The Traders Journal

The Endowment Effect

EvolutionInvestors beware or at least be aware.  Over the past two years, I’ve had a number of significant relationships, but that’s changed now – in part because I was reminded of Charles Darwin’s famous quote “It is not the strongest of the species that survives, nor the most intelligent that survives.  It is the one that is most adaptable to change.” 

Academics like to write lots of papers proving that investors ascribe much more value to a position they already own than to one they don’t.  They call this the endowment effect.  I confess – I fell prey to exactly that effect.  I’ve been trading the biotech run profitably for over 2 years.  I knew it was long in the tooth.  I saw the industry begin to underperform the market.  I saw the lower peaks and negative money flows amongst the sister stocks. 

Continue reading "The Endowment Effect" »

How Individual Investors Can Use Data Mining to Grow Their Profits

ImagesSchwab, Fidelity, TD Ameritrade and Google likely know more about most investors and their trading habits than the investors themselves.  Have you ever asked yourself why Google offers free gmail accounts?  It’s because they are obsessed with collecting data.  They now have complex algorithms and unimaginable computing power that allows them to sift through vast seas of raw data and literally get inside your head.  This consumer data has real economic value that now lets them know what truly and deeply motivates you as a unique individual consumer, voter or whatever – it’s absolutely infinite.

Why talk to people and use old school market research asking investors what they thought or what they need.  They seldom tell you honestly anyway.  The dark side is that these big corporations have morphed their marketing research departments into the ultimate supercomputing spy shops with gear that vacuums, collects and mines every piece of data imaginable concerning you.

Continue reading "How Individual Investors Can Use Data Mining to Grow Their Profits" »

Two Traders Talk: Candid Insights Over Lunch

 

Images (2)

Trading the markets is basically a solo adventure, and since the markets here in Seattle close at 1:00 PM, it’s nice to break bread afterward with other traders and unwind.  I thought my readers would enjoy a brief summary of one such spontaneous unscripted discussion at a recent lunch.

Continue reading "Two Traders Talk: Candid Insights Over Lunch" »

The Paralysis of Perfection: The Investor’s Ongoing Challenge

ImageThe brilliant novelist Isabel Allende once wrote, “Fear is inevitable, I have to accept that, but I cannot allow it to paralyze me.”  Similarly, far too many investors are reluctant to trade because they believe every puzzle piece of their complex methodology must be in place before they can act.  They are frozen into inaction by the misguided need to do it perfectly right or else not do it at all.   While this is commendable in many vocations, what they fail to acknowledge is that this is virtually unachievable in the investment arena.

Continue reading "The Paralysis of Perfection: The Investor’s Ongoing Challenge" »

How Life Hacking Applies To Us As Individual Investors

Images (2)Life hacking was a term first tossed around by computer programmers in the ‘80s as the label they used trying to get things done better and faster.  These days, it has a wider definition incorporating improved productivity and personal enrichment.  Wikipedia defines it this way:  “Life hacking refers to any productivity trick, shortcut, skills or novelty method to increase productivity and efficiency, in all walks of life; in other words, anything that solves an everyday problem of a person in a clever or non-obvious way.”

I began asking myself how we as traders can embrace elements of life hacking.  The challenge is not a small one.  We individual investors can now trade almost anything we can imagine 24/7.  The markets by their very nature are dynamic and fluid, and we have ever more powerful technical tools and superfast computers at our disposal to analyze a steady stream of real-time news and data.  Amidst this tornado of technology and avalanche of analysis, a new breed of investor has evolved.  This new generation of self-tracking, self-aware and self-adjusting traders has found its edge. 

Continue reading "How Life Hacking Applies To Us As Individual Investors" »

Mr. Market Wizard: Jack Schwager Speaks Part II

YBMMH7H5President Harry Truman once said “We must have strong minds, ready to accept facts as they are.”   He must have been addressing a convention of individual investors. 

Let me pick-up this week where I left off last week.  If you missed last week’s blog, I suggest you visit that Part I blog to get a better foundational understanding of this week’s Part II.

http://blogs.stockcharts.com/journal/2014/03/mr-market-wizard-jack-schwager-speaks-part-i.html

Continue reading "Mr. Market Wizard: Jack Schwager Speaks Part II" »

Mr. Market Wizard: Jack Schwager Speaks Part I

ImagesA quick survey of the Amazon website lists over a dozen books written by Jack Schwager, but that is not what impresses me the most.  What I find worthy for some sort of listing in the Guiness Book of World Records is that in writing these volumes, he has gained access to the very secretive circle of world-class traders and gotten them to open up to him.  Jack Schwager is an interviewer extraordinaire and a trader himself.  As such, he’s managed to get into the minds of the most exceptionally profitable investors in the world, and he’s asked the questions we professional traders want asked.  Marvelous stuff. 

I was fortunate to hear Jack speak recently to a group of insiders at the International Federation of Technical Analysts in San Francisco.  It was a fascinating ride as he shared his knowledge of the jungle and described the proverbial “Swiss Army knife” that is successful investing.

Continue reading "Mr. Market Wizard: Jack Schwager Speaks Part I" »

Tensile Trading ChartPack v2.0: 60 Upgrades to Help You Invest Smarter with Less Effort

6a0105370026df970c019b00c6d59c970b-800wiTo the over 500 investors who are presently using my ChartPack, I’ve been sincerely humbled by your many emails and wonderful personal comments.  When you are happy, making money and saving time, I’m happy too!  My objective is to help you step up your investing another tier with over 60 upgrades within Version 2.0.

(Instructions for installing the upgrade are at the bottom of this article.)

To those who have not yet downloaded the ChartPack, I’d like to invite you to read the introductory blog that describes each of the chartlists from Version 1.0 as well as the overall structure and trading methodology behind the Tensile Trading ChartPack.

http://blogs.stockcharts.com/journal/2013/11/the-tensile-trading-chartpack-users-manual-organized-optimized-for-maximizing-profits.html

Continue reading "Tensile Trading ChartPack v2.0: 60 Upgrades to Help You Invest Smarter with Less Effort " »

We Investors Lose At Times: You Are Not Alone

Images (2)We investors are imperfect creatures living in a complex world.  We are destined to stumble and fall.  It’s part and parcel of the probability game that is the stock market.  One day in the near future, you will find yourself here amongst “the investing losers”, just as surely as any exceptional salesperson whose potential customer refuses his or invitation to buy.  Be comforted in the knowledge that when you land here, you will not arrive alone.  Other “investing losers” will be there with you – old and new friends as well.

This isn’t the end.  You’ll just need to brush yourself off, put the bad trade completely behind you (after first siphoning off the key insights you just learned) and know that probabilities dictate you are now one step closer to your next big winning trade.  What you don’t do is ignore potential lessons just learned and simply kick the can down the road.  You don’t allow all those negative ions to jump all over you and drown you like a tsunami.  This is where you need to get vaccinated with a little personalized truth serum and answer the question:  what will I do differently next time?

Continue reading "We Investors Lose At Times: You Are Not Alone" »

Monitoring Your Investments is a Sisyphean Task

ImagesWhen Google’s co-founder, Larry Page, famously asked Steve Jobs for advice, Job’s reply was “Don’t get distracted.  Focus.”  From what I’ve seen with hundreds of investors, this is possibly the number one reason institutional investment managers outperform individual investors.  The power of disciplined focus cannot be underestimated.  Investment firms codify it.  Institutional managers follow the program or they get fired.  That’s pretty good motivation to stay focused.  How can individual investors do likewise?

It’s not really about brains.  Many smart individual investors know exactly what they need to do, but their Achilles heel seems to be that they lack the ongoing, consistent discipline to focus on their positions. 

“The stock market has a very efficient way of transferring wealth from the inattentive to the attentive.”   Thank you, Warren Buffet. 

Continue reading "Monitoring Your Investments is a Sisyphean Task" »

Table of Contents

Other StockCharts Blogs

Subscribe to this blog