Posts

The Benchmarks You Should Strive to Beat with Your Stock Trading System

The following is adapted from Automated Stock Trading Systems by Laurens Bensdorp. As a trader, you may make some profit and start to feel pretty good about your strategy. Then the profit stalls or you experience a long draw down, or you hear from a friend who is doing even better, and doubt creeps in: Do you really know what you’re doing? Is your strategy working? That doubt will infect your decisions. Where before you executed trades without hesitation, you’ll begin to second-guess. Though your strategy could very well be working, you’ll start to abandon it at key moments. Trading is a long-haul game, and consistency is key. To succeed, you must be able to trust your strategy and execute it with confidence. By comparing your results to a benchmark, you can evaluate the effectiveness of your trading system and either build confidence or identify a need for improvement. Let’s look at two different benchmarks you should strive to beat with your trading system. Th...
Post a Comment
Read more

How do you judge success?

Not every trader is looking for 30 and 40% annual returns. I remember one trader, Samuel, who was managing his parents’ retirement account. With interest rates at nearly zero and with very little tolerance for a drawdown, they were barely getting by with their bond portfolio despite a lifetime of saving and sacrificing. Samuel was able to quickly transform their portfolio into a profit-generating machine earning them 10% a year with very little risk. Imagine having a $1 million portfolio that was previously providing just $30,000 a year in income that now easily provides three times that! For this couple in their 70s, the greater returns radically changed their lifestyle AND gave them the confidence that they could spend without worrying about whether they’d have a legacy for their children. Samuel wasn’t a typical student-most of my students are professionals in their 40s and 50s who want to maximize the growth of their portfolio so they can retire early o...
Post a Comment
Location: Plaza de la Solidaridad, 12, 29006 Málaga, Spain
Read more

Yesterday Doesn’t Matter — Laurens Bensdorp

Trading nirvana is when you get to the point that your daily results don’t matter to you anymore. I know that sounds crazy, so let me explain. The only thing that matters to the elite traders of the world is the progress towards the defined long-term objective. When you’ve set that correctly and you are following your rules 100% of the time, you won’t care about yesterday, today or tomorrow’s results. It’s not that we master traders are in some sort of ‘Zen’ state where nothing matters, it’s just that we know that trading, like life, isn’t made up of perfectly straight lines! There are ups and downs along the way. There are rainy days and sunny days. Do you get angry and shake your fist at the sky when it rains? Of course not! The sun rises and sets every day, the tide goes in and out, and the markets go up and down. There will be days you make money and days you lose money. In fact, I will have many losing days this year. It might even be 40% of all days. That d...
Post a Comment
Location: Plaza de la Solidaridad, 12, 29006 Málaga, Spain
Read more

The Fed Just Killed Fundamental Analysis Forever

It’s been an interesting few weeks, hasn’t it? Beyond the roller coaster of a ride and panicked market reaction to what is normally good news (like rate cuts and the Fed injecting liquidity), below the headlines a fundamental transformation of the markets is taking place. We’ve seen interventions by the Federal Reserve in the marketplace before, most notably after the 9/11 attacks and again in 2008 and 2009 as liquidity became an issue. But what is happening now is unprecedented in size and scope.  The US government, through the Federal Reserve, is injecting so much money into the markets through multiple instruments that it’s impossible any longer to make evaluations on price action based on fundamentals. Put another way, the whole notion of price as a reflection of an honest, transparent, voluntary ‘struggle’ between a buyer and a seller has been washed away by the flood of money. Banks, funds, huge corporations and institutional investors have been given a...
Post a Comment
Location: Plaza de la Solidaridad, 12, 29006 Málaga, Spain
Read more