The Traders Journal

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Charts I'm Stalking: Action Practice #9

The Seasonality Action Practice blog from December 16, 2016 is about the two most impactful decisions you can make as an investor.  Academics have produced stacks of papers confirming that your asset allocation decisions have immense consequences that flow directly to your bottom line.  I maintain it’s the second most important investment decision you can make.  

The most important decision is making a commitment to actively and regularly rebalancing your asset classes.  That’s where seasonality comes in by putting the probability winds at your back as you buy and sell to realign your positions with your target allocations.  The discipline decision is the most important because while seasonality has a degree of predicable probability, human behavior is predictably irrational.  

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New Year's Resolutions for Investors

Babylonians did it.  Ancient Romans did it.  Medieval knights pledged the “peacock vow” each New Year as their promise of chivalry.  Reflecting upon the previous year’s efforts and seeking ways for self-improvement in the coming year has been a common ritual for millenniums because our human nature drives us to be better next year than we were this year.  

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Ten Holiday Vacation Lessons from This Trader's Experience

At this time of year, it’s one distraction wave after another.  Admit it.  Your investing efforts take a back seat to shopping, socializing, decorating, drinking and feasting. Just pick your poison.  In addition, many of you head off to warmer climates, as you should.  As an investor or trader, how do you approach these seasonal holidays and travel challenges?  The markets don’t close when you go to the Caribbean.  They do not  tolerate inattention or loss of focus, not even accidental lapses.

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Charts I'm Stalking Action Practice #8

You can’t download stock market wisdom.  You have to experience it firsthand and practice it.  In a nutshell, that is precisely what these Action Practice blogs every two weeks are all about.  

The previous Action Practice (#7) presents a tool for uncovering individual investors’ tolerances for risks and rewards.  The exercise was intended to identify the personal balance between fear and greed with which investors participate in the market.  The response was so positive and encouraging that I actually wrote an entire blog last week to dive into the material in greater depth.  Please review that description.

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A Tool to Uncover Your Personal Risk / Reward Profile

Far too many investors get it wrong, and perhaps no other group more so than the Millennials.  In a recent cover page article on the investing habits of the Millennial generation, IBD reported that Index ETFs are the investment vehicles of choice for these 19 -35 year olds.  I maintain that this is foolish and simply the result of the young investors not being aware of the powerful decision tools that are available to them.

I have personally discovered that the sweet spot with investing is to have a truly accurate understanding of your own tolerance for the markets’ inevitable pullbacks and drawdowns.  Most fundamentalists approach this problem with a static model that considers standard deviations, beta,percentage drawdowns or some numerical gauge.  The reality of investing, however, is that we each have completely unique tolerances for risk and reward.  This is precisely how it should be.

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Charts I'm Stalking: Action Practice #7

I’ve analyzed over one million charts.  That’s not  bravado, just math.  A hundred to two hundred charts a day (most days) for over 25 years, and that’s the number you reach.  I share this because chart reading practice has indeed allowed me to train my eye in such a away that it allows me to wring an astonishing amount of information from a one-page chart.  Cultivating these skills is what this bi-weekly “Action Practice” blog is all about.

For those of you who might have stumbled upon this as your first exposure to these “action practice” blogs, think of this as paper trading, visual investing or virtual trading exercises.  Might I suggest you revisit the September 2, 2016 blog where I explain my objectives in more detail.

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Investors: Look Here for the Attributes and Skills You Must Have

As an individual investor, what you bring to the table in the way of intellectual, emotional and behavioral skills will determine whether you succeed or fail.  This is hardly a breakthrough revelation, but it needs to be said nonetheless.  It’s been my experience that great investors are not born.  For the most part, they are average people who simply make a personal commitment to teach themselves the most appropriate skill set.  

Investors Business Daily (IBD) acknowledges this by its regular features about individuals who have excelled in one sphere or another.  For it is role models who can indeed jump start the acquisition of these essential faculties.  IBD features a large number of entrepreneurs in these bio picks.  This is clearly from experience and by design.  This is a reasonable alternative in lieu of face-to-face mentoring.

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Charts I'm Stalking: Action Practice #6

Yes, I’ve profited handsomely for years by trading on the coattails of top  mutual funds when they report their new holdings each quarter.  Yes, this is precisely why so many of you download the Tensile Trading ChartPack each quarter because we make it super easy for you to coattail along as well.

No, you don’t make these profits without some independent thinking, research and comparisons on your part.  

Okay, so we know that due to legislative changes as explained in the Action Practice #5 blog, Fidelity is selling their positions in certain financial equities and replacing them with different financial equities, such as ICE, CME, SPGI and STT.

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How I Maintain Emotional Consistency and Behavioral Intelligence Trading the Markets

I heard an insightful interview with a judge talking about the transformation she goes through in her chambers as she puts on her black judicial robes and enters the courtroom.
It reminded me of my own physician who I know socially and who I’ve seen experience a similar conversion when he dons his white doctor’s coat before we discuss my medical well-being.  Stay with me; there is a powerful and profitable lesson here for us investors.

Think back to your academic graduations and how you wore robes to prove that you had absorbed the wisdom imparted by your teachers.  Books have been written about the dual personalities of our sport heroes when they don their shoulder pads, helmets and uniforms.  Even our superheroes are empowered when they step out of the phone booth transformed by tights and a big “S” on their chest.  

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