trading, getting out of your office or your house and letting it all go is food for the soul and your psyche. It is amazing what just a 5-10 walk can do on a daily basis to clear your head and give you a new perspective.

Exercise tends to be extremely beneficial because of movement of air through your body and the raising of your endorphins. Exercise literally changes the physiological state of your body thus forcing a mental change that is extremely freeing and refreshing. The more stressed out you are the more exercise you need no matter how tired you are. You will feel much better and have a lot more energy when you are done.

For me, I tend to really enjoy getting out in nature and noticing all that is going on around me. It helps me realize that the world is much bigger than my little bubble and that life goes on no matter what is happening in my life, good or bad. I love to notice and hear the birds chirping and see the chipmunks chasing each other. It brings me back to the purity of life and energizes and cleanses me in a way I can’t get indoors. Skiing in the winter and hiking and mountain biking in the summer are my main outlets. If I do not have much time I simply take my dogs for a walk around the block.

Posted in Emotions, Trading | 3 Comments »

Tiger Woods and Trading

Friday, February 19th, 2010

Today, Tiger Woods apologized to the world for being unfaithful to his wife and for letting his ego get the best of him. For a guy that seemed infallible, the world now realizes that he is human too. Everyone, including the best in the world, go through set backs and bumps in the road in this journey called life. I know that I have experienced them and I am sure you have as well.

These moments tend to be very polarizing and awakening. The key is to use these events to grow and become more conscious. In trading, events like this happen all the time. Traders have a strategy and their ego gets the best of them and they deviate, or cheat on their system or strategy so to speak. When this happens it inevitably leads to losses and sometimes failure.

I have lived these experiences in the markets and in life, and I can tell you firsthand that they are very humbling. Trading in my ways is a metaphor for life. It requires commitment, continual growth, humility, and most of all consciousness. Consciousness can be extremely brutal on the psyche. It can easily bring you to your knees and it will if you are not willing to learn from the events of your life. One of my favorite spiritual teachers, Caroline Myss, says consciousness can only be learned through wisdom or woe. Unfortunately, woe is the typical path for 95% us.

For this reason, I have spent a lot of time studying eastern spirituality. Eastern spirituality is deeply rooted in consciousness and freedom from egoic thinking and behavior. I tend to find implementing these concepts in my life makes me a much better trader and more importantly a much better person. Take the time to improve your life and your trading by learning from others experiences.

Posted in Educational, Emotions, Trading | No Comments »

Simple Truths

Wednesday, February 17th, 2010

Posted in Emotions | No Comments »

Why Winning Streaks End

Saturday, February 13th, 2010

Why Winning Streaks End
04:08 PM Monday February 08, 2010

By Rosabeth Moss Kanter

Reprinted from: Why Winning Streaks End

That crashing sound you hear is not an accident caused by sudden acceleration of your hybrid car; it is the continuing toppling of idols, such as hybrid car companies, off their pedestals. Listen hard, lest you be next.

Toyota, the world’s leading auto company, faces a series of product problems causing a $2 billion recall, an investigation by the National Highway Traffic Safety Administration, and a galling loss of face for a company from face-conscious Japan. This follows its first annual financial loss in 50 years, with profitability regained partly through cost-cutting.

Sayonara for a while to Toyota’s reputation for quality control and invincibility. But in Dearborn, Michigan, there are no smug smiles. Ford announced that it is also fixing electronic brakes in its hybrid cars after a damaging review by Consumer Reports and more generalized concerns about electronics in cars.

The noise continues. In banking, the latest jackhammer blow to any remaining pedestal pieces is a civil fraud lawsuit against former Bank of America CEO Kenneth Lewis. Okay, bankers might not be saints, but the saintly are crashing, too. Ten U.S. missionaries were arrested in Haiti on charges of abducting children, apparently admitting that they had neglected to secure all the necessary permissions, and with hints that some of the “orphans” had living parents. Do some people who feel they are doing good think that they can bend a few inconvenient rules to do it?

And if these weren’t enough reminders about fallen idols for one week, the Super Bowl did not feature my favorite team, the New England Patriots, whose period of NFL dominance snapped this fall among hints of eroding focus and discipline.

All too often, long periods of continued success are undermined not by the competition but by self-inflicted wounds. I uncovered common patterns in business, sports, leadership, and life in research for my book Confidence: How Winning Streaks & Losing Streaks Begin & End.

Winners become sinners when confidence turns into complacency and arrogance. They over-estimate their own invincibility and under-value mundane disciplines. Whenever someone feels on top over a long period of time, they are tempted to neglect the very fundamentals that helped them succeed in the first place. They might even start to feel that the rules don’t apply to them.

Success means that people or teams or organizations survive long enough to need maintenance, repairs, and reinvestment. Winners undergo natural aging processes, as people get older, slow down, leave. Facilities, tools, and bags of tricks get older, deteriorate, and run down. Newcomers might get less rigorous training while long-timers forget what they learned. As momentum runs down, people and buildings begin to look run down. Neglect takes on tangible physical manifestations, such as out-of-shape bodies or broken windows. Add to this the pressures in a recession to cut costs and defer expenditures.

Erosion begins by removing a process or discipline. Let’s defer those roof repairs for another year… Let’s cut out one practice; we already have so many… Let’s save time by eliminating the weekly team meeting… The Chernobyl nuclear plant disaster was said to be caused by engineers neglecting small portions of routine safety checks because they had done so before, and nothing had happened. Oops.

Whether you head a company, lead a good cause, or coach your children’s soccer teams, your job is to root out complacency. Remember to:

* Keep up the essential disciplines every single day, not skipping a single one.
* Keep checking everything carefully.
* Repair, renew, relearn, and reinvest regularly.
* Don’t rejoice in others’ misery, because you could be next.
* Thank anyone who points out flaws. Listen to disgruntled customers or disaffected constituencies.
* Treat even small setbacks as occasions for redoubled efforts.

“Winning is great, but sometimes it takes a loss to get you motivated again. It humbles you down to reality,” said a high school athlete in my research. That youth speaks truth! Although he might not be old enough to drive a Toyota, he is headed in the right direction.

Posted in Emotions, Risk Management, Trading | No Comments »

Revenge of the Nerds: The New Masters of Wall Street

Friday, February 12th, 2010

Scott Patterson, author of “The Quants,” discusses systematic trading:

Rise of the Machines: How Quant Trading Triggered the Credit Crisis:

Posted in Emotions, Hedge Funds, Trading | No Comments »

The Surprising Science of Motivation and How It Could Fix Wall Street

Friday, February 5th, 2010

This is an amazing video that could help change Wall Street and the banking industry around the world. The odds of it happening are slim and none! Nonetheless, it is an amazing video:

Posted in Economics, Educational, Emotions, Risk Management, Trading | No Comments »