More on this book
Community
Kindle Notes & Highlights
a good trader will usually be able to outperform a good system.
prices move first and fundamentals come second.
I don’t just use a price stop, I also use a time stop. If I think a market should break, and it doesn’t, I will often get out even if I am not losing any money.
Don’t focus on making money; focus on protecting what you have.
Bielfeldt does not believe in diversification. His trading philosophy is that you pick one area and become expert at it.
Whenever too many people are doing the same thing, the market will go through a period of adjustment.
staying with your winners and getting rid of your losers.
you need courage to go into the market, and courage comes from adequate capitalization. Fourth, you must have a willingness to lose; that is also related to adequate capitalization.
waiting for the right trade, just like you wait for the percentage hand in poker. If a trade doesn’t look right, you get out and take a small loss; it’s precisely equivalent to forfeiting the ante by dropping out of a poor hand in poker. On the other hand, when the percentages seem to be strongly in your favor, you should be aggressive and really try to leverage the trade similar to the way you raise on the good hands in poker.
Fundamentals that you read about are typically useless as the market has already discounted the price,
The elements of good trading are: (1) cutting losses, (2) cutting losses, and (3) cutting losses. If you can follow these three rules, you may have a chance.
Cut losses. Ride winners. Keep bets small. Follow the rules without question. Know when to break the rules.
the winning traders have usually been winning at whatever field they are in for years.
everybody gets what they want out of the market
you can test a system and see how it would have done in the past and get a fairly good idea of how that system will perform in the future. That is our edge.
The markets may change, but people won’t.
“I don’t trade for excitement; I trade to win.”
So the very first rule we live by at Mint is: Never risk more than 1 percent of total equity on any trade.
The second thing we do at Mint is that we always follow the trends and we never deviate from our methods.
The third thing we do to reduce risk is diversify.
The fourth thing Mint does to manage risk is track volatility.
If you argue with the market, you will lose.
why do people lose money trading? Sometimes, because their trades are based on a personal bias, instead of a statistical approach.
If you don’t bet, you can’t win. (2) If you lose all your chips, you can’t bet.
Volatility is continually tracked in each market in order to generate signals to liquidate or temporarily suspend trading in those markets where the risk/reward ratio exceeds well-defined limits.
In the 1950s and 1960s, the heroes were the long-term investors; today, the heroes are the wise guys.
balance between the conviction to follow your ideas and the flexibility to recognize when you have made a mistake.
The balance between confidence and humility
there are no absolute formulae or fixed patterns. The markets are always changing, and the successful trader needs to adapt to these changes.
I use the easy-to-remember acronym CANSLIM. Each letter of this name represents one of the seven chief characteristics of the all-time great winning stocks during their early developing stages, just before they made huge advances.
you should be able to win even if you are right only half the time.
If you aren’t willing to cut your losses short, then you probably should not buy stocks. Would you drive your car without brakes?
not be upset if the price continues to advance after you get out.
How many issues would you advise a typical investor to hold at any one time? For an investor with $5,000, one or two; $10,000, three or four; $25,000, four or five; $50,000, five or six; and $100,000 or more, six or seven.
The key to success in mutual funds is to sit and not to think. When you buy a fund, you want to be in it for 15 years or more.
when a good, diversified growth fund is down sharply, you should buy more.
shorting is about three times as hard as buying stocks.
When did you turn from a loser to a winner? When I was able to separate my ego needs from making money. When I was able to accept being wrong.
By living the philosophy that my winners are always in front of me, it is not so painful to take a loss. If I make a mistake, so what!
Whenever there is a really rough period, I try to play defense, defense, defense. I believe in protecting what you have.
After a devastating loss, I always play very small and try to get black ink, black ink. It’s not how much money I make, but just getting my rhythm and confidence back. I shrink my size totally—to a fifth or a tenth of the position that I trade normally. And it works.
Work, work, and more work.
The most important thing is money management, money management, money management. Anybody who is successful will tell you the same thing.
I always take my losses quickly. That is probably the key to my success. You can always put the trade back on, but if you go flat, you see things differently.
every time you go against panic, you will be right if you can stick it out.
The basic problem in the world today is that America is consuming more than it is saving. You need to do everything you can to encourage saving and investment:
I learned that it is better to do nothing and wait until you get a concept so right, and a price so right, that even if you are wrong, it is not going to hurt you.
Don’t do anything until you know what you are doing.
there are a lot of people in this business who just enjoy watching others lose money.
the greatest traders are the ones who are most afraid of the markets.
