Much has been written about JP Morgans blow up and I have read very little with the exception of Kid Dynamite’s post. The guy is relentless in his research and is way more qualified to talk about it than most people who have. I did not even want to talk about this but the conversation…
Tag Archive: losses
How you define an outcome (losing capital), changes future outcomes.
(From the archives) Redefining or changing a word in a sentence can provide the necessary psychological shift to see things in a different way. This different perspective can lead to different results (hopefully positive). Probably the most common redefined word in finance is “Loss” which is turned into “Investment in Education” or “Tuition”. I am…
How expectations will destroy you.
In most things success depends on knowing how long it takes to succeed. – Charles de Montesquieu That great quote came across my twitter feed from @PhilosophersSay via @eminiplayer. It best sums up expectation and is extremely useful in trading. The most simple thing I can say about expectations in trading is that at first you…
Dangers of trading in small and distributed days.
There is danger in every type of market but nothing scares me quite like small and distributed days. Here are the dangers as I see it: Boredom: I lose that sharpness. Watching a market trade in a few dollar range is one of the more painful, energy sucking circumstances in trading. It provides a very false sense…
7 dirty words you can’t say while trading. Enjoy the weekend.
This originally appeared in January 2011. Be careful how you use the following words and phrases. Should- Phrases include: “The market should have” and “I should have”. Those phrases are often used to socialize losses. They are a strong signal something is off. They should be used to aid you in correcting your vision not…
5 words in trading that are bull&!#%
There are few words that get thrown out a lot that do not share the same context as their everyday counterpart. Consistency- if anything other than your process is consistent you are looking at it the wrong way. If you are consistently making the same money everyday and the market is changing you are doing…
The hidden losses.
Hidden losses occur when you do not get out on the best tick. It is impossible to always get out on the best tick and even harder if you are not trading multiple contracts. Not saying everyone should trade multiple contracts, it could also be that your trading plan does not allow it. But I…
Two reasons this isn’t window dressing.
The Reformed Broker has a piece out today talking about window dressing. As a technical analyst I am aware of the games that can happen but I can’t ever bet on it. The reasons why a market moves doesn’t really matter to me. Of course you put things in the back of your mind for…
How over trading develops into a problem.
There are a few things to consider when analyzing how much you are trading. For me it is volatility and efficiency. There is nothing I can do about volatility but efficiency is something I look constantly. If you do not look at efficiency you are always prone to the following problems. False sense of risk. Every trade has…
Risk/reward ratio is bullsh$t.
When people ask what is a good risk reward ratio, I think they ask for the wrong reasons. Risk/reward is not about an expected outcome it is about trade selection or trade elimination. By only taking a trade with an X for 1 ratio you are eliminating trades. By only taking these types of trades…
