Great Lessons from Wall Street Legends

Over the past decade, I have studied many of the legends of Wall Street and have noticed several overlapping similarities in their thinking. The following list outlines critical components that many of the best investors/traders share, regardless of their investment style or background

Market Is Strong! Status Changed: Market In Confirmed Rally

Make no mistake about it- this market is strong! Every pullback since the March lows has not exceeded -8% and the bulls have promptly showed up to quell the bearish pressure. The latest correction began on October 28, 2009 and ended today on November 9, 2009 when this rally-attempt was confirmed.

Market Tracing Out A Bearish Head & Shoulders Pattern

It is also important to note that several of the popular averages encountered resistance near their respective 50 DMA lines before turning lower today (SP500, NYSE, RUT, Nasdaq 100, Nasdaq Comp, & the mid cap S&P 400).

What Happens When You Overlook Risk?

There is a major (flawed) assumption that is commonly used when people think about risk: that there is an equal relationship between risk and reward. However, in the real world, most so-called “risky” investments fail. Therefore, one would be wise to step back and take an objective look at the upside (i.e. potential return) before putting a single penny to work in any investment.

Lesson 2: Always Keep Your Losses Small & Never Fight The Tape!

Lesson 1 stressed the importance of developing “a sound market-tested trading plan, then trade your plan.” Lesson 2 discusses the importance of handling losses. Remember, losses are inevitable so don’t set them aside. Instead, prepare for them by integrating them into your trading plan. That way you can recognize when you are wrong, and instead of battling it out in the psychological warzone, you can cut your losses and get back to winning.

Steve Wynn and Ron Baron On the Economy

Steve Wynn and Ron Baron, two heavyweights in the financial and investing worlds, talk the economy on this clip from CNBC

Lesson 1: Don’t Be A Wall Street Fool

Reminiscences of a Stock Operator by Edwin Lefèvre and Roger Lowenstein is one of the most powerful investment books every written. Many people believe the book outlines the story of Jesse Livermore, one of the most famous stock market operators in history. The book contains a wealth of wisdom and prescient information that has stood the test of time. Many of the concepts are applicable today! Over the next few weeks, I will break down much of that “market wisdom” into a series of easy to digest blog posts.

Follow The Yellow Brick Road!

Adam Sarhan, CEO and Founder of Sarhan Capital, announces his foray into blogging in this introductory blog post