Beautiful Quote
- Thread starter nkpanjiyar
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Wisdom on Losses !!!
Wisdom on Losses !!!
Always understand the risk/reward of the trade as it now stands, not as it existed when you put the position on. Some people say, "I was only playing with the market's money." That's the most ridiculous thing I ever heard.
-Bill Lipschutz
You don't have to get in or out of a position all at once. Avoid the temptation of wanting to be completely right.
-Jack Schwager
I basically learned that you must get out of your losses immediately. It's not merely a matter of how much you can afford to risk on a given trade, but you also have to consider how many potential future winners you might miss because of the effect of the larger loss on your mental attitude and trading size.
-Randy McKay
I take the point of view that missing an important trade is a much more serious error than making a bad trade.
- William Eckhardt
Large profits are even more insidious than large losses in terms of emotional destabilization. I think it's important not to be emotionally attached to large profits. I've certainly made some of my worst investments after long periods of winning.
-William Eckhardt
Investing is a negative game emotionally. If you're playing for the emotional satisfaction, you're bound to lose, because what feels good is often the wrong thing to do. When all the criteria are in balance, do the thing you least want to do.
-William Eckhardt
You should spend no time at all thinking about those roseate scenarios in which the market goes your way, since in those situations, there's nothing more for you to do. Focus instead on those things you want least to happen and on what your response should be.
-William Eckhardt
It's important to distinguish between respect for the market and fear of the market. While it's essential to respect the market to assure preservation of capital, you can't win if you're fearful of losing. Fear will keep you from making correct decisions.
-Howard Seidler
Make sure you have an edge. Know what your edge is. And have rigid risk control rules.
- Monroe Trout
cheers,
nkpanjiyar
Wisdom on Losses !!!
Always understand the risk/reward of the trade as it now stands, not as it existed when you put the position on. Some people say, "I was only playing with the market's money." That's the most ridiculous thing I ever heard.
-Bill Lipschutz
You don't have to get in or out of a position all at once. Avoid the temptation of wanting to be completely right.
-Jack Schwager
I basically learned that you must get out of your losses immediately. It's not merely a matter of how much you can afford to risk on a given trade, but you also have to consider how many potential future winners you might miss because of the effect of the larger loss on your mental attitude and trading size.
-Randy McKay
I take the point of view that missing an important trade is a much more serious error than making a bad trade.
- William Eckhardt
Large profits are even more insidious than large losses in terms of emotional destabilization. I think it's important not to be emotionally attached to large profits. I've certainly made some of my worst investments after long periods of winning.
-William Eckhardt
Investing is a negative game emotionally. If you're playing for the emotional satisfaction, you're bound to lose, because what feels good is often the wrong thing to do. When all the criteria are in balance, do the thing you least want to do.
-William Eckhardt
You should spend no time at all thinking about those roseate scenarios in which the market goes your way, since in those situations, there's nothing more for you to do. Focus instead on those things you want least to happen and on what your response should be.
-William Eckhardt
It's important to distinguish between respect for the market and fear of the market. While it's essential to respect the market to assure preservation of capital, you can't win if you're fearful of losing. Fear will keep you from making correct decisions.
-Howard Seidler
Make sure you have an edge. Know what your edge is. And have rigid risk control rules.
- Monroe Trout
cheers,
nkpanjiyar
Max Heinrich, who has studied the principles of making money has called these principles the Zurich Axioms and most of them make a lot of sense.
Here they are:
On Risk - Worry is not a sickness but a sign of health - if you are not worried, you are not risking enough. - Always play for meaningful stakes - if an amount is so small that its loss won't make any significant difference, then it isn't likely to bring any significant gains either. - Resist the allure of diversification.
On Greed - Always take your profit too soon. - Decide in advance what gain you want from a venture, and when you get it, get out.
On Hope - When the ship starts sinking, don't pray. Jump. - Accept small losses cheerfully as a fact of life. Expect to experience several while awaiting a large gain.
On Forecasts - Human behaviour cannot be predicted. Distrust anyone who claims to know the future, however dimly.
On Patterns - Chaos is not dangerous until it starts to look orderly. - Beware the historian's trap - it is based on the age-old but entirely unwarranted belief that the orderly repetition of history allows for accurate forecasting in certain situations. - Beware the chartist's illusion - it is characteristic of human minds to perceive links of cause and effect where none exist. - Beware the gambler's fallacy - there's no such thing as "Today's my lucky day" or "I'm hot tonight".
On Mobility - Avoid putting down roots. They impede motion. - Do not become trapped in a souring venture because of sentiments like loyalty and nostalgia. - Never hesitate to abandon a venture if something more attractive comes into view.
On Intuition - A hunch can be trusted if it can be explained. - Never confuse a hunch with a hope.
On the Occult - If astrology worked, all astrologers would be rich. - A superstition need not be exorcised. It can be enjoyed, provided it is kept in its place.
On Optimism & Pessimism - Optimism means expecting the best, but confidence mean knowing how you will handle the worst. Never make a move if you are merely optimistic.
On Consensus - Disregard the majority opinion. It is probably wrong. - Never follow speculative fads. Often, the best time to buy something is when nobody else wants it.
On Stubbornness - If it doesn't pay off the first time, forget it. - Never try to save a bad investment by "averaging down".
On Planning - Long-range plans engender the dangerous belief that the future is under control. It is important never to take your own long-range plans or other people's seriously. In essence these axioms point to the benefit of having an investment strategy and sticking to it, regardless of what other investors say or do. If you don't have an investment strategy, you could do worse than adopt these principles. However, don't be afraid to add or subtract ones according to what works for you.
Here they are:
On Risk - Worry is not a sickness but a sign of health - if you are not worried, you are not risking enough. - Always play for meaningful stakes - if an amount is so small that its loss won't make any significant difference, then it isn't likely to bring any significant gains either. - Resist the allure of diversification.
On Greed - Always take your profit too soon. - Decide in advance what gain you want from a venture, and when you get it, get out.
On Hope - When the ship starts sinking, don't pray. Jump. - Accept small losses cheerfully as a fact of life. Expect to experience several while awaiting a large gain.
On Forecasts - Human behaviour cannot be predicted. Distrust anyone who claims to know the future, however dimly.
On Patterns - Chaos is not dangerous until it starts to look orderly. - Beware the historian's trap - it is based on the age-old but entirely unwarranted belief that the orderly repetition of history allows for accurate forecasting in certain situations. - Beware the chartist's illusion - it is characteristic of human minds to perceive links of cause and effect where none exist. - Beware the gambler's fallacy - there's no such thing as "Today's my lucky day" or "I'm hot tonight".
On Mobility - Avoid putting down roots. They impede motion. - Do not become trapped in a souring venture because of sentiments like loyalty and nostalgia. - Never hesitate to abandon a venture if something more attractive comes into view.
On Intuition - A hunch can be trusted if it can be explained. - Never confuse a hunch with a hope.
On the Occult - If astrology worked, all astrologers would be rich. - A superstition need not be exorcised. It can be enjoyed, provided it is kept in its place.
On Optimism & Pessimism - Optimism means expecting the best, but confidence mean knowing how you will handle the worst. Never make a move if you are merely optimistic.
On Consensus - Disregard the majority opinion. It is probably wrong. - Never follow speculative fads. Often, the best time to buy something is when nobody else wants it.
On Stubbornness - If it doesn't pay off the first time, forget it. - Never try to save a bad investment by "averaging down".
On Planning - Long-range plans engender the dangerous belief that the future is under control. It is important never to take your own long-range plans or other people's seriously. In essence these axioms point to the benefit of having an investment strategy and sticking to it, regardless of what other investors say or do. If you don't have an investment strategy, you could do worse than adopt these principles. However, don't be afraid to add or subtract ones according to what works for you.
"The one principal that applies to nearly all these so-called "technical approaches" is that one should buy because a stock or the market has gone up and one should sell because it has declined. This is the exact opposite of sound business sense everywhere else, and it is most unlikely that it can lead to lasting success in Wall Street. In our own stock-market experience and observation, extending over 50 years, we have not known a single person who has consistently or lastingly made money by thus "following the market." We do not hesitate to declare that this approach is as fallacious as it is popular." ---Benjamin Graham, The Intelligent Investor
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