The Daffodil Principle

When I finished reading this story it reminded me of something. How do you eat an elephant?....One Bite at a Time.

Several times my daughter, Julie, had telephoned to say, "Mom, you must come see the daffodils before they are over." I wanted to go, but it was a two-hour drive from my place by the beach to her lakeside mountain home. 

"I will come next Tuesday," I promised, a little reluctantly, on her third call. The next Tuesday dawned cold and rainy. Still, I had promised, and so I got in the car and began the long, tedious drive. 

When I finally walked into Julie's house and hugged and greeted my grandchildren, I said, "Forget the daffodils, Julie! The road is invisible in the clouds and fog, and there is nothing in the world except you and the children that I want to see bad enough to drive another inch!" 

My daughter smiled calmly, "We drive in this all the time, Mom." 

"Well, you won't get me back on the road until it clears and then I'm heading straight for home!" I said, rather emphatically. 

"Gee, Mom, I was hoping you'd take me over to the garage to pick up my car," Julie said with a forlorn look in her eyes. 

"How far will we have to drive?" 

Smiling she answered, "Just a few blocks, I'll drive ... I'm used to this." 

After several minutes on the cold, foggy road, I had to ask "Where are we going? This isn't the way to the garage!" 

"We're going to the garage the long way," Julie smiled, "by way of the daffodils."  

"Julie," I said sternly, "please turn around." 

"It's all right, Mom, I promise, you will never forgive yourself if you miss this experience." 

After about twenty minutes we turned onto a small gravel road and I saw a small church. On the far side of the church I saw a hand-lettered sign ... 

"Daffodil Garden"

We got out of the car and each took a child's hand, and I followed Julie down the path. As we turned a corner of the path, and I looked up and gasped. 

Before me lay the most glorious sight. It looked as though someone had taken a great vat of gold and poured it down over the mountain peak and slopes. The flowers were planted in majestic, swirling patterns, great ribbons and swaths of deep orange, white, lemon yellow, salmon pink, saffron, and butter yellow. Each different-colored variety was planted as a group so that it swirled and flowed like its own river with its own unique hue. 

Five acres of the most beautiful flowers I had ever seen! 

"Who planted all these?" I asked Julie. 

"It's just one woman," Julie answered, "She lives on the property. That's her home," and she pointed to a well-kept A-frame house that looked small and modest in the midst of all that glory.

We walked up to the house and on the little patio we saw a poster ... 

Answers to the Questions I Know You Are Asking 

50,000 bulbs
one at a time
by one woman
2 hands, 2 feet
and very little brain
Began in 1958 

There it was ... "The Daffodil Principle" 

For me that moment was a life-changing experience. I thought of this woman whom I had never met, who, more than thirty-five years before, had begun - one bulb at a time - to bring her vision of beauty and joy to an obscure mountain top. 

Still, this unknown, old woman had forever changed the world in which she lived. She had created something of magnificent beauty, and inspiration. 

The principle her daffodil garden taught is one of the greatest principles of celebration: 

• learning to move toward our goals and desires one step at a time, (often just one baby-step at a time) 
• learning to love the doing, 
• learning to use the accumulation of time 

When we multiply tiny pieces of time with small increments of daily effort, we too will find we can accomplish magnificent things. We can change the world. 

"It makes me sad in a way," I admitted to Julie, "What might I have accomplished if I had thought of a wonderful goal thirty-five years ago and had worked away at it 'one bulb at a time' through all those years. Just think what I might have been able to achieve!" 

My daughter summed up the message of the day in her direct way, "Start tomorrow, Mom," she said, "It's so pointless to think of the lost hours of our yesterdays. The way to make learning a lesson a celebration instead of a cause for regret is to only ask ... " 

"How can I put this to use today?" 

~~~

Jaroldeen Asplund Edwards, Author

The Holy Grail of Trading

Do you want to make money from the markets? Consistently? I'd suggest forgetting everything you know about the market. The more you know about the stock market the worse off you are. The majority of people when they first start out trading think it's necessary to know everything about it because the market seems so complex. The markets are complex only if you make them out to be. Trading is actually very simple but what makes it so hard is human nature, not the market.

 

 

Lack of confidence, second guessing, fear of losing money, being greedy and selling when you can, not when you're forced too all are human emotions and those qualities are the reasons it's so hard to trade. It's not the market, it's you. The holy grail of trading is inside you, not in some technical indicator, a newsletter or some book. Understanding why people make the decisions they do under pressure and being able to read emotion from a chart, is one step closer to the only thing you really need to know. Emotion and perception about what people believe the prices should be are the driving forces of the market.

 

 

I'm telling you, technical indicators all pretty much same. It's the same regurgitated bull crap derived from volume and price. It only tells you where the price has been, none of them tell you where it will end up. If an indicator did tell you where the price is going to end up, exactly and all the time, that indicator won't work very long because everyone will jump on the bandwagon and destroy that particular indicator because everyone is expecting the same thing. At that point it'll be a great contrarian indicator.

 

 

Plus, the more technical garbage you have on your chart, the more likely paralysis by analysis will spring up while you're debating whether to sell or buy. You have so much going on you start second guessing yourself because one indicator might be conflicting with another. Soon enough, you sit there doing nothing while the stock is declining. Having a game plan before entering a trade is so crucial because it prevents what I just mentioned. The game plan you create will include: when to get in, when to get out if it goes against you, when to get out if you goes in your favor. Knowing these before hand, I guarantee will take the fear and psychological load off you while in the middle of a trade.

 

Trading is about probabilities, the odds of something happening with the provided information. Creating a strategy you develop yourself or buying one if you have the discipline to follow it are ways to help push the odds in your favor. But, the hard part is following the strategy exactly. Following directions seems to be something people don't know how to do. Someone will buy a strategy, put on a few trades and they all end up being losers's so they completely scrap that strategy and find one that works. WRONG! You can't have 100% winners, it just doesn't work like that. You will have losers. Any strategy that doesn't produce losers, I'd be very afraid of. 

 

Another emotional barrier you need to get past is admitting your wrong while you're in the moment of a losing trade. This is something I have trouble with sometimes. Why? Because I think the stock will go back up. Horrible...the fact that the stock is declining is more than enough reason to sell it for the loss you have and move on. When you buy a stock, I'm sure you're expecting it to move in your favor. Why would you hold on to it if it's not doing what you intended it to do? Stocks will go against you, it's the nature of the beast. Again, why is this so hard to do? Emotion. We get so wrapped up in wanting to make money now that we won't sell it and hope it goes back up so we can say we "won".

 

Trading is something of an art. It's not something you can go to school for, learn and then start making money right after school. It takes time, a lot of patience, and passion to keep you driven to understand the language of the market. Which is why I think the market is similar to reading music.

 

To a musician, he/she can read the musical notes and tell if this is a master piece or work done by a 5th grader (not knocking any genius 5th graders or anything  but I'm sure you get my point). To the untrained and undisciplined person, that sheet of music looks like a bunch of mumbled up squiggly garbage. But anyone can learn to read music. Same idea apply's to trading. An uninformed person looking at a chart has no idea what's going on and wonders how anyone can consistently make money at this. But the to trader who understands emotion and can relate that idea with the chart of a particular stock, he can read whether he'll buy it or sell it or even walk away from the trade. He can read the probabilities and decide whether to pounce or not.

 

It's about only putting on trades where the probabilities are slanted in your favor. Trade these setups over and over, while cutting any losses that might result from a good trade turning into a loser, and taking profits that result from your trade, is the holy grail to trading. Keeping it simple is the best way to go.

 

 

 

Below are a few books that I've read and highly recommend everyone to read to help them on their journey. Go to amazon and read the reviews.

• Trade With Passion and Purpose by Mark Whistler
• Market Wizards by Jack Schwager
• Inside the Investors Brain by Richard Peterson
• Trading in the Zone by Mark Douglas

Non Trading Books

• Richest Man in Babylon by George S. Clason
• Think and Grow Rich by Napolean Hill (love this book)
• Rich Dad Poor Dad by Robert Kiyosaki (of course everyone needs this on their book shelf)

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If You Think You Can

If you think you are beaten, you are

If you think you dare not, you don't

If you like to win, but think you can't

It is almost certain you won't

 

For out in the world we find,

Success begins with a fellows will,

It's all in a state of mind

 

If you think you are outclassed, you are

You've got to think high to rise

You've got to be sure of yourself,

before you ever win a prize

Life's battles don't always go,

to the stronger or faster man,

 

But soon or late the man who wins

IS THE MAN WHO THINKS HE CAN

I have this poem taped up on the side of my monitor and I read it when I feel down and bummed out. It puts perspective back into my vision. Unfortunately, I don't know who it's by. I found it in a book I read a long time ago.

Brilliant Hope

Dreams will never fade

And our destiny is never truly made

And even when the nigh is brisk with frost

There is no reason to ever be afraid

Because trust can never be lost

Never give up...if all seems gone

...And see that which we truly love

Forever stand tall and strong...

Real truth comes from within our hearts

Knowing our passions can never fall apart

We quietly reflect on all time

Wishing for everything to unwind

It's true...life can change on a dime

And when we least expect to touch the sky

We do so in the blink of an eye

The ship of self can float adrift

Can the fate of this man ever shift?

Drifting from shore with broken rope

The whole of soul feels lost and missed

But in the end, there's only brilliant hope.

 

By Joppa JaMocha

My "Success Notes for Beginners"

I've had a stack of notes on my desk that I took from various books and seminars last summer. About 15 pages or so and I just condensed them down into a 6 page PDF document for anyone to download.  The notes are all well laid out with bullet points and highlights.

 

I can't even begin to describe how much is here and I'm sure you'll find at least one tidbit in here that you can use.

 

Download: http://www.mediafire.com/?ansdxysy3wm

 

 

Sample screen shot below

 

Key Elements to a Successful Trading Model

 

Found another chart. This one is by Van Tharp and I think it sums up what it takes to be successful and to truly view trading as a business.

 

 

Risk of Ruin- Chart

Found this chart earlier. It show's the probability of Risk of Ruin. Which is a concept that every trader should know and follow. It's a fairly straight forward chart, however, you won't know your Risk of Ruin unless you keep a detailed log of all your trading data. Without that, you're blind and keeping a log of your data in itself, is the best book you can read on trading, your own.

 

The left hand side shows the ratio between your average win and your average loss and the top row shows your Win Percentage. Right now I'm about 1.5 and I'm hitting 50%. So my risk of ruin is about 4%. My odds of me blowing out my account by 50% net capital loss is 4%

 

At the moment based on my current data, those are good numbers to have. Plus, the fact I have a positive expectancy should tell me that over the long run I'll be profitable while keeping the odds of a Risk of Ruin to a low odd.

 

A side not: This is based on if you do 100 trades (strong statistical data to represent the long run) and Risk of Ruin is 50%

 

Momentum Trading Plan

EDIT: I've developed a new trading plan that I've been following since Early January, 2008.

Check it out here: http://tradeswing.blogspot.com/2008/01/trading-plan-residual-morning-momentum.html

 

 

I've been doing a lot of thinking and going over my past winners and comparing them to my recent losers to see if I can spot some differences and then to eliminate those differences.

 

The loser I had today was moving on weak volume. It had momentum but the volume wasn't there to back it up and sustain the move. I'm going to use this post to write out in detail exactly what it is I'm looking for. I'm going to print this out and lay it on my keyboard and every time I come to my PC to trade, I'll see the plan, read it and keep a fresh image of exactly what it is I'm looking for.

 

Selection Criteria for Winning Candidate:

1) Momentum has to be in a steady up trend. Nothing moving straight up and not dead slow either.

2) The 10 EMA (red line) for intra day volume has to be increasing and showing moderate to heavy white volume. Volume will confirm whether the momentum is good or not.

3) Price action of the stock must be in an up trend, confirming the volume backed behind the increase.

4) Ideally, the stock should be going against the overall trend and should be obvious that the stock is taking off whether the market is up or down.

5) The wicks on the candles should be very small and/or almost non existent. Do not trade long wicked candle patterns. Pattern should be tight and concise.

 

Entry:

1) If above criteria has been met then don't hesitate to buy at market value.

 

Exit:

1) Stop will be placed in a spot below entry that's not too far away but not too close so that I'll be stopped out immediately. This will completely discretionary. Risk will always be 0.5% of total equity unless a 2.5% draw down has been reached, at that point risk will be cut to 0.25%

2) When a 2% increase has been reached from the point of entry, stop will be raised to break even. The selling of 50% of shares at this 2% increase will be mandatory.

3) When the 2% mark has been passed and the price action is still increasing, the stop will be trailed continuously until stopped out. Once the stop has been increased, it won't be lowered for anything.

I'm a Consistent Profitable Trader because...

 

1) I objectively identify my edges

2) I predefine the risk of every trade

3) I completely accept the risk and/or I am willing to let go of the trade                                                                             

4)I continually monitor my susceptibility for making errors

 

I understand the absolute necessity of these principles of consistent success and therefore, I NEVER VIOLATE THEM!

 

I have this taped up onto the side of my monitor. I pulled it out of a book but I can't remember which one. Just some good words to follow and to live by as a trader.

Trading Fears

Mark Douglas once said, "Ninety-five percent of the trading errors you are likely to make-causing the money to just evaporate before your eyes-will stem from your attitudes about being wrong, losing money, missing out, leaving money on the table"

 

I've over come all of these except the fear of missing out. Which is clearly shown on my blog on all the trades I make every day that consistently become losers. I've been forcing myself to justify bad setups into thinking they can be profitable just so I can trade them. I need to seriously stop that if I want to be successful at this for the rest of my life. I'm reading this book for the second time now since I'll be having more down time while I wait for good trading setups.

 

The quote above is from a book called Trading In The Zone by Mark Douglas. Easily one of the best books you can find on trader psychology. Anyone who is interested at all in the market or who is currently trading now as an amateur or professional should read this book before doing anything else with trading.

Words of Wisdom

-Proper money management is essential at all times.

-Remember, tips are for suckers! Never take tips and never give tips.

-Use a system with rules and don’t break the rules.

-Never buy a stock because it looks cheap compared to its recent high.

-“Stocks are never too high to buy and never too low to sell.” – Jesse Livermore

-Don’t take losses personally and never blame the market for your mistakes.

-Never average down. Don’t put good money after bad.

-Sell stocks showing losses and keep stocks showing profits.

-The market has two sides; the right side and the wrong side.

-The right side will always show you a profit.

-Stick to your game and keep emotions at bay by believing in yourself and judgments.

-Cut all losses short and quick, don’t allow losses to grow.

-Check your pride at the door and admit when you are wrong, don’t argue with the market.

-Form a plan for each stock that you plan to purchase.

 
-Develop an exit strategy for each stock before your purchase.

-Perform post analysis on all of your trades.

 

-Study, Study, Study. Make a goal to look at a certain number of charts each day.

 

-It is wise to remember that you are not competing against other traders. You are competing against yourself. If you are not at the top of your game when you play, the probability that you will beat yourself increases.

 

- In almost any other profession there is a range of performance across all participants. Not everyone in a profession is a top performer, but in most professions you can earn a paycheck without being a top performer.

 

-The trader who tries to do it all, all the time, is the one who will make a mistake. Don’t be that trader. Know when to take a break.

 

-We hope for consistent positive results, but until we discover our personal winning trade method, we will have losses.

Secrets to Success

Came across an awesome video about what it takes to be successful. Believe it or not but the entire video is summed up in 3 minutes. Check it out.

I can't embed the video so here's the link