Posts Tagged ‘Stock Options’

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Dr. Doug Hirschhorn: Gaining Edge in a Post-Galleon World

Friday, October 30th, 2009

(Watch The Video Online: Market coach Doug Hirschhorn, PhD, discusses how to gain a competitive edge in a post-Galleon world.)

With everything that’s going on these days, we may find ourselves asking, “What is edge?”

Rules are changing when it comes to the way we used to think about having competitive advantages and making the right trades at the right time. As the Galleon situation plays out before our eyes, we no longer know if it’s ok to access certain information and to actually trade on that information. And as people at the top of the pyramid are questioned and challenged, it causes us to all rethink our strategies.

Well, here are some things to think about.

First, you may want to consider technicals as indicators. You may also want to look at price action. There’s more than one way to make money in the market. Pick the right strategy and you don’t really even have to worry about missing out on all that information.

Start to look inside yourself. See how your emotions react to the market. See how your personality matches up with your trading style. If you do those types of things, you can find an edge and take your trades to the next level.

Think better, invest smarter.

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Dr. Doug Hirschhorn Answers Viewer Questions

Friday, October 23rd, 2009

(View The Video Online: Market coach Doug Hirschhorn, PhD, answers your questions.)

From time to time, I get questions at my website, drdoug.com. Many people want to learn how to overcome the barriers they face as a trader. And I try to help them, focusing on the psychology of investing.

Here are a few more recent inquiries:

Q: What do you think are the most important characteristics for a trader?

A: Hands down, the most important characteristic for a trader is self awareness. You have to have self awareness to know how you think, where your fears are, what the triggers are. And once you understand the barriers are around you and how they influence your decision-making process, you can modify your behavior to make better trades.

Q: I’ve been burned by the markets in the past and my confidence has been shattered. How can I re-engage in the process.

A: Confidence is a very interesting thing. We feel like it comes and goes, but the reality is, it never really disappears. You always have it somewhere inside of you. What you need to do during times you’re feeling low confidence is actually put together a solid game plan and make it as mechanical as possible. Follow the game plan so there’s less thinking involved. If you follow the game plan, you can execute with confidence.

Q: How can I learn to be more aggressive in my trades? I often find I have the right idea, but I miss out on opportunities where I think I should be making more money.

A: Being able to see the right trade is really the first step to being a profitable trader. The next step is sizing up, getting more aggressive. The way to do that is to have a process in place where you identify your A-, B- and C-quality trades, which trades you feel the most confident and the least confident in. On the other side of the spectrum, you want to have sizing charts. In other words, if you feel you have A conviction in a trade, and you’re feeling very confident, then rather than thinking about the right size, you just go to the chart and say, ‘Well, if I have A conviction, I gotta go with A size. If I have B conviction, I go with B size. And if I have C conviction, I go with C size.’

Think better, invest smarter.

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Hirschhorn: Earnings Schmernings

Friday, October 16th, 2009

(Watch The Video Online: Market coach Doug Hirschhorn, PhD, discusses why earnings don’t mean as much as we think they do.)

We’re smack dab in the middle of earnings season. Many investors get hung up on earnings — they spend way too much time thinking about what the numbers really mean. But here are four good reasons why, if you’re a typical investor, you might want to re-think an investment strategy based on earnings data.

  1. You snooze, you lose If you’re waiting to find out the earnings before you make an investment in a company, you’re already too late the party.
  2. Listen to what the market is saying by watching what it’s DO-ing Successful trading is about watching the price action and reacting to it. It’s far less about trying to outsmart the markets.
  3. TMI (Too Much Information) Earnings season is exciting to watch and fun to talk about, but so what? It just creates more confusion than clarity. My Advice: Pick a few companies in play and focus on them rather than spreading yourself too thin.
  4. Mix it up a bit Here’s a news flash: Just because you have always traded US equities does not mean you should only trade them. In reality, there are lots of different ways to make lots of money, like metals, oil and currencies.

Sometimes as a trader, the less comfortable you feel about a product, the more objective your decisions are. My advice, for Q4? Think outside the box.

Think better, invest smarter.

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Smart Risk, Stupid Risk

Thursday, October 8th, 2009
(View The Video Online: Market coach Doug Hirschhorn, PhD, discusses the five things traders can do to take smart risks in the market.)

For now, the market really has no idea which direction it’s headed. Is it a bull or is it a bear. Are we set to take off, test new lows or stay flat for the foreseeable future?

The truth is, people always speculate, but no one knows for sure what’s going to happen. And that’s why it’s a market.

Here are 5 things you can do to take smart risk in uncertain situations:

  1. Look inside yourself and pay attention to what you feel Our bodies are hardwired to sense things before we fully understand why. Call it intuition, instinct or whatever you want, we all have it. The point is, in a game where uncertainty is the status quo, the best indicator you have is your gut. Trust it.
  2. Trust the markets Have faith, yes, faith. The markets will continually present you with opportunities to make great trades. If you trust this, then you won’t rush into or out of trades because of fear.
  3. Recognize fear Look for fear in the market’s behavior (over-selling or over-buying). Over-selling means people are afraid to take big losses. Over-buying means people are afraid they are going to miss out on profits. Once you know what over-selling and over-buying look like, you want to either avoid it, if you’re not in the market; ride it out, if you’re already in the market; or fade it, if you’re looking to get into the market.
  4. Trade to make money, not to be right If you want show people how smart you are, teach at a university or write a book. If you want to make money, do more of what the market is paying and less of what it’s not.
  5. Love to take a loss Yes, losses are your friend, not the enemy. Losses, like profits, are a necessary and essential part of the trading game. After all, even the best traders on the Street have a winning percentage of about 50 percent, so relax.

Trading really is a game of probabilities, not perfection. Put these five things in place, you can take smarter risks in uncertain markets.

Think better, invest smarter.

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Dow 10,000. Who Cares?

Wednesday, September 30th, 2009
Watch The Video Online: Market coach Doug Hirschhorn, PhD, discusses the four reasons why the Dow Jones reaching 10,000 does not really matter.

There has been an incredible amount of hype lately about the Dow Jones Index hitting the magic 10,000 level. So, I had to ask myself, does the Dow hitting 10,000 really matter? Well, here are four reasons I don’t think it carries the same weight it used to:

1. People are desparate While recovering from a year of pain, people are desperate to feel good about something. 10,000 is a nice round number with lots of zeros. That’s it. Don’t waste time reading too much into it because really, in the end, it is just another number.

2. Old rules are just that, old rules We are in a new financial world, with new rules created every day. What used to matter most doesn’t matter so much anymore. And that kind of change scares people. So how do you beat that? It’s easy (but not necessarily fun). Simply become a student of the current game and learn new rules.

3. Comfort zone issues It’s easier to look back today and embrace what used to make us comfortable in the past. Getting comfortable with a specific way of thinking can lead to three things:

  • Sloppy trading
  • Complacency
  • Missed opportunities to outperform

You want to be successful in trading? Start to get comfortable with being uncomfortable.

4. The Dow is really just a worn down name brand Look, I’m a trading coach to the elite on Wall Street and I don’t have a single client who follows the Dow as a leading indicator. So, why would you? Rather, they look at the S&P, global commodities like oil, natural gas, or gold. They look for those things to tell them which way the market’s going to go and how the enrironment is really playing out.

My advice, think like a champ, not like a chump.

Think better, invest smarter.

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