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Reading The Markets Getting Out Of Control

Frequent readers will have noticed recent posts on speed reading and reading lists. This is going to be another one of sorts.

This weekend just gone I decided to go through my online reading list and I was shocked by how much material I had saved up to read.

I’ve done this before and I’m sure I’ll do this again and it is always with a little bit of pain, but, I am not saving any more reading from online until I have caught this backlog up.

I may well even have a digital break. This has got ridiculous and like many things with me there is an almost addictive nature to my need to save new things to read.

As I said in my post on ‘Questioning the benefits of reading lists’ there is actually nothing (or little) that I gain directly in terms of performance to my trading from my reading. Given this fact and the sheer silliness of the volume of info I think there are some good reasons to put a ‘time stop’ in place with my accumulation of digital reading. Here are a few of them:

—> I like to be aware of if I am spiraling out of control and ‘nip it in the bud’ before it gains momentum. I have done this in the past to varying degrees with drinking, eating, going out etc etc.

—> The total of my reading is not just online. I also have a backlog of real books to read. Recently there have been articles on the potential loss of deep reading skills (as amply demonstrated by some comments I receive about blog posts where it is clear that the reader hasn’t actually bothered to read the post they are proffering comment on!). I think this is a very real problem looming. I do not want to lose my deep reading ability.

—> I think taking a digital reading hiatus, once I have crushed through my saved reading, is a smart move that will enable me to get back to reading longer material.

—> I also have a number of new projects in the works and focusing in on them has a higher payoff and so I ought to get on that as a priority.

If I find something compelling online I will read it then and there or let it go.


Does your reading get on top of you and if so what methods have you found effective for dealing with it? You might be like my mate Adam and have resorted to toilet reading down under http://adamjowett.com/2014/08/toilet-reading

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Disclaimer: Embrace The Trend / Richard Chignell does not provide investment, financial or product advice.  If you are going to trade / invest it’s at your own risk and you must take responsibility for your actions.

Goal Clearing

 

I’ve recently been thinking about how unclear so much speech is and I’ve been considering how unclear speech could represent unclear thought.

I’ve been looking up seemingly obvious words in the dictionary. I often find the results surprising and informative. You may think all this dictionary referencing is a strange thing for a 35 year old man to be doing. I thought so as well and yet it has been a very beneficial pursuit.

To be successful requires work. If I use wooly thinking my goals are not clear and it makes the likelihood of my achieving them less clear too.

I have experienced the negative effect of having unclear goals. That is why I advise investigating whether you have defined your goals clearly.

Sometimes the process of redefining and investigating goals highlights that we don’t know what we want at all.

I’m reminded of the joke where a man continually asked God to help him win the lottery. He repeatedly prays to God over the months and months to provide him with the winning lottery ticket. Eventually there is a loud voice like he hoped from heaven. God says ‘Will you at least help me out a little bit by buying a bloody lottery ticket’.

I think often if we have not really thought about our goals, done the work required to define them, we often find that we are in our own way. This is like the man in the story.


Are you even purchasing a lottery ticket?

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Disclaimer: Embrace The Trend / Richard Chignell does not provide investment, financial or product advice.  If you are going to trade / invest it’s at your own risk and you must take responsibility for your actions.

Questioning the benefit of reading lists

image

I read a lot. I always have and absolutely love reading. I think this is because I have an inbuilt quest for knowledge. I love to learn and read about new things as well as go down the rabbit hole to investigate topics that interest me.

I recently wrote about my experiments with speed reading (here). One of the reasons to practice and develop my ability to speed read is the sheer amount of information that I try to consume.

I like to use www.pocket.com , which is a way of saving reading material for later, that has a really nice simple interface on which to read, when I get around to it.

One thing to question is whether my reading adds any value to my trading. Here when I speak of value I can define it very simply as: does it at add any profit to my trading account.

When I was starting there was no other way for me to find information out or to come up with an approach to trading other than to read. I discovered price-based trading and trend following as well as mentors to help me through reading.

It is important to note that where I am now in my trading there is actually very little that I gain from my reading. What I mean is that the specifics of the way I trade are not influenced by anything that I read. I realised that I have to listen to myself and no one else and that when I do that my performance is considerably better.

I think what I want to highlight is that it is a useful exercise to become aware of why you’re consuming information and ask is it actually benefiting me?

For example in my case I know that I’m consuming information in the form of amazingly written material on psychology and trading to fill my mind out of intellectual curiosity. I’m also absolutely aware that it has very very little effect on my profitability as a trader.

The reason for this post comes about as a result of my scrolling endlessly down through my list of saved reading and feeling some level of anxiety that I’ve missed lots and that I have a great deal to catch up with.

The reality is that I need not worry about this anxiety over what I’ve missed as it actually has no effect on me personally.

It’s important to know or at least have enough awareness to consider why you do things and what effect they have.

I’m still going to read because I love reading but I can be fully aware that it has no material effect on my performance as a trader.

I achieve intellectual satisfaction through reading. I achieve profitability through applying my trading systems.

Successful trading comes down to keeping your losses small and making sure your winners are considerably bigger. I like to do this following the trend. I’m sure there are other methods where people make money in the market but I have discovered that this is the way that is best for me.

If you haven’t considered this then perhaps this will trigger you to evaluate this for yourself and clear up any fuzzy-ness as to how important things you do are to your trading results.


It has been my experience that many are not aware as to which of their actions directly contribute to their success. In most cases much can be stripped away and I think this is extremely beneficial and can save a great deal of time spinning your wheels and going nowhere.

Down the rabbit hole image thanks: http://paradisexpress.blogspot.de/2011/06/krislyn-design.html

Does your reading take you down the rabbit hole?

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Disclaimer: Embrace The Trend / Richard Chignell does not provide investment, financial or product advice.  If you are going to trade / invest it’s at your own risk and you must take responsibility for your actions.

Do you read a lot? I’ve been experimenting with speed reading tools.

Every day I have a dedicated speed reading session. In this session I push myself to read a little faster than my current reading speed. With some practice my reading speed is increasing.

I first read Tony Buzan’s ‘The Speed Reading Book’ years ago. I used a knitting needle under each line to increase the speed by guiding my eyes. I also worked on ‘chunking’, reading the text in chunks or groups of words, rather than the old fashioned way of word by word. I also tried to stop sub-vocalising. Sub-vocalising limits the speed you read by keeping it close to the speed you can speak. Even if you are a complete chatter box you can probably only speak at about 180 words per minute (wpm), maximum. That’s fast talking but slow reading.  

Honestly I didn’t keep this up for that long. Before I even started speed reading I wasn’t such a slow reader. Some of that could be because I love reading and I don’t actually read fast but what I lose in speed I make up for in dedicated time. It used to be a bit of a pain to work out my reading speed. A lot of faff! I had to set a stopwatch, read, say 5 pages, count the words on each page (OK I cheated and counted only the first page and averaged) and then work out the average wpm. As you can imagine as a result of all this faff I didn’t bother working it out much. I have no idea how fast I used to read as a result.

Now I do a lot of reading online. A large amount of my reading is in digital format. I cherry pick pages and pages of digital reading and save it to read at my own convenience using the excellent www.pocket.com. Pocket rocks but I could use Instapaper or similar - I don’t think it really matters. I can’t use the old knitting needle trick on digital devices as I don’t like to scratch my screens up. Since, to increase reading speed, I need to push myself it’s necessary to have a guide. Enter a problem…. how do I do this for my reading of digital material?

I started using www.spreeder.com. This is a great little tool. You can copy and paste text you want to speed read. You can set the speed and even set the ‘chunks’ you want to read in. This is pretty sweet and I’ve been using it for a while. They also have a bookmarklet that you can add to your browser’s bookmark bar: “Select text in your web browser and click the Spreed! bookmarklet, which will open Spreeder in a new window with the text preloaded. Eliminates the copy/paste step!”. I sort of like this but found it clunky and didn’t particularly like the way that it opened in a new page.

Skimming Twitter (that’s all I ever do) I saw a comment that referred to Spritzing (hat tip: Rachel of options trading fame https://twitter.com/Sassy_SPY). Spending a lot of time in Berlin, German I had to laugh initially. Put it this way, searching for this term may not be appropriate if you’re at work or need parental guidance (the thought of parental guidance in this context does freak me out somewhat! Probably not so much the Germans), you have been warned. However, having seen the context was related to reading and coming from a respectable source I decided to click on through.

I have found a new reading tool that seems to give me a lot of what Spreeder did but improve on it. www.spritzinc.com are a start-up (with a sense of humour it seems looking at their company image and having read they know of the German reference given one of their founders is from Munich!). They have their own booklet that you can put in your bookmark bar called a spritzlet. It allows you to spritz the internet! That’s right you find an article that you are interested in reading and click the Spritzlet in your bookmarks bar and boom you can speed read the whole page (get your spritz on herehttp://sdk.spritzinc.com/js/1.2/bookmarklet/index.html ).
What I particularly like is how you can select the words per minute that you want to read at. They also do something a bit different in that they emphasise one of the middle letters with red. This is actually pretty smart as it focuses your eyes on this point.  You peripheral vision takes care of the rest. It seems to work quite seamlessly and although it does not allow you to ‚chunk’, you are limited to single words at a time, you can select the speed you want to read, click and speed on through. It doesn’t force you to a new web page but opens up a small viewing box at the top of the screen. (I think it is going to be rolled out for mobile, iWatch, etc etc although I probably will never use it in that format).

Naturally there is all sorts of research that you can read, quite compelling it appears, but the bottom line for me at least is that this is a very good tool to read quicker. Which is the whole point of this post. I am in no way affiliated with any of these companies but I like to share when something rocks. Speed reading rocks, digital information offers me an amazing array of diverse material to read and the only problem is how to consume it. Perhaps companies like Spreeder and Spritz may help you as well. I’m currently spritzing away!!

Question: Do you speed read or have you ever tried? Do you have any tools that you recommend? I’d love to know in the comments below.

#speedreading #reading #digital #tools  
NB: Although there are a lot of links in here none of them are affiliate related.

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Disclaimer: Embrace The Trend / Richard Chignell does not provide investment, financial or product advice.  If you are going to trade / invest it’s at your own risk and you must take responsibility for your actions.

The Pro’s Process - Anne-Marie Baiynd

I am very excited to be able to offer the twenty-fifth in my series of posts asking Pro Traders (Investors) about their psychological processes.  Delving a little into how it feels to them when trading / investing.  The good and the bad.  How this has changed over time and what preparation they do mentally for performing as a trader / investor.

One of the key features for me was that I wanted traders / investors with experience who have been through the mill over the years and of course those who were kind enough to broach this subject publicly.  This I hope gives developing traders / investors more to learn from.  

I’m very fortunate to have a great line up and this week is:

Trader: Anne-Marie Baiynd

1) How long have you been trading?

This September will make it 9 years

2) What style of trading / investing do you practice (technically driven, fundamental, systematic, a combination etc)?

Technically driven with some attention to fundamental performance.

3) How do you feel when a trade goes against you?

Truthfully, I am always a little anxious when a trade goes against me for any period of time….say more than a week or so.  I begin to immediately look for reasons that I might be wrong.  If I cannot find anything significant, I will sit on my hands.

4) How do you feel when an investment goes for you?

What can I say, I live in a heightened sense of awareness if I am engaged in the market in any form or fashion.  I constantly look for reasons I might be wrong.  I react the same way – if I cannot find anything significant to nullify why I entered the trade, I will continue to stay in the trade.

5) How have these feelings changed over your trading career? (Can you recall how you originally used to feel and elaborate on how this has changed over time?)

I was a very emotional trader who thought she was not emotional at all.  The worst kind of trader- self deceived-makes for a lot of losses.  When I figured out that who I thought I was and who I really was, the road to success began.  But not before I had lost a great deal of money.  It was a slow process for me, but I never gave up.

6) Do you have any practices that you do away from the trading screen to help you mentally and emotionally handle trading?

I try to disconnect completely from my screens when I am away. Whether it is at the end of the day or when I take time away.  I spend so much time in a heightened sense of awareness, that I exhaust myself at the end of the day, and in order to replenish and be sharp the following day or week, I must disconnect.

7) Have you always done this?

Definitely not.  I learned that less is more when I believed that more is better.  I burned myself out and got very sick from 20 hour days, and thinking about the market through interrupted sleep for the remaining four hours.  My body finally told me it was time to create balance or I was not going to be able to enjoy retirement.

8) If not, how have you learnt to deal with the feelings that come up when trading?

Feelings are real and must be managed; if they are suppressed they rise up in the worst places.  I learn to listen to my ‘center’.  The solar plexus and lower back are spaces that I feel a lot of physical tension, so I work through mentally why I might be feeling that building in myself.  If I realize it is a feeling coming from fear or worry, I immediately stop what I am doing and begin to triage the event.  I know that sounds antiseptic, but it really isn’t. It’s about learning to understand myself, and why I feel a certain way.  Usually if my gut begins to tell me that I am wrong, I usually am, so I have learned to listen to my core.

9) Can you describe a time in your trading life which really rammed home the point that so much of trading comes down to psychological factors?

When I became technically proficient but still could not stay green week over week, I knew I was missing the really important part.  It is not about the knowledge base, but the execution events that make or break the trader.  And execution, consistent execution over time, cannot continue if personal and psychological management are not made paramount.

10) If you could give aspiring traders / investors one piece of advice about emotionally handling the market what would it be?

Don’t be afraid of your emotions.  Don’t stifle them.  That doesn’t work.  Our success is not about how much knowledge we have, but how we make decisions when our senses are heightened by fear or anxiety.  Realize that we are wired to take risks in the wrong places; that we are wired to wait until the last minute, and that we can’t stand being wrong so we must re-engineer our minds to manage those facts.   

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I’d like to thank Anne-Marie Baiynd for sharing about the way she tackles the market from an emotional / mental side of things and for her willingness to allow me to post this as a free resource in the hope that traders who have been in the market for less time or are thinking of entering can perhaps pick up some A-HA’s.

If you are interested in finding more out about Anne-Marie Baiynd you can find her here:

Twitter: @AnneMarieTrades

Blog / site: http://www.thetradingbook.com/

***

Previously in the series:

Charles Kirk - read it…..here

Matt Davio - read it…..here

David Blair - read it….here

Mike Bellafiore - read it….here

Mark Holstead - read it ….here

Brian Shannon - read it…. here

Mike Dever - read it…. here

Anthony Crudele - read it… here 

Derek Hernquist - read it … here

Ivan Hoff - read it… here

Brian Lund - read it… here

Greg Harmon - read it… here

Michael Bigger - read it… here

Jon Boorman - read it…. here

Darrin Donnelly - read it….. here

Stephen Burns - read it…. here

Tony Rohrs - read it…. here

Bruce Bower - read it…. here

Richard Weissman - read it… here

Larry Tentarelli - read it… here

Chris Ebert - read it… here

David Merkel - read it… here

Ian Cassell - read it…. here

Derald Muniz - read it…. here

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***

Disclaimer: Embrace The Trend / Richard Chignell does not provide investment, financial or product advice.  If you are going to trade / invest it’s at your own risk and you must take responsibility for your actions.

Hmmm a Big iPad

I think I quite like the idea of this.

I’ve been thinking of how I can streamline my computer set up in an ongoing quest to be more minimalist whilst at the same time increasing my mobility.

I went through one iteration of my computer set up as I morphed from trading intraday to end of day. I originally had two large monitors and a laptop. I now have a single monitor and a laptop.

As I have become more than accustomed to this set up I realise I can reduce things even more.

It always helps to hear of people you look up to being able to trade very effectively with a simple set up. In a podcast I heard Market Wizard Tom Basso say that he now trades comfortably whilst traveling on a single laptop.

I envision a ‘trading desk’ that I can take on the road. Really what I would like is a set up that is the same wherever I am. This would basically mean I can have my preferred office set up anywhere in the world.

I like two screens and so I was originally thinking of a MacBook Pro and Air combo.

I read a post by +Mike Elgan on working whilst traveling in Europe where he made a case for how good an iPad with an external keyboard is.

I think I may be a buyer of a larger screen iPad rather than an Air. After all my main requirement for this is a little expansion of screen real estate when trading but after that is complete it would be used for research, reading and writing. If it has a good battery life, the portability and the space saving factors would be a good fit for the wannabe digital nomad trader.

As it is yet to be confirmed officially I mull over whether this could be the ideal location independent trading desk for me.

http://www.bloomberg.com/news/2014-08-26/apple-said-to-prepare-new-12-9-inch-ipad-for-early-2015.html

Question: Are you a professional trader and if so what setup do you take on the road with you? Please share in the comments below.

#trading #apple #ipad #macbook #digitalnomad  

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***

Disclaimer: Embrace The Trend / Richard Chignell does not provide investment, financial or product advice.  If you are going to trade / invest it’s at your own risk and you must take responsibility for your actions.

The Pro’s Process - Derald Muniz

I am very excited to be able to offer the twenty fourth in my series of posts asking Pro Traders (Investors) about their psychological processes.  Delving a little into how it feels to them when trading / investing.  The good and the bad.  How this has changed over time and what preparation they do mentally for performing as a trader / investor.

One of the key features for me was that I wanted traders / investors with experience who have been through the mill over the years and of course those who were kind enough to broach this subject publicly.  This I hope gives developing traders / investors more to learn from.  

I’m very fortunate to have a great line up and this week is: 

Trader: Derald Muniz

1) How long have you been investing?

I have been actively trading my personal accounts for over 15 years with an increase in my time spent in the public markets since 2009. I make my living as an investor and so one thing I look for are meaningful cycle bottoms amongst a variety of asset classes. 2009 looked like a good opportunity to increase the focus in U.S. stocks so I diverted more of my investing time there. Over the past year I have moved into a more professional capacity with my involvement in Presidium Capital where my partners and I provide Managed Account services.

2) What style of trading / investing do you practice (technically driven, fundamental, systematic, a combination etc)?

I would view my style as Hybrid. I incorporate fundamental analysis with technical chart review. I utilize Options in my trading so this expands the trade design greatly and allows for a LOT of flexibility in optimizing
trade returns. I trade across all time-frames but the largest percentage of trade efforts are with Swing to longer term trades. A large part of my short-term trading centers around specific trades for Earnings reports (a known catalyst, expected larger short-term moves).

I would also add that I trade several “baskets” of stocks where the trade setup is very specific. These are:


- 50/50 Basket (stocks that have very outsized UP moves, they trigger when they are 50% above the 50 SMA)

- The Fab 5 basket involves stocks that trigger at a break above the $90 level with the thesis being they make a run at the $100 level

- The Submarine Basket are stocks in a pullback to a solid Support level (the reason for the pullback can be a wide variety of reasons, I try to keep this basket under 10 stocks at any one time).

3) How do you feel when an investment goes against you?

I am sure that I feel as most do but as long as I follow my trading process I consider this a normal part of trading. Not every trade can work as you expect but you are in control of the trade management process so there are still things that can be/need to done on every trade.

4) How do you feel when an investment goes for you?

Actually, I think I answer this the same as the last question.

5) How have these feelings changed over your trading career?  (Can you recall how you originally used to feel and elaborate on how this has changed over time?)

I am not sure I can answer this with any real specifics but I am sure that I was more emotional in my trading early on versus how my mindset is now.

With that said, if I were to discuss the evolution of my mindset
change - and where I could see a shift - it would have to be after I began to actually study the Stock Market in more depth (reading books, meeting with trading groups, discussions with colleagues that were involved in the stock market at some level, etc). When I started out I didn’t have a lot of investing capital - like most young people - so I wanted to be sure to treat it with care.

6) Do you have any practices that you do away from the trading screen to help you mentally and emotionally handle trading? 

I do have other investing interests (private equity, real estate as examples) that take up some of my time and focus. I keep a regular weeky workout schedule at a gym so I am away from my trading/investing routines to refresh and stay healthy.

7) Have you always done this? 

Yes, this has always been important to me

8) If not, how have you learnt to deal with the feelings that come up when trading?

N/A

9) Can you describe a time in your trading life which really rammed home the point that so much of trading comes down to psychological factors?

1999 comes to mind. I owned $YHOO stock at the time and it was trading over $300 a share (pre-split). EVERYONE was bullish and that seemed crazy to me. Shear craziness. I can’t tell you how many times I heard “but it will keep going up, I’m sure of it”. Everyone was on one side of the boat. That never turns out well.

I wouldn’t say that my Risk Management was “strict” at this point but I did use price levels where I would exit if it got anywhere near them. Yahoo was so volatile so I got a lot of practice lol.

10) If you could give aspiring traders / investors one piece of advice about emotionally handling the market what would it be?

Find/seek out other traders, a trader community that you can be a part of / learn from / contribute to. A mentor would be ideal.

Why is this important?

From my perspective it can be easy to get into a pattern of doing things
and when they stop working it will not be easy to beginner traders to make adjustments. Being a part of a community allows for an environment to seek out discussion / advice / comments on what can be done in general and specifically in many cases. A mentor is an additional bonus in that you get 1 on 1 conversation.

***

I’d like to thank Derald Muniz for sharing about the way he tackles the market from an emotional / mental side of things and for his willingness to allow me to post this as a free resource in the hope that traders who have been in the market for less time or are thinking of entering can perhaps pick up some A-HA’s.

If you are interested in finding more out about Derald Muniz you can find him:

Twitter: @1nvestor

Blog: http://deraldmuniz.com/

***

Previously in the series:

Charles Kirk - read it…..here

Matt Davio - read it…..here

David Blair - read it….here

Mike Bellafiore - read it….here

Mark Holstead - read it ….here

Brian Shannon - read it…. here

Mike Dever - read it…. here

Anthony Crudele - read it… here 

Derek Hernquist - read it … here

Ivan Hoff - read it… here

Brian Lund - read it… here

Greg Harmon - read it… here

Michael Bigger - read it… here

Jon Boorman - read it…. here

Darrin Donnelly - read it….. here

Stephen Burns - read it…. here

Tony Rohrs - read it…. here

Bruce Bower - read it…. here

Richard Weissman - read it… here

Larry Tentarelli - read it… here

Chris Ebert - read it… here

David Merkel - read it… here

Ian Cassell - read it…. here

***

[If you liked this please follow me on twitter and Google Plus

***

Disclaimer: Embrace The Trend / Richard Chignell does not provide investment, financial or product advice.  If you are going to trade / invest it’s at your own risk and you must take responsibility for your actions.

Opinions Galore

I’m not entirely sure why this popped into my mind today. Perhaps it is due to all the talk from traders and investors when I skim twitter. 

There are opinions galore and whilst that is nothing new there is another common thread; the need to quote Jesse Livermore ad infinitum. 

Now we all do it.  I do. You do.  And that is OK. 

(What is not OK is if you have never heard of him or Reminiscences of a Stock Operator. If that is you - stop what you are doing get the book and read it cover to cover.  In fact, read it three times as you have some catching up to do). 

What is mildly amusing however is how often he is quoted and yet how much of what he wrote is continually ignored by the twittering masses. 

I’ll cover an aspect here. There is an edition of this classic with a forward by the great Paul Tudor Jones and from within his commentary this: 

The whole point of Reminiscences was that all of those very serious economic issues should be largely irrelevant to a great operator. Yes, they are interesting to debate, important to know, but always secondary to the tale the tape tells us on a continual basis

Now no matter what angle we look at the trading and investing world…. the tale of the tape subsumes opinion. 

As one of the earliest Pro’s in my Pro’s Process Series +Brian Shannon  is fond of saying:

Only Price Pays

Are you listening to the what the tape tells you? 

I wrote about this a little in the post Interesting Sh*t Isn’t Always Profitablehttps://plus.google.com/+RichardChignell1/posts/RhNPhHmwYXw You might like it. 

You can also find the Pro’s Process series, totally free, here:http://embracethetrend.com/

Reminisences amazon link http://www.amazon.co.uk/Reminiscences-Stock-Operator-Commentary-Livermore-ebook/dp/B007U303R0/ref=sr_1_1?ie=UTF8&qid=1408103138&sr=8-1&keywords=reminiscences+of+a+stock+operator

Post previously featured here

The Pro’s Process - Ian Cassel

I am very excited to be able to offer the twenty third in my series of posts asking Pro Traders (Investors) about their psychological processes.  Delving a little into how it feels to them when trading / investing.  The good and the bad.  How this has changed over time and what preparation they do mentally for performing as a trader / investor.

One of the key features for me was that I wanted traders / investors with experience who have been through the mill over the years and of course those who were kind enough to broach this subject publicly.  This I hope gives developing traders / investors more to learn from.  

I’m very fortunate to have a great line up and this week is: 

Trader: Ian Cassel

1) How long have you been investing?

I started investing my own account when I was a teenager. I lost it all very quickly. Around this same time I started looking at smallcaps and microcaps. I quickly fell in love with the microcap space because of the accessibility of management teams. While in college I skipped a lot of classes to travel and visit microcap companies. I had a couple of successes that allowed me to build up capital only to lose it again and again.  Over the next few years and into Graduate school I continued to learn by losing my own money over and over again. Then all of a sudden I started losing less money. I did some advising work for a few microcap companies right out of graduate school while managing my own account. In 2008, I quit advising and became a full time private investor focusing on microcap companies.

2) What style of trading / investing do you practice (technically driven, fundamental, systematic, a combination etc)?

There are 23,000 public companies on all US and Canadian Exchanges. This statistic might be a surprise but over 8,000 of these companies are below $50 million market capitalization. This is my playground, the smallest of the small. In general, I’m trying to find the diamonds amongst the dirt. I’m looking for great high growth companies that are profitable with great share structures, meaningful management ownership, with little or no institutional ownership. I try to find unique companies in an emerging trend where there aren’t many public comps so that a high scarcity value propels the stock once the rest of the market awakens to the opportunity. In general I’m trying to buy undiscovered and undervalued great companies that have the potential to get very overvalued.

I’m a concentrated investor normally investing in six companies, and I will hold them as long as management executes and the story or trend doesn’t change. I’m a high contact, high due diligence investor that enjoys the process. The “edge” is knowing your investments better than anyone else. It will give you an early indication on when to sell before the masses and the conviction to hold for big gains. I try to find the companies sub $25 million market cap, and sell them at $100+ million when they become institutionalized.

The stocks I buy are very illiquid so it can take days, weeks, even months to buy a full position. In most cases I take a 2-5% position of a company to stay under filer status. I don’t use technical analysis when I buy because the stocks I’m buying might only trade $5,000-$10,000 of volume per day so TA is rather useless. If a company is successful, the stock increases and so does the volume so TA can become more useful when selling.

3) How do you feel when an investment goes against you?

As long as the story (aka investment thesis) doesn’t change it doesn’t bother me. If the story does change, I sell. Since I spend a lot of time talking to management, contacting customers, suppliers, other investors, there is an initial let down because of the emotional energy I put into the due diligence process. However, because I’ve lost a lot of money in my investment career it has helped me to emotionally detach from my investments. I’ve learned to move on quickly.

4) How do you feel when an investment goes for you?

I feel great, but I don’t let it go to my head.

The biggest mistake an investor can make is to develop an ego. Your ego clouds your judgment and slows your thinking. Only fools think they know it all. Investing is a life long education and its teacher is loss.

I will continue to have losses and make mistakes, but I can continue to increase my success rate, and most important, decrease the time it takes for me to realize I made a wrong decision.

5) How have these feelings changed over your trading career?  (Can you recall how you originally used to feel and elaborate on how this has changed over time?)

You cannot learn the real lessons in investing by sitting in a classroom or reading a few books. You have to experience investing by going through every emotional extreme from going broke to making a lot of money. I went broke several times in my early 20’s. Losing all your money either motivates you or you give up. Either way losing money is the best educator there is. After you fight and claw your way out of the hole, you have made it. I had to claw my way out of the hole a few times.

The same goes for making money. In an early season of my investment career I made a lot of money and starting buying cars, Rolexes, etc. I wasn’t mature enough at the time to deal with the success. Tying this back into “ego”, you will normally make your biggest investing mistakes after a big win.  Soon after these early successes, I made bad investing decisions because I thought I knew it all, and Mr. Market broke me again.

You need to go through both extremes.

Over time I’ve refined my investment philosophy, and I pass on a lot of companies. I try to invest in the best companies with the best management teams I can find. My decision making on both the buy and sell side have also become much quicker.

6) Do you have any practices that you do away from the trading screen to help you mentally and emotionally handle trading? 

At the beginning of each day I spend 30 minutes reading or listening to something that will inspire me. I try to stay passionate and keep my motivations in check. I listen to a lot of leadership lectures and even sermons and try to take bits and pieces and apply them to my life. I’m also quite the fitness fanatic. I try to get out everyday in the middle of the day for 1-2 hours to keep my body in shape. I found it’s very unhealthy to sit in my office from 6am to 6pm.

I get very active in the investments I’m in, and if I can positively influence managements to make the right decisions, hundreds if not thousands of employees, shareholders, and company stakeholders will be positively impacted. I take that very seriously.

In 2011, I founded MicroCapClub.com which is a private social network for experienced microcap investors.  There is no subscription fee or monetization. It’s an agenda free zone I like to call it. The site is meant to be an idea generator for the membership. We also produce educational articles on our public blog. Our membership ranges from Peanut Farmers and Construction workers to Attorneys and Doctors to Small Institutions and $15 billion PE Funds. Administrating the site is almost like a full time job except I love to do it.

A couple other things..

I’ve learned that nothing you can purchase will ever make you happy, so finding good uses for your wealth is very important. You won’t be remembered because you made $5-10-20 million in the market. People turn ideas into millions everyday. But you will make a legacy if you get passionate about a cause and use your wealth to change lives.

Always surround yourself with people that are better than you. Your friends have far greater influence over your future than you think. If you want to be successful, start hanging out with successful people. If you want a better marriage, hang out with other couples that have a great marriage. Your life will change for the better.

7) Have you always done this? 

Most of the things I do outside of my investing have also evolved. It’s sort of what getting older is all about, becoming less selfish.

8) If not, how have you learnt to deal with the feelings that come up when trading?

N/A

9) Can you describe a time in your trading life which really rammed home the point that so much of trading comes down to psychological factors?

Here is a lead in to an article I wrote on this subject.

When I was in college (1999-2003) I worked for a local stockbroker. He was a top producer and well known in the local area. During those years I witnessed an entire boom and bust cycle. In the office I was the person that answered any questions clients would have to save my boss the time, effort, and annoyance.

We had over 1,100 clients, and when the markets crashed I think I heard from all of them over a 6-month period of time. I witnessed sadness, anger, hopelessness, and despair. I would go to work, the markets would drop again, the phones would ring, I would get the sh!t kicked out of me, rinse-repeat. When I met with my old boss just last month he reminded me if I wasn’t there during that time period he would of quit. I was the first line of defense, a human punching bag.

This experience was probably the best education I would ever receive. First hand seeing how human emotion and the stock market are intertwined helped prepare me to be a better investor. What I witnessed during those couple of years saddened me, but I was also disgusted. It made me numb and since then I’ve always been able to distance my emotions from the markets. http://microcapclub.com/2014/03/master-your-emotions-before-you-go-broke/

10) If you could give aspiring traders / investors one piece of advice about emotionally handling the market what would it be?

Stay Cool. Keep a level head and you will have an edge on most other market participants. Persevere when you are tested on the extremes of taking losses and gains. Lastly, stay passionate and motivated and keep your goals centered on what really matters in life.  

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I’d like to thank Ian Cassel for sharing about the way he tackles the market from an emotional / mental side of things and for his willingness to allow me to post this as a free resource in the hope that traders who have been in the market for less time or are thinking of entering can perhaps pick up some A-HA’s.

If you are interested in finding more out about Ian Cassel you can find him:

Twitter: @iancassel

Blog: http://microcapclub.com/

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Previously in the series:

Charles Kirk - read it…..here

Matt Davio - read it…..here

David Blair - read it….here

Mike Bellafiore - read it….here

Mark Holstead - read it ….here

Brian Shannon - read it…. here

Mike Dever - read it…. here

Anthony Crudele - read it… here 

Derek Hernquist - read it … here

Ivan Hoff - read it… here

Brian Lund - read it… here

Greg Harmon - read it… here

Michael Bigger - read it… here

Jon Boorman - read it…. here

Darrin Donnelly - read it….. here

Stephen Burns - read it…. here

Tony Rohrs - read it…. here

Bruce Bower - read it…. here

Richard Weissman - read it… here

Larry Tentarelli - read it… here

Chris Ebert - read it… here

David Merkel - read it… here

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Disclaimer: Embrace The Trend / Richard Chignell does not provide investment, financial or product advice.  If you are going to trade / invest it’s at your own risk and you must take responsibility for your actions.

Critical Thinking: The Importance of Differentiating between Quality and Garbage

"The skill most are lacking these days is not an open mind but a critical one and the ability to differentiate between quality and garbage info sources"  
(Ido Portal)

Ido here was challenging the all too common statement about having an open mind

In the context of #trading / #investing there are so many information sources nowadays that the importance of being able to use critical thinking to differentiate between quality and garbage is very important. 

I try to ensure I do but I think it is something that you have to constantly keep in check..  

One of the safest ways to do this I find is by doing my own work.

A teacher of mine drummed home the importance of self-responsibility in trading.  

I listen to no one when it comes to my trading.  I couldn’t care less what markets someone else is in or what someone else may think of what I am doing.  

I do it for me.

I judge myself based on whether I am getting the performance I intend and focus on self to self comparison.

I find as a result that I can limit my questioning of whether an information source is quality or garbage. 

As I will never act on it to make a trading decision I remove the effect that could occur if it was garbage.  This is like a trading stop in my process that has the intention of keeping me safe from exposure to garbage.  

This leaves me in the position of using the information sources in the financial space (and there are so very many) in a pretty specific context.  I follow traders, read blogs, articles etc in the main to draw inspiration relating to process and psychology. 

Sure, sometimes I find areas that interest me and that I have little or no knowledge in.  If I want to know more about this I start a detailed research process with my bullshit detector set on high.  

However, before there is any chance of garbage having an effect on me financially - I do my own work - I test, test and test. Then when I get to the position of being able to take full self-responsibility for it I will act upon it.  (If you are just starting out this may well be helpful.  It was the process I went through to find my way and one I continue to utilise). 

This last process is in the context of trading but can be used in other areas of life.  

Are you critically aware enough to differentiate between what is quality and garbage for you?  Do you have a process for this?