"The speculators deadly enemies are: Ignorance, greed, fear and hope. All the statute books in the world and all the rules of all the Exchanges on earth cannot eliminate these from the human animal." - Jesse Livermore in Edwin Lefevre's "Reminiscences of a Stock Operator"
Last week was what we can learn from rappers and how that ties into the market. This week I want to focus on what we can learn from authors and books. What better book to start the week with than Reminiscences?
It is celebrating its 100th anniversary this year and the messages it contains for those that follow markets are as timeless now as they were then. If you want to learn how to trade, forget all of the touters on Twitter, go to the library and get this.
Ignorance: the Merriam-Webster definition is lack of knowledge or information. Many think that it means one is stupid or rude. Those might be symptoms but not the root cause.
Ignorance in the mkts means not seeking out all of the information you need to make your decision. It means staying buried in your bullish or bearish echo chamber. For me, I like to go thru several drivers of fundamentals, technicals & catalysts. Today it is technicals.
Fear: an unpleasant emotion caused by the belief that someone or something is dangerous. I see many people that seem to take personal offense when the mkt doesn't move in the direction they want. They lash out at the other view or policy makers.
The market goes up and it goes down. It is driven internally and externally by individuals maximizing their own personal opportunity set. It is not out to get you but it always seems to move in the way that hurts the most people because people don't control emotions well.
Greed: selfish desire for something like wealth. Jesse also says bulls & bears make money but pigs get slaughtered. Don't be afraid to take a profit, even if not as much as you wanted, or stop yourself out. As a boss once said "live to fight another day"
Hope: while this is a great acronym for how money flows thru the system, hope is a horrible investment strategy. If you find yourself hoping for something, you have already lost.
Technical analysis also helps me maintain discipline. Identify entry & exit levels. Take the emotion out of trading/investing. Keeps the process disciplined. Technical analysis helps a lot on that front. I have been bearish & caught the recent move lower - should I be greedy?
I could hope that futures move back lower. However, you can see the support & change in momentum I have circled. I can also tell you that March & April seasonals are very strong for stocks.
We can learn a lot from good books. Even if they are celebrating their 100th year. Ignorance, fear, greed & hope are your deadly enemies in the markets. Try to eliminate them with your process.
#markets #investing #stocks