Sam Zell: A Famed Investor INSIGHTS INTO THE MINDSET OF SUPER TRADERS – Part 7 “I appreciate the opportunity to manage money for others. A lot of people don’t enjoy it, but I do.”– Mike Melissinos Name: Sam Zell Date of Birth: September 27, 1941 Nationality: American Occupation: Business magnate, investor and philanthropist Website: www.egizell.com Career Sam’s parents were Jewish immigrants who left Poland to settle in the States before the outbreak of the World War II. Sam was born in Chicago and he attended Highland Park High School in Highland Park, Illinois. He obtained a BA from the University of Michigan and later, he obtained a JD (Juris Doctor) from the University of Michigan Law School. In 1967, Sam founded Equity Group Investments. Bob Lurie Robert H. Lurie joined him and they worked together to transform the firm into a vast business empire. Lurie died in 1990, but the business continues to grow and grow and grow. One source confirms that the majority of Sam Zell’s investment portfolio ranges across industries such as energy, logistics, communications and transportation, but he is often best known for his pioneering role and stewardship in creating the modern commercial real estate industry. Moreover, EGI’s holdings also include fixed-income investments in public and private companies. Sam is involved in various international and local causes, donating generously to them, including education. He’s blessed with 3 children. As of January 2015, Sam was worth about $4,900,000,000. Insights: 1. Good traders and investors are able to tackle the uncertainties in the markets, solving the problems of the unpredictable nature of the markets in simple ways. That’s the secret of our ongoing success. We make complex problems (that put off people from the markets) look simple. We simplify these problems and come with simple solutions. That’s exactly what Sam has been doing in decades – unraveling the mystery of various markets and amassing huge wealth by doing so. 2. There’s one though-provoking quote on Egizell.com, which says: “Solid business strategy is not anchored in suit, or a tie. It comes from the gut. Corporate culture can’t be dictated. It comes from the soul. A great company comes from the heart.” How true is it! 3. The qualities of a good trader aren’t measured by her/his attitude when things are right, when things are fine, and during winning streaks; but when the road is rough, tough and during losing streaks. Conclusion: Winning strategies are the ones that go contrary to the expectation of the public, and that’s why it takes serious discipline to follow such strategies. We want to follow good strategies when they work and when they don’t work. This article is concluded by a quote from Sam: “The reality is that I need to be challenged and interested, as long as the risk and reward is in line.” What Super Traders Don’t Want You To Know: http://www.advfnbooks.com/books/supertraders/index.html Further reading: Advfnbooks.com Source: Tallinex.com
The Greatest Trading Skill in the World “With every trade or investment there are four possible outcomes. You can have a small win, big win, small loss or big loss. As long as we make sure we eliminate the big loss from happening, we can certainly live with the other three.”– Sam Seiden What’s the most important thing every trader can/must do? What’s the greatest trading skill in the world? One market wizard was asked this question, and he answered that there are 3 things you must do: 1. Cut your losses. 2. Cut your losses. 3. Cut your losses. If you can do these three things, then you may have a chance of becoming a successful trader. Warren Buffet also has been quoted as saying that there are two most important things you must do: 1. Don’t lose your money. 2. Don’t forget the rule above. The market has no respect for your educational background or achievements. It has not respect for your high school diploma or a collection of PhDs. The market doesn’t respect your political posts or achievements. The market doesn’t respect any strategy you use whatsoever: whether simple or complicated. The market doesn’t know whether you’re highly experienced or have no experience. The market has no knowledge of your religious background, beliefs and titles (whether you’re a bishop, primate, general overseer, etc.). The market has no acknowledgment of your race, tribe, nationality or region or age or gender. It doesn’t know if you’re a chairman or a president or an administrator or a manager or a CEO or a founder. The market has no sympathy for your poor background or your rich status. You may be a celeb, a star or a hero somewhere else, but the market couldn’t care less. The market couldn’t care less whether you’re a chief market strategist or a currency analyst or a senior analyst or an official analyst or a coach or a funds manager or a website manager or an accomplished programmer or a software developer or a financial journalist. The market has no regards or honor for who or what you’re. The only person the market respects is the person that cuts his losses. When you see professional traders dashing themselves against the floor of their trading rooms and crying like a baby, it’s because they don’t cut their losses. When you see a pro trader running to a medical doctor for help; while the doctor says there’s nothing wrong with her/him, it’s because she/he doesn’t cut their losses. The best trader in the world is excellent at cutting his losses. When a trade is opened according to a technical or fundamental signal, the best trader opens his trade. However, if there’s a loss, he quickly closes the trade. There’s no hope or question or argument from the best trader. When a trade doesn’t work, he closes it. But another trader – the crazy speculator – argues in favor of significantly losing positions. Losses are like weeds in a garden while profits are like flowers in the garden. We want to remove our weeds and water our flowers. We don’t want to water our weeds and remove our flowers, but according to cold reality, many traders remove their flowers by cutting their profits and water their weeds by allowing their losses to run. Your ability to cut your losses when they’re still insignificant is the most important aspect of your trading career. It’s the greatest determinant of your everlasting success, your ability to survive losing streaks (which all proficient traders must inevitably face occasionally), and the possibility of ending up being profitable. Someone with 80% accuracy will lose his money eventually for failing to cut her/his losses while someone with 40% accuracy will ends up winning eventually for cutting losses. When 80% profits are cut and 20% losses are run, she/he ends up losing money because the 20% losses that aren’t controlled can take away all the profits and provide further negativity. When the 60% losses are cut and 40% profits are allowed to run, she/he ends up making money. Triumphant traders focus on what they can really control, i.e. their losses (plus profits), knowing full well that their overall success has nothing to do with their strategy which simply shows them when to buy or when to sell. The knowledge of fundamentals, technicals, Elliot Wave, Fibonacci, programming, etc. can’t help you if you fail to cut your losses. When an Elliot Wave company makes forecasts and loses, they can be saved only by cutting their losses. Decades of experiences can’t help you unless you are good at cutting your losses. Failure to cut your losses will eventually lead to frustration. Great fundamental figures like Non-farm Payroll have sent some people to their grave because they bet too big and failed to cover their losses. On the other hand, these great fundamental figures have benefitted sane speculators as well. If you believe in scalping or robots or candlestick patterns, don’t forget that the ability to cut your loss while it’s small is the ultimate thing. When you enter a trade based on a Hanging Man (Hammer), you might later see it as a “Sitting Man (fata morgana)” if you don’t cut your losses. Whether you follow signals or copy trades, cut your losses. Whether you use 5-minute charts, or 30-minute charts, or hourly charts, or 4-hour charts or daily charts, cut your losses. You shouldn’t bet big in the first place: only bet very small. When the small bet proves to be wrong, then exit with a small loss. This is your life insurance in the market. A small loss that’s allowed to run can metamorphose into a gargantuan negativity. When I place a trade and it loses, I exit at a predetermined level. When I place another trade and it loses, I exit at a predetermined level. When I place another trade and it loses, I exit at a predetermined level. When I place another trade and it loses, I exit at a predetermined level! When I place another trade and it loses, I exit at a predetermined level!! When I place another trade and it loses, I exit at a predetermined level!!! Anytime I see a weed, I don’t allow it to grow. I can continue losing, and usually, I don’t go down more than 5% in worst-case scenario. After all, the existence of my account is the most needed thing, not the profits on it. When a winning streak comes around, I quickly recover. This is the most effective way to make uncertainties my ally. With a series of stop loss triggers, breakeven triggers, trailing stop triggers and take profit triggers (alternating themselves randomly), I’m sure to move ahead in the long run, no matter how slowly. You remain victorious as long as you cut your losses without hesitation. Last month, I made a profit of 950 pips as a result of cutting my losses. I’m not better than other traders – neither is my strategy. I realize that cutting my losses is what I must do in order to make profits consistently and enjoy permanent success as a trader. Ability to cut losses is a huge edge indeed! Please don’t let your competitor know about this. The quote below ends this piece: “Cut Your Losses Short and Let Your Winners Run,” is the salvation of our trading plans. Since we will both win and lose, big winners outshine small losses every time… Here’s a rule we can take to the bank: Whenever you identify HOPE as the primary reason for holding a position, CLOSE IT IMMEDIATLY!” - Bob Robertson Copyright: Tallinex.com
I could cut a loss short if I new it would turn out to be a loss and not a gain. Cut losses short is the stupidest hindsight I have ever heard and the wizards usually say it to those that ask for secrets just to get rid off them, a kind of sarcastic response.
No, cutting your losses is the only one definite rule of trading, speculating and investing. You can probably prove it mathematically somehow.All those who are successful (from skill rather than luck) employ this rule, from Soros and Buffet and Druckenmiller to the guy who trades off 1 minute charts. Now, where you cut losses on a unprofitable position is an entirely different question.
Before someone says Buffett doesn't take losses... http://www.thisismoney.co.uk/money/...investor-Warren-Buffett-loses-678m-Tesco.html
I think there are two problems: cut your losses, but went to cut? let your profit run, but till where or when? If you can solve these two questions all problems are solved. But then the next problem will be taxes. :eek:
Greek Debt Crisis and Its Effects on Your Investment Accounts “When I put on a trade, all I expect is that something will happen.” – Mark Douglas With a great interest, I’ve been watching the events in the Eurozone. I didn’t write about Greek debt crisis because I wanted to see how things turned out. Many economists and financial journalists have written interesting articles about this issue, stating the causes, effects and possible consequences. I don’t think repetition is mandatory. What’s happening to Greece is what a nation eventually suffers if their government can’t spend within their means. The US government is another good example of a government that can’t spend within their means, and wise people now ponder the dire/grim consequences that would result in future. Greece has serious economic problems, and she’s now been given this week to submit a new reform plan. In spite of Eurogroup meetings from time to time, no solutions have been agreed upon. Eurozone leaders will meet on Sunday to try to reach a new deal. Greek Withdrawal from the Eurozone Experts are debating whether Greece would eventually quit or be forced to quit the Eurozone. It’s possible that Eurozone leaders and Greece would be able to agree on viable solutions; otherwise, the inevitable might occur. Anything is possible, and of course, with grave effects. It is expected that if Greece withdrew from the Eurozone, the withdrawal would cause a great impact on Greek economy, Eurozone economy and world economy. But no matter what happens, the sun will continue to rise in the east and set in the west. I don’t expect any serious effects in the currency markets. Current and Future Effects of Greek Debt Crisis on Forex Since the media started shouting about the Greek debt crisis, there haven’t been any serious effects on the Forex market. The press will always try to find something to write about and whenever the market moves, analysts will try to pinpoint causes for the movement. The market has a knack for going against people’s expectation. Events that people don’t anticipate are what cause surprise moves, not events that people anticipate. People didn’t anticipate the unprecedented CHF pairs volatility and there were surprise consequences. Another instance of an event that caused surprise movements was the last major earthquake in Japan, which also caused nuclear fallout. There are years in which the markets move very strongly (like the year 2008) and there are years in which the markets don’t move very strongly (like the year 2014). Speculators, especially trend-followers, find it easier to harness decent gains when the markets trend strongly. When the market goes into an equilibrium phase, then sooner or later, there would be an increase in volatility. Conversely, a strong trending movement would eventually lead to low volatility and more predictable outcome. Time indeed factors in economic events and resulting financial consequences. Within May – June 2015, there was low volatility in the market, and as a result of that, trend-following strategies suffered. Nevertheless, a measure of volatility has returned to the Forex market since the end of June. Someone who’s seen oceans and seas will definitely find a pool in the bathroom negligible. On June 29, 2015, the EUR pair and JYP pairs gapped downwards massively. They later bounced upwards and began to trend downwards the following day. They then consolidated till the end of the week. The same price action was repeated on EUR pair and JPY pairs this week, though the downwards gaps were less significant than the gaps of the last week. What has happened in the market so far is nothing special and nothing special will happen in the weeks and months to come. Any movements or gaps we see won’t be more serious than what we’ve seen so far since the beginning of this year. Many Will Survive the Markets Unpredictability, You Can Too Some people want to stay away from EUR pairs, whereas there’s no movement on them that’s more serious than the movement on AUD pairs, NZD pairs, CAD pairs and JPY pairs. Don’t expect any surprises when the public are anticipating them. Surprises come when the public don’t anticipate them. EUR pairs would continue to move up and down - as usual – but there’ll be no great deal about that. What happened to EUR pairs on June 29 had an adverse effect on me. I’d 3 long positions that were all stopped out at 0.75% loss (0.25% X 3 = 0.75%). Was there a big deal in that? What happened on July 6 had positive effect on my short trades and I gained 2.0%. Again, there was no big deal in that. The market may move slowly against you or in your favor. The market may move fast against you or in your favor, but you’ll be fine as long as you truncate your negativity. Please remain faithful to your positive expectancy trading method – in times of losses and in times of gains. Life isn’t a matter of holding good cards but of playing poor cards well. Nowadays, no trader has been dealt perfect market conditions. Often, the secret to gaining control is to both accept those circumstances and manage your trades within the limitations the markets impose on you. As long as portfolios are concerned, many traders will survive the uncertainties of the future. May you survive as well. So Greek debt crisis can’t have any adverse impact on your accounts, if you know how to control risk. Though I find articles about the Eurozone interesting, I don’t worry about how that can affect my accounts. That’s the beauty of trading. Waiter, another bottle of Pepsi, please! This piece is ended with the quote below: “Traders who devote less time to trying to beat the markets and more to mastering their own behaviour and emotion will often outperform those who go in all guns blazing. Trading at the end of the day is a long-term educational process and understanding this and having the patience to develop your skills properly will prove more fruitful in the long run.”– Ryhun Rahman Copyright: Tallinex.com
This is so BS. Half the people who cut their losses end up missing on giant gains. Buffett's selling strategy is to sell when the reason for owning the stock is no longer true. I've been down 40%+ on positions that ended up being multibaggers from my initial buy.
Exactly, Buffet closes his position sometimes at a loss. He cuts his losses at some point, for his reasons. Most recent example i think was his position in Tesco.
Larry Hite: What Can You Learn from Him? INSIGHTS INTO THE MINDSET OF SUPER TRADERS – Part 9 “The best strategy loses its effectiveness when you trade from a place of fear.”- Mercedes Oestermann van Essen Name: Lawrence D. Hite Nationality: American Profession: Funds manager, trading systems developer, philanthropist Career: Larry Hite is an award-winning funds manager who’s one of the forefathers of trading strategies. In 1981, he co-founded Mint Investments, and several years later, the firm became the most successful of its kind (at that time). He was featured in Jack Schwager’s book titled Market Wizards. Larry also partnered with Man Group and started some ground-breaking trading concepts – which also proved successful. In the year 2000, Larry shifted gears and focused on other things that also mattered to him, including family, investing, funds management and philanthropy. For instance, he founded his own foundation, calledThe Hite Foundation, which he heads. One source says he also serves as chairman of the Development Committee for the Institute of International Education’s Scholar Rescue Fund, whose goal is to provide safe haven for academics and professionals who are at risk throughout the world. Insights: No matter how great your trading method or analysis is, no matter how much information you’ve or how much knowledge you’ve, you can open a position and still experience negativity. Always see a new trade as a potential loser. Don’t think of how much you can make, but think of how much you can actually lose. With that mindset, you’ll risk as low as possible and trade defensively, thus ensuring your safety. What you can determine is how much you’ll lose; you can’t determine how much you’ll gain. Protect your wealth. Protect your capital. You need capital to play the markets, and without playing the markets, you can’t make money. Without your capital, you can’t play the markets, and that’s why you need to protect your capital. When you’ve a good system, please be faithful to it. It can’t work always, but try to never deviate from it. Make this a hard-and-fast rule. Always respect the market; otherwise, you’ll suffer for your stubbornness. Go with the flow. Larry says this: “I have a cousin who turned $5,000 into $100,000 in the option market. One day I asked him, "How did you do it?" He answered, "It is very easy. I buy an option and if it goes up, I stay in, but if it goes down, I don't get out until I am at least even." I told him, "Look, I trade for a living, and I can tell you that strategy is just not going to work in the long run." In his next trade he put his money in Merrill Lynch options, only this time, it goes down, and down, and down. It wiped him out.” Lesson: Simply cut your loss. Never allow it to run. What you call markets are really risks, rewards, money and means to financial freedom. When risks are controlled and the flow of the markets is respected, things will work for you as traders. Many speculators may have different kinds of stories to tell, but the truth is that we’re all speculators. We’re the same. We all have access to a level playing field. Conclusion: All challenges we face in trading have their hidden blessings; but we’re often blind to the blessings and allow disappointment, ire and fear to take control of our lives when a position doesn’t do what we want it to do. One expert advises that trading should be treated as another splendid opportunity to learn something and improve our skill. We shouldn’t concentrate on money alone. This article is ended with two quotes from Larry: “There are just four kinds of bets. There are good bets, bad bets, bets that you win, and bets that you lose. Winning a bad bet can be the most dangerous outcome of all, because a success of that kind can encourage you to take more bad bets in the future, when the odds will be running against you. You can also lose a good bet, no matter how sound the underlying proposition, but if you keep placing good bets, over time, the law of averages will be working for you.” “I met the guy who wrote this best seller now called, Bringing Down the House, it's about these MIT guys who beat the blackjack tables. And part of the problem, if you're going to be a blackjack counter is that the casinos don't like you. They actively don't like you. And they come and tell you in rather strong things to take your business away. Well, the beautiful thing about the markets, they don't like you, they don't dislike you, they just don't care. They are there everyday. You want to play, you can play.” Further reading: Advfnbooks.com Copyright: Tallinex.com