I’m glad I don’t have to actually do any trading today. Thanks to a late night watching the Red Sox finish their sweep of the Rockies in the World Series, I’ve been walking in a fog most of the day. I’ve had to keep my brain moving, after a fashion, just to keep from getting that thousand mile star and mentally checking out all together. In spite of the fog, or perhaps because of it, I find myself reminded of a call I hosted with Brett Steenbarger (The Psychology of Trading, Enhancing Trader Performance) a...

If you’ve been on many trading sites recently you will almost certainly have come across mention of Timothy Sykes and/or his new book An American Hedge Fund. A great many folks have slammed Tim for any number of reasons. Some of the criticism can be called legitimate. Much, though, would seem to be more motivated by jealously at the type of publicity Tim’s been receiving. Don’t get caught up by only one point of view, but instead draw your own conclusions. For the sake of full disclosure, Tim approached me...

This morning I came across a blog post talking about the bid/ask spread in the stock market. It talks about how the spread is a hidden cost in trading, which it is to be sure. A lot of folks don’t realize that to be the case in stocks since they primarily see just closing value. As with every market, though, there is a bid/ask spread. The post’s author made some good points in general, but had a few things incorrect. I figure that if he is off in his thinking on the subject, then it’s likely other stock...

Have you ever seen a baseball player swing so hard at a pitch that he lost his balance and fell over when he missed the ball? What about a golfer who tried to hit the ball a mile, but missed it all together? Both of these are examples of getting greedy. We may not think of it that way, but it is. After all, how different is that from going after that trade that will double your trading account in one fell swoop? It really isn’t. We normally think of greed involving money, but that’s really only one form of it. The...

There’s a post on the Kirk Report blog which offers up 12 Trading Rules. In general terms I agree with the majority of the rules. The are two in particular I thinks are extremely good rules to live by.  “Loss of opportunity is preferable to loss of capital.” (#1) There will always be another trade coming around the bend. Do not feel like you need to catch each and every one. If you do you’ll just end up pressing and putting on trades that aren’t very good ones. Be patient. If you miss the entry...

The following quote from an article on the New York Times web site (Can We Turn Off Our Emotions When Investing?) says exactly what I’ve tried to tell finance professors and teach traders and investor for years. It’s about a comment Harry Markowitz made. Markowitz, if you’re not aware, won a Nobel Prize for his work in developing Modern Portfolio Theory. The idea of MPT is that by combining different securities we can create optimally balanced portfolios that maximize return for a given risk. The funny thing...