Open your eyes

Seth Godin has an interesting article on finding the one, who can really help you. Very thoughtful and a must read.

“People in charge can rarely help you, because they are rarely (truly) in charge. Billionaires can’t help you, either, because they have their defense force fields on full strength during meetings like this. In fact, the person who can help you the most is almost always someone who doesn’t appear that powerful on the surface.

Remember, it’s not just that they can help you. It’s that they want to help you. Famous people qualify in neither category.

So, who is it? Hint, it’s not the Wizard of Oz or the Pope or Barack Obama. It’s someone not famous, someone who actually makes things happen and someone who actually cares. Think hard… Got it?”

Livermore on irationality

Trying to figure out the “why” of amarket move can often cause great emotional strife. The simple fact is, the market always precedes economic news, it does not react to economic news. The market lives and operates in future time.

Livermore on knowing yourself

It is my conclusion that playing the market is partly an art form, it is not just pure reason. If it were pure reason, then somebody would have figured it out long ago. That’s why I believe every speculator must analyze his own emotions to find out just what stress level he can endure. Every speculator is different, every human psyche is unique, every personality exclusive to an individual. Learn your own emotional limits before attempting to speculate, that is my advice to any one who has ever asked me what makes a successful speculator. If you can’t sleep at night, because of your stock market position than you have gone too far, if this is the case then sell your position down to the sleeping level.

On the other hand, I believe everyone who is intelligent, conscientious and willing to put in the necessary time, can be successful on Wall Street. As long as they realize the market is a business like any other business – they have a good chance to prosper.

Livermore on Discipline

I believe that having the discipline to follow your rules is essential. Without specific, clear, and tested rules speculators do not have any real chance of success. Why, because speculators without a plan are like a  general without a strategy, and therefore witout an actionable battle plan. Speculators without a single clear plan can only act and react, act and ract, to the “slings and arrowws of stock market misfortune”, until finally they are defeated.

Step by step…

1. Create a clear, concise method that will serve you to find trading ideas. A method consist of simple to implement consecutive steps based on market anomalies. A method should be derived from your trading goals and it always incorporates in itself money management techniques for capital preservation.

2. Use those trading ideas to create a plan of action.

3. A plan of action usually consists of two or more scenarios. For example if X happens, I will go with trading idea A; if Y happens, I will go with trading idea B. We create different scenarious, because we can’t control the market. We forecast what might happen and plan how we will react if certain event or a process happens.

Having a clear method helps you to be consistent and disciplined in finding new trading ideas. Creating a plan helps you to profit from your trading ideas. It assist you to focus on your goals.