Archive for: February 2007

Does this heading sound familiar to you ? You must have heard it many times … ( I quoted this in my previous post too )

Please note that the statement is to sell the fact , not buy the fact. Implicit in this statement is the assumption that the rumor is bullish. Rumors , however , could be bearish too.

Bullish rumors are what we base our buying on. Once the bullish fact is known , then it is too late to buy because the bullish news would have been factored into the stock price. Instead it should be sold. The concept , then , is to buy in anticipation of bullish news and sell when the news is out. I used to monitor pre-earnings in some of my favorite stock picks. It has to be a fast game …

If the rumor you heard is bearish , leading to actual bearish news , then the statement , buy the rumor and sell the fact , does not hold. In fact , there …

Some traders love market news , because news often makes the market move , and these traders thrive on volatility. Other traders hate news. They feel that news cloud their views of chart patterns , technical indicators , cycles etc. At times I do not understand why markets seemed to move contrary to the news. Many experienced traders capitalize on the news by following the old adage ” buy the rumor , sell the news. ” Are you in this category ?

Some of my trading gurus ( teachers ) told me not to trade during news release or during earning seasons. This kind of advice is debatable. As I progressed and learned more about the impact of news on market , I begin to observe some cogent points to consider in relation to the news …

In trading , the market response to the news is even more important than the news itself. One would also wonder whether the market anticipates the news before the news is published. …

In ancient China , Sun Tzu guided his military generals to wars using timeless concepts such as :

“think before you act” and ..
“act only when you are sure of a favorable outcome”

Do you think the above statement is very applicable to trading ?

Much of Sun Tzu’s teachings are focused on “the enemy.” If there is an enemy for investment and trading , then it is likely to be the enemy within - your own human emotions , that is - yourself.

Sun Tzu believed that anger and greed are the fundamental causes of defeat. He taught his followers that it was the unemotional , reserved , calm , detached warrior who wins , not the hot-head seeking vengeance and not the ambitious seeker of fortune. The Stock Market is like a battlefield. There is no room for “gut-feel” when it comes to investing. It requires rational and logical thinking in the midst of chaos , and decisions based on probabilities , not emotion.

Investors and traders should benefit from developing an appreciation of the ancient …

In the stock trading and investment world , there are two opposing philosophical camps. The first camp subscribes to the notion that ” the trend is your friend ” and that you must identify the trend and ride it in the direction that it is moving. Most traders fall into this category. A trend-rider is an integral part of the crowd , sensing its direction and merging with it. There is a compelling logic to this philosophy because it works perfectly well in the right context. Trend riders can do very well when they buy into a rallying market.

The second camp subscribes to the notion that , in order to make real money , you must do what is contrary to the crowd. Thus , to be a contrarian in the market means that you identify the trend and trade in the opposite direction , buying on widely perceived weakness and selling on widely perceived strength. Do you have the guts to trade in this way ? Not for me … There …