InvivoAnalytics.com

Swim With Sharks

That’s exactly what pilot fish do. And they love it.

Legendary trader William Eckhardt once said, “Anyone with average intelligence can learn to trade. . . . Of the people who can learn the basics, only a small percentage will be successful traders.”

He reckoned, “If a betting game among a certain number of participants is played long enough, eventually one player will have all the money. If there is any skill involved, it will accelerate the process of concentrating all the stakes in a few hands. Something like this happens in the market. There is a persistent overall tendency for equity to flow from the many to the few. In the long run, the majority loses. The implication for the trader is that to win you have to act like the minority. If you bring normal human habits and tendencies to trading, you’ll gravitate toward the majority and inevitably lose.”

What holds back the majority? Just being human, I guess. In my nearly 25-year career, I have seen both investors and advisers chase fads, be contrarian, mistake luck for brains, search for needles in haystacks, accept counterknowledge as fact, and confuse animal spirits with conspiracy. Strip away the B.S. and all that’s left is a handful of fundamental truths, knowledge that makes money.

My approach is simple. Stay disciplined. Pick battles I can win. And swim with sharks for fun and profit.

Next

A Rich Attitude

Early in my career, I got some good advice in a letter-to-my-son sort of book about a Swiss banker. The fictional account conveyed a fundamental truth about investing and trading, that one’s attitude toward money is key.

Frank Henry’s rule of thumb was that only half of one’s financial energies should be devoted to job income. The other half ought to go into investment and speculation.

For here is the cold truth. Unless you have a wealthy relative, the only way you are ever going to lift yourself above the great unrich — absolutely the only hope you have — is to take a risk.

Yes, of course, it is a two-way street. Risk-taking implies the possibility of loss instead of gain. If you speculate with your money, you stand to lose it. Instead of ending rich, you can end poor. — Max Gunter, The Zurich Axioms

Focus on earning income and speculation. Have money set aside for a rainy day. If you are in the wealth-building phase, a high-net worth individual, or would like to do more for your portfolio, membership to this site is for you. Those in the wealth-seeding phase should visit RetirementBuilder.ORG.

Prev Next

Do You Have the Right Tools?

If the stock market were a poker game, would you bet it all on one hand? If it were a football game, would your quarterback find himself constantly scrambling or making Hail Mary passes? Trading is a business, and every business needs a plan. Success is rarely accidental.

Many systematic traders spend the majority of their time searching for good places to initiate. It just seems to be part of human nature to focus on the most hopeful point of the trading cycle. Our research indicated that liquidations are vastly more important than initiations. If you initiate purely randomly, you do surprisingly well with a good liquidation criterion. . . .

. . . Our aversion to summary statistics that obliterate structure extends to the trading systems themselves. For instance, we avoid moving averages of price in making trades. Such moving averages are popular mostly because they’re mathematically tractable, but they smooth away all the structural information inherent in the price data. — William Eckhardt

A chart is just a chart until tools are applied. The right ones make all the difference in the world. Whether you trade stocks or ETFs based on a daily chart (”swing trading”) or day-trade stock index, currency or commodity futures (”intraday trading”), SmarterSuite for TradeStation and eSignal helps traders manage risk and make decisions with confidence.

Prev Next

Easier Than Rocket Science

Babe Ruth’s career batting average was .342. While a certain amount of knowledge, know-how, and practice is required, perfection is not a prerequisite to profitability. The things we learn from failure often paves the way to great success.

There is something between up and down or black and white or good and bad–or between success and failure. It is possible for a man who has learned measure in all things to enjoy a modicum of success. He can arrive at the amount of success that for him is necessary and sufficient.

Engineers know this well. Since all engineering measurements are approximations, the framework of a problem becomes a study in how much accuracy is necessary and sufficient. It is not at all necessary, nor is it desirable, to shoot for perfection. Inability to achieve the (often impossible) perfection is not necessarily ruin or failure. — John Magee, Winning the Mental Game on Wall Street

Become a member today and tap into my professional experience in trading and portfolio management. I work closely with members, many of whom I consider friends. Join our community and start making the capital markets work for you and your money.

Prev