If you are new in trading and don't know when to buy/sell, then you should have a strategy on which you will take decisions while trading.

Want to Trade ? But don’t know which strategy to use ? (for beginners)

Before telling you about the strategy first you need to keep in mind that no strategy will work every time, as the market is driven by various factors. Sometimes your strategy will work and sometimes not.So our goal is to Increase the Probability of Winning so that in total we will be in profits.

Keep this in mind!

The most common mistake a beginner do is to use so many Indicators and Strategies which makes us so confused and everything becomes so complicated that we can’t even make a decision to take the trade or not and then start taking wrong trades and if it fails then tries to hold it until the price comes up at your level and eventually you become an Investor 🙂.Now let’s understand one of the simplest yet an effective strategy:

Precautions: 

1) Price-based action: EMA acts as good support and resistance. Use 50,200 EMA in 15 minutes time frame.In the uptrend, if the price comes down to ema and takes support from it then we can buy near it and stop-loss a little below ema. In the downtrend, Ema acts as a resistance and price may come to it then fall again so we can short near it (see picture) {Notion page link for all the images used here (but not clearly visible) - <a href="https://internal-tumbleweed-664.notion.site/672070fd663e49e09a96168e846491ad">https://internal-tumbleweed-664.notion.site/672070fd663e49e09a96168e846491ad</a>}

Exponential Moving Average (Indicator)

Notion page link for all the images used here (but not clearly visible) - <a href="https://internal-tumbleweed-664.notion.site/672070fd663e49e09a96168e846491ad">https://internal-tumbleweed-664.notion.site/672070fd663e49e09a96168e846491ad</a>

If price breaks up Ema vigorously(with a big green candle {1or multiple candle can be considered}) then a good uptrend may come and we can buy near it. From this breakout point, the Ema will now act as good support which was acting as resistance before the breakout.Same if the price breaks down the Ema then a good down trend may come so we can sell over there. Ema will act as a resistance now.

2) Breakout Strategy : 

If a short-term Ema crosses up a long-term Ema then an uptrend may come and we can buy at that point.If a short-term Ema crosses down a long-term Ema then a downtrend may come and we can short near it.

3) Cross-over (Golden Ratio): 

Overview: 

So it’s better to not get fascinated by so many indicators at the starting of your trading career.At last, I would suggest using only one strategy at the beginning and testing it, trying a new strategy then testing it too and finding the strategy which suits you and gives you profits. Follow this until you understand the things otherwise, you will become an investor rather than a trader.

Conclusion :

It's very imp. for a beginner who wants to trade but doesn't know which strategy to use!

📈 Doing real trading and experiencing the same.

moneyandinvestments

Money & Investments

strategy

Strategy

Trading

Most of the people consider the ” process of getting money ” as a struggle but if we take it as a struggle then we are definitely not going to love the process of achieving money . To create a good energy flow of money you should not only see the money as a positive thing but also enjoy the whole journey of achieving that money .

Remove The Energy Blocking Beliefs

Want to know how to increase Money Energy Flow ? Here is an amazing 7 step effective guide to align with the right money energy and attract wealth and abundance

Understand yourself and those around you.

psychology

Psychology

personaldevelopment

Personal Development

habits

Habits

How To Increase Money Energy : 7 most powerful steps

The privatization of banks are going to happen sooner or later, and with that customer base PSu's would become a huge potential business. This Potential growth also has the potential of churning out continuous and/or constant returns on investments.!

A Good Tip.

Stocks

Predicting the movement of stock prices is an alluring challenge with the promise of riches. Unfortunately, predicting future stock prices consistently and reliably is generally considered impossible. However, we can use models to make useful predictions, manage risk, and profit probalistically .

The options casino

Monthly simple and logarithmic returns of IBM stock with fitted normal distributions. We observe more returns at the extremities of the distributions than the normal distribution would predict. We call these 'fat tails' or 'excess kurtosis'. This image has been taken from 'Analysis of Financial Time Series, 3rd Ed.' by Ruey S. Tsay.

Normal Distribution

<a href="https://stats.libretexts.org/Bookshelves/Probability_Theory/Probability_Mathematical_Statistics_and_Stochastic_Processes_(Siegrist)/18%3A_Brownian_Motion/18.01%3A_Standard_Brownian_Motion">Brownian motion </a>describes the motion of a particle in a fluid or gas. Such a particle bounces around “randomly” within the fluid surrounding it. The path it creates appears quite noisy and random. It can essentially be considered a limiting form of the random walk where both the time between steps and the step length approach zero (with some caveats: namely, if the time step is, the step length must be- this produces a process whose variance scales exactly with time). Consider flipping a coin to determine whether to take a step forward or backward. Now let the time between steps approach zero.<warningtag> </warningtag>

Brownian motion

Monte-Carlo simulation is a statistical technique inspired by the casinos of Monaco. Much like gamblers resigning their fates to probability, we hand over the results of statistical analysis to chance. By running enough trials, we can make conclusions with statistical significance.Consider evaluating a call option with a strike prices of $105 for this stock. What would be the expected value of the option at expiry, given a geometric Brownian model for the stock’s movement?

Option Pricing

Monte-Carlo simulation of terminal values is a relatively simple simulation, and one can probably be completed analytically. The true power of Monte-Carlo simulation is unlocked when analysing scenarios that are more difficult to solve analytically, if not impossible. For example, if we wanted to analyse an American-style option, which can be exercised anytime, we might want to count the probability of a stock price exceeding the strike price at any time during the lifetime of that option. We could do this by counting how many trials cross the strike price boundry.

More Advanced Scenarios

problemsolving

Problem Solving

computerscience

Computer Science

artificialintelligence

Artificial Intelligence

Monte Carlo Options Pricing 

As a company selling products, you need to know the costs of creating those products. That’s where the cost of goods sold (COGS) formula comes in. Beyond calculating the costs to produce a good, the COGS formula can also unveil profits for an accounting period, if price changes are necessary, or whether you need to cut down on production costs.Whether you fancy yourself as a business owner or a consumer or both, understanding how to calculate the cost of goods sold can help you feel more informed about the products you’re purchasing — or producing.

Cost Of Goods Sold: A Primer

Cost of goods sold is the cost of producing the goods sold by a company. It includes the cost of materials and labor directly related to that good. However, it excludes indirect expenses such as distribution and sales force costs.

Defining COGS

When <a href="https://mint.intuit.com/blog/how-to/sell-online/">selling a product</a>, you need to understand the production costs associated with it in a given period, ​​which could be a month, quarter, or year. You can do that by using the cost of goods sold formula. It’s a straightforward calculation that accounts for the beginning and ending inventory, and purchases during the accounting period. Here is a simple breakdown of the cost of goods sold formula:COGS = beginning inventory + purchases during the period – ending inventory

The Formula

To calculate cost of goods sold, you have to determine your beginning inventory — meaning your merchandise, including raw materials and supplies, for instance — at the beginning of your <a href="https://mint.intuit.com/blog/investing/balance-sheet/">accounting period</a>. Then add in the new inventory purchased during that period and subtract the ending inventory — meaning the inventory leftover at the end for your accounting period. The extended COGS formula also accounts for returns, allowances, discounts, and freight charges, but we’re sticking to the basics in this explanation.

Calculate Cost of Goods Sold

Direct CostsDirect costs are the costs tied to the production or purchase of a product. <ul><li>Direct labor</li><li>Direct materials</li><li>Manufacturing supplies</li><li>Fuel consumption</li><li>Power consumption</li><li>Production staff wages</li></ul> Indirect CostsIndirect costs go beyond costs tied to the production of a product. They include the costs involved in maintaining and running the company. <ul><li>Utilities</li><li>Marketing campaigns</li><li>Office supplies</li><li>Accounting and payroll services</li><li>Insurance costs</li><li>Employee benefits and perks</li></ul>

The Steps: Identify Direct and Indirect Costs

The beginning inventory will be the amount of inventory leftover from the previous time period, which could be a month, quarter, or year. Beginning inventory is your merchandise, including raw materials, supplies, and finished and unfinished products that were not sold in the previous period.Keep in mind that your beginning inventory cost for that time period should be exactly the same as the ending inventory from the previous period.

The Steps: Determine Beginning Inventory

After determining your beginning inventory, you also have to account for any inventory purchases throughout the period. It’s important to keep track of the cost of shipment and manufacturing for each product, which adds to the inventory costs during the period.

The Steps:  Tally Up Items Added to Your Inventory

The ending inventory is the cost of merchandise leftover in the current period. It can be determined by taking a physical inventory of products or estimating that amount. The ending inventory costs can also be reduced if any inventory is damaged, obsolete, or worthless.

The Steps: Determine Ending Inventory

Now that you have all the information to calculate cost of goods sold, all there’s left to do is plug it into the COGS formula.

Final Step: Plug the Info Into the Cost of Goods Sold Equation

FIFO: First In, First OutThe first in, first out method, also known as FIFO, is when the earliest goods that were purchased are sold first. Since merchandise prices have a tendency of going up, by using the FIFO method, the company would be selling the least expensive item first. LIFO: Last In, First OutThe last in, first out method, also known as LIFO, is when the most recent goods added to the inventory are sold first.Average Cost MethodThe average cost method is when a company uses the average price of all goods in stock to calculate the beginning and ending inventory costs.

Accounting for Cost of Goods Sold

Business owners are likely familiar with the term “operating expenses.” However, this shouldn’t be confused with the cost of goods sold. Although they are both company expenditures, operating expenses are not directly tied to the production of goods.Operating expenses are indirect costs that keep a company up and running, and can include rent, equipment, insurance, salaries, marketing, and office supplies.

Considerations for Cost of Goods Sold: COGS vs. Operating Expenses

The COGS calculation focuses on the inventory of your business. Inventory can be items purchased or made yourself, which is why manufacturing costs are only sometimes considered in the direct costs associated with your COGS.

COGS and Inventory

Another thing to consider when calculating COGS is that it’s not the same as cost of revenue. Cost of revenue takes into consideration some of the indirect costs associated with sales, such as marketing and distribution, while COGS does not take any indirect costs into consideration.

Cost of Revenue vs. COGS

Since service companies do not have an inventory to sell and COGS accounts for the cost of inventory, they can’t use COGS because they don’t sell a product — they would instead calculate the cost of services. Examples of service companies are accounting firms, law offices, consultants, and real estate appraisers.

Exclusions From COGS Deduction

How do you calculate cost of goods sold? Learn how to use the cost of goods sold formula and how it pays off for companies.

business

Business

Cost of Goods Sold Formula: A Step-by-Step Guide

This study aims to analyse the adoption of mobile payment applications during the coronavirus disease 2019 (COVID-19) pandemic using the technology acceptance model (TAM) and Technology Readiness Index (TRI). TRI constructs affect perceived usefulness and perceived ease of use, with the exception of discomfort which has no significant effect on the perceived usefulness. In addition, attitude is influenced by two main TAM variables: perceived usefulness and perceived ease of use. Meanwhile, the intention to use mobile payment applications is influenced by attitude.

Summary

<ul><li>perceived usefulness and easiness of use determine one’s attitude towards the adoption of a particular technology and consequently determine the intention to use and apply the technology</li><li>perceived usefulness: the extent to which a person believes that using a particular system will improve his work performance </li><li>perceived ease of use: a person’s belief that using a particular system will free him from effort</li><li>readiness for a specific system</li></ul>

Technology Acceptance Model (TAM)

<ul><li>related to one’s tendency to use new technology as well as the general sentiment about the new technology </li><li>16 items, measuring optimism, innovativeness, discomfort and insecurity</li><li>readiness for general technology</li></ul>

Technology Readiness Index (TRI)

H1-4: Optimism/Innovativeness have a positive effect on perceived usefulness/ease-of-use. ✅ supportedH5-8: Discomfort/Insecurity have a negative effect on perceived usefulness/ease-of-use. ✅ H6❌ H5, H7-8H9-10: Perceived usefulness/ease-of-use have a positive influence on attitude. ✅ supportedH11: Attitude has a positive influence on intention to use mobile payment applications. ✅ supported

Hypotheses

<ul><li>TRI constructs have a high level of importance in their effect on attitude and intention to use</li><li>optimism has the highest level of importance ➡️ must be increased by service providers by convincing users of the benefits of using mobile payment applications </li><li>insecurity has a positive effect on perceived usefulness and ease of use (❌H7-8); “explorer”/techno-ready user more likely to learn to use the application</li></ul>

Findings

Predicting the adoption of mobile payment applications during the COVID-19 pandemic - Author: Wahyu Rafdinal, Widi Senalasari

marketingandsales

Marketing & Sales

technologyandthefuture

Technology & The Future

Predicting the adoption of mobile payment applications during the COVID-19 pandemic

The study found that consumers experiencing social exclusion are more likely to make high risk investments. This effect is moderated by consumers' level of mental budgeting such that at high levels of mental budgeting the effect of social exclusion on investment choice is attenuated. The study further finds that the moderating effect of mental budgeting is mediated by pain of payment.The findings suggest that policymakers can reduce unduly risky personal investment behavior by triggering mental budgeting thoughts using methods such as advertising and mention of transaction fees.

<ul><li>a state of physical/emotional isolation involving feelings of loneliness due to being left out, ignored or ostracised by others</li><li>leads to anti-social behaviour</li></ul>influences:<ul><li>preference for distinctive products: psychological emptiness/ unsatisfactory interpersonal relationships intensify the desire for material possessions and conspicuous consumption</li><li>risk-taking behaviour: present-day bias, less conservative investment behaviour</li><li>inclination towards brand/ product switching (self-efficacy, sense of control)</li></ul> <ul><li>financial literacy is lower in developing countries; lowest w.r.t. risk diversification</li></ul>

Social exclusion

<ul><li>incl. mental budgeting (separation of monetary income into economic categories), labelling of income and assets, hedonic framing (evaluation of gains and loss combinations)</li><li>violates the fungibility assumption of money: different propensities to use money depending on the source</li><li>hampered by credit card use: decouples costs and benefits by facilitating mixing of purchases among budgeted categories and increasing temporal distance between purchases and payments (payment delayed until credit card bill is due)</li></ul>

Mental Accounting 

<ul><li>prospect theory: loss perception decreased in consumers in a low state of mental budgeting</li><li>psychological myopia: tendency to focus on immediately relevant information (e.g., transaction fees) while ignoring relevant background information stronger for high levels of mental budgeting ➡️ lower probability of engaging in high-risk investments</li></ul>

Mental Accounting II

<ul><li>painful state of mind or psychological burden consumers experience upon purchase</li><li>lowered by credit card and mobile payments</li><li>bottom dollar effect: purchases using budgets close to exhaustion result in a lower customer satisfaction</li><li>higher level of mental budgeting results in stronger pain of payment</li></ul>

Pain Of Payment

H1: Socially excluded people have a higher preference for high-risk investment products than socially included people. H2: For individuals with higher mental budgeting, the positive effect of social exclusion on preference for high-risk investment products will be lower. H3: The moderating effect of mental budgeting on the impact of social exclusion on consumer preference for high risk investment is mediated by pain of payment.

The effects of mental budgeting and pain of payment on the financial decision making of socially excluded people - Author: Sungyong Chun, Devon S. Johnson

The effects of mental budgeting and pain of payment on the financial decision making of socially excluded people

The Least Square Moving Average indicator allows you to assess the direction of the market movement and its possible reversals.The least squares moving average algorithm plots a regression line on the graph at the current point.(The indicator is based on the least squares method to find the straight line that best matches the data for the selected period.)The LSMA tries to predict the price behavior, what it would be if the regression line continued.

Definition & Fundmenta

<ol><li>Since LSMA is a mathematical line, it can show values that prices have never shown (values higher than ATH).</li><li>LSME is much more responsive than any other moving average. Given that its calculation accuracy will be higher.</li></ol>

Differences With Ordinary Moving Average

LSMA indicator: description, formula, signals, examples and tips for use, as well as disadvantages of the least squares moving average.

Least Squares Moving Average (LSMA)

Frugal living is one of the most powerful tools to reaching financial independance and these are some great frugal tips!

Frugal Living Tips That Work

Just one idea can save you thousands over a lifetime.

scienceandnature

Science & Nature

7 Frugal Tips to Help Save Money – Gabe Bult Blog

Everything should be made as simple as possible, but not simpler.

<ul><li>Even the best investors don’t get it right every time. The reasons are simple. No rule always works.</li><li>Psychology plays a major role in markets, and because it’s highly variable, cause-and-effect relationships aren’t reliable.</li><li>Because investing is at least as much art as it is science, it’s never my goal – in this book or elsewhere – to suggest it can be routinized.</li><li>One’s investment approach be intuitive and adaptive rather than be fixed and mechanistic.</li><li>Just invest in an index fund that buys a little of everything. That will give you what is known as ‘market returns’.</li></ul>

Market Investing Basics

Only a few of them will achieve the superior insight, intuition, sense of value and awareness of psychology that are required for consistently above-average results. Doing so requires second-level thinking.Your thinking has to be better than that of others – both more powerful and at a higher level.What is second-level thinking?First-level thinking says, ‘It’s a good company; let’s buy the stock.’ Second-level thinking says, ‘It’s a good company, but everyone thinks it’s a great company, and it’s not. So the stock’s overrated and overpriced; let’s sell.’

Second Level Thinking

First-level thinkers think the same way other first-level thinkers do about the same things.All investors can’t beat the market since, collectively, they are the market.To outperform the average investor, you have to be able to outthink the consensus. Are you capable of doing so? What makes you think so?The problem is that extraordinary performance comes only from correct non-consensus forecasts.The upshot is simple: to achieve superior investment results, you have to hold non-consensus views regarding value, and they have to be accurate. That’s not easy.

Don't Be Like The Crowd

In theory there’s no difference between theory and practice, but in practice there is.

Asset prices immediately reflect the consensus view of the information’s significance. I do not, however, believe the consensus view is necessarily correct.To beat the market you must hold an idiosyncratic, or nonconsensus, view.The efficient market hypothesis is its conclusion that ‘you can’t beat the market.’The greatest ramifications of the Chicago theory has been the development of passive investment vehicles known as index funds.

Market Efficiency

If riskier investments could be counted on to produce higher returns, they wouldn’t be riskier.The key question is whether it’s right: Is the market unbeatable? Are the people who try wasting their time? Are the clients who pay fees to investment managers wasting their money?Second-level thinkers know that to achieve superior results, they have to have an edge in either information or analysis or both. They are on the alert for instances of misperception.

Taking Risk Is.... Risky

Efficiency is not so universal that we should give up on superior performance.Efficiency is what lawyers call a ‘rebuttable presumption’ – something that should be presumed to be true until someone proves otherwise.Inefficiency is a necessary condition for superior investing. Attempting to outperform in a perfectly efficient market is like flipping a fair coin: the best you can hope for is fifty-fifty.For investors to get an edge, there have to be inefficiencies in the underlying process – imperfections, mispricings – to take advantage of.

The Limits Of Efficiency

For investing to be reliably successful, an accurate estimate of intrinsic value is the indispensable starting point. Without it, any hope for consistent success as an investor is just that: hope.Buy at a price below intrinsic value, and sell at a higher price.An investor has two basic choices: gauge the security’s underlying intrinsic value and buy or sell when the price diverges from it, or base decisions purely on expectations regarding future price movements.

Defining Value

Day traders considered themselves successful if they bought a stock at $10 and sold at $11, bought it back the next week at $24 and sold at $25, and bought it a week later at $39 and sold at $40. If you can’t see the flaw in this – that the trader made $3 in a stock that appreciated by $30 – you probably shouldn’t read the rest of this content.Two approaches, both driven by fundamentals: value investing and growth investing.

The Flaw Of Day Trading

If value investing has the potential to consistently produce favourable results, does that mean it’s easy? No. For one thing, it depends on an accurate estimate of value. Without that, any hope for consistent success as an investor is just that: hope.It’s hard to consistently do the right thing as an investor. But it’s impossible to consistently do the right thing at the right time.Being too far ahead of your time is indistinguishable from being wrong.

Being Right Isn't Always Easy

<ul><li>Investment success doesn’t come from ‘buying good things,’ but rather from ‘buying things well.’</li><li>Deciding on an investment without carefully considering the fairness of its price is just as silly.</li><li>There’s no such thing as a good or bad idea regardless of price!</li><li>Well bought is half sold.</li><li>There’s nothing better than buying from someone who has to sell regardless of price during a crash.</li><li>You can’t make a career out of buying from forced sellers and selling to forced buyers.</li><li>Since buying from a forced seller is the best thing in our world, being a forced seller is the worst.</li></ul>

Buy It Well: The Price And The Value

<ul><li>Investing is a popularity contest, and the most dangerous thing is to buy something at the peak of its popularity.</li><li>The safest and most potentially profitable thing is to buy something when no one likes it. Given time, its popularity, and thus its price, can only go one way: up.</li><li>In bubbles, ‘attractive’ morphs into ‘attractive at any price.’</li><li>In bubbles, infatuation with market momentum takes over from any notion of value and fair price.</li></ul>

The Upside Down World Of Investing

Possible routes to investment profit:<ul><li>Benefiting from a rise in the asset’s intrinsic value.</li><li>Applying leverage.</li><li>Selling for more than your asset’s worth.</li><li>Buying something for less than its value.</li></ul>

The Heart Of The Matter

Dealing with risk is an essential element in investing. There are three reasons for this:<ul><li>First, risk is a bad thing, and most level-headed people want to avoid or minimize it.</li><li>Second, when you’re considering an investment, your decision should be a function of the risk entailed as well as the potential return.</li><li>Third, when you consider investment results, the return means only so much by itself; the risk taken has to be assessed as well. Was the return achieved in safe instruments or risky ones?</li></ul>

Understanding Risk

Risk means more things can happen than will happen.

Risk is – first and foremost – the likelihood of losing money.The possibility of permanent loss is a risk to worry about.<ul><li>Falling short of one’s goal</li><li>Underperformance</li><li>Career risk</li><li>Unconventionality</li><li>Risk that could jeopardize return to an agent’s firing point is rarely worth taking.</li><li>Illiquidity</li></ul>

The Probability Of Losing Money

<ul><li>First, risk of loss does not necessarily stem from weak fundamentals.</li><li>Second, risk can be present even without weakness in the macroenvironment.</li><li>Third, risk is deceptive.</li></ul>

The Three Attributes Of Risk

<ul><li>Skillful investors can get a sense of the risk present in a given situation. They make that judgment primarily based on (a) the stability and dependability of value and (b) the relationship between price and value.</li><li>The fact that something – in this case, loss – happened doesn’t mean it was bound to happen, and the fact that something didn’t happen doesn’t mean it was unlikely.</li><li>When markets are booming, the best results often go to those who take the most risk.</li><li>There’s a big difference between probability and outcome. Probable things fail to happen – and improbable things happen – all the time.</li></ul>

Risk: Hard to formulate, measure or predict

<ul><li>Risk cannot be measured. Certainly it cannot be gauged on the basis of what ‘everybody’ says at a moment in time.</li><li>Risk can be judged only by sophisticated, experienced second-level thinkers.</li><li>Investment risk is largely invisible before the fact – except perhaps to people with unusual insight – and even after an investment has been exited.</li><li>Risk exists only in the future, and it’s impossible to know for sure what the future holds.</li></ul>Only the things that happened, happened.

The Rabbit Hole Of Risk

The received wisdom is that risk increases in the recessions and falls in booms. In contrast, it may be more helpful to think of risk as increasing during upswings, as financial imbalances build up, and materializing in recessions.

<ul><li>No matter how good fundamentals may be, humans exercising their greed and propensity to err have the ability to screw things up.</li><li>Great investing requires both generating returns and controlling risk. And recognizing risk is an absolute prerequisite for controlling it.</li><li>Recognizing risk often starts with understanding when investors are paying it too little heed, being too optimistic and paying too much for a given asset as a result.</li><li>High risk, in other words, comes primarily with high prices.</li><li>Participating when prices are high rather than shying away is the main source of risk.</li></ul>

Recognizing Risk

<ul><li>Risk tolerance is antithetical to successful investing.</li><li>A prime element in risk creation is a belief that risk is low, perhaps even gone altogether.</li><li>Better safety gear can entice climbers to take more risk – making them in fact less safe.</li><li>Risk cannot be eliminated; it just gets transferred and spread.</li><li>Developments that make the world look less risky usually are illusory.</li><li>The risk-is-gone myth is one of the most dangerous sources of risk, and a major contributor to any bubble.</li></ul>

Tolerating Risk

<ul><li>Outstanding investors, in my opinion, are distinguished at least as much for their ability to control risk as they are for generating a return.</li><li>Loss is what happens when risk meets adversity. Risk is the potential for loss if things go wrong. As long as things go well, the loss does not arise.</li><li>Risk gives rise to loss only when negative events occur in the environment. The absence of loss does not necessarily mean the portfolio was safely constructed.</li></ul>

Controlling Risk

<ul><li>The manager’s value added comes not through higher return at a given risk, but through reduced risk at a given return.</li><li>The intelligent bearing of risk for profit, the best test for which is a record of repeated success over a long period of time.</li><li>So in most things, you can’t prepare for the worst case. It should suffice to be prepared for once-in-a-generation events.</li><li>Risk control is the best route to loss avoidance. Risk avoidance, on the other hand, is likely to lead to return avoidance as well.</li></ul>

The Value Of A Portfolio Manager

<ul><li>Nothing goes in one direction forever.</li><li>Rule number one: most things will prove to be cyclical. Rule number two: some of the greatest opportunities for gain and loss come when other people forget rule number one.</li><li>The basic reason for the cyclicality in our world is the involvement of humans.</li><li>When people are involved, the results are variable and cyclical. The main reason for this, I think, is that people are emotional and inconsistent, not steady and clinical.</li></ul>

Being Attentive to Cycles

<ul><li>The first, when a few forward-looking people begin to believe things will get better.</li><li>The second, when most investors realize improvement is actually taking place.</li><li>The third, when everyone concludes things will get better forever.</li></ul>What the wise man does in the beginning, the fool does in the end.

Investor Stupidity: The Three Stages of a Bull Market

it takes analytical ability, objectivity, resolve, even imagination, to think things will ever get better. The few people who possess those qualities can make unusual profits with low risk.The oscillation of the investor pendulum is very similar in nature to the up-and-down fluctuation of economic and market cycles.Extreme market behaviour will reverse.

Extreme Market Behaviour

Why do mistakes occur? Because investing is an action undertaken by human beings, most of whom are at the mercy of their psyches and emotions.The desire for more, the fear of missing out, the tendency to compare against others, the influence of the crowd and the dream of the sure thing – these factors are near universal.Inefficiencies – mispricings, misperceptions, mistakes that other people make – provide potential opportunities for superior performance. Exploiting them is, in fact, the only road to consistent outperformance.

Combating Negative Influences

Nothing is easier than self-deceit. For what each man wishes, that he also believes to be true.

To avoid losing money in bubbles, the key lies in refusing to join in when greed and human error cause positives to be wildly overrated and negatives to be ignored.<ul><li>Nobody has all the answers; we’re all just human.</li><li>No strategy can produce high rates of return without risk.</li></ul>

Avoiding Bubbles

<ul><li>Buy low; sell high is the time-honored dictum, but investors who are swept up in market cycles too often do just the opposite.</li><li>Once-in-a-lifetime market extremes seem to occur once every decade or so.</li><li>Most typical of market victims: the six-foot-tall man who drowned crossing the stream that was five feet deep on average.</li><li>Much of the time there aren’t great market excesses to bet against.</li></ul>

The Most Repeated Business Advice

Nobody goes to that restaurant anymore; it’s too crowded.

<ul><li>If you believe the story everyone else believes, you’ll do what they do.</li><li>Only a skeptic can separate the things that sound good and are from the things that sound good and aren’t.</li><li>Skepticism calls for pessimism when optimism is excessive. But it also calls for optimism when pessimism is excessive.</li><li>Skepticism and pessimism aren’t synonymous.</li><li>The key – as usual – was to become skeptical of what ‘everyone’ was saying and doing.</li><li>The error is clear. The herd applies optimism at the top and pessimism at the bottom.</li></ul>

Skepticism

The process of intelligently building a portfolio consists of buying the best investments, making room for them by selling lesser ones, and staying clear of the worst.The raw materials for the process consist of(a) a list of potential investments,(b) estimates of their intrinsic value,(c) a sense for how their prices compare with their intrinsic value (d) an understanding of the risks involved in each, and of the effect their inclusion would have on the portfolio being assembled.The starting point for portfolio construction is unlikely to be an unbounded universe.

Finding Bargains

Since bargains provide value at unreasonably low prices – and thus unusual ratios of return to risk – they represent the Holy Grail for investors.It’s obvious that investors can be forced into mistakes by psychological weakness, analytical error or refusal to tread on uncertain ground. Those mistakes create bargains for second-level thinkers capable of seeing the errors of others.

The Inevitable Mistakes

<ul><li>Patient opportunism – waiting for bargains – is often your best strategy.</li><li>You’ll do better if you wait for investments to come to you rather than go chasing after them.</li><li>An opportunist buys things because they’re offered at bargain prices. There’s nothing special about buying when prices aren’t low.</li><li>We don’t look for our investments; they find us.</li></ul>

Patient Opportunism

The market’s not a very accommodating machine; it won’t provide high returns just because you need them

<ul><li>One of the great things about investing is that the only real penalty is for making losing investments. There’s no penalty for omitting losing investments, of course, just rewards.</li><li>The dumbest thing you can do is to insist on perpetuating high returns – and give back your profits in the process.</li><li>You simply cannot create investment opportunities when they’re not there.</li><li>If it’s not there, hoping won’t make it so. Wishing won’t make it so.</li><li>You want to take risk when others are fleeing from it, not when they’re competing with you to do so.</li></ul>

To Invest Or Not Invest

We have two classes of forecasters: Those who don’t know – and those who don’t know they don’t know.

Every once in a while, someone makes a risky bet on an improbable or uncertain outcome and ends up looking like a genius. But we should recognize that it happened because of luck and boldness, not skill.The truth is, much in investing is ruled by luck. Some may prefer to call it chance or randomness, and those words do sound more sophisticated than luck.A great deal of the success of everything we do as investors will be heavily influenced by the roll of the dice.

Appreciating the Role of Luck

An investor needs to do very few things right as long as he avoids big mistakes.

Successful investing requires thoughtful attention to many separate aspects, all at the same time. The Most Important Thing by Howard Marks covers these key aspects in layman language and without a lot of finance jargon though it covers the concepts of investment theory.

"This is that rarity, a useful book."--Warren Buffett Howard Marks, the chairman and cofounder of Oaktree Capital Management, is renowned for his insightful assessments of market opportunity and risk. After four decades spent ascending to the top of the investment management profession, he is today sought out by the world's leading value investors, and his client memos brim with insightful commentary and a time-tested, fundamental philosophy. Now for the first time, all readers can benefit from Marks's wisdom, concentrated into a single volume that speaks to both the amateur and seasoned investor. Informed by a lifetime of experience and study, The Most Important Thing explains the keys to successful investment and the pitfalls that can destroy capital or ruin a career. Utilizing passages from his memos to illustrate his ideas, Marks teaches by example, detailing the development of an investment philosophy that fully acknowledges the complexities of investing and the perils of the financial world. Brilliantly applying insight to today's volatile markets, Marks offers a volume that is part memoir, part creed, with a number of broad takeaways. Marks expounds on such concepts as "second-level thinking," the price/value relationship, patient opportunism, and defensive investing. Frankly and honestly assessing his own decisions--and occasional missteps--he provides valuable lessons for critical thinking, risk assessment, and investment strategy. Encouraging investors to be "contrarian," Marks wisely judges market cycles and achieves returns through aggressive yet measured action. Which element is the most essential? Successful investing requires thoughtful attention to many separate aspects, and each of Marks's subjects proves to be the most important thing.

The Most Important Thing

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