Gerald Loeb’s Market Wisdom
1. The most important single factor in shaping security markets is public psychology.
2. To make money in the stock market you either have to be ahead of the crowd or very sure they are going in the same direction for some time to come.
3. Accepting losses is the most important single investment device to insure safety of capital.
4. The difference between the investor who year in and year out procures for himself a final net profit, and the one who is usually in the red, is not entirely a question of superior selection of stocks or superior timing. Rather, it is also a case of knowing how to capitalize successes and curtail failures.
5. One useful fact to remember is that the most important indications are made in the early stages of a broad market move. Nine times out of ten the leaders of an advance are the stocks that make new highs ahead of the averages.
6. There is a saying, “A picture is worth a thousand words.” One might paraphrase this by saying a profit is worth more than endless alibis or explanations. . . prices and trends are really the best and simplest “indicators” you can find.
7. Profits can be made safely only when the opportunity is available and not just because they happen to be desired or needed.
8. Willingness and ability to hold funds uninvested while awaiting real opportunities is a key to success in the battle for investment survival.-
9. In addition to many other contributing factors of inflation or deflation, a very great factor is the psychological. The fact that people think prices are going to advance or decline very much contributes to their movement, and the very momentum of the trend itself tends to perpetuate itself.
10. Most people, especially investors, try to get a certain percentage return, and actually secure a minus yield when properly calculated over the years. Speculators risk less and have a better chance of getting something, in my opinion.
11. I feel all relevant factors, important and otherwise, are registered in the market’s behavior, and, in addition, the action of the market itself can be expected under most circumstances to stimulate buying or selling in a manner consistent enough to allow reasonably accurate forecasting of news in advance of its actual occurrence.
12. You don’t need analysts in a bull market, and you don’t want them in a bear market
Trend Following Lessons from Jesse Livermore
Remember, you do not have to be in the market all the time.
Profits take care of themselves – losses never do.
The only time I really ever lost money was when I broke my own rules.
Throughout all my years of investing I’ve found that the big money was never made in the buying or the selling. The big money was made in the waiting.
Reasonable people act unreasonably when they are afraid. And people become afraid when they start to lose money, their judgement becomes impaired. This is our human nature in this stage of our evolution. It cannot be denied. It must be understood.
The successful speculator must always have cash in reserve, like a good general who keeps troops in reserve for exactly the right moment, and then moves with great conviction, and commits his reserve armies for final victory, because he has waited until all the odds are in his favor.
I believe that the public wants to be lead, to be instructed, to be told what to do. They want reassurance.They will always move on masse, a mob, a herd, a group, because people want the safety of human company. They are afraid to stand alone because the pressure is to be safely included within the herd, not to be the lone calf standing on the desolate, dangerous wolf-patrolled prairie of contrary opinion.
Think about these immortal words. Nothing ever changes. Internalize these thoughts from Jesse Livermore and you will be on your way to be a better trend follower
There is A Solution for Everything…..
There was a father who left 17 camels as an asset for his three sons.
When the father passed away, his sons opened up the will.
The
Will of the father stated that the eldest son should get half of 17
camels while the middle son should be given 1/3rd (one-third). The
youngest son should be given 1/9th (one-ninth) of the 17 camels.
As
it is not possible to divide 17 into half or 17 by 3 or 17 by 9, three
sons started to fight with each other. So, the three sons decided to go
to a wise man.
The wise man listened patiently about the Will.
The
wise man, after giving this thought, brought one camel of his own and
added the same to 17. That increased the total to 18 camels.
Now, he started reading the deceased father’s will.
Half of 18 = 9. So he gave the eldest son 9 camels
1/3rd of 18 = 6. So he gave the middle son 6 camels
1/9th of 18 = 2. So he gave the youngest son 2 camels.
Now add this up: 9 plus 6 plus 2 is 17 and this leaves one camel, which the wise man took away.
The
attitude of negotiation and problem solving is to find the 18th camel
i.e. the common ground. Once a person is able to find the common ground
the issue is resolved. It is difficult at times. However, to reach a
solution, the first step is to believe that there is a solution. If we
think that there is no solution, we won’t be able to reach any!
Letting Winners Turn in to Losers
The Solution
Like Kenny Rogers used to sing, “Don’t count your money, when you are sitting at the table, there will be time enough for counting, when the dealing’s done.” Do not calculate your profits before you lock them in. Avoiding the profit watch will help you avoid an emotional attachment to the paper profits, giving you greater clarity to take the exit door when the market tells you it is time to do so.
I hope this outline of mental problems and some solutions helps you become a better trader. The difference between those who succeed in trading and those who fail is not the system they play, but how well they play it. Your mind is a powerful thing, don’t let it beat you in the market.
21 Things a Trader Should Know About Trading
2. Don’t trade inactive markets.
3. Don’t assume that the relation between your two favorite markets will stay the same from year to year.
4. Be alert to big minimums on Monday as they tend to reverse.
5. Try not to sell markets that have big drifts upwards like stocks.
6. Try to go with with the central banks.
7. Be one with the idea that has the world in its grip and be on the side of the market that will further that grip.
8. Never go for small profits as the vig is too great relative to your gain as a %.
9. Don’t trade when a loved one is very sick.
10. Round numbers will be broken.
11. Gold has been a store of value for a long time. When it gets hit hard, think of all the people in the world and the institutions that use it for insurance.
12. Don’t sell premium in the grains as they move explosively.
13. Never trade so that you exceed your margin. (You will have to get out at the close unless it moves in your favor and that makes you weak).
14. Don’t listen to tips or try to follow fast moving operators as you won’t know when they are going to change positions and how strong and on what basis their views are made.
15. Let your profits run after you have a big loss and get back to even sell to the sleeping point.
16. Don’t take positions that you plan to extricate from in inactive trading hours.
17. After or just before a major announcement don’t use limits.
18. Only buy the worst markets or stocks at the end of a quarter or year.
19. Never trade when you’re out of the office or on vacation or on a whim.
20. Beware of trading when the market is going to be closed and you will not be able to extricate from your position like European markets when they close for a month around Christmas.
21. Don’t short big up opens.