The Traders Journal

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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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You Bought It...But Here's How You Increase Your Probabilities of Making Profits!

I think of this weekly blog as a sort of view from the kitchen.  Mine is not some candy-coated representation of a non-existent financial Valhalla being peddled by someone who is trying to sell his black box with the holy grail formula.

 

This is a weekly experience where I invite you into my trading kitchen and let you look over my shoulder as I blend a lot of essential ingredients into what becomes a tasty profitable investment dish.  Is it simple?  Heck, no!  That’s the point.  I make it clear that it takes a lot of study, practice and work.  If you can’t stand the heat, get out of the kitchen.  Find a money manager to take over your assets and learn to live with his or her results.  If that’s the road you chose, I hope I helped you make the right decision. 

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A Through Z of Investing: The Essentials

Fair warning: everyone has some comments to offer when you write an investment book.  And they do.  

For 25 years now, I’ve operated under the caveat:  “if it ain’t broken, don’t try to fix it.”  As a former entrepreneur, my customers reviewed my performance daily.  As an athlete, the stopwatch rated and ranked me.  As a trader, the markets always critique the choices I make.   Feedback like this is nothing new, and I’m used to it. 

It’s the source of the feedback that’s always mattered to me.  In other words, the accolades from close friends and family is what I strive for.  The applause from the multitudes is not. 

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The Four Crucial Beliefs Necessary to Achieve Stock Market Mastery

Galloping through the markets without recognizing the impact of your essential beliefs is an investing tragedy of Shakespearean proportions.  If this describes your style, money management will be like trying to nail Jello to the wall. 

We use to joke that my high school buddy, Brian Maxwell, was a force of nature – so much so that the weather would follow him wherever he went.  In truth, it was his beliefs that fueled his behavior. Brian was a world-class marathon runner. When he created PowerBar, he believed beyond the shadow of a doubt that its formulation would allow him to break through the inevitable 21-mile wall that all runners hit in a marathon race.  His absolute belief in his PowerBar formulation allowed him to aggressively run to 21 miles knowing he would blast through “the wall”.  The faith he had in his methodology facilitated his near-evangelical zeal as he pedaled PowerBars out of his van at numerous race events.  His beliefs resulted in the building of a 300-person company that he eventually sold to Nestle for $375 million.

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