May 9, 2012- Voracious Readers Make Great Macro Investors + Book Preview of Brian Shannon’s “Technical Analysis in Multiple Time Frames”

Here’s a link of a great article written by Mr. Barton Biggs : “The Gospel According to Barton Biggs” .  Read it completely.  Lots of nice insights.

Just highlights/ Things to think about:

1.) We must base our asset allocation not on the probabilities of choosing the right allocation but on the consequences of choosing the wrong allocation.” – Jack Bogle

2.) Barton has learned over the years to be disciplined in controlling risk and respectful of Mr. Market.

3.) There are no relationships or equations that always work.  Quantitatively based solutions and asset allocation equations invariably fail as they are designed to capture what would have worked in the previous cycle whereas the next one remains a riddle wrapped in an enigma.  The successful macro investor must be some magical mixture of an acute analyst, an investment scholar, a listener, a historian, a river boat gambler, and be a voracious reader.  Reading is crucial.  Charlie Munger, a great investor and a very sagacious old guy, said it best, “I have said that in my whole life, I have known no wise person, over a broad subject matter who didn’t read all the time — none, zero.  Now I know all kinds of shrewd people who by staying within a narrow area do very well without reading.  But investment is a broad area.  So if you think you’re going to be good at it and not read all the time, you have a different idea than I do. ”

4.) Also, be obsessive in making sure your facts are right and that you haven’t missed or misunderstood something.  Beware of committing to mechanistic investing rules such as stop-loss limits or other formulas.  Work very hard to better understand how you as an investor react to both prosperity and adversity, and particularly to the market’s manic swings, both euphoric and traumatic.  Keep an investment diary and re-read it from time to time but particularly at moments when there is tremendous exuberance and also panic.  We are in a very emotional business, and any wisdom we can extract from our own experience is very valuable.

*****

Yey, I got my pasalubong from my auntie who recently just got back from the States.  I asked her to buy me Brian Shannon’s “Technical Analysis Using Multiple Time Frames”.  Whee 😀  Okay, it’s just 170 pages, but I haven’t read it all yet.  Plus, I think it’s better to be read slowly, so that I could understand the concepts better and apply it for the markets.

I love Mr. Brian Shannon from watching him in his youtube clips “www.alphatrends.net” , even if I don’t even trade the US markets.  He’s one of the best guys I believe available online that one can look up to, and learn from, whether from twitter, his blogs etc just as so many in the Stocktwits network of course.  Okie, without further ado… let me highlight the favorite lines I found memorable from his learning experiences as well, that he’s written in the book.

Below are some of my favorite timeless wisdom, just found in the introduction of the book.  Really worth the price!

1.) You see, you can have the knowledge and work hard, but in the end success comes down to one word — discipline.  Just like any goal worth pursuing in life, it takes hard work to succeed at trading.  Without the discipline to recognize and control the emotions that creep into your decision making process, all of your hard work will likely be condemned to failure.

2.) The number one job of a trader is that of a risk manager.  Because greed is a typical trait of the casual market participant, he or she either ignores or is unaware of the risks being taken until it’s too late.  This is a key realization with which you’ll need to cope with early on.

3.) The goal is to time the trade so that your account is exposed to minimum financial downside and the greatest potential profit.

4.) To succeed at trading, you need to get in tune with the markets rather than impose your own set of beliefs upon them.  When the market doesn’t provide clear direction, the correct interpretation should be to sit on the sidelines and preserve capital until the low-risk opportunities present themselves.  It has been said that knowing when to be involved in the markets is just as important as knowing what to be in.

5.) Successful speculation requires a good dose of cynicism.

6.) Your emotions, left unchecked, can often be the catalyst for some very bad decision making.

7.) Being a good stock picker and a successful trader are separate talents, and they require different skills.  You can take a good trader and give him a poor setup, but he will still make money because of his trading skills.  Flipping this on its head, you can take an inexperienced trader and give him the best setups, but he will still find a way to lose money because of poorly developed trading skills.

8.) Do not interpret my words.  I do believe that fundamentals matter, but they are not useful in making short-term trading decisions.  It is important to know when a fundamental event may be due for release because it often becomes a catalyst for price movement.  However, objective analysis should be made of the reaction to the event rather than the formation of an opinion about the company.  The market doesn’t care what you think a stock should do.  Again, only price pays.

9.) To completely dismiss fundamental analysis is to say that the motivations for a large percentage of market participants do not matter.  This close-minded thinking is how technical analysts are often portrayed.  I am not here to defend technical analysis.  I know it works for me, but only because I use it as a framework for my decision making, not as an inflexible system.  I am interested in anything that may serve as a catalyst for price change because understanding human nature leads to unbiased analysis that ultimately should lead to greater profitability.  

10.) We need to understand the motivations of the participants whose opinions are acted upon in the markets and thereby force price change.  

 

– Faceless Trader hopes those lines above help you in your trading.  See ya .  Have a happy day.

Message me for anything market related. 🙂

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5 Responses to May 9, 2012- Voracious Readers Make Great Macro Investors + Book Preview of Brian Shannon’s “Technical Analysis in Multiple Time Frames”

  1. imbangklase says:

    HI FT glad you’re posting again. How’s your holdings? 🙂

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    • oks lang 😀 got cash, and some positions still remain profitable despite the market crashes. Ayala Corp, VLL, Puregold strong performers hehe 😀 —whee :d

      Like

      • imbangklase says:

        Ohhh that’s good. what do you think about SMPH as of the moment? BTW, do you also invest/trade fix-income securities?

        Like

      • i dont trade much re fixed income. No time kasi me, though I did go get for my family the FGEN preferred notes which despite being an equity raising, I consider more like a bond hehe kasi 7.8% coupon/yr. SMPH- I know not much to really give a good opinion eh. I’m not a mall operators analyst eh. I checked simple p/e ratios lang and at current prices of 16- looks like fairly valued— but that doesnt mean it wont go higher. If you like SMPH, look at RLC too kasi parehas silang mall operators which get money from rentals. same with the Rockwell listing which is near… hope those things help 😀 Check revenues, income etc to make a gauge whether you like it or not. Kasi kung trading wise lang— (not longer term)—maybe u like the company, pero chart’s still not stabilizing. wait for it.

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  2. Nobody says:

    HI FT glad you’re posting again. How’s your holdings? 🙂

    Like

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