“Never average losses” Jesse Livermore - David Paul : VectorVest UK

let's talk to David Paul he's the managing director of vector vest UK Morici David here's kimonos right we're gonna do a review of hell not too basic playing the markets the headlines you've got number slides if for mistakes preventing consistent gains in your trading business well yes I've been looking at both retail and institutional accounts pretty much since 1999 and in that I've noticed for mistakes that traders are at both retail and institutional level make over and over and over again in our training of activists we like to make investors truck traders aware of those

so hopefully they can actually get around them in their own trading understood I think if you're aware of them certainly it's reasonably easy to actually change your performance and most people are not aware of them and I'm no traders who've been making the same simple mistakes for the last thirty years and wonder why their performance is poor and inconsistent very easy to make an awful lot of money in the stock market quite difficult to keep hold of it yep okay so let's move swiftly on you think of money first well yes and we certainly go

into the investing stock trading business to make money but if you think of a professional who's good at their job for example the best dentist in your area that dentist has a full waiting room and has got a very successful business because they focus on perfect execution of each and every root canal for example and similarly in trading stroke investing the traders should think about perfect execution of each and every trade according to their own little trading plan if they focus on perfect execution of each and every trade then the cash will take care of

itself so my job as a trader is to make the very best possible trades and not allowing my mind to move into the past where I've stuffed up before or I'm moving my mind move into the future where I might stuff up in the future to focus on cable in this moment and if you think that anybody who's very good at their job they do the same thing I think with Wayne Rooney who said that penalties are never a formality so when good goal the difference with a good golfer and a Sunday morning hacker is

a good golfer focuses on perfect execution of each and every stroke they don't allow stuffing up in the third last Sunday to affect them stuffing up in the third this Sunday ok well let's talk about the emotions emotional trades well yes when you allow your mind to move to the past or move to the future my definite engineers definition of emotion is that it's your body's reaction to a thought and when you become emotional it's very easy to make really really really bad decisions and we see it every morning driving and the next slide I've

got a picture of a young fella I saw somebody like that this morning and Notting Hill for example and you've got to sort of say to yourself what is the quality of the decisions that this chap is making now compared to the quality of decisions that he would make a bit sitting in his armchair relaxed at home yeah very easy to become a more emotional and in years one past I did a three-day seminar on trading psychology mostly to institutions and I spent one full day on showing traders had to keep their mind in the

present moment so they didn't become emotional and it was well received ok so in terms of boys stocks and going down averaging in the wrong way well yes I think that the old two for the price of one bankrupt or traders than anything else in history we've just got to look at Karelian and dozens and dozens of other opportunities in Germany and South Africa there's a company called Steinhoff fund in South Africa it fell from a hundred grand I think to 2r and on the way down my son's a stockbroker in Johannesburg and he has

a big plant he bought quite a few at 12 thought he'd follow the bottom as Livermore says and reminisces of a stock operator I've never share too high not to go higher and too low not to go so buying stocks are going down pollen cost averaging may work with exchange-traded funds it may work with a fund but in individual stocks sooner or later you're going to hit that big one Marconi for example from 13 pounds will a few pence and that will there's two types of capitalist one is the cash and two's your emotional capital

and if you do something like that then that can really knock your emotional capital for six okay so what losses well the holding onto losers too long when I started in I started trading in October 1982 and I had a really good run to 1984 in 1984 I was now somewhat of a guru I'd read all the books our betters yes and I bought into one chair and the darn thing kept going the other way and of course I held on to it not held on to it and I held on to it and pretty

much and give up all the money that I made in the previous two years so holding on to losers too long now there's two aspects to holding on to losers too long one is the opportunity cost of the cash and two every time you open up your trading account there's red and that read pretty much reinforces the belief that you're no bloody good at this year so that's holding on to losers too long it took me a long time to find that slide okay so let's move on to the next slide you ignore market direction

this is the cave me stocks go up in the bull market stocks go down in a bear market that's right there's a really good time to be in the stock market and there's an awful time to be in the stock market and I don't care what your market timing system is it could be moving averages in the footsie 100 or the S&P 500 but I think that you need to have a good idea as to when the general market is rising or whether the general market is falling everything follows from that and that vector-based we

have a set of market timing objective market timing systems for long-term position traders and for short-term swing traders whatever system you use I think you really need to know what the market is doing at the moment certainly over the last few years we've been blessed with a market that's been rising and rising very nicely and I think there's more upside to it the next slide which well that's buy and hold buy and holds a great place to be if you've got 21 years to wait goes up like a roller coaster very slow and comes down

like a roller coaster of his urban into it so that's our market timing system over the last couple of years and at the moment the short term trend of alundra market is up the longer-term trend of the London market is up and all is good I see it's up in our 30 points this morning and the American market setting within a triangle it's also in enough moving towards the end of a symmetrical triangle the S&P 500 and I would expect a decision to be made by the American market relatively soon technical say that there's more

legs to the upside at least my technical say there's more legs to the upside so I'm reasonably positive for a move upwards over the next few weeks few months okay so let's go to the next slide in terms of worryfree investing performance so this is a back test of this is our most conservative trading plan yeah and we call it worryfree trading and inwardly free trading we sort all the shares in the London market by a proprietary measure relative safety which brings those shares with the best track record of making money where all the financial

issues are getting better to the top of the pile and anybody can on vector s can reproduce this and we've turned 250,000 pounds into I can hardly see it 250,000 pounds since 2009 which is a compounded rate of return of 19 percent a year okay and invective Esther we offer a 30-day trial of activist anybody can reproduce that yeah one vector of Esther okay so wrap it up if anyone wanted got any questions for you well yes David Paul advective Esther come go to the website vector-based at co dot UK we've got quite a few

webcasts that I'll be doing during the course of May and anybody wants to come along to listen to those and just give me a shirt David dot polarity based on Col David as always thank you thank you miss thing for those wise words I'm says just like Jesse Livermore