WORDS OF WISDOM FOR THE DAY : Complexity Breeds Confusion....!

To see things as they are and not the way you want them to be requires good vision and a reasonable intellect. Actually, it is better if we have no intellect working at all. This test will illustrate what it takes to be a success using a Zen approach to the market. Start with the vision test. Keep this page at a reasonable distance from your nose. Now read aloud the following numbers:

27 28 29

Did you say twenty-seven, twenty-eight, and twenty-nine? Brilliant! You've passed the second-hardest part of doing well in the market. Now for the hardest part. Look again at the numbers and say out loud the number that is the highest. Now say the lowest. Which number is between both numbers? Did you say that twenty-seven was the lowest and that twenty-nine was the highest? If you also said that twenty-eight was in the middle, then you've passed the test with flying colors! You are on your way to being very successful in the markets.

You may be laughing, but I am dead serious. If it really is that simple to recognize what the market is saying at all times, why do you have to complicate it? The vision test that you have taken proves that you can recognize different numbers, and the I.Q. test demonstrates that you know the relationships among them. Believe me when I say that no other knowledge of the market is necessary. This exam determines that you are clearly capable of an egoless view of the market a Zen view, if you wish. A view that is free of personality needs. Twenty-nine is higher than twenty-seven. No one can dispute that. Not even your ego, no matter how hard it may try.

You've proven beyond a shadow of a doubt that you can tell when you've got a profit and when you've got a loss. There is no question about it. Absolutely none. When you buy something at 27 and it goes to 29, you know that you are showing a profit. Absolutely no doubt about it. Conversely, when you do the opposite, you know that you are sitting with a loser. If you bought at 29 and now the price is lower, you must recognize that you have a loss. Don't rationalize and say that you don't have a loss until you sell. And don't say that you know it will come back. You don't know that, either. And if you say it's a long-term investment, you're just kidding yourself. That's just another way of not having to deal with a mistake. Your ego is just hoping, trying to shield itself from the pain of being wrong. You've proven that you know the difference between a profit and a loss. That's the easy part. Doing something about it is where the difficulty lies.

Before going farther, let's review once more the basic rules all successful investors and traders must constantly follow in order to profit in the market. These rules are:

1. Never add to a loser.

2. Add to a winner only.

3. Let profits run.

4. Cut losses fast.

5. Don't pick tops.

6. Don't pick bottoms.

And most important of all:

7. Let the market make the decisions, not your ego.

The rules are not hard to understand. Recognizing a profit from a loss is simple. If the rules are easy to grasp and a profit is distinguishable from a loss, where does the problem lie? What makes it so hard to apply the rules? There is something within each of us that has a power over our minds that prevents our acting according to what we have agreed is the proper course of action. That something is present in all of us and is very powerful, more powerful than anything I know. Let's call it ego. Until we learn to get rid of our ego, we will never make money in the market consistently. Those who haven't identified the ego's ways will eventually be destroyed in the market because of their ego's tendencies. It is just that powerful.

The market rewards those who have subdued their egos. Those who rid themselves of their egos are rewarded greatly. They are the superstars of their fields. In the stock market, rewards come in the form of profits. In the world of art, masterpieces are the results. In sports, the players are all-stars and command enormous salaries. Every pursuit has its own manifestation of victory over the ego.

High Low Matrix Coaching Model: Coaching Techniques for Will and Skill Issues

[extracted from 

http://coach4growth.com/coaching-skills/high-low-matrix-coaching-model-coaching-techniques-for-will-and-skill-issues ]

The High Low Matrix can help managers overcome one of the more challenging aspects of their role which is understanding what motivates their employees. It's easy to assume that because you are motivated by knowing you did a good job or by making an impact on your environment, that others feel this enthusiasm as well. In the real world, people have many different motivations.

In turn, people also have different levels of skill sets for particular tasks. Their level of skill can often depend on their experience, the level of training they have received, or the type of task itself.

Since most coaching techniques rely on the employees skills and their will to accomplish a goal, it is important to understand how these two aspects work together. This knowledge will help you to better craft your approach with your employees and teams to get the best results possible from each individual.

Let's start by introducing the High Low Matrix.

As you can see, the High Low Matrixcoaching model is a punet square of an employee'swill vs. skilland contains some coaching techniques to utilize based on where the associate falls.

Let's get into further detail about how to use this coaching model and discuss each of the coaching techniques to use once we've identified where our employee falls on the High Low Matrix.

First, how do we identify if an employee is exhibiting or feeling a high degree of will? This should be somewhat obvious from how they approach their work. If tasks that are not skill related are still delivered in a less than stellar fashion or their attitude has taken a change recently, you can infer that the associate's motivation has slipped. Utilizing the IGROW Model will help you to determine the root causes for any changes in behavior.

Assessing their skill is typically a much simpler task as it is likely why you are here. You have no doubt seen results from your employee or team that do not meet your expectations and therefore have determined a change must be made. Again, to determine the exact skill that the associate is struggling with that has caused the poor performance, the IGROW Model is recommended.

Now that you have determined both the employee's skill level and their will level, it is time to discuss the coaching techniques that you should apply based on where the employee falls in the High Low Matrix coaching model.

High Low Matrix Coaching Model: Advise

Are you faced with an employee that is highly motivated, yet as much as they want it, they just can't seem to deliver the results needed? This is your low skilled, high willed employee. In order to effectively apply coaching techniques to this type of employee, the Advise phase of the High Low Matrix coaching model should be applied.

Advising is focused on providing the skills necessary to turn the employee's motivation into success. By focusing on teaching or training the skill, you will leverage the employee's desire and provide them with the necessary tools to improve. Throughout the learning process, it is key that you continually give the employee praise and endorsement for their improvements.

Remember, you may be expecting great leaps, but even baby steps deserve some positive reinforcement. Skipping this valuable step could result in a backslide in will and you'll then have a whole other set of challenges to deal with.

High Low Matrix Coaching Model: Motivate

At the other end of the spectrum, you may be faced with an employee who has the necessary skill set to deliver and perhaps has delivered great results in the past, but is experiencing a will issue that is apparent in their performance. 

Again, utilizing the IGROW Model will help you to identify what has occurred or changed and impacted their level of motivation. This coaching model will also help you determine if your approach should be one of Coaching vs. Counseling. When faced with an employee who lacks the will there are some key areas to focus on while trying to re-engage the employee. 

Start by determining what the employee's 'hot buttons' or motivators are. This can be done as simply as by asking what they take the most pride in at work or how they like to be recognized for a job well done. Once you have determined their hot buttons, focus on them. 

Whenever the employee does deliver, use your new found knowledge to show your appreciation. Next you should determine if there are any road blocks or constraints that the employee is experiencing. Often times removing these road blocks or providing options, can alleviate their challenges with motivation.

High Low Matrix Coaching Model: Direct

For situations that involve a low skilled and low willed employee, the Direct coaching technique should be utilized. Directing is focused on a combination of the previously discussed coaching techniques applied together. Since this employee is not very skilled and is not very motivated, the two key areas to focus on are training and praising. You will first need to provide the employee with the tools to develop their skills.

This does not mean that the tools you provide, such as training, have to be new information to them, but can offer reinforcement to information they have already been presented with. Because the employee is not delivering results there can often be a challenge with their confidence level that is inhibiting their ability to apply new or existing skills.

Giving the employee low risk opportunities to practice their skills and to succeed, will give you the ability to provide them with the positive feedback they need, and will result in a confidence building experience for them. This is one of the better coaching techniques to apply with this type of employee.

High Low Matrix Coaching Model: Delegate

The last type of employee is the high skilled, high willed employee. These are typically your top performers that consistently provide results and strive to do a good job. They are a motivating force for themselves and typically for your team. If they are succeeding, you may wonder why we are discussing their development? 

Many schools of thought tell us to always focus on bringing up our bottom performers, and this often times leaves a lack of focus on our top performers. Since these high skilled, high willed employees are likely your future leaders, utilizing the Delegate coaching technique can help them to develop to the next level. 

Delegating is often misused in the business world today. Many managers use this technique not for development but as a way to reduce their work load or stress by shoving the work onto their team. This is not always a bad thing, but what most managers don't do is follow up on the opportunities they've delegated to others or provide them with the tools or resources to succeed. 

Delegation, when used effectively, will often take more time than just doing the task yourself. You should not be using this technique as a means to reduce your workload as you will be working through the task with your high performer, helping them to learn and master it. This is how development through delegation works. 

Giving your highly motivated top performers the opportunity to be challenged and to continue to learn will ensure they continue to be your highly motivated top performers. While delegating you should also focus on praising and endorsing what they do well as well as offering them opportunities to either make decisions or to collaborate on decisions being made. This will continue to instill a sense of ownership in them.

As we have discussed, each scenario you are faced with requires a different approach or coaching technique to achieve the desired results. To ensure you are successful in your approach, be sure to spend time prior to your coaching session thinking about where the associate falls, what motivates them, and what options you may want to offer. Being prepared for the discussion will make a great difference.

For greater details on how to build skill and motivation, see the article on the Motivational Chain of Events.

Be Patient With Winning Trades....!

WORDS OF WISDOM FOR THE DAY : 

The way you're dealing with this common trading issue will determine your fate as a trader. Depending on what you do with your winners and losers you will either end up being a profitable trader or a trader losing money. A typical character trait of amateur traders is the inordinate amount of time they spend thinking about their biggest winners. They constantly want to take profits because of their need to satisfy their ego and their inability to cope with greed. Their thinking goes like this: "I should take profits because the stock has gone up."
Instead, they should do the exact opposite. They should cultivate an emotionally detached approach to trading, and most of their time should be spent monitoring and managing the losing positions in their portfolio. On the other hand a typical character trait of winning traders is the ability to cut losses. A few market adages that come to mind:

• Winners take care of themselves
• Patience is a virtue
• Ride your winners
• Stay calm and focused
• Cut your losses
• Always use stop losses
• Do more of the things that work
• Never add to a losing position

Be patient with winning trades; be enormously impatient with losing trades. Remember it is quite possible to make large sums trading/investing if we are "right" only 30% of the time, as long as our losses are small and our profits are large. Controlling losers is a must; let your winners run out of control. Of all speculative blunders, there are few greater than selling what shows a profit and keeping what shows a loss. Think twice before you sell a big winner. Instead, ask yourself why that huge losing position is still part of your portfolio. The best traders have no ego. You have to swallow your pride and get out of the losses.

Understanding The Trading Psychology At Support And Resistance Point....!

WORDS OF WISDOM FOR THE DAY : 

In studying a chart for any liquid instrument, traders will observe that prices usually move in a series of peaks and valleys. The direction of these peaks and valleys provide us with a lot of valuable information about price action and direction. They also help us in determining the direction of a trend and levels of support and resistance. These valleys and peaks create opportunities for traders to enter or get out of trades.  Professional traders always like to buy at support and sell at resistance, since these trades will usually have a much higher probability of success.

A price support point or level is a place where buying interest is sufficiently strong to overcome selling pressure. As a result, prices hold at this level and eventually start to rise. Consequently, they provide great buying opportunities. On the other hand, resistance points are the exact opposite of support, they represent price levels where sellers dominate and are able to overcome buyers. Price increases are halted by resistance and eventually prices start to drop.

To understand the psychology of activity at support and resistance, we need to first understand the different postures or positions that traders may have at any price point. When we arrive at a support level, we are going to find traders that are holding long positions, traders that are holding short positions and traders that are holding no positions but are looking to get in.
At the support level, strong buyers are stepping in and prices are starting to hold. Traders with a long position that entered the trend at a wrong point, and were previously in a losing position, are now pleased that their losses are starting to dwindle and that prices will start to move their way. They may in fact be looking to add to their positions. On the other hand, when traders who are short will recognize the support level, they will exit and cover their shorts generating more buying power. Traders that are still outside will fall into two groups, one group realizes that prices are rising and they decide to immediately enter and thus help propel prices higher. The other group is still waiting for prices to dip back so that they can enter at a better price.


So as you can see that there are several groups that are eagerly waiting to buy a price dip. Naturally, if and when prices decline back near support more buying takes place. The support level becomes stronger and prices get an upward lift. Consequently prices continue to push up, until they encounter resistance. Once again, when we arrive at a resistance level, we are basically encountering supply or strong selling pressure. Recognizing this fact, many traders that are holding long positions will want to get out quickly to capture their profits and thus create an added selling pressure. Traders that did not exit quickly are now dealing with the psychology of watching profits slip away as prices continue to drop before their eyes. 


They are praying and wishing for prices to move back up to capture a little more profit and capture some of the gains that they just had. As soon as prices pull back up towards resistance they see this as their opportunity to get out and sell their long position. This in turn creates another wave of added selling pressure. Traders on the sidelines are watching prices and they can see that even when prices pulled back towards resistance they dropped again, this gives many traders on the outside their queue to short and get into the market. Sure enough this creates more added selling volume and continues to push prices lower. The resistance point holds and prices continue to drop until buyers decide to step in creating a level of support.



This behavior occurs continuously in the market in every time frame. Consequently, It's helpful for traders to understand the psychology behind the opportunities that present themselves. It helps them to time their entries better and gain a greater sense of confidence in the market. Note that in understanding theses valleys and peaks, traders need to always keep in mind that an uptrend is defined by a series of consecutive higher peaks or higher highs and higher valleys or higher lows. However, a downtrend is established when prices follow a sequence of lower highs and lower lows. I strongly believe that investment knowledge and education are always the best foundation for profitable trading in the stock markets.




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Common Investment Mistakes Made....!

WORDS OF WISDOM FOR THE DAY : 

We all want to make money and then more money. Because of this desire to increase our income we set out to create ways to earn money outside of our normal jobs.  Because real estate investing or starting a business requires a lot more to get up and running, many people turn to paper assets. 


Stop and think about it for a moment.  If you can just scalp $50 net a day out of the stock market you have picked up an extra $1,000 per month.  Many stocks will move S$0.10 to $1.00 within a days trading so you don't even have to be totally right, just catch the move and scalp some money. Sounds easy right?  But as you may have well experienced it is a lot easier to say then to do.  Because this sounds to easy many have jumped in with their new idea and have been clobbered by the market. 


Why isn't this as easy as it looks?  Because the market is always right. This is a hard lesson to learn, but the market is never wrong. People are wrong. People will trust indicators to lead them when indicators are lagging. Markets can sometimes be confused, indecisive and even fickle, but the market is still right. Because the market is always right then if we are going to take on the market we have to realize that our battle is not with the market. Our battle is with ourselves. Everyone makes mistakes, but knowing what can go wrong puts you one step ahead. Here are some common mistakes investors make. How many of them apply to you?

Common Mistake #1 - Entering A Trade Without A Plan...

Common Mistake #2 - Entering A Trade Without Understanding Your Risk...

Common Mistake #3 - Breaking the rules of your plan...

Common Mistake #4 - Falling In Love with a Stock or Company...

Common Mistake #5 - Failure to Use or Stick with a Stop Loss...

Common Mistake #6 - Increasing Position Size to Make Up for Past Losses...

Common Mistake #7 - Failure to Learn From Past Mistakes...

There are only two kinds of stocks; Those that make you money and those that don’t. That’s why protraders don’t fall in love with their stocks !

WORDS OF WISDOM FOR THE DAY :


One of the big investor mistakes I've observed is that some investors, once they've taken a loss on a stock, keep looking for an opportunity to buy that same stock. Without realizing it, they become enamored of the stock simply because it has "done them wrong." Like an adolescent who's been beaten up, they are looking to "get even." "I'll show that stock," they say to themselves. By so doing they lose focus of what they are trying to do: Make money, not save face.

There are thousands of companies available for them to invest in , so why do they keep coming back to a proven loser? The answer is, of course, ego. Ego is one of the most destructive forces that you can unleash on your investment performance, and we will take a close look at how it manifests itself in the next chapter, so you can recognize it. It crops up in everyone now and then, but when it does, you must resist it and think logically.

If you are fishing and a fish slips off your hook, do you refuse to pull in any fish other than the one that got away, from then on? Of course not – you throw your line back into the water in hopes of catching "a fish," not "the fish." It seems obvious when fishing, but unfortunately, many people's common sense goes out the window when it comes to the stock market. They keep gunning for that one particular stock, ignoring the other rich targets which abound around them. Thus, one mistake begets another.

Sometimes, people also return to a stock because they had such a good experience with it. They made some good money off this stock and so they have warm, fuzzy feelings for it. Again, this is not logical thinking unless the stock has recovered and is showing itself still to be one of the stronger stocks in the market. 

Once you have sold a stock, forget it, whether it was sold for a profit or a loss.

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The Need To Be Right – Common Psychological Traps For Stock Traders....!

WORDS OF WISDOM FOR THE DAY : 

 

My experience tells me one of the biggest issues traders have is the ever present 'Need to be right'. 

Some thoughts on what characterizes great and successful traders:

• Great traders graciously accept losses. They don't need to be right all the time.
• Great traders focus on proper execution not on the outcome of a single trade.
• Great traders concentrate on good risk management. They constantly manage their open positions.
• Great traders are emotionally detached. Single trades do not affect their mood.
• Great traders don't compare themselves to others. They isolate themselves from the opinions of others.
• Great traders are not afraid to buy high and sell low.

As you probably know by now the single biggest mistake a trader can make is to hold on to a losing position. Failing to cut losses quickly and letting them develop into huge losses is mentally and financially devastating. The underlying psychology which is responsible for this behavior is the 'need to be right' and the fear to sell at a loss. What aggravates the situation is adding to a losing position.

 

Do more of the things that work and less of the things that don't. Isolate yourself from the opinions of other people. Make trading decisions your own. Focus on proper execution. Have the courage to do the right thing because it is right. The most important rule of trading is to play good defense, not great offense.