Trader's Thread 01 (May 08 - Dec 08)

[kennynah]

to know the beginning, is to know the end first.

[HengHeng]

How to know whether i going to win or not ? ... How to know the end when i haven even start?

Or not how i know how i going to end ? .. Paradox leh ...

If i know i going to lose why will i invest ... if i don't invest how to lose?

[kennynah]

when u finally figure out...i will tell you...

[HengHeng]

to me everything is 50-50 ... beh ki jiu lou beh lou jiu ki ...

beh yia jiu su , beh su jiu yia

[kennynah]

there u go...u got the answer figured out ... hahaha...

[winston]

A Trading Anecdote -- by Bill Kraft

As you read this, I am sitting on a lanai in Kauai overlooking magnificent Hanalei Bay. I'm not trying to make anyone envious, I only want to point out the great surroundings I am enjoying because I probably couldn't be doing what I am doing now unless I was in the trading business.

Last weekend I wrote about what I consider to be the advisability of treating trading as a business and how I believe it can increase the likelihood of success as compared to those who treat trading as a hobby or as a gambling venture. Nothing guarantees success in trading or, for that matter, any business, but the investor's approach can make a real difference.

One of my early coaching students came to me after having lost a huge sum of money when the tech bubble burst and the markets turned down. Tears literally ran down his cheeks when he described his losses and his hands shook when he spoke about trading. In spite of this, the student claimed he wanted to be a full time trader. We spoke about the necessity of getting his obvious emotions out of the way and substituting discipline in their place. I suggested that the first step would be the creation of a trading business and he was all for the idea.

We then began to go through the business plan elements I discuss in "Trade Your Way to Wealth" in order to help this fellow develop a plan that might fit his personality, risk tolerance, and needs. Our discussions began well and he started to develop his plan. We then came to the question of what his business hours would be. I believe it is important for traders to set out time that they will specifically devote to their trading business just as it was important for me when I was in the law business to devote hours to the practice.

I also believe it is important to have time for oneself that is not devoted to the business. Time to shake out cobwebs, time to enjoy other things in life can be very important as well. My student absolutely refused to set hours for himself. I explained that the hours he set originally always could be changed because his business plan was never to be set in stone; it was always a work in progress. Nevertheless he flatly refused. He came up with a myriad of excuses even though he had no other fixed time obligations since he had quit his job several years before when he began trading (and before he lost the bundle).

It was only after more discussions with him that I began to realize that refusing to set business hours was an excuse for his unwillingness to continue to trade. I addressed that situation with him and suggested that trading might not be for him. He disagreed vehemently so I asked him when he had last made a trade. He had not made a trade in more than 2 years. I suggested we find a stock that looked bullish in a bullish sector (the market at the time was going up) and buy a single share.

He began to shake and to cry. He was unable to buy a single share of a $15 stock. He told me he had to wait until the system he was working on was perfected. Though he didn't use these words, he was working to create the holy grail. I suggested he might be better off marketing his system, but now, several years later, he is still working on the system and he still has not made a single trade as far as I know. This poor fellow is an example of the need to know ourselves. Some people are not cut out to be traders and if he ever was he isn't now.

While a plan is very important to trading, my old student taught me that something needs to come before the plan. Honest self evaluation is critical. Anyone can be a happy trader when they are making money, but first we need to know whether we can face the prospect of loss and whether we can handle actual loss since there will be losses. In the business sense, can we look at a loss and understand that it is a cost of doing business or is it going to be devastating?

If the prospect of a loss is daunting, trading probably isn't for you. If you understand that losses will occur and that risk is ever present but can be managed with discipline, and if the idea of trading interests you, then maybe you can start working on your plan.

[kennynah]

W: thanks for this great article
"know thyself, know thy enemy
all battles can be won"

[iam802]

"In a down-trending market, an early gap up is a short 95 percent of the time"

- Linda Raschke

[iam802]

For your reading pleasure. (Do not know where to file it).

Another Oversold Watch: Is This One Different?

http://seekingalpha.com/article/96052-a ... -different

Note: Article touch on possible rebounds before going down further, VIX and T2108 indicators etc.

[winston]

Pursuing a Trading Education -- by Bill Kraft

As many readers are probably aware, I am a great believer in advancing my trading knowledge and advocate ongoing trading education for anyone who wants to become and remain a successful trader. During the last week, I had a short dialog with a subscriber on the blog who adamantly takes the position that he is going to learn for himself. Good for him! That is what I did and that is what most traders must do.

However, the subscriber further explained he wants nothing to do with books, seminars, coaching, DVDs, or services that are sold. I am not sure what that means except that he is going to the school of REALLY hard knocks. I have no idea how much money this person has to risk, but with an attitude that he can do it without assistance from those who have gone before, my bet is he won't have it long. It's a little like deciding to be a doctor, but not be willing to put out the cash and effort to attend medical school -- potentially hard on the patient -- and in this case, the subscriber is his own patient.

I remember when I first became interested in trading. I at least bought a book and that piqued my interest which led me to attend a free "come-on" seminar where I knew I would be solicited to pay for a more comprehensive seminar. I went to the free seminar fully determined not to pay for the seminar being sold. Thankfully, I re-thought my decision and did pay for a two and a half day seminar.

I made back the cost of that seminar within a week using information I had gained at the seminar and from that time forward never hesitated to pay for my education. It was far less costly than trying to get everything for free. Though I speak at events on occasion (usually without pay) I no longer give seminars so I am trying to sell nothing when I say that the many I attended have helped me succeed as a trader. Without them, I might possibly have been out of the trading business years ago.

In my own case, I read every trading book I could get my hands on, watched umpteen VHS and DVDs, and still attend seminars with some regularity. I read several trading books a year. In short, I make sure I devote substantial time each year to enhancing my knowledge. I know several would-be traders who, like the subscriber, absolutely refuse to pay for any educational information regarding trading. Not a single one of them has been successful and most lose their trading money within the first six months.

Education only makes good sense and why shouldn't the educator be paid? Should you buy a stock, for example, if you don't know how you might limit or remove risk? Would it be helpful to know a strategy that will make you money if the market or the stock moves in either direction, just so long as it moves? Though not currently the case, would it be helpful to know strategies that provide a nice return in a flat market? How likely is someone to stumble upon these things as a new trader unwilling to read a book, go to a class or watch a DVD?

I realize I'm probably preaching to the choir here, but when I see folks like the subscriber who evidently resents authors or lecturers and begrudges them payment for passing on their knowledge, I feel a need to reiterate that successful trading requires work and study, it does not come from bull sessions with other unsuccessful traders. Serious trading, in my view, requires a foundation of knowledge first and then the acquisition of experience. Trading real money before obtaining the basic knowledge seems like a perfect recipe for failure.