The Traders Journal

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Thrive as an Investor, Don't Just Survive

Jonathan Wendel earned $454,544.  He is very similar to us investors / traders in many ways despite being a professional video gamer.  Academics have in fact identified  the roles that gamers adopt — such as Explorers, Sentinels, Analysts and Campaigners.  Not that dissimilar to the tribes academics assigned us investors. The point is, we are more alike than we are unalike, and both groups could learn valuable lessons from one another.  

I’d like to focus on one important similarity.  Video gamers competed for more than $65 million in prize money last year.  It’s serious money that demands a serious mindset.  Therefore, the top gamers treat it like a business, just the way that we investors need to treat our portfolio management efforts as a business.  

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Charts I'm Stalking Action Practice #2

This blog is in the new bi-weekly format where we’ll first analyze the charts I presented to you in my September 2, 2016 blog.  After that, we’ll present new charts.

http://stockcharts.com/articles/journal/2016/09/charts-im-stalking-action-practice.html

As I wrote previously, this “Action Practice” only benefits you if you revisit the analysis you performed two weeks ago.  At that time, you had no idea what would actually happen during the ensuing two weeks.  So here’s my analysis done for you two weeks ago that you can now compare to your own effort.

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How I Use My Personal Pocket Pads to Produce Profits

As many of you know, American composer extraordinaire Richard Rodgers collaborated with Oscar Hammerstein to produce some of the greatest musicals of the 20th century.  Discussing their success, he once explained his thoughts on what it takes to be a superb songwriter.  In his marvelous quote, I took the liberty of substituting his references to a songwriter with the word “investors” instead.   With this substitution, his thoughts are especially insightful for our community:

I don’t believe that investors do something extraordinary spontaneously.  I believe it is the result of years of observational living, of diligent study, reading and dedicated practice.  Finally, after cultivating the proper prerequisites, their experience, their personality and very temperament is just so and at that particular moment, all these come together and the investors are able to profitably express themselves.

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Charts I'm Stalking: Action Practice

 

This “Charts I’m Stalking” blog is the second in a new series which will be a bi-weekly feature of The Traders Journal.  I’ve decided to actually take it one step further than I initially explained in my August 19th blog.

 

                                                  “Perfection is not attainable, but if we chase perfection, 
                                                          we can catch excellence.”  — Vince Lombardi

 

When I used to survey my investment classes, the results were consistent year in and year out.  One of the most highly rated aspects of my seminars was always  an exercise we labelled “Action Practice”.  I would distribute select charts to the attendees and give them five minutes to put pens to paper and analyze a chart by themselves.  We would then review the charts and indicators together as a class and render a go or no-go decision.

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Fundamentals versus Technicals: This Ends the Debate!

In one corner, you have investors.   In the other corner, you have the stock market.  When the two communicate accurately, you make money.  Yes, it is that simple.  Stay with me and I’ll make it worth your while.

Investors, stock pickers, traders – pick a label – all sit somewhere along a dichotomist spectrum from fundamental analysis (based on earnings, sales, assets, liabilities) on one end to technical analysis (charts) on the other end.  Personally, I prefer to more accurately label technical analysts as visual analysts.  And yes, research in the academic community tells us that women are actually better in this area than men.  I consider myself a rational analyst which simply means that I sit between both camps, utilizing the power of charts while keeping an eye on earnings.

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New Direction, New Feature for The Traders Journal

Announcing a new direction for The Traders Journal.  Since 2012, I’ve been delving into my own trading journals every week and sharing with my readers what I found there.  I will continue to do so, but on a bi-weekly basis.  My revised plan is to alternate that with a new feature that I’m calling “Charts I’m Stalking”.

This change is a direct result of visitors to my office who always ask me what I’m currently looking at on my computer screen.  This past weekend, when my son Grayson queried me with this very question, I happened to be in the midst of an asset allocation rebalancing effort.  I’ve sermonized about the importance of this same topic before in my blog and in our book.  Over the past 25 years, I’ve benefited immensely by my consistent focus on making certain that my assets are working on my behalf in the most appropriate asset baskets.  I’d like to encourage you to do the same.

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All Successful Investors Need an EDGE: Here's Mine

All successful investors must have some type of “edge”.  If you don’t know what yours is, odds are you don’t have one.

Not long ago, I heard an address by Ben Bernanke, the former Fed Chairman, who said, “it’s not illegal to make stupid investments.”  I submit to you that without an edge, you are indeed more likely to do exactly that.

I’ll describe mine.  In my book, the word “edge” is a verb.  It’s evolved over the past 25 years and it’s proven to be sustainable through all market cycles as it’s weathered the decades nicely.  It’s my trading plan.  It’s a durable system with a margin of safety that has effectively mitigated risk and produced consistent profits.

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One + One = Three/Analogue + Digital/ Fundamentals + Technicals

                                                                 If there’s a better way, take it.
                                                                If there’s a bar, raise it.
                                                               If there’s a methodology, stake it.
                                                              If there’s a dream, chase it. 

                                                 (paraphrased from an Acura advertisement)

I met a digital trader on the streetcar last month in Toronto.  I’ll call him Digital Dan because he writes code for a hedge fund house that trades the markets based on algorithms written by computer nerds.  After talking with Dan, I discovered that, for the most part, these nerds have no idea what it is they are trading.  Dan told me that when the volume occasionally spikes, he and the other programmers might stop and ask out of curiosity some specifics about the particular ticker symbol.

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Flopping in Sports Can Make One Millions / Flopping in Investing Can Cost You Millions

As an investor, there is only one day a year that you are unable to do anything about the stock market’s behavior, and that is yesterday.  Any other day, your action or inaction will determine your bottom line.  As a trader, the two things I must do each day is focus on doing and focus on being.

Flopping has no place in the investment arena, but you see it as often there as on the basketball court.  For those of you who are not big sports fans, a “flop” in basketball, for example, is when a player intentionally falls down in a grandstanding manner after little or no physical contact by an opposing player in hopes of drawing a referee’s attention, thereby securing a personal foul against the opponent.  It’s unsportsmanlike, but widely practiced and even perfected by a number of professional players in multiple sports, not just basketball.  

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ChartPack Quarterly Updates & Insights 200 New Enhancements (Version 8.25)

The last three months since Wiley published our book, Tensile Trading, has given us a unique opportunity to talk with many investors.  In doing so, we’ve been able to discuss with them the big picture challenges of managing one’s assets, as well as hear unique testimonials extolling the organizational value of the ChartPack.  

The most common refrains we hear from investors is that until now they had struggled without a clear and simple process.  As they’ve explained, our book has not just given them an organizational structure but it has allowed them to incorporate their own investment needs and inclinations into a personalized methodology.   One investor told us that the book really “plugged the holes in my money management ship.”  

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Investorship, like Citizenship, Must Have Parameters

Friends don’t let friends drink and drive.”  We have all been exposed to this public service advertisement since it was first broadcast in 1983.  This simple slogan has been embedded in our collective consciousness, and research has proven that its impact has saved thousands of lives. It really works.

If you read my blogs regularly, I’d wager that you are probably the most sophisticated investor in your friend group.  With that comes a similar responsibility to look out for your friends.  This is in part what motivated me to begin teaching investors over twenty years ago.  Perhaps a comparable handle might be to say “Friends don’t let friends invest wildly or blindly” – use whatever synonym you feel is appropriate.  I’d even go so far as saying that perhaps potential investors should be treated like immigrants and your role being that of a customs official.

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The Single Most Important Lesson I've Learned Trading the Markets for 25 Years

My Thesaurus lists the same two words – enhance and augment – as synonyms for both words “improve” and “more”.  The mantra of today’s global society could indeed be “improve and more” with all the corresponding complexity that it brings with it.

I merely have to look in my garage at a new BMW that is so improved with more gadgets (I use the word with tongue-in-cheek) that one must make multiple appointments with a   “BMW Genius” (their label, not mine) since the salesman clearly could not give us an adequate explanation of the car’s infinite features.  Improved and more?  Unfortunately, most investors bring those same expectations to their money management endeavors where investing is most definitely not one-size-fits-all decision making.  Investing geniuses don’t offer appointments.

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