Trading Education: Information is Money
- fenwick136
- Jun 25, 2023
- 5 min read
Buenos dias! I’ve been in Bogota for close to a month now. Walking around each day, it’s difficult to not see the difference between the “have’s” and the “have not’s”. A huge contrast to daily life in what is a beautiful city (and country).
High-end restaurants are full from Monday to Sunday with prosperous businessmen, doctors, lawyers and financiers. Yet the streets show the less fortunate (or less effective) infrequently selling sweets, fruits, low-quality goods, and recycling trash. It’s amazing to watch a city in motion. People from all circumstances striving to make a living with wildly differing results.
With a trader’s hat on, it’s clear to see there are patterns to success and prosperity if you have the luxury to zoom out and observe both information and results.
Travelling puts everything into perspective which is invaluable. Not simply from a business standpoint, but also to question how we live in general and how the world differs in desires, standards, and priorities. Its easy to see what's effective and what is not, especially when you're not "in the trenches".
That said, it got me thinking about the major importance of educating ourselves versus the consequenses of standing still. The continuous need to evolve, adapt and apply learnings to current market conditions.
This is true to be effective in every part of life, and one of the major pillars to successful trading or making money consistently.
Previously, we highlighted the value of the trading skillset, the importance of making a start, and today we’ll get moving on improving our knowledge and information which we are ultimately working at converting to dollars and pounds.
So that’s the theme of today’s post!
Random fun fact of the week: It's illegal to own just one guinea pig in Switzerland. It's considered animal abuse because they're social beings and get lonely.
The Problem
It’s not that you needed to have spent the last 10 years reading. It’s not that you need to read the newspaper back to front every day. It’s not even that you need to have a degree in maths, economics, or astrophysics!
The problem is that when people get a setback or loss, they miss the learning, and then stop trading.
They don’t have a system for learning that will allow them to continuously grow, benefit from their failures, and stay in business.
Even the best traders are only right about market direction ~60% of the time. Yet maximising gains and minimising losses is a skill that is grown over time, learnings and experience.
Most people forget to manage their emotions, focus on the pain of loss, and then take decisions in a bad state.
“Never take a decision in a bad state”.
Most disempowering states come from fear.
"The primary difference between a rich and a poor person is how they manage fear."
In failure you get some of the strongest negative emotions. And if you’re willing to see it, the most valuable information that will take you to the next level.
Our goal is to turn information of every kind into money, and not let anything stop us along the way.
The Opportunity
The key to growing money is to grow our informational edge, knowledge, and our ability to take action. Throughout history, there has never been better access to all of these resources than there is today.
In trading, staying ahead of the curve is essential. The ability to adapt to market fluctuations, identify profitable opportunities, and make informed decisions requires continuous education. Just as money is the lifeblood of trading, information is its currency.
Let’s start with the first bricks in the wall, and get a system for continuous active learning that will dramatically improve our trading knowledge, skills, and ability to take action.
Here are 5 excellent books that will immediately enhance your trading knowledge and skillset from psychology, strategy, to analysis:
1. "A Random Walk Down Wall Street" by Burton G. Malkiel:
This timeless classic is a must-read for any trader, regardless of level or experience. It explores the concept of market efficiency, debunks common myths, and provides valuable insights into investment strategies. Malkiel's book offers a strong foundation in understanding the stock market and helps readers navigate the complexities of trading.
2. "Reminiscences of a Stock Operator" by Edwin Lefèvre:
This fascinating account of legendary trader Jesse Livermore's life provides invaluable lessons on the psychology of trading. Through captivating storytelling, Lefèvre reveals the emotional rollercoaster that traders experience and offers timeless wisdom on risk management, discipline, and the importance of patience.
3. "Technical Analysis of the Financial Markets" by John J. Murphy:
For those interested in technical analysis, Murphy's book is a comprehensive guide. It covers a wide range of technical indicators, chart patterns, and trading strategies. With detailed explanations and real-life examples, Murphy equips traders with the necessary tools to analyse market trends and make informed trading decisions.
4. "Market Wizards" by Jack D. Schwager:
Schwager interviews some of the most successful traders of our time and distils their invaluable insights in this captivating book. "Market Wizards" highlights the importance of developing a unique trading style, managing risk effectively, and maintaining discipline. Reading the stories and experiences of these market wizards can inspire and provide guidance for traders at any level.
5. "Trading in the Zone" by Mark Douglas:
This book delves into the psychological aspects of trading and the importance of developing the right mindset. Douglas explores the impact of fear, greed, and self-discipline on trading outcomes. By understanding the psychological barriers that hinder success, traders can cultivate a mindset focused on consistency, rationality, and self-control.
Call to Action:
For me, I’m currently reading: “Principles for dealing with the changing world order”, by Ray Dalio, one of the most successful money managers of all time.
Understanding and having a view on where we are in the market cycles, from a short and long term perspective, is among the most useful tools when trading or investing. How can we take risk on the future without knowing where we are?
Another few must reads on this subject of cycles are from Howard Marks of Oaktree Capital:
Mastering The Market Cycle: Getting the Odds on Your Side
The Most Important Thing
Here are some great cheap or free resources I read frequently to keep on top of markets. Increasing knowledge and spurring market views:
A few twitter accounts that add value daily:
@PeterSchiff
@CharlieBilello
@GRDecter
@Schuldensuehner
Trading: I'm trading risk from the short side here as is making more sense intraday. Cautious given where valuations are year to date, current macro themes, cycles, and seasonality. Developements in Russia over the weekend will keep things volatile next week, so it's better to keep positioning light and be reactive to news flow.
Investment: I bought more bond ETFs focussed on emerging markets this week with interest rates at these levels. It’s impossible to ignore fixed income with US interest rates at such levels comparable to equity yields. Interest rate curves are heavily inverted and indicating an upcoming recession which should favour bond performance vs. broader equities. Plus we've already made healthy returns on equities in H1, it makes sense to be more defensive.
iShares J.P. Morgan USD Emerging Markets Bond UCITS ETF
Random SPX 500 fact: The index has averaged a return of ~10% per year throughout its history since inception in 1957.
Links:
A great snapshot of what's going on in markets today:
Principles for Dealing with the Changing World Order by Ray Dalio:
What resources are helping you make money right now?
What’s getting in the way of your trading?
What does a recession mean for your investments?
Message me.
The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of financial advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
Comments