Monday, 1 June 2009

Inside the House of Money

I recently had a look a one of my trading books and thought this was a good excerpt. Very true.

Excerpt:
"Talk is cheap; think in terms of risk/reward rather than just direction; and think big move, not little stuff. Be very honest with your thought process. Markets are hard. When we are totally honest with ourselves, we place ourselves in a position to read the news clearly. If you're stuck in a view, you're going to kid yourself, disbelieve new news, and probably panic too late. That's the other dictum, by the way, that I've learned or that I pass on: If you're going to panic in markets, panic early. Panicking late is a recipe for disaster."
-Dr. Andres Drobny

I would like to add to that. I think, really, you should think in terms of risk/reward because you will be more objective about your investments/trades, and try mostly to focus on price rather than fundamentals. Because you don't really need the extra noise when you get right down to it. Turn off Bloomberg and CNBC. The mainstream financial media is there to throw you of course. Everything you need to know at that moment is in the price. That's the only thing that doesn't lie. Also, there shouldn't be a need to panic if you've thought everything through. There is no such thing as panicking early, when you have a stop-loss order. The decision to get in has already been made.

Source:
Inside the House of Money
Steven Drobny

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