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⚡️Timeless lessons from the book The Psychology of Money
Financial success is not a hard science. It’s a soft skill, where how you behave is more important than what you know.
We will talk about some of the most important lessons from the book.
#squareoffthreads🧵👇
1/14
Financial success is not a hard science. It’s a soft skill, where how you behave is more important than what you know.
We will talk about some of the most important lessons from the book.
#squareoffthreads🧵👇
1/14
1⃣ No one’s crazy!
Young households in the 1980’s were less likely to invest in the stock market in response to the poor market returns of the 1970’s.
As a result these young adults missed one of the best times to invest, The S&P 500 returned an average of 14.9% from 1980-1990
Young households in the 1980’s were less likely to invest in the stock market in response to the poor market returns of the 1970’s.
As a result these young adults missed one of the best times to invest, The S&P 500 returned an average of 14.9% from 1980-1990
Young households in the late 1990’s were more likely to hold a high percentage of their net worth in the stock market.
They were informed by a hot market in the 80’s and 90’s. Many of them piled into stocks right before the dot com crash, and they lost decade during the 2000’s.
They were informed by a hot market in the 80’s and 90’s. Many of them piled into stocks right before the dot com crash, and they lost decade during the 2000’s.
⚡️Mean Reversion VS Trend Following
Trend following and mean reversion both are two great trading forms & you really cannot say that one is better than other.
It all depends on the type of strategy & market you’re trading & personal preferences.
#squareoffthreads🧵👇
1/10
Trend following and mean reversion both are two great trading forms & you really cannot say that one is better than other.
It all depends on the type of strategy & market you’re trading & personal preferences.
#squareoffthreads🧵👇
1/10
What Is Mean Reversion?
Mean reversion is when a market tends to swing around its mean.
When a market has moved too much to the upside, we say it’s overbought.
The goal in mean reversion trading is to identify when a market has entered oversold or overbought territory.
2/10
Mean reversion is when a market tends to swing around its mean.
When a market has moved too much to the upside, we say it’s overbought.
The goal in mean reversion trading is to identify when a market has entered oversold or overbought territory.
2/10
General Characteristics of Mean Reversion Strategies
Mean reversion strategies tend to have quite a high win rate.
The fact that winners are quite many, has the effect that mean reversion strategies have quite small winners and a few big losers.
3/10
Mean reversion strategies tend to have quite a high win rate.
The fact that winners are quite many, has the effect that mean reversion strategies have quite small winners and a few big losers.
3/10
⚡️Are you ready for full-time trading?
Trading is simple but not easy! you can buy or sell in just at the click of a button, but what to buy and when to buy is a difficult ball-game altogether.
95% of people who opt for trading eventually, QUIT!
#squareoffthreads🧵👇
1/10
Trading is simple but not easy! you can buy or sell in just at the click of a button, but what to buy and when to buy is a difficult ball-game altogether.
95% of people who opt for trading eventually, QUIT!
#squareoffthreads🧵👇
1/10
Keep these questions in mind before losing your capital.
1. Do you have a robust trading strategy?
To be a successful trader, you need a robust trading strategy with a statistical edge — Something that is thoroughly backtested & works in most of the market conditions.
2/10
1. Do you have a robust trading strategy?
To be a successful trader, you need a robust trading strategy with a statistical edge — Something that is thoroughly backtested & works in most of the market conditions.
2/10
Let us take the example of Casino, make billions every year.
Casinos don’t beat players because they are lucky, but because the odds are in their favor.
By introducing 2 green pockets, they enjoy a winning probability of 20/38 viz a player’s winning probability of 18/38.
3/10
Casinos don’t beat players because they are lucky, but because the odds are in their favor.
By introducing 2 green pockets, they enjoy a winning probability of 20/38 viz a player’s winning probability of 18/38.
3/10
⚡️5 Tips For A New Trader-How To Turn Profitable Trader
You must have started Day Trading, 6 months passed…1 year passed….2 years passed…. you’re still not profitable or maximum at break-even.
Are you in the same situation?
#squareoffthreads🧵👇
1/10
You must have started Day Trading, 6 months passed…1 year passed….2 years passed…. you’re still not profitable or maximum at break-even.
Are you in the same situation?
#squareoffthreads🧵👇
1/10
1) The law of large number(Probability) in Trading
The law of large numbers says that if the probability of something happening is X%,
the result will approach closer and closer to that probability the more attempts are made.
2/10
The law of large numbers says that if the probability of something happening is X%,
the result will approach closer and closer to that probability the more attempts are made.
2/10
If you toss the coin hundred times and record your results, you will find that the result is very close to 50%.
Same applies in Trading. Result is close to 50% on big sample of trades.
Remember, It’s impossible to be profitable every day, you should have a long term goal.
3/10
Same applies in Trading. Result is close to 50% on big sample of trades.
Remember, It’s impossible to be profitable every day, you should have a long term goal.
3/10
⚡️The 7 Best Traders in the World
The richest and best traders in the world aren’t trading their own accounts to pay the weekly grocery bill and monthly rent they are managing billions of dollars to grow their clients capital over the long term.
#squareoffthreads🧵👇
1/12
The richest and best traders in the world aren’t trading their own accounts to pay the weekly grocery bill and monthly rent they are managing billions of dollars to grow their clients capital over the long term.
#squareoffthreads🧵👇
1/12
The best traders in the world are under pressure not only to make money every month but also must keep their clients satisfied with their performance.
These top traders not only have to beat the market returns but trade in markets with enough liquidity to execute.
2/12
These top traders not only have to beat the market returns but trade in markets with enough liquidity to execute.
2/12
These traders are in the major leagues of the markets and are rewarded for it. Maximum pressure, big trading size, and clients that demand results monthly and yearly. They are also entrepreneurs as they run firms and manage employees.
3/12
3/12
⚡️10 Realities of Trading For a Living
Trading for a living is a professional endeavor like any other. It requires a large amount of capital to go full time like other business & the returns are irregular much like being a commissioned sales person.
#squareoffthreads🧵👇
1/9
Trading for a living is a professional endeavor like any other. It requires a large amount of capital to go full time like other business & the returns are irregular much like being a commissioned sales person.
#squareoffthreads🧵👇
1/9
It is less about trading from a lap top on the beach with a Lamborghini in the garage and more about taking on the risk, managing the uncertainty along with the stress and being rewarded for good trades.
There is no regular paycheck, there are losing weeks, months & years.
2/9
There is no regular paycheck, there are losing weeks, months & years.
2/9
1. You have to purchase medical insurance as you have no employer plan
2. You will be your own boss so you have to make yourself do the needed work of research, screen time, and trading
3. The lower your living expenses are the less you need to make to trade for a living.
3/9
2. You will be your own boss so you have to make yourself do the needed work of research, screen time, and trading
3. The lower your living expenses are the less you need to make to trade for a living.
3/9
⚡️What does a delay in #investing do to your retirement prospects?
Is there cost to investing later on in life?
In investing, considering that it doesn’t show any immediate benefits, it is one of those decisions many of us tend to put off for later
#squareoffthreads🧵👇
1/10
Is there cost to investing later on in life?
In investing, considering that it doesn’t show any immediate benefits, it is one of those decisions many of us tend to put off for later
#squareoffthreads🧵👇
1/10
From low earnings in the initial phase of our careers to higher expenses post marriage, the reasons are many that we fall back on. What little we save often ends up either in just the savings account or at best an FD even for years together.
2/10
2/10
We do end up getting our collective acts together later on when concerns for our childs future or a drying up job market force us to think seriously about investing But is there a cost to investing later on in life, rather than earlier?
Let’s let the numbers do the talking
3/10
Let’s let the numbers do the talking
3/10
⚡Fixed Fractional Vs. Fixed Lot Money Management
A tried and tested approach is the concept of money management which can be the game-changer in helping you get to your trading goals.
#squareoffthreads🧵👇
1/10
A tried and tested approach is the concept of money management which can be the game-changer in helping you get to your trading goals.
#squareoffthreads🧵👇
1/10
Why money management is important?
Losses is a part and parcel of trading. The trick here is to be able to limit your losses and find the appropriate money managing strategies to suit a situation.
2/10
Losses is a part and parcel of trading. The trick here is to be able to limit your losses and find the appropriate money managing strategies to suit a situation.
2/10
Money management not a guarantee of sure fire success and high profits but is an assurance against mounting losses in a difficult market. At the same time you need to keep an eye on the volatility of the stock and how much money needs to be put at risk on any one position
3/10
3/10
⚡Checking your portfolio return too often?
You shouldn’t be concerned about portfolio returns every now and then. Of course you have to check at some times, But looking at your portfolio returns too often can be detrimental too.
#squareoffthreads🧵👇
1/6
You shouldn’t be concerned about portfolio returns every now and then. Of course you have to check at some times, But looking at your portfolio returns too often can be detrimental too.
#squareoffthreads🧵👇
1/6
Numbers feed emotion
In a market crisis, negative news causes anxiety and fear. In such times looking at the falling value of your portfolio can only add to that anxiety.
The opposite happens when the market is rallying; you feel like you have made all the right choices.
2/6
In a market crisis, negative news causes anxiety and fear. In such times looking at the falling value of your portfolio can only add to that anxiety.
The opposite happens when the market is rallying; you feel like you have made all the right choices.
2/6
You can’t really compare the portfolio return to your return objective on a daily basis, because your goal is likely to be unchanged for a while. Hence, a daily comparison says nothing about whether your portfolio will be able to achieve what it has been set to do.
3/6
3/6
⚡Calculated Risk
A calculated risk tries to determine if the risk is worth the reward based on the probabilities between success and failure.
It’s an undertaking whose potential for failure has already been estimated before any action is taken.
#squareoffthreads🧵👇
1/5
A calculated risk tries to determine if the risk is worth the reward based on the probabilities between success and failure.
It’s an undertaking whose potential for failure has already been estimated before any action is taken.
#squareoffthreads🧵👇
1/5
Calculated risk-taking is defined as the skill of making decisions based on incomplete information and unknown future.
The skill requires the ability to act decisively based on all options available while filtering the decision making through the process of risk management
2/5
The skill requires the ability to act decisively based on all options available while filtering the decision making through the process of risk management
2/5
Calculated risk questions:
1. What will be gained if maximum success is achieved?
2. What will be lost in the worst case scenario?
3. What is the risk/reward ratio on this bet?
4. What is the probability of success?
5. What are the consequences of failure?
3/5
1. What will be gained if maximum success is achieved?
2. What will be lost in the worst case scenario?
3. What is the risk/reward ratio on this bet?
4. What is the probability of success?
5. What are the consequences of failure?
3/5
5 Key Investment Lessons From Ramayana
Our elders often use stories and incidents from Ramayana to show us the right path in life. But epic Ramayana can be equally valuable in learning lessons on #investment and financial planning.
#squareoffthreads 👇
1/15
Our elders often use stories and incidents from Ramayana to show us the right path in life. But epic Ramayana can be equally valuable in learning lessons on #investment and financial planning.
#squareoffthreads 👇
1/15
Everything That Shines Is Not Gold
Ram chased the golden deer & Laxman also went out. But before leaving Sita in jungle, Lakshman drew a line and requested Sita not to cross that line. But then Ravan arrived as a saint trapped Sita to cross the line, and kidnapped her.
2/15
Ram chased the golden deer & Laxman also went out. But before leaving Sita in jungle, Lakshman drew a line and requested Sita not to cross that line. But then Ravan arrived as a saint trapped Sita to cross the line, and kidnapped her.
2/15
The lesson here is not to chase anything and everything that looks attractive. Today many investors are getting lured into #investing in direct stocks based on hot tips cryptocurrencies, covered bonds, and so on that promise them the moon.
3/15
3/15
⚡️Emotions in Trading and How to Use Them to Your Advantage
In the market there is no way to know what will happen next.
This is daunting for new traders, but it also provides an opportunity to use your emotions in your favor.
#squareoffthreads 👇
1/10
In the market there is no way to know what will happen next.
This is daunting for new traders, but it also provides an opportunity to use your emotions in your favor.
#squareoffthreads 👇
1/10
Stay Positive
It is important to remain calm and not overreact to the market. You can’t predict what will happen with your trades.
So try to stay positive even when things aren’t going as planned. This way its easier for your emotions not to get in the way of your trades.
2/10
It is important to remain calm and not overreact to the market. You can’t predict what will happen with your trades.
So try to stay positive even when things aren’t going as planned. This way its easier for your emotions not to get in the way of your trades.
2/10
Always Have a Strategy
In trading it’s essential to always have a solid plan in place.
It is never easy knowing what will happen next, so stay positive and not focus too much on the short-term nature. Always be prepared with your strategies for whatever may come up!
3/10
In trading it’s essential to always have a solid plan in place.
It is never easy knowing what will happen next, so stay positive and not focus too much on the short-term nature. Always be prepared with your strategies for whatever may come up!
3/10
⚡️12 Qualities of Good Traders
Let’s explore 12 qualities that good traders have, knowingly or unknowingly these qualities are the reason they thrive in the market and are net-profitable in the long term, while others lose their shirt sooner or later
#squareoffthreads 👇
1/14
Let’s explore 12 qualities that good traders have, knowingly or unknowingly these qualities are the reason they thrive in the market and are net-profitable in the long term, while others lose their shirt sooner or later
#squareoffthreads 👇
1/14
#1- Good Traders Are Excellent Risk Managers
We don’t know when trading losses are going to hit us. Good traders understand this, and they know that managing risk not only preserves their capital, it also protects their emotional well-being.
2/14
We don’t know when trading losses are going to hit us. Good traders understand this, and they know that managing risk not only preserves their capital, it also protects their emotional well-being.
2/14
#2- Good Traders Know How To Manage Their Emotions
Good traders understand how their emotions can influence their trading performance. They have mindset management routines like mindfulness, physical exercise, or journaling.
3/14
Good traders understand how their emotions can influence their trading performance. They have mindset management routines like mindfulness, physical exercise, or journaling.
3/14
