“But the most controversial step, considered by many to be a dark moment in U.S. economic history, was the Gold Reserve Act of 1934 passed on January 30 making it illegal for U.S. citizens to own gold and requiring them to exchange it for U.S. dollars. The very next day, Roosevelt fixed the value of gold to $35/oz from $20.67 the day before, which instantly devalued the dollar by 69%. Without a doubt, this was the single most confiscatory act by government in U.S. history.”  Matt Blackman

“The practice of issuing gold claims in amounts that exceeded actual holdings came to be known as fractional reserve banking (the number of gold receipts floating was only ‘fractionally reserved’ by the amount of physical gold). Clearly, earning interest on receipts lent that exceeded the gold on deposit enhanced their profitability – and, as we see yet again today, greatly magnified the eventual vulnerability of bank balance sheets.”  Paul Brodsky and Lee Quaintance

“Historically, the Fed’s balance sheet counted the peoples’ gold held in member banks as assets on its balance sheet, and counted the banks’ claims against that gold as liabilities.”  Paul Brodsky and Lee Quaintance

“In 1971, the US dollar went completely off the gold standard, meaning all paper dollar holders had no claim to the metal (still owned by the government).”  Paul Brodsky and Lee Quaintance

“Were the US to have a gold standard today, bank reserves held at the Fed would be strictly redeemable into gold. That is no longer the case under today’s fiat money standard.”  Paul Brodsky and Lee Quaintance

“Nevertheless, it is argued and seems logical that a gold standard WOULD INDIRECTLY constrain excessive voluntary bank leverage to the extent that banks would rightly perceive as finite a central bank’s status of lender of last resort.”  Paul Brodsky and Lee Quaintance

“The reason there is very little support for the gold standard is the consequences of those types of market adjustments are not considered to be appropriate in the 20th and 21st century. I am one of the rare people who have still some nostalgic view about the old gold standard, as you know, but I must tell you, I am in a very small minority among my colleagues on that issue.”  Alan Greenspan

“Where there is no possibility of subjective moral hazard there would be far less hazard. Be that as it may, under a fractional reserve banking system such as we have today, where the number of claims against a bank exceeds its reserves by a factor of 10, the notion of a bank run is easily understood and indeed, seems to be a black-swan type of inevitability.”  Paul Brodsky and Lee Quaintance

“In times of stress, waning confidence of both potential lenders and borrowers causes the money multiplier to contract sharply (debt deflation).  Under a gold standard, central banks would be left relatively powerless to stimulate the monetary/lending process, as they could not create gold ‘out of thin air.’  This is no longer the case because the current fiat regime allows central banks to subjectively create ‘paper gold’ (inflate the monetary base) to counteract deflationary forces.”  Paul Brodsky and Lee Quaintance

“Gold’s remarkable stability over time is evident in the following. A gentleman’s suit in sixteenth century England around the time of King Henry the VIII, cost the equivalent of one ounce of gold, approximately the same as a suit would cost today.”  Unknown

“Nevertheless, a wad of bills and coins in your pocket amounting to $20.67 in 1929 could have been exchanged for a one ounce gold coin. A few years later, FDR officially devalued the dollar by about 70% when he confiscated private gold holdings at that price and subsequently raised the price fix of gold to $35 per ounce.”  Paul Brodsky and Lee Quaintance

“The ‘floating’ gold price ever since has moved progressively higher than $35 an ounce, reflecting the massive devaluation of the dollar against something real (scarce and thus costly to expand).”  Paul Brodsky and Lee Quaintance

“[Gold] gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.”  Warren Buffett 

“To identify the intrinsic value of the dollar today, we examine the corollary – the intrinsic value of gold in dollar terms, which we dub ‘The Shadow Gold Price’ (SGP). To do so we assume that Federal Reserve Bank liabilities are again exchangeable into gold (recall, FRB reserves are bank assets – the stuff that used to have to be gold).  As we discussed in ‘A Not-So Modest Proposal,’ one would simply divide the dollar amount of current Fed liabilities by official gold holdings. This calculation, while simple, is intellectually honest and produces a breathtakingly large ‘equilibrium’ gold price of approximately $9500 per ounce today ($2.5 trillion divided by US official gold holdings of 8100+ metric tons).”  Paul Brodsky and Lee Quaintance

“The economic forces that affect the price of gold are different from, and often are opposed to the forces which determine the price of most common financial assets. This independent movement of gold to other financial assets can reduce the overall volatility and adds balance to a portfolio.”  Unknown

“Between 1971 and 1981, the U.S. dollar lost more half its value, while silver prices rose nearly five times.”  Unknown

“The purchasing power of gold over time has been generally stable, whereas the purchasing power of the U.S. dollar has steadily declined. Dollars invested in gold, generally provide a rate of return that is equal to inflation over time. Thus gold has the ‘hedge against inflation’ capability.”  Unknown

“Over the last six months, spot gold has dropped about 20% while the Shadow Gold Price (SGP) has virtually tripled. At a minimum, this is a radical departure from historical relationships. When we last experienced a gold market frenzy (peaking in 1980), the spot market gold price traded at a sizable premium to the SGP (about 1.75 times when spot gold peaked above $800 per ounce). Today, spot market gold is trading less than 0.09 times the SGP. This is as cheap as it’s ever been by a large margin. To reach the frenzied peak today in terms equivalent to 1980, spot gold would need to trade above $16,000 per ounce. If the Fed doesn’t very quickly reverse the paper reserve growth of the last 20 years to bring the SGP back to Earth, then spot gold will inevitably blast off to the moon to join FRB reserves.”  Paul Brodsky and Lee Quaintance

“We doubt gold will trade at $16,000, but we’re not price anchored. Would you have imagined in 1971 that gold would rise from $35 to over $800 an ounce only nine years later?”  Paul Brodsky and Lee Quaintance

“If the Shadow Gold Price, as an indicator of intrinsic value for spot gold (and therefore the recent diminution of absolute value of the dollar), has no basis in reality, then there can be no basis of value for anything denominated in dollars.”  Paul Brodsky and Lee Quaintance

“Where are we today? With gold trading around $850/oz [2008-12-16] means that it now takes $41.12 to buy something that cost $1 in 1933. This works out to a 97.6% devaluation of the dollar.  But I’m getting ahead of myself.”  Matt Blackman

“An ETF is a fund comprised of a group of stocks, bonds, or other investment vehicles similar to a mutual fund. However, unlike a mutual fund, ETFs trade like stocks allowing a trader to buy and sell during normal exchange trading hours.  That means you can have immediate access to your funds upon selling an ETF position during normal market hours anytime you want. In addition, ETFs are generally more cost and tax efficient than mutual funds.”  Bill Poulos

“Research, both academic and experiential, suggests that funds with a large number of holdings establish trends and exhibit reversions to the mean.  By contrast, individual stocks do not exhibit such behavior.”  Gerald Gardner and Trent Gardner

“When you own an individual stock, you are sitting on a financial time bomb.  On the other hand, if you own a broad-based Exchange Traded Fund (ETF) like the S&P 500 SPDRS or the Russell 2000 (small cap), you only have to worry about a general market decline.”  Terry Allen

“However, when trading ETFs, there is a commission cost the same as you would have when trading stocks. There are no minimum buy requirements or holding period requirements common to many mutual funds. In fact you can buy as little as 1 share of an ETF as you would buy 1 share of a stock. And so ETFs are an excellent trading vehicle whereas mutual funds are not.”  Bill Poulos

“Prime Broker: Service offered by major brokerage firms providing clearance, settlement, trading, and custody functions for hedge funds.” Daniel Strachman 

“There are four Direxion leveraged ETFs designed to go up or down three times as fast as the index they track. Direxion Large Cap Bull 3X Shares (BGU), Small Cap Bull 3X Shares (TNA), Financial Bull 3X Shares (FAS), Energy Bull 3X Shares (ERX).”  Jim Van Meerten 

“So that means you can get the diversification that a fund has to offer with giving up the ability to trade in and out of the fund.  This is a big deal, because you can virtually eliminate stock specific risk by trading a basket of stocks within the fund so that if one stock in the fund suddenly drops in price, the negative impact on a position you may have in the fund would be far less than if you had owned a position in the shares of that particular stock.”  Bill Poulos

“The SEC does not allow mutual fund managers to use derivatives or to sell securities short to enhance performance.  Hedge funds can use any legal means necessary to produce results.  Most mutual fund managers are paid on the basis of the amount of assets they attract, while hedge fund managers are paid for performance.”  Daniel Strachman

“Hedge funds are generally referred to as unregulated investment pools.  This may conjure up images of some maverick managers doing as they please.  However, hedge fund managers who take this attitude do so at their peril.”  Paul Roye 

“ETFs include stock sector, country, currency, commodity, bond or other investment objective related funds.  In addition, there are funds that have only short positions and are sometimes referred to as ‘Short’ funds, or ‘short ETFs,’ which will increase in price as the short positions they hold go down in price.  Some funds are leveraged funds, meaning that when the stocks in their funds go up by say 5%, the fund could go up by 10% and short funds whose stocks go down in price by say 5%, could go down 10%.”  Bill Poulos

“Jones’ basic concept is simple: By combining the use of long and short positions coupled with the use of leverage, a manager should be able to outperform the market in good times and to limit losses in bad times.  Today most hedge funds employ the same concept.”  Daniel Strachman 

“However, not all ETFs are suitable for trading as many are thinly traded or too volatile to be considered good swing trading vehicles.”  Bill Poulos

“I believe the best approach to trading ETFs is with swing trading.  Swing trading is a commonly used term to describe any method of trading whose trade duration lasts from a few days to a few weeks using daily charts. Position trading, on the other hand, is any method of trading whose trade duration lasts from weeks to months. The next category would be investing, which is typically viewed as being in a position for months to years.”  Bill Poulos

“He [Jones] believed that management fees would only breed more assets and take away from the concept of performance and induce the fact that you could make more money building assets than through performing according to the model.”  Robert Burch

“In my opinion, investing in a diversified portfolio of mutual funds ranks among the worst possible investments.  The problem with funds is fees.  The longer you invest in a mutual fund, the more you pay in fees.”  Robert Kiyosaki 

“The mutual fund industry has a stranglehold on the average investor that they don’t want to lose. They keep the average guy stuck in ‘long only’ dead-end strategies to spin off their massive fees.”  Michael Covel 

“The historical record is that on a cumulative basis, over three-quarters of professionally managed funds underperformed the S&P 500 Stock Average.”  Charles Ellis

“Performance fees are intended to align the interests of manager and investor better than flat fees that are payable even when performance is poor.”  Unknown

“My peculiarity is that I don’t have a particular style of investing or, more exactly, I try to change my style to fit the conditions.”  George Soros

“Year after year, millions of investors pay mutual fund managers billions of dollars to underperform the market.  It’s one of the investment world’s strangest mysteries.”  Terry Allen

“Performance fees have been criticized by many people for giving managers an incentive to take excessive risk rather than targeting high long-term returns.”  Unknown

“Figure out what something is worth and pay a lot less.”  Joel Greenblatt 

“In an attempt to control this problem, fees are usually limited by a high water mark and sometimes limited by a hurdle rate. Alternatively a ‘claw-back’ provision may be included, whereby the investment manager might be required to return performance fees when the value of the fund drops.”  Unknown

“We’re subject to the same forces of capitalism that have built the entire American economy.  Strong returns induce more capital flow, which creates more competitors, and you have to evolve and get better, or you die.”  Kenneth Griffin 

“Most individual investors would be better off in an index mutual fund.”  Peter Lynch

“If investing is entertaining, if you’re having fun, you’re probably not making any money. Good investing is boring.”  George Soros

“If I plug my estimates into the Magic Formula, and it comes out cheap, that’s good.”  Joel Greenblatt 

“Most investors will find that the best way to own common stocks is through an index fund that charges minimal fees.”  Warren Buffett

“And, if the gold standard is crazy, is it really any crazier than hedge funds?”  Ron Paul

“What follows are some simple steps to crook-proof your portfolio: (1) Don’t invest in something you don’t understand; (2) There is no such thing as a free lunch; (3) Diversify; (4) Don’t stand for no or low disclosure; and (5) Be wary of no-name operations.”  Andy Serwer 

“A hedge fund betting on the outcome of a magic show, how unrealistic! But did you know that there is at least one hedge fund that ‘invests’ in poker players, funding their play and taking a cut of their winnings? So who knows what they will think of next?”  Paul Wilmott

In addition, he is a regular contributor to a number of trading publications and investment/trading websites in North America and Europe: Active Trader; Barron’s Online; CBS MarketWatch; Dow Jones Business News; E-Commerce Quarterly; Investopedia.com; Laffer Economics; Offshore Finance Canada; Offshore Finance USA; Offshore Investment Magazine; Offshore Outlook; Physician’s Money Digest; Reuters; ; SFO (Stocks, Futures & Options); Shoreliner; Shore-to-Shore; Technical Analysis of Stocks & Commodities; The Wellington Letter; Trader Monthly; Traders Mag (Europe); Traders Advantage; TradingEducation.com; Working Money; and many others.

Matt coined the term: “The Pollyanna Paradox” to describe a financial trap that catches millions of investors.

Check out Matt’s quotes.

“Fundamental analysis:  Very powerful in terms of determining long-term direction, but lacks short-term applicability.”  John Forman

“A well-documented characteristic of financial markets is the presence of asymmetric information.  Asymmetric information refers to a situation in which one party of a transaction has information that the other party involved in the transaction does not have.  For example, the managers of a corporation have better information about how well their business is doing than the stockholders do.”  Charles Kirkpatrick and Julie Dahlquist

“Does the company have products or services with sufficient market potential to make possible a sizable increase in sales for at least several years?” David Arturo Chaves
 
“A classic example of the presence of asymmetric information is the Enron debacle in 2000.  The management of Enron knew for years that the fundamental numbers being reported to the public and to analysts were incorrect and were upwardly exaggerated to maintain an artificially high stock price for acquisitions.  The true information was kept inside the corporation and known only by a few insiders.” Charles Kirkpatrick and Julie Dahlquist

“Does the management have a determination to continue to develop products or processes that will further increase total sales potentials when the growth potentials of currently attractive product lines have largely been exploited?”  David Arturo Chaves
 
“I’ve never bought a stock unless, in my view, it was on sale.”  John Neff

“Therefore, several problems exist in the process of information dissemination.  First, in its transmission, the information may be inaccurate.  Second, the source may be intentionally lying, as in the case of Enron executives.  Third, the information may not be disseminated immediately even though it is time-sensitive.  Fourth, there exists a natural lag between when the news is announced and when it is received by the last recipient, during which time the information may have changed.” Charles Kirkpatrick and Julie Dahlquist

“Despite three years of falling prices, which have significantly improved the attractiveness of common stocks, we still find very few that even mildly interest us. That dismal fact is testimony to the insanity of valuations reached during The Great Bubble. Unfortunately, the hangover may prove to be proportional to the binge.”  Warren Buffett

“How effective are the company’s research and development efforts in relation to its size?” David Arturo Chaves
 
“Once information disseminates, the market participants must interpret the information.  This interpretation can be extremely difficult and problematic.  The information may be too numerous and too complex and, thus, not easily or inexpensively interpreted.  The ‘Information Age’ produces an enormous and incomprehensible amount of news and data that is impossible to assimilate.  Often information is vague and its consequences, not understandable.  Not enough precedent has occurred to be able to judge what potential consequences are likely from specific information.  In short, information by itself is unreliable and its interpretation subject logical errors.” Charles Kirkpatrick and Julie Dahlquist

“Does the company have an above-average sales organization?” David Arturo Chaves

“Go for a business that any idiot can run – because sooner or later, any idiot is probably going to run it.” Peter Lynch

“Understand the risks and rewards of trading in different markets.  Look at Market Capitalization (Cap) to get an idea of increased risk as Market Cap decreases.  Market Capitalization is defined as: (1) Mega Cap = greater than $200 billion; (2) Big/Large Cap = $10-$200 billion; (3) Mid Cap = $2 to $10 billion; (4) Small Cap = $300 million to $2 billion; (5) Micro Cap = $50 to $300 million; and (6) Nano Cap = under $50 million.  Trade accordingly.”  Unknown

“Does the company have a worthwhile profit margin?” David Arturo Chaves
 
“While the small and mid-cap indexes have been rising, their P/E ratios have been rising as well.  Whereas the current S&P MidCap 400 P/E is nearly 35, its average P/E since mid-1995 is about 24.  And for the SmallCap 600, the current P/E of 43 compares to an average of 29 going back to 1993.”  Andrew Kashdan

“It’s also risky and possibly foolish to say to yourself, ‘I’m not worried about my stocks being down because they are good stocks, and I’m still getting my dividends.’ Good stocks bought at the wrong price can go down as much as poor stocks, and it’s possible they might not be such good stocks in the first place.  It may just be your personal opinion that they’re good.”  William O’Neil

“What is the company doing to maintain or improve profit margins?” David Arturo Chaves

“It is critical to re-evaluate our responsibilities as investors and stop viewing stocks as a means of getting rich quickly and as executives as the means for making that happen.  Stocks are an investment, and companies need good management, good policies and good product to generate value for investors over time.”  Doug Rogers

“Does the company have outstanding labour and personnel relations?” David Arturo Chaves

“Does the company have outstanding executive relations?” David Arturo Chaves

“The ideal business offers a product which enjoys an ‘inelastic’ demand.  Inelastic refers to a product that people need or desire — almost regardless of price.”  Richard Russell

“Does the company have depth to its management?” David Arturo Chaves
 
“The ideal business sells a product which cannot be easily substituted or copied.  This means that the product is an original or at least it’s something that can be copyrighted or patented.”  Richard Russell

“How good are the company’s cost analysis and accounting controls?” David Arturo Chaves

“The ideal business enjoys low overhead.  It does not need an expensive location; it does not need large amounts of electricity, advertising, legal advice, high-priced employees, large inventory, etc.”  Richard Russell

“Are there other aspects of the business, somewhat peculiar to the industry involved, which will give the investor important clues as to how outstanding the company may be in relation to its competition?” David Arturo Chaves

“The ideal business sells the world, rather than a single neighbourhood or even a single city or state.  In other words, it has an unlimited global market.”  Richard Russell

“Does the company have a short-range or long-range outlook in regard to profits?” David Arturo Chaves

“The ideal business has minimal labour requirements (the fewer personnel, the better).  Today’s example of this is the much-talked about ‘virtual corporation.’ The virtual corporation may consist of an office with three executives, where literally all manufacturing and services are farmed out to other companies.”  Richard Russell

“In the foreseeable future will the growth of the company require sufficient equity financing so that the larger number of shares then outstanding will largely cancel the existing stockholder’s benefit from this anticipated growth?” David Arturo Chaves
 
“The ideal business does not require big cash outlays or major investments in equipment.  In other words, it does not tie up your capital (incidentally, one of the major reasons for new-business failure is under-capitalization).”  Richard Russell

“Does the management talk freely to investors about its affairs when things are going well but ‘clam up’ when troubles and disappointments occur?” David Arturo Chaves
 
“The ideal business enjoys cash billings.  In other words, it does not tie up your capital with lengthy or complex credit terms.”  Richard Russell

“Does the company have a management of unquestionable integrity?” David Arturo Chaves

“The ideal business is relatively free of all kinds of government and industry regulations and strictures  (and if you’re now in your own business, you most definitely know what I mean with this one).”  Richard Russell

“The best investment on earth is earth.”  Louis Glickman 

“The ideal business is portable or easily moveable.  This means that you can take your business (and yourself) anywhere you want — Nevada, Florida, Texas, Washington, S.  Dakota (none have state income taxes) or hey, maybe even Monte Carlo or Switzerland or the South of France.” Richard Russell

“Nothing tells shareholders more about the overall health of a company than a cash flow statement, which details how much cash a business makes from its operating activities.  Cash flow from a company’s operations holds the key to a company’s true performance – precisely why executives don’t want you to see it.  Unlike earnings or revenue, the cash a company creates is just that — cash.  There is no fancy way to fudge it.  Shareholders have a right to know what’s left over after companies pay the bills.  But no law requires CFOs to provide such information in a release.  As a result, many investors who focus on pro forma, or even GAAP net income results, may never realize how badly their companies are struggling to make money.”  Mike Tarsala

“Here’s a crucial one that’s often overlooked; the ideal business satisfies your intellectual (and often emotional) needs.  There’s nothing like being fascinated with what you’re doing.  When that happens, you’re not working, you’re having fun.”  Richard Russell

“The entrepreneur is essentially a visualizer and an actualizer.  He can visualize something, and when he visualizes it he sees exactly how to make it happen.”  Robert Schwartz 

“The ideal business leaves you with free time.  In other words, it doesn’t require your labour and attention 12, 16 or 18 hours a day (my lawyer wife, who leaves the house at 6:30 AM and comes home at 6:30 PM and often later, has been well aware of this one).”  Richard Russell

“People have all this data and they go through it and make up their minds in four seconds, .  .  .  We’re forcing people to do the wrong things.  They look at what’s hot.  They spend so much time trying to figure out if the market is going up.  That’s so unimportant.  It’s about earnings.  They need to follow the earnings.” Peter Lynch

“Super-important: the ideal business is one in which your income is not limited by your personal output (lawyers and doctors have this problem).  No, in the ideal business you can sell 10,000 customers as easily as you sell one (publishing is an example).”  Richard Russell
 
“A great company could be a terrible investment if its price has already more than discounted the bullish fundamentals.  Conversely, a company that has been experiencing problems and is the subject of negative news could be a great investment if its price decline has more than discounted the bearish information.  Fundamentals are not bullish or bearish in a vacuum, they are bullish or bearish only relative to price.” Jack Schwager

“If it’s earnings season then it’s an absolute must that you know the date that your company reports its earnings.  Many traders prefer to be out 100% before a company reports its earnings in case the company misses its earnings or guides lower.  Others I know reduce positions substantially before earnings are released to lower risk.”  Dan Zanger

“It’s selling now at 35 times what they’re going to earn in 1998 and over 25 times what they’re going to earn in the year 2000.  There’s some relationship between what a company earns and what they grow at.” Peter Lynch

“My basic philosophy is that price follows growth and that the key to superb performance in the stock market is picking the companies with the best potential earnings growth.  Everything else is secondary.  Interestingly, the high growth stocks that meet my criteria often sell at extremely high P/E ratios.  The so-called prudent approach of buying only stocks with average to below-average P/Es will automatically eliminate many of the best performers.  The stocks that I tend to buy are also often companies that are not followed by, or only lightly followed by industry analysts, a characteristic that I believe lead to greater inefficiencies and hence greater opportunities.” Richard Driehaus

 “As investors we’re interested in anticipating the performance of asset classes in both real and nominal terms over time in a highly inflationary environment, and the best place to start is with the most ubiquitous “asset” of all – the US dollar.”  Paul Brodsky and Lee Quaintance

“When managing trades in Forex, it is wise to target profit-taking and stop-loss levels based on pips rather than equity. I do not watch equity on my trading platform, only +/- pips.”  Chris Lori

 “Fiat currency is not convertible to precious metal. It has value only because it is declared to be money by government decree, and because it is agreed to have value by all involved individuals, businesses and governments. When a government issues too much fiat money, the value falls and inflation results.”  Gary Scott

 “Currency pairs either move in a trend or within a range.  Once you digest this fact, you will come to the realization that currency price behavior can be understood to a large extent and exploited to your advantage.”  Grace Cheng

“The United States Federal Reserve or ‘The Fed,’ is a privately-owned organization chartered by the U.S. government to create and maintain the U.S. monetary supply by buying Treasury certificates, loaning money to banks, and designating interest rates. If the Fed decides to add to the U.S. money supply it buys U.S. Treasury securities directly from the government or from major banks and brokerage companies. The Fed also makes direct loans to U.S. banks, charging them a specific interest rate, which is the discount rate that determines the rate banks charge customers for loans. To pay for these securities and when making these loans, the Fed writes a check on its own account, but in reality it’s only asset is the assurance of the U.S. government that it will pay the bearer of the securities in full. In effect, the Fed has created money with the stroke of a pen.”  Gary Scott

 “If a currency pair is not moving in a trend, then it must be stuck within a trading range.”  Grace Cheng

 “Fractional Reserve Banking is an economic system for creating money. Banks receive money through deposits by customers, sales of assets, and loans from the Fed.  These funds become reserves, upon which the bank can loan money to businesses and private consumers.”  Gary Scott

“Gross Domestic Product (GDP) is the sum of private consumption, investment, government expenditure, net stock building, and the surplus of national exports over imports.”  Gary Scott

“Gross National Product (GNP) represents the production growth of a country.”  Gary Scott

“In Forex, assuming 1% margin, or 100:1 leverage, we will place up to 10% of available equity on a given trade and risk 0.5% to 4% of available equity, depending on the trade. My records show that if I am winning on 50% of my trades using disciplined equity management that I will be modestly profitable in a moderate to good market environment. If my win rate drops significantly, I will survive a string of losing trades in a poor market environment with strict equity management.” Chris Lori

 “The Money Supply is the rate at which money is growing in a country. If the money supply is growing faster than the GNP, inflation will result.” Gary Scott

“Equity and commodity markets are probably cheap across the globe in nominal terms, as most central banks are inflating their currency reserve bases to keep up with the Fed.” Paul Brodsky and Lee Quaintance

“Currencies with higher rates of inflation will lose value quicker than currencies with lower rates of inflation.”  Unknown

“You can always find out how long it will take something to double by dividing the inflation rate (or interest rate) into 72.”  Gary Scott

“M1 is an economic term that designates the sum of all currency in circulation plus all checking account deposits (short- term deposits).”  Gary Scott

“M2 designates the sum of M1 plus all savings account deposits (short-term time deposits).”  Gary Scott

“M3 is M2 plus all long-term deposits (CD’s).”  Gary Scott
 
“When money is paid out of a checking account and put into a savings account, M1 is decreased and M2 is increased. When money is taken out of a savings account and put into a checking account, M1 increases.  But M2 stays the same because M2 is the total of M1 and all savings deposits.” Gary Scott
 
“A country beggars-its-neighbor when it purposefully devalues its currency, or encourages its currency’s depreciation on foreign exchange markets in order to make products produced in the country cheaper in foreign countries. Devaluing in effect increases sales.”  Gary Scott

“The actual spendable return of an investment, calculated by subtracting the consumer price increase from the total return paid by an investment. Real return is, in a way, synonymous with actual purchasing power gained from an investment.”  Gary Scott

“Real return must be taken a step further when you hold an investment in the currency of a foreign country.  If you intend ultimately to spend your profits in U.S. dollars, you must also factor in your return or loss from foreign exchange.”  Gary Scott

“Whenever a person has a choice between using a currency that has stable, underlying value (such as one backed by gold) and a currency that has no underlying value (such as a fiat currency), the person will always hoard the valuable currency and spend the worthless currency first.” Gary Scott

“Hyperinflation is extreme inflation in which prices rise uncontrollably, threatening to completely wipe out a currency’s purchasing power. The United States has never undergone hyperinflation, but many major currencies of the world have.”  Gary Scott

“Stagflation is a combination of economic inflation and industrial recession, during which consumer prices rise but business output falls. This is often accompanied by rising unemployment as businesses cut back.”  Gary Scott

“For an American investor, diversifying into the Canadian dollar would not give much protection, since it tends to rise and fall much as the U.S. dollar.”  Gary Scott

“Consumer prices are the most immediate indication of rising or falling inflation, because they directly measure the price that consumers are paying for goods and services.  The overall Consumer Price Index contains prices for a wide variety of goods.”  Gary Scott

“Wholesale Prices are a more long-term indicator of rising or falling inflation. When Wholesale Prices move, they tend to affect consumer prices at a later date.”  Gary Scott

“Forex Spread or Forex Cost is the difference between the buy price and sell price of exchanging one currency into another. This cost is built into every transaction or investment that involves foreign exchange of currencies.”  Gary Scott
 
“The Swiss Franc (SFR) is the currency of the confederation of Helvetia, commonly known as Switzerland. Hence the currency is often called CHF.”  Gary Scott
 
“The British Pound (GBP) is called Pound Sterling or just Sterling. The currency of Great Britain, hence the code GBP.  Great Britain is a nation that encompasses four states: England, Scotland, Wales and Northern Ireland. Thus Scottish and English Pounds are one and the same. They are interchangeable and are legal tender throughout Great Britain. Other Pound currencies such as the Manx Pound (issued on the Isle of Man) keep a one-to-one parity with the English and Scottish Pounds but are not legal tender except on their own island. The Irish Pound (which is correctly called the Irish Punt) used to maintain parity, but no longer does so.”  Gary Scott
 
“Currency Allocation is the process of diversifying your investments into several currencies. Most currency allocation tactics first divide an investor’s savings into local and foreign currencies. For example, a U.S. investor would divide his or her portfolio into a U.S. dollar portion and a non-U.S. dollar portion, with a determined percentage for each portion. In times of a rising dollar, one normally weights the portfolio more heavily in dollars. In times of a falling dollar, one weights the portfolio out of the dollar. The second part of Currency Allocation is the choosing of other currencies and foreign investments to hold.”  Gary Scott

 “Although 100:1 leverage is offered in FX, I advise that you trade an absolute maximum of 4:1. It is good to start off trading at 1:2 reverse leverage to build up your equity before increasing risk. We trade on 1:1.2 leverage, or safer, when starting a new portfolio.” Chris Lori

 “Consumer Price Increases are a sign of current inflation. Producer Price Increases are an indicator of inflation that could soon be with us. And Wage/Earnings are an indicator of inflation that could be with us at a still later date.”  Gary Scott

“The ability of banks to issue claims far in excess of their reserve position is essentially regulated counterfeiting when those claims have little or no chance of being satisfied, and it is an inherently cyclical and destabilizing process. The Fed, as US banks’ chief regulator, has not only condoned this imprudent, unsustainable (and Constitutionally-dubious) activity, it has encouraged and abetted it.”  Paul Brodsky and Lee Quaintance

 “The velocity of a currency measures how rapidly the currency is strengthening or weakening. This helps us measure future tendencies of strength or weakness. The velocity of a currency is measured by dividing the currency’s latest value (compared to the dollar) by the 9- month average of the currency’s value against the dollar. For instance, if the 9-month average of the yen is 97.00 (meaning that one dollar buys 97 yen), and the latest value of the yen is 101, the velocity is figured by dividing 101 by 97 (101/97=1.041). Since the yen, at 101, is higher than it had been on average during the past 9 months, the value of the yen is tending to rise, and therefore is a good bet to rise further. Velocities over 1.00 of any currency indicate that the currency may be a good buy. Velocities less than 1.00 indicate that a currency is falling in value and may be a good candidate to sell.”  Gary Scott

“I put a great deal of effort into getting the best entry price possible.  I feel this is probably one of my strongest skills.  In day trading, a good entry price is critical because it buys you time to see how the market will react.  If you buy because you think the market should bounce, but it only goes sideways, you’d better get out.  Part of the trading process is a matter of testing the water.  If your entry timing is good enough, you won’t lose much even when you’re wrong.” Linda Bradford Raschke 

““A good exit is more valuable than a great entry. Emotions usually run high at both reward and risk targets. So take a deep breath and clear the mind before closing out a position.” Alan Farley

“Your trading system must be easy to follow and by that I mean the rules and entries cannot be too complicated and in this day of electronic trading should be able to be implemented with any standard trading platform.  Part and parcel of this is that there cannot be conflict within a system regarding orders for the next trade.  In other words, it can’t give a buy price and short price right next to each other.  In order to pull the trigger, you must have clear entry and exit signals without conflicts.  Clarity of your trading rules is also critical and the system must be back-testable.  If you are not able to backtest it, it may be because the rules are not clear enough but in any event, you don’t have a system.” Larry Williams

“Careful entry bridges the gap between the setup and the trade. This is the door through which you take on monetary and emotional risk. There are many ways to time the market, but three strategies work for most swing trades. First, enter a breakout or breakdown after it’s under way. Second, wait for a pullback and enter near support/resistance. Third, buy or sell within a narrow range before the move begins.” Alan Farley

“Chasing momentum can work if traders choose their plays wisely and pay close attention to two important rules. First, always establish your risk before making the trade. Choose a flat stop-loss percentage, or use a pattern in a lower time frame to signal when the trade goes against you. Second, make sure the broader market offers adequate support for your strategy. Momentum stocks benefit from momentum markets.” Alan Farley

“Many traders believe they’re too late when they stumble across a breakout in progress. In fact, they’re often too early. Many times you’re better off standing aside and waiting for the market to reverse, rather than jumping in with the crowd. Pullback entry is a very powerful method because it uses the eager capital of those who missed the first move. But the trick is to get into the trade before they do, and let their enthusiasm carry you into a profit.” Alan Farley

“Narrow range entry confuses many traders, but the theory is simple. Common sense dictates the best time to enter a new position is just before a breakout or breakdown. Narrow range uses characteristics of low volatility to identify when conditions are ripe for a big move. The trader enters at a tight price level and waits for a move to begin. The advantage is that the position can be exited for a small loss if the market breaks the other way.” Alan Farley

“Congestion patterns, such as triangles, often look like coiled springs. Paradoxically, this wound-up appearance predicts the return of rapid price movement. Traders can use classic indicators, such as historical volatility, to identify trigger points for this movement. But a better way is to locate narrow range bars and declining volume right at key support/resistance levels. Enter the trade here while everyone else gets ready to chase the breakout or breakdown.” Alan Farley

“It’s easy to get into the market, but what about getting out? Most traders don’t have an exit plan, whether their positions are turning a profit or going down in flames. The truth is that a good exit will save your neck on a bad entry, and keep you in the game longer than good stock-picking.”Alan Farley

“People started to pat me on the back and say great call: however, like most traders, I am very superstitious about congratulations on trades that haven’t been booked yet, as keeping a clear head and following a plan is key to success.  I had to constantly tell myself not to get greedy and to follow my plan to take profits at my downside target.”  John Netto

“Exit planning must deal with the good, the bad and the ugly. In other words, keep a profit protection strategy to exit winning trades, a stop loss strategy to get out of bad ones and a fire drill in case disaster strikes. You’ll need all three tactics in every trade, because anything can happen once you hit the order button.” Alan Farley

“Your holding period guides the profit side of the exit equation. Always seek the reward target that matches your time in the market. In other words, trade the most profitable move from your entry to the target within the time frame that you’re long or short the stock. This lets you apply both a time- and a price-based exit strategy to your winners.” Alan Farley

“A time-based exit strategy requires little interpretation. Focus on your holding period’s time window rather than the price action. Exit the trade immediately when price hits the reward target at the right time. Exit the trade before price hits the reward target if the window starts to close. The trick with time-based strategies is to look for the best price available within the chosen window.” Alan Farley

“Most traders should start with a price-based exit strategy. For example, you enter a long position, and it moves into a profit. It rallies at a moderate pace and hits your reward target within the holding period. You exit the trade ‘blind’ at the reward price. This means you take the money and go, without considering the current price action.” Alan Farley

“Start by focusing on trends within shorter-term time frames. For example, when trading a daily chart, manage profit and loss using a 60-minute chart whenever possible. The shorter-term pattern will tell you when to move the stop in order to protect profits, or when to exit the trade entirely.” Alan Farley

“Let’s outline common stages for a long position that eventually reaches the reward target: (1) Price moves into a profit; (2) Price reaches first resistance, and reverses; (3) Price finds support and rallies through first resistance.  This action/reaction continues until price reaches the target. In this scenario, trade management requires a breakeven stop as soon as price moves into a profit. This stop should be moved up after the first reversal, but stay below short-term support. When price finally rallies above first resistance, move the stop just below this new level. Continue the process until the position hits the reward target.” Alan Farley

“At this time, I really started to understand the time frames of the market.  I began to see that the bigger time frames ruled the smaller time frames, and that in order to have successful short-term trades, the larger time frame has to be in your favor.”  Tim Ord

“Profits are nice, but many trades go haywire right away. The exit strategy is very simple in this situation: get out as soon as price breaks support on a long trade, or resistance on a short sale. This may sound simple, but there are two problems. First, many of us lack the discipline to take losses when they should be taken. Second, many of us don’t understand how to place stop losses in the first place.” Alan Farley

“Take your loss when the market says you’re wrong. Every setup has a trigger that violates the pattern you intend to trade. Identify this price in advance, and place your stop just behind it. Remember that this magic number changes dynamically with each new bar, so you need to adjust it often. But don’t remove it under any circumstances.” Alan Farley

“Do you get frustrated because your stops get hit frequently on good trades? The fault lies in your analysis and trade management, not in the stops themselves. Many traders believe they can improve their performance by placing stops where they shouldn’t go. Every stock will violate support/resistance up to a point before reversing. Your analysis must consider the stock’s underlying volatility, so the stop can be placed outside this ‘market noise’.” Alan Farley

“Finally, you need a way to deal with unexpected bad news. Start with a panic drill, and practice it over and over again in your head. The exit strategy is simple: If you can beat the rest of the crowd out of the door, act immediately. The after-hours market can save you a fortune if you learn to use it wisely. If you can’t escape right away, watch price action closely and take your best shot. The market can do anything it wants once bad news hits, and you may need to accept a large loss.” Alan Farley

“Sudden losses are a cost of doing business as a trader. Full disclosure rules and external events will impact your bottom line from time to time. Reduce your risk by choosing lower-volatility stocks to carry over longer time periods. Avoid holding anything through earnings reports or terrorist threats. Remember, it’s not hard to rebuild profits after the unexpected takes a bite out of your bottom line.” Alan Farley

“Almost every trade can be divided into three distinct parts: First, there is the STD [Start Trade Drawdown] leading down to the low.  Then there is the actual money-making phase, leading up to the high.  Finally, there is the ETD [End Trade Drawdown], leading down to the exit level and the final profit.”  Thomas Stridsman

“All systems have drawdowns.  You can’t have a profitable methodology, without taking some calculated risks as well as some losses.  Turtle trading drawdowns are a function of the risk level desired.  Risk level among Turtle traders varies depending upon the size of the profit they seek.  For example, if you sought 100%+ a year gains you must be prepared for the possibility of a 30% drawdown.  Anyone who promises you can make 100%+ with only the possibility of a 5% drawdown is lying.”  Michael Covel

“The negative aspects of long-term trading usually include a low percentage of winners, long-term market exposure (and the accompanying inherent risk of being in the markets), and the need for a greater starting equity because more capital is required to live through the longer and deeper drawdowns that are typical of this type of trading.”  D. R. Barton

“Depending on what type of entry technique you are using, many of your trades will experience a start trade drawdown (STD) before they start going your way.  This is especially true for short-term top and bottom picking systems, where you enter with a limit order.  In this case, the only way to avoid an STD is to enter at the absolute low or the absolute high, and how often will that happen”  Thomas Stridsman

“Day traders have several things going for them, as well.  Their high frequency of trade typically results in a smoother equity curve with lower drawdowns.  Day traders have lower risk levels (because they do not hold trades over night) and are afforded higher leverage as a reward for this reduced risk.  Successful day trading systems typically enjoy higher winning percentages than longer-term systems.” D. R. Barton

“In answer to a question on Maximum drawdowns, there are two popular definitions: The first is the amount lost by a string of consecutive losing trades before a winning trade is experienced.  The second is a subtraction of the highest equity level in your account minus the lowest equity level in your account, the difference being the max drawdown.” Walter Downs

“Ralph Vince, author of The Handbook Of Portfolio Mathematics, studied the correlation between various tradeables.  He found that over long time frames, the price of gold and crude oil show little tendency to move together – one zigs when the other zags – which leads to slow but steady profits in theory.  However, on days with very large moves in the stock market, these two futures usually trade in the same direction as the other, with both losing or gaining a notable amount based upon the news driving the move in stocks.”  Mike Carr

 “So when the Dow Jones Industrial Average (DJIA) falls 3% in a day, almost all stocks go down in price and diversification does little to limit the damage to your portfolio.”  Mike Carr

“U.S. Dollar-Gold: The gold market and the dollar usually trade in an inverse relationship. This has been the case for many years. During times of U.S. economic prosperity and lower inflation, the dollar will usually benefit as money flows into U.S. paper assets (stocks and bonds), while physical assets (gold) are usually less attractive. Conversely, during times of weaker U.S. economic growth, higher inflation or heightened world economic or political uncertainty, traders and investors will tend to flock out of ‘paper’ assets and into ‘hard’ assets such as gold. Inflation is a bullish phenomenon for gold.” Jim Wyckoff

“U.S. Dollar-U.S. Treasury Bonds: Usually, a stronger dollar means a stronger bond market because of good demand for U.S. dollars (from overseas investors) to buy U.S. T-Bonds. T-Bonds are also seen as a ‘flight-to-quality’ asset during times of economic or political instability. In the past, the U.S. dollar has also benefited from ‘flight-to-quality’ asset moves. However, since the major terrorist attacks on the U.S. and the resulting damage to the U.S. economy, the safe-haven status of the ‘greenback’ has been much less pronounced.” Jim Wyckoff

“Crude Oil-U.S. Treasury Bonds: If crude oil prices rally strongly, that is a negative for U.S. T-Bond prices, due to notions that inflationary pressures could reignite and become problematic for the economy. Inflation is the arch enemy of the bond market. Rising crude oil prices are also bullish for the gold market.” Jim Wyckoff

“CRB-U.S. Treasury Bonds: The CRB Index is a basket of commodities melded into one composite price. A rising CRB index means generally rising commodities prices, and increasing inflation. Thus, a rising CRB Index is negative for U.S. Treasury Bond prices.” Jim Wyckoff

“U.S. Stock Indexes-U.S. Treasury Bonds: Since the bull market in U.S. stocks ended just over two years ago, stock index futures prices and U.S. Treasury bond futures prices have traded in an inverse relationship. When stock prices are up, bond prices are usually down. However, during the long bull market run that preceded the current bear market, stock and bond prices traded in tandem. In fact, years ago, before all the electronic overnight futures trading had begun, the best way to get a good read on how the stock indexes would open was by early trading in the T-bond market. (T-Bond trading opens 70 minutes before the stock indexes).” Jim Wyckoff

“Silver-Soybeans: This corollary may be more fiction than fact, at least nowadays. But during the ‘go-go’ days of soaring precious metals and soybean prices, it was said that if soybean futures would lock limit-up, bean traders would buy silver futures.” Jim Wyckoff

“Cattle-Hogs: The point to mention here is that if strong price gains or losses occur in one meat futures complex, there is likely to be somewhat of a spill-over effect in the other meat complex. For example, sharp losses in the cattle or feeder cattle futures will likely weigh on the hogs and pork bellies.” Jim Wyckoff

“Currency Futures-U.S. Dollar Index: Most major IMM currency futures contracts are ‘crossed’ against the U.S. dollar. Thus, when the majority of the currencies are trading higher, it’s very likely that the U.S. Dollar Index will be trading lower. It’s a good idea for currency traders to keep a watchful eye on the U.S. Dollar Index, as it’s the best barometer for the overall health of the U.S. dollar versus major foreign currencies.” Jim Wyckoff

“U.S. Stock Indexes-Lumber: Lumber is a very important commodity for the U.S. economy. It is literally a building block for the nation. If the stock market is sharply higher, lumber futures prices will be supported. A big sell off in the stock market will likely find selling pressure on lumber futures.” Jim Wyckoff

“N.Y. Cocoa-British Pound: London cocoa futures trading is as important (or even more important) than New York cocoa futures trading, on a worldwide basis.  London cocoa futures trading is conducted in the British pound currency. Thus, big fluctuations in the pound sterling will impact the price of U.S. cocoa futures, due to the cross-currency fluctuations of the British pound versus the U.S. dollar. Keep in mind there is constantly arbitrage taking place between the New York and London cocoa markets, and thus the currency cross-rates between the pound and the dollar are very important.” Jim Wyckoff

“Grains-U.S. Dollar Index: A weaker U.S. dollar will be an underlying positive for the U.S. grain futures markets because it makes U.S. grain exports more competitive (cheaper prices) on the world market. Larger-degree trends in the U.S. dollar will have a larger-degree impact on the grains.” Jim Wyckoff

 “The buy and hold approach minimizes costs and allows the investor to participate in the long-term growth of a quality company ‘plus’ any change in its market valuation relative to its intrinsic economic value ‘providing’ they have purchased the shares at a significant enough discount.”  Randy Befumo

“Buy and hold is a scam promoted by Wall Street for the gullible, and would you believe most people still accept this notion?”  Michael Gibbons

“In a bull market your game is to buy and hold until you believe that the bull market is near its end.”  Jesse Livermore

“The buy and hold approach should focus on selecting quality companies with current market values that are at a discount relative to their underlying economic value. By accumulating these issues selectively over time and holding them, an investor minimizes transaction costs while maximizing the possibility of enjoying the long-term returns generated from the business.”  Randy Befumo

“They got conditioned like lab rats to buy stocks because of the propaganda they got from an industry that makes money by getting people to buy the stocks they and others are selling.”  Michael Gibbons

“Since short-term market movements have always been difficult to predict, you should focus on the long-term direction, which has been decidedly upward over time.”  Unknown