Secrets of Market Wizards

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Ibill;
1] Plenty of money has been made on low probability/low hit rate investing/trades

2]Aussie trader Mr Guppy said'' dont confuse a high probability with infallibility'' You have confused the 2 Not even close to the same thing.Hope this helps.
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Dan Zanger: Be a Top Trader

LEARN FROM GENERALS OF THE MARKETS - PART 15

“…Trading looks like work. It requires a certain level of persistence just to even dip their toe in the water and some shiver and run away before they give themselves a chance to 'get it'. This is exactly why the wealth of the population is pyramid shaped, with only a few people rising to the upper echelons.” – Loiuse Bedford

Daniel J. Zanger is a market professional and trading analyst. Growing up in Los Angeles, his parents were professionals (his father a physician and his mother a psychologist). He failed to finish his college education, and later did some odd jobs. His interest in the stock market began in 1978. Then, he started taking the stock markets seriously. He bought a PC and began to study charts. He attended a William O’Neil’s seminar, studied charts for tens of hours per week, and then became highly proficient in picking winning stocks. He has the world record for 12- month and 18-month percentage returns, for turning ten thousand, seven hundred and seventy-five dollars into eighteen million dollars. Eventually, in a matter of 24 months, he turned that roughly eleven thousand dollars into forty-two million dollars. Because of this achievement, top magazines have published inspirational articles about him. He’s really one of the best traders on this planet. Many clients benefit from Dan’s newsletters and technical analyses. You can get access to this at his website: Chartpattern.com.

Lesson
There are invaluable lessons to be learned from Daniel Zanger. Some of them are below:

(a). When you have the correct mindset and education, you’ll thrive in the markets that others find very difficult. This is mandatory, and there’s no other way around it. The game of speculation has certain rules that ensure success. Seek there rules.

(b). You can learn successful trading by your own trials and errors, but this method is risky and very painful. Most people don’t survive this. The best thing therefore, is to learn successful trading from those who’re experienced and victorious professionals. These have learned their lessons and are prepared to help you so that you won’t have the same hard experiences they’ve had.

©. You can purchase instruments in dear markets if there are valid reasons for doing so. Dear markets can often bring you the desired gains.

(d). If the market doesn’t go according to your expectation, smooth it. If you’ve some long order and the instrument you’re holding plunges, please sell. Dan is able to enjoy long-term success, not only because he knows how to pick great stocks, but because he knows how to cut his losses as many as they may be. He also knows how to exit a market that was once profitable, but now losing its gains. You negativity shouldn’t be more than what it should safely be. Whenever you realize that your assumption is wrong, get out of the market.


(e). For as long as you can, hold onto the stocks that are performing well (just as you lose patience with the stocks that can ruin your portfolio). Even if a stock isn’t moving clearly upwards or is consolidating too much for too long, you could sell it. It’s worthwhile to hold onto a stock only when its value is rising.

(f). Look for the strongest stocks only. Trade only the market that is performing well and trending nicely. You should be able to do this before you make any trading decisions.

(h). Let it be a habit for you to use stops always, because a market that’s moving strongly continuously can experience abrupt end and turn significantly in the opposite direction; at any time. You should have exit plans in place.

Conclusion: You need to know that your trading results are the outcome of the decisions you take. Whether you gave your money to a fund manager or you speculated based on an analyst’s recommendation, it’s still your action. Using others as scapegoats isn’t going to improve the matter. Those who’ve made progress are those who accept their own errors and work on themselves for improvement. You’re the only one you can really discipline. Please you don’t need to think of your past failures, challenges and unfortunate circumstances. Your future trading career is bright. When you think of this, the worry about the future uncertainty disappears. You can face tomorrow with calm.

The article is ended with a quote from Dan:

“…Bulls make money, bears make money, pigs get slaughtered.”

 

Carl Icahn: A Contrarian Investor

LEARN FROM GENERALS OF THE MARKETS - PART 16

“Despite years of experience I still have sleepless nights, but I think this is important – it is a sign that I am focused and fully committed to my job.” - Stephen Temes

Carl Icahn, who was born on February 16, 1936, is a highly successful investor and businessman. He grew up in New York City, and was educated at Princeton University. He also went to New York School of Medicine, but he didn’t graduate from that school. He started playing the Wall Street in 1961. In 1968, he started a trading company. From 1978, he started to take positions in certain companies where he could influence them, usually to his own advantage, and of course, to the advantage of the shareholders of each company.

In 2008, Forbes mentioned Icahn as the forty-sixth wealthiest person on earth. Around March, 2012, his fortune was mentioned as being worth fourteen billion dollars. Icahn made generous donations to many humanitarian and education causes. As a result of this, buildings, places, etc. are named after him. He’s also been honored with many awards.

Lesson
What are the lessons that can be learned from Icahn?

1. Icahn is a contrarian investor. He’d invest in companies whose shares were thought to be very cheap. There’s something the Wall Street calls “Icahn Lift,” which means that the shares of a company could start rallying when Icahn buys them. He’d struggle with companies he believed weren’t properly managed (after he’d purchased enough positions to be able to do this). The purpose of the struggles was to effect changes in those companies, so that the following results could benefit those who’d invested in those companies. He said some CEOs were being paid for doing something nasty. But it was from the nastiness that he made his money (as some others also did). He used other professionals’ weaknesses to his own benefit. This is one of his most effective investing strategies – things that made him a multibillionaire. How can you benefit yourself from others’ errors on the battlefield of the financial markets?

2. Of course, this strategy, though effective, wasn’t always bringing exactly the desired results. Yet, Icahn is hugely successful. This means that if you’ve a good trading or investing strategy, it won’t bring the desired results always, but in the end you should be a victorious market speculator. Icahn investment style works out because his Partners hedge fund usually posts decent profits on a yearly basis.

3. The markets have immense riches in them. Making money is no evil, provided it’s done in legitimate ways. "I make money. Nothing wrong with that. That's what I want to do. That's what I'm here to do. That's what I enjoy." Icahn himself says. So if you want to, and do, make money in the markets, there’s nothing wrong with that. You should be rewarded for your determined effort.

Conclusion: Caution notices are present in here and there, whether you buy new gadgets or some playthings. Medicines also have some paper that contains a notice about what might go contrary to expectations. The caution in trading is that it carries risk, yet great riches are brought to market wizards by that risk. Top traders have their own share of heartaches and faults, but their steadfast determination result in much success.

This piece is ended with a quote from Icahn:

"When most investors, including the pros, all agree on something, they're usually wrong."

 

good thread

thanks

 

Dr. Alexander Elder: Safeguard Your Profits

“You can be free. You can live and work anywhere in the world. You can be independent from routine and not answer to anybody.” - Dr. Alexander Elder

LEARN FROM GENERALS OF THE MARKETS - PART 17

Dr. Alexander Elder was born in Russia and raised in Estonia. He attended a medical college when he was 16 years old. While working as a doctor on a USSR vessel, he absconded and sought asylum in America. Having worked as a psychiatrist in New York and as a lecturer at Columbia University, he got a good understanding of traders’ mindset. He’s written a number of books, articles and software reviews. He’s also credited with the creation of the Force Index indicator – a unique technical analysis tool.

He’s a top expert when it comes to technical analysis, position sizing, and trading psychology. Some of his books are titled: Trading for a Living, Come into My Trading Room, Entries and Exits, etc. which are popular among speculators. Those books have been translated into many languages. Dr. Elder’s official website is: Elder.com



Lesson
You’ll benefit greatly from the lessons below.

1. As a trader, it’s better for your to be realistic than to be idealistic. Many people approach the markets with terrible methodologies and unrealistic expectations. It’s possible to become a successful trader, but it’s not easy. For you to become successful, you’ll need to work hard at it and learn what it takes to be a successful trader.

2. According to Dr. Alexander Elder, every winner needs to master three essential components of trading; a sound individual psychology, a logical trading system and good money management. These essentials are like three legs of a stool – remove one and the stool will fall, together with the person who sits on it. Losers try to build a stool with only one leg, or two at the most. They usually focus exclusively on trading systems. Your trades must be based on clearly defined rules. You have to analyze your feelings as you trade, to make sure that your decisions are intellectually sound. You have to structure your money management so that no string of losses can kick you out of the game.

3. Dr. Elder is a living proof that one can be a successful trader without being an expert in the area of fundamental analysis. Dr. Elder’s entry and exit criteria are usually chart-based, not something fundamental. Too many people have irrational belief in fundamental analysis as an open sesame to great riches – only to experience negativity continually in their portfolios. While fundamental analysis will always be a very useful and effective decision making tool, long-lasting trading triumph really boils down to risk and money management, self-control and trading only what you see.

4. There should always be a maximum amount of money you’ll to put at stake – as far as each trade is concerned. Dr. Elder believes that the use of stop loss is necessary. He’s a maximum amount he’d be willing to risk in a month. If he loses more than 6 per cent, he would stop trading for the month. This is very effective, especially in avoiding further drawdown during a losing streak: something every top trader encounters occasionally.

5. Safeguard your profits! After you’ve made a substantial profit on a position, you should try to safeguard it, so that it doesn’t turn into a loss. In one interview in the year 2008, Dr. Elder said he developed this rule after banging his head against the wall for 19 years. There are ways one could safeguard his decent profits, and prevent them from turning into losses. This is however, another topic. You can read my past articles on risk control.

Conclusion: Successful trading principles are like a rainbow for comeliness, like an oasis in the wilderness, and like an anchor in a stormy ocean. Taking time to learn the art of trading will enable you to control your future.

This piece is concluded with a quote from Dr. Elder:

“Markets offer unlimited opportunities for self-sabotage, as well as for self-fulfillment. Acting out your internal conflicts in the marketplace is an expensive proposition. Traders who are not at peace with themselves often try to fulfill their contradictory wishes in their market. If you do not know where you are going, you will wind up somewhere you never wanted to be. You can succeed in trading only if you can handle it as a serious intellectual pursuit. Emotional trading is lethal. To help ensure success, practice defensive money management. A good trader watches his or her capital as successfully as a professional scuba-diver watches his or her air supply.”

 

Tim Knight: Make Fortune Also in Bear Markets

LEARN FROM GENERALS OF THE MARKETS - PART 18

“Many times I’ve tried to run away from unpleasant circumstances only to discover that the problem was not the situation I was in but me.” – Julie A. Link

Tim Knight is a highly proficient and experienced trader. He founded Prophet.net, which was taken over by Investools in 2005. Between 2005 and 2010, he was senior vice president for that company. He wrote a book titled: Chart Your Way to Profit (published by John Wiley). He’s a very wide audience on his blog; Slopeofhope.com. What makes him popular is the fact that he’s very skilled in making money from bear markets. For example, he made a great fortune in the weak markets in 2008. As an expert funds manager, he uses mainly technical analysis for making his trading calls. He’s technical analysis addict. Tim has been interviewed by many media, including Traderinterviews.com.

Lesson
Here are some lessons that can be learned from Tim Knight:

1. Tim is a great bear - a bear that makes money on bearish instruments. While some languish in falling markets, Tim thrives. You simply have to be a bull in rising markets, and be a bear in falling markets, otherwise, your portfolio pines away. Many people, when caught in falling markets, would be reluctant to smooth their positions. Instead, they’d hope that the markets would come back to their entry levels. And you likely know the probable result of that.

2. Based on skills and experience, one can manage multiple positions at a time. For example, it’s not uncommon for a proficient trader to have up to 10, 15, 20, 25 even 40 open positions at time. With risk control and money management, one would manage an individual position successfully. Tim can manage up to 200 positions at a time – diversifying his portfolios. One who manages trades poorly can even lose if they open only one trade at a time; whereas a good trader can manage tens (even hundreds of trades) at a time. Interestingly, Tim has a stop loss for each position. In addition, his exit rules are mainly discretionary.

3. Tim is another living proof (apart from Dr. Alexander Elder) that one can be a permanently successful trader based on chart analysis alone.

4. Tim’s charts are extremely simple; not complicated, and he makes money from that. If you make your charts complicated and intricate, you’re simply making life difficult for yourself (and that won’t even guarantee higher hit rate or success in the long-term). Please be successful with very simple but effectual trading methodologies, and thus make life easy and comfortable for yourself.

Conclusion: Did you lose a lot of money in recent bear markets? Well, some made fortunes. What you, perhaps failed to acknowledge is that bulls suffer in downtrends, but lots of gains can be derived in downtrends. Just have it in mind that you too, like Tim Knight, can make money when the markets fall. Focus on that possibility. Focus on the present and let go of the past. Yes, we can’t change the past, but we can certainly learn from it.

A quote from Tim ends this article:

“…I'm very dedicated to having a stop on every single position at all times. And the whole idea of a mental stop is just anathema to me. They must have stops the moment the trade is on…”

 

What is the point of this thread if trading is a negative sum game?

 

They sell books.

 

Benjamin Graham: The Brain behind Market Giants

LEARN FROM GENERALS OF THE MARKETS – PART 9

Benjamin Graham lived from May 8, 1894 until September 21, 1976. He was born in the UK but was taken to the US when he was yet a kid. He graduated from Columbia University when he was twenty years old. Then he became an instructor. He’s considered the first person to espouse and teach value investment and investment discipline. He was able to influence great followers (who’re successful traders; giants of the markets), including Warren Buffett, William J. Ruane, Irving Kahn, Walter J. Schloss, Chris Johnston, etc.

Benjamin’s investment principles have stood the test of the time, and are therefore peerless. His principles and ideas are mentioned in his books titled: Security Analysis (published in1934) and The Intelligent Investor (published in 1949). The books are very popular in the world of investment. Benjamin himself said: “Investment is most intelligent when it is most businesslike. It is amazing to see how many capable businessmen try to operate on Wall Street with complete disregard of all the sound principles through which they have gained success in their own undertakings. Yet every corporate security may best be viewed, in the first instance, as an ownership interest in, or a claim against, a specific business enterprise. And if a person sets out to make profits from security purchases and sales, he is embarking on a business venture of his own, which must be run in accordance with accepted business principles if it is to have a chance of success.”

Lessons
Some good lessons can be learned from Benjamin. Some of them are mentioned below (in very simple terms):

1. You can benefit greatly from trading teachers. Benjamin is presumed to be the first effective investment lecturer. This fact is evident in his followers, like the Oracle of Omaha (Warren), who’s been a long-term success on the battlefield of the markets. There are many great investment teachers like Benjamin today. How can you learn their timeless and non-market specific principles and make yourself one of the best traders in your generation?
2. The hypothetical theory of the Efficient Market is bunkum. The Efficient Market theory says that that it is generally impossible for any individual to consistently outwit the market. I don’t know why someone would take this theory serious when reality shows otherwise. That fact that someone fails in the markets doesn’t mean that everybody fails. If you don’t know those who can constantly beat the markets; no matter how small their profits are, I‘ll tell you that they exist. Those who spread that theory are probably those who’ve not found the secrets of everlasting success in the markets. Nearly all the generals of the markets that are featured in this series have found the secrets. Trading is definitely not easy, but everlasting success is possible. Once you start enjoying this, you’ll be hooked.
3. Some of Benjamin’s cardinal investment topics are: You should always invest with a margin of safety, expect volatility and movements from the markets and gain from them, and you should know the kind of investor you are.
4. You’ve to master yourself before you can master the markets. According to Benjamin, individuals who cannot master their emotions are ill-suited to profit from the investment process.

Conclusion: We may be expecting too much from the markets; the exact opposite of having realistic expectations. Would wouldn’t agree that in most cases we’re our own worst enemy? Without minimizing the great harm losses can do to our portfolios, and to our emotional well-being, who can deny the damage we cause as we apply poor position sizing and risk management rules. However, if we can control ourselves logically, we can garner great riches inherent in the markets.

This article is ended with a quote from Benjamin:

“Have the courage of your knowledge and experience. If you have formed a conclusion from the facts and if you know your judgment is sound, act on it - even though others may hesitate or differ. You are neither right nor wrong because the crowd disagrees with you. You are right because your data and reasoning are right.”

 

The Best Trader in the World

“Life itself is a risky enterprise. Sometimes we fly high, enjoying great success. But then suddenly we fall into deep disappointments and the haunting reality of a failure, leaving our hearts wondering if there is anything worth looking forward to.” – Joe Stowell

There are super traders all around the world. If you don’t know them, I know some of them. They earn their livelihood by trading and they’re financially free. Now the question is: Who’s the best trader in the world? Indeed, the best trader exists. Now, I won’t mention names, but I’ll tell you how the best trader trades.

The best trader doesn’t argue with the markets - he always admits his mistakes. Most people tend to feel they’re right, even if facts prove them wrong. Extremely terrible speculators don’t accept their errors. It’s really a psychiatric condition that makes a person refuse to think he’s made a mistake, even if reality shows otherwise. Being overconfident in riding a position that’s determinedly negative is definitely not a good thing. Top traders always acknowledge their mistakes.

Likewise, the best trader may use any kind of positive expectancy system including fundamental strategies, and anticipate the market to move in a certain direction. If the price movement or fundamental figures happen to be against his expectation, he’ll smooth all his positions immediately. No arguments, no hope. Financial markets have no mercy upon anybody. If things go against you, then get out of the market without wasting time. Every good speculator I’ve studied is really good at cutting positions that seem to go determinedly against them. Yet, whenever the market proves them right, they run their gains for a considerable amount of time.

The greatest trader accepts the uncertainty that can affect any open orders; they even did this before they opened the orders. Uncertainty remains our ally, since speculation is a game in its own right. Negativity is also included in the game. The best trader doesn’t feel sad when a trade goes negative, nor does he feel too happy when a trade goes positive.

Using A System Profitably Is Conditional

Are you a successful trader? Did you like the results you produced as a trader in the previous year? If not, what errors did you make and how can you improve your results henceforth? You may need a trading system that takes care of some cogent factors contributing to profitable trading. Do you have these factors in mind? Please consider some of them:

1). Do I have a rule to follow in my speculative activities? A trading strategy should be approached with the level of seriousness and enthusiasm with which one would approach any high level endeavor or business. The entry, exit, position sizing and other rules of this strategy must be followed to the letter.

2) Do I have a worst-case emergency plan? A good system should have (a) rule(s) that can deal with any adverse movements that can affect an open trade, as well as a rule that makes you exit quickly if things are no longer going in your favor.

3). Do I have a positive expectancy system that can enable me to survive the current type of market? A good system ought to make money in good market conditions and make as little drawdowns as possible in bad markets conditions. It should have positive expectancy incorporated into it, which means that at least, two dollars should be expected for each dollar that is being risked. In other word, one should be profitable on a long-term basis even with only 30% accuracy.

4). Do I have a technique that will continue working even if the market conditions change without warning? Yes, a good trading system ought to survive all market conditions. A good trading system can work well in bull or bear markets. But you may stay out of extremely consolidating markets! You would just need to stick to its rules.

5). Do I even recognize the current type of market? It helps to be aware of the type of the market one is trading and the current prevailing condition of the market. This can help you make informed trading decisions.

6) Do I constantly condition my mindset in a way that makes me execute my trades flawlessly? You need to work on yourself. There are traders who use position sizing that is far bigger than the one recommended. Some enter additional trades based on analysis that is completely different from the rules of the system. Some do not even use stops at all – contrary to the system rule! A trader using a good system should learn how to control herself/himself and do the right things in the markets rather than doing things that would satisfy human emotions.

If you answered no to any of those questions, you have clues about why your results in the past have been undesirable. These, by the way, are only a few of the questions you could ask yourself. If you could take the factors above into consideration and work on them successfully, then you may find that trading can indeed be profitable.

Conclusion: When the markets go in our favor, we feel like a champion. We’ll assume that we are super trader and that we’re smarter than other traders. In most cases, only traders who’ve experienced the good and the ugly sides of the markets and survived them all are those who’re really qualified to be our mentors. You need to forget about your past and look forward to a brighter future. It’s important that you overlook your past failures and press forward.

This article is concluded with the quotes below:

“Stephen Covey says - ‘Live out of your imagination, not your history’. Look forward, not in your rear view mirror - or you're sure to crash. It's not what happens to you, it's how you handle it that counts. Your mistakes are completely separate from who you are as a person. Take pride that you're moving one step closer towards your goals. Don't cripple your future growth by shooting yourself in the foot because you made a screw up.” - Louise Bedford [paraphrased]


“One of the main issues that new traders have is that they have expectations of huge rewards in a short period of time. “I’ll take my $5,000 trading account and turn it into a million dollars in a year, and tell my boss where he can go!” That rate of return is a bit unrealistic. By increasing your account size just a couple of percentage points a month, the power of compound interest will make you wealthy, but over a long period of time. Trading as a career is a marathon, not sprint. Those who try to make too much too fast often over-leverage their account and take on unnecessary risks by doing so. One or two large losses can wipe out a few weeks or months of good gains! If you do that you have “worked for free” as your account takes these major drawdowns. Does anyone want to work for free? I know I don’t.” – Rick Wright (Online Trading Academy)

Source: Paxforex.com