TheRiskBlog

If you had a busy day and you cannot trade as long as usual, don’t begin to stress yourself. In this situation you won’t gain any advantage by trying to make your money in only half an hour. If you get nervous and don’t have much time left before you must leave your computer, your choices will reflect this.

This quite old book from Edwin Lefévre tells us the story of fictional Larry Livingston. He started trading as a boy in Bucket shops and went on to became a very successful Trader of the early 20th century. But Livingston is the fictionalised Jesse Livermore, quoted as the greatest trader of all times. We’ve featured Livermore’s book “How to trade in stock” before in this blog.

Nowadays it is by far more important to take care of your own investments than it was even just a couple of months ago. Help from the outside is going to fade away like this article shows. You need to take care of your own investment

Today I discovered a pretty interesting video from Michael Covel (Author of: Trend Following) about Greed. In it he wonders why this attitude is usually seen so negatively. He takes the standpoint, that greed is a good side of human behaviour. And I can only agree with this!
Cause from greed awakes the desire to achieve something. And if you really want to achieve something you have a goal and that’s very motivating.

Seth Godin says its best in this post.

It is the future that makes people buy stock it is not the past.
When you think about risk management, this becomes very important. People are not interested in what happened months ago because all is done and said and more important it already changed their account. It still might do that in the future but it is more likely that new news are far more interesting.

Thats one of the reasons why technical analysis is overrated. It does look back, it does not look forward. When investing

We all know - or should know - that it affects us negatively when we make a trading decision while we’re in a highly emotional state. And we are told that we should “trade without emotions”.
But does that mean we should become emotionless computers?  That we should only decide because of calculations?

Not exactly

It rather means that we try not to get overwhelmed by our feelings, especially while trading or making important decisions. Such distracting feelings can be for example:

“The relation between the stock exchange and the economy is like a man walking his dog. The man walks slowly, the dog runs back and forth.”(Andre Kostolany)

This quotation from Andre Kostolany shows how markets work most of the time. For example, sometimes markets react to economic news in a way nobody would have thought off and sometimes it just seems to ignore the economic “reality” outside the market.

You can see this best by watching the movement of single stocks…

That’s what a friend of mine recently responded when I asked him about how much of his money he wanted to risk in his stocks.

Not long ago, this friend of mine had read an article about a company which was considered to be a good stock by an economic journalist. And having available some money in his account, my friend thought about buying some stock in this company and holding it in the long term. But before he did this, he came to me asking if this was a good investment. He thought, that with me being a trader, I could help him to make this decision. He expected to hear from me, whether this company and its products were successful. But that’s usually nothing I am really concerned about in everyday trading….

At the moment it is very difficult to stay with the markets at all times. We are seeing high volatility throughout the markets. This is very helpful if you can deal with it correctly, but it doesn´t help when you are beginning and don´t quite know how to cope with risk.

On the other hand there is always opportunity out there. We as traders need to be able to find it and we can, it is not all that difficult. To be able to spot a good trade we first need to make sure that we understand what´s going on in the markets. Are the market participients scared or are they euphoric? Is there optimism in the market or does everybody think the world will stop turning tomorrow?…

Very often while coaching, a customer asks me what to do with insider information. I personally think that a lot of people go the wrong path when trading off of insider information.
Here is what i do: