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Probably, there is no such trader who would not dream of a win-win strategy in the Forex market. About a strategy that will make all transactions profitable, probably, everyone dreams. But is it real?
After all, every player on the market has his own strategy, his methods of analysis. In addition, absolutely successful players in the Forex market do not exist. All sooner or later they suffer losses, but someone in time manages to close the deal or change the trend, but someone does not. From this, in fact, the size of losses depends.
However, they lose everything, and this proves once again that the ideal win-win strategy of Forex is a myth. Beautiful, desirable, but, alas, non-existent. The key to success in earnings on the difference in exchange rates is knowledge and the ability to analyze and predict the changing situation. In order to earn necessary to master the skills of fundamental and technical analysis of Forex. We need to carefully monitor the development of the trend and be able to leave the game in time.
Only this approach will allow you not to drain immediately all your deposit. Of course, much depends on luck, but only with the knowledge it can bring you profit. Each trader should have his own strategy based on experience and knowledge, and if you increase your deposit every month by at least 10%, then your strategy is a success.
Foresee the behavior of the Forex market is not easy enough, however, relying on technical analysis and signal indicators to do this is possible. Your win-win strategy is the knowledge and ability to systematically increase your deposit. And if you do it, then you should stick to your tactics with small adjustments to the specific situation.
Forex is quite a dynamic market, so an ideal strategy, suitable for all situations, simply can not exist in nature. And all the proposals to acquire the ideal strategy for a symbolic, and sometimes very serious fee, which today is full of the Internet – just a fiction. Trade is something that simply does not exist.
The ideal strategy is to maximize profits, and reduce losses to a minimum. And each trader has his own approaches to implementing this strategy.
Experienced traders in the Forex market basically use one or several of the most successful strategies for trading. Naturally, at the same time they rely on certain trading signals to make decisions, and they also constantly analyze the current situation on the market. However, no matter how experienced the player was, the so-called “human factor” often plays a big role, which can seriously hamper even the most experienced businessman.
So, for example, strong emotions, experiences, stress, poor overall physical well-being – all this negatively affects the effectiveness of the trading day. In addition, for a thorough analytical work a person can take more than one hour, while a smart program can process a large amount of information in a split second and make the right choice.
That is why automatic trading has a number of undeniable advantages in trade. Nevertheless, once it is worth mentioning that as there is no easy money, there are no ideal trading “robots” that can endlessly lead their owner to profit. The only difference between programs is that the risks will be somewhere greater, somewhere less.
So, as already described above, automatic trading is able to significantly minimize the emotional factor. Since the program “draws conclusions” on the basis of dry statistical data and makes deals automatically, there can be no question of any doubts and hesitations.
It is also worth noting that the most profitable programmed strategies are of an “authorial” nature. Therefore, resorting to the “services” of the program, which is in the public domain, it is best not to count on momentary fabulous profits. Of course, they will, but with a private strategy to compete in efficiency they will be very difficult. That is why relatively new market players who have come seriously and for a long time, it is best not to rely on the Russian randomly and a clever program that “already knows everything”, but to conduct an independent study of the market, its rules, trends and at least roughly imagine from which economic factors-indicators, will depend on the success of transactions. Moreover, their own programs, traders can test without losing real money. This approach will allow the player to constantly use successful tricks of trade,
Thirdly, many in the heat of the struggle for a bright financial future on Forex forget about one of the main successes in trade – planning. Traders who do not comply with trade rules can significantly violate any positive dynamics of development. While automatic trading demonstrates the iron discipline, observing a predetermined balance between profit and loss, and is also able to stop in time, in contrast to the “live” player.
Thus, automation of the trading process is an excellent way for more or less experienced players who can soberly assess potential risks, costs and other factors, so they can receive a stable profit based on their personal developments. While with the novice on the market, the robot program can play a cruel joke, solely because of the lack of knowledge about the fundamentals of the currency market.
Trading in the Forex currency market can be either manual or fully automatic. The possibility of automatic trading appeared relatively recently, with the development of the well-known trading platform Meta Trader 4, and in particular with the development of the Mql4 programming language. The concept of auto Forex trading implies fully automatic trading, which boils down to control over the work of an adviser. The Meta Editor terminal editor will allow you to fully automate the trade using a simple language that everyone can easily master.
Advisors can fully or partially automate the actions of the trader. The advisor may ask the trader for confirmation before opening the position. And it can open and close deals absolutely independently. In addition, the development environment called Meta Editor allows you to create scripts on your own. There is a huge variety of various scripts, with their help, for example, you can open multiple SELL orders with a single click of a mouse with a certain volume. Or close all profitable orders, but at the same time keep all unprofitable open, giving them a chance to go into a plus.
With the help of scripts, advisers and indicators of auto Forex trading is available even to a person who is far from the foreign exchange market. A small problem is that some brokers are against automatic trading, so when choosing a dealing center, you need to find out this issue. Even supporters of manual trading use indicators and advisers, which facilitate the process of trade and take on the performance of routine duties. You can write scripts yourself, but if you do not have the necessary knowledge, then you can use the ready-made options.
Advisors have long proven their right to exist, they are actively used by the vast majority of traders. The undoubted advantage of automatic trading is the lack of the need to trade independently. With all the duties an advisor will manage, and you can only control his work. Also, the fact that you can trade in parallel with the adviser makes you happy, thereby increasing efficiency and increasing profits. But it is worth remembering that even proven and effective advisers sometimes give a drawdown.
Where to go and where to start? To begin with, you need to contact the broker and open a brokerage investment account.
To begin with, you need to determine: what amount do you intend to trade and what type of investors do you consider yourself to be. What is the expected size of commercial capital and what is the period of the alleged retention of the position. These are very important parameters that allow you to immediately cut off unsuitable brokers.
Choosing a Trading Platform
The next question to be answered is on which trading floors and with what securities are you going to work?
section of the MICEX stock market,
section of government securities MICEX
section FORTS Exchange RTS,
Stock Trading Section of RAO Gazprom Stock Exchange Sankt-Pererburg,
a section of guaranteed quotations (RBS) of the RTS Stock Exchange
There are a number of other sites (including regional ones) where securities trading is also possible via the Internet, but due to the lack of market liquidity, these opportunities are not of practical importance.
Web-interface or trading terminal?
The next important criterion is the software used to bring customer requests to the market. There are two ways to output client requests to the market via the Internet. The first, the simplest and most reliable way is trading through an interface based on a standard Internet browser (MS Internet Explorer or Netscape Navigator). Such a brokerage service uses standard Web technologies and a secure communication channel formed during the client session, which allows to ensure both the secrecy and the integrity of client transactions. This technology does not require the installation of additional software and can be used from anywhere from any computer connected to the Internet. This technology is ideal for most investors who are not doing their trades too often,
Another way to bring orders to the market is to use a special program installed on the user’s computer as an interface. The installed program, called the trading terminal, allows you to connect to the trading gateway of the exchange through the broker’s server and carry out operations with just one click of the mouse button. Such trading platforms are designed for active players on the exchange, they are quite numerous and require special installation and configuration.
Insurance – it’s not superfluous
The next question that will help reduce the list of possible brokers is the reliability of the broker and the risk that you take on yourself by opening a brokerage account with this particular broker. Therefore, a broker who really cares about his customers, firstly, insures their accounts in insurance companies, and secondly, at the request of the client, can additionally insure his account for more than the standard amount. Of course, this measure, although it is worth the extra cost, increases the reliability of the broker.
Your own or someone else’s depositary?
An important issue when choosing a broker is the availability of additional licenses for the depositary activity. A broker who does not have a depositary license can not store securities of clients. The securities in this case are kept in an independent depository. An independent depository reduces the risks of the client, since it itself is subject to fewer risks than the broker. By definition, an independent depository, as a commercial enterprise, leads a less risky business than a broker, and is less exposed to market conditions.In addition, an independent depository completely eliminates the risk of possible arbitrariness of the broker in the possession of the securities of its clients. Thus, storing securities on the side allows the client to feel more secure about the possibility of a bankruptcy of the broker and unauthorized use of client papers.
And one moment
We do not believe that the level of commission should be the determining criterion when choosing a broker for a novice investor. The fact is that in a modern, very competitive environment, the rates of different brokers are rather close and depend more on the volume of the client’s trading. In addition, tariffs have the property to change from time to time and not the fact that a broker with a worse tariff today will not offer the best tariff tomorrow. Nevertheless, the tariffs should also be paid attention when choosing a broker.
A great popularity when trading on the Forex and the Exchange have automated trading systems (MTS), which make independent trade decisions when trading in the foreign exchange market and the exchange. The idea of using a trading robot to generate profit automatically, without the intervention of a trader, looks very tempting. However, many novice forex traders do not even guess how many problems they can face by buying such a trade advisor on Forex on the Internet.
If the forex advisor traded well on history, it is not a fact that he will bring you profit on-line.
Programmers are also people who “earn their bread on the Internet”.
It happens that many authors of such advisors are not even traders. What for? The history of trading on the terminal of any currency pair of forex is taken and the criteria for the “miracle of the adviser” are adjusted to it:
⦁ if in the market the flat-adviser works in the flat (looking for the peaks of the waves to open the transaction in the opposite direction);
⦁ if the market trend – looking for a peak of a rollback for opening trades on the trend.
How many percentages of “earnings” you need on such a “miracle advisor” that you buy it? 100% per month? 500% per month? 1000%? Easily. A programmer with many years of experience in programming and little experience working in forex – making such an advisor is not so difficult. Only to you from him to work in the forex market will not be any.
How to expose such a fraudster programmer? For pros it’s pretty simple – ask questions:
⦁ about the criteria for the transition of the trend in the flat and back in the forex market, laid in the adviser.
⦁ ask why the adviser works on one currency pair and does not approach other currencies.
⦁ find out what discoveries the forex market was made personally by this “trader” (part-time programmer) and what are the features of its trading system.
⦁ what are his achievements at the world championships in auto-trading (his “miracle of the adviser”).
⦁ read on the Internet reviews about this trader or his adviser.
⦁ find out how many brokers – “kitchens DC” exposed this “miracle adviser” and where about it read on the Internet.
⦁ Does he conduct on-line trade lessons on this adviser. How long. What successes of his students.
Summary: programmers are also people, and after such detailed interrogation most programmers will refuse to sell their “miracle advisor” themselves under one or another motive. What for? Naive novices who believe that buying an “Internet expert” miracle can make him a millionaire is enough to contact a trader who is versed in the forex market.
It is a problem of successful automated trading advisors with Forex brokers.
Many forex brokers use advisors to limit the consequences of which may even be non-payment of profits and cancellation of transactions. How can a trader avoid automatic trading traps?
As experience shows, the dealing center has many ways to “control” the work of an excessively profitable advisor, which is what a number of DCs have that have such capabilities:
⦁ The dealing center can block the work of the adviser at any time;
⦁ DC has the ability to reconfigure a highly profitable advisor;
⦁ DC can cancel the transaction under the pretext of a non-market price (for example, at the peak of a candle);
⦁ DC can prohibit one or a group of traders from working as advisers;
Reasons for prohibiting the automatic trading of a too lucrative advisor can be very different.
It is important to understand that any adviser must be adapted to the trading conditions of your broker before launching, tested in history and must conform to your trading style. A mandatory requirement is compliance with the rules of the company’s trading operations. It may prohibit trade advisors, whose algorithm is built on the use of trade and technical errors.
Advisors should be used, since the main problem of most traders is eliminated – psychology, but the work of advisors needs to be controlled, since the robot is limited by the embedded algorithm and is not able to adjust to the changing volotility of the market.
Well, a disciplined trader, consciously working on the trading system and a “feeling” market, always surpasses any trading robot and one should strive for this.
All experienced traders use Forex trading strategies in their work. Some, the most experienced, develop strategies for themselves. This is quite a labor-intensive process, and it is not as easy to develop an optimal and profitable strategy as it might seem at first glance.
There are many strategies that are classified according to the most diverse characteristics. One of the classifications is based on the use of indicators in the strategy.
Accordingly, allocate Forex strategies without indicators and strategies based on indicators. At the heart of the latter lie either fundamental or technical indicators. And in the work of the second indicators are not used at all. The basis of such strategies is the analysis of the schedule and currency quotations. These strategies are universal, they are great for players who prefer long-term transactions and for fans of short-term deals. The most optimal strategies without indicators are suitable for those traders who prefer to work with the market directly.
The category of such strategies includes strategies based on the analysis of currency quotations, graphs and waves. Also here it is possible to carry positional systems and strategies that work with tics. These include the following most common strategies:
⦁ A strategy based on the analysis of resistance and support for a currency pair;
⦁ Strategies based on scalping;
⦁ Strategies based on the Martingale method;
⦁ Ordinary price strategies;
⦁ The so-called “Inner Bar” strategy.
As already mentioned above, the main advantage of strategies of this type is their universality. But in general, it is recommended to have in the arsenal of several trading strategies, one of which will be optimal in this situation. And it is desirable that the strategies chosen by the trader belong to different types. After all, strategies are based on a variety of algorithms and methods, and if you use different strategies for analyzing one particular situation, then the probability of making the right decision significantly increases.
Forex strategies without indicators are universal, but they do not provide a comprehensive analysis of the situation on the market. And that’s why one type of strategy can not be fully trusted, but it’s worthwhile to have several different plans in service.
The only goal that unites all traders of the Forex currency market is to extract the maximum profit. You can have a stable profit from transactions in the foreign exchange market, but for this you need to use Forex trading strategies . There are several ways to get strategies.
The first is to independently develop a successful model of behavior in the foreign exchange market. This method is not suitable for beginners, they can only be used by experienced players who in detail have studied all the subtleties and nuances of working in the foreign exchange market.
The second option is to take advantage of the already existing strategy, choosing the best option, corresponding to your trading style and deposit size. The only sure sign of a successful trading strategy is the positive balance of the deposit, and therefore each trader has his own successful strategy. Conventionally, Forex strategies can be divided into three categories, depending on the basis on which their principle of operation is based. Allocate fundamental forex strategies, strategies based on indicators and strategies that do not use indicators in their work.
At the heart of fundamental strategies lies the fundamental analysis of the market and global factors that can influence the exchange rate. Such strategies are especially effective when concluding long-term transactions in the foreign exchange market. The most popular strategies of this type include:
⦁ A trading strategy based on key news;
⦁ Strategy on Wednesdays for the currency pair AUD / JPY;
⦁ The carry trade strategy;
⦁ A strategy based on gaps.
The strategies on the indicators are based on the use of a variety of graphical indicators of the currency market. Modern trading platforms greatly simplified the use of this type of strategy. These strategies are based on technical analysis and are perfect for fans of short-term deals. The most popular Forex trading strategies of this type are:
⦁ Strategies with the intersection of two moving averages;
⦁ Strategies with MACD divergence;
⦁ Strategies with an oscillator;
⦁ Strategies based on a combination of stochastics and SS.
Each player has his own tactic and strategy, however, there are some free forex strategies that are worth taking into account. First of all, they include trade in graphic models and patterns.
The strategies of this type are based on methods of graphical analysis of the Forex market. This strategy uses a chart of the exchange rate for a strictly defined period of time, corresponding to the period of the selected trading system. The chart is divided into repeating figures. Then the trader assumes which of these figures will be repeated in the future. Then you need to analyze the current section of the chart and try to determine its behavior in the future, based on the available data on its behavior and development in the past. The most effective of these strategies is the Elliott wave analysis.
There are also strategies based on technical analysis. With such strategies, technical indicators and their aggregate analysis are widely used. You can analyze them and singly, but this method is not effective enough. Indicators can be divided into leading and lagging indicators. Their cumulative analysis brings brilliant and accurate results. At the moment, there is a sufficient amount of literature on technical analysis, so the study of this issue is not difficult.
There are also free Forex strategies based on Japanese candles. This type of strategy is very popular now, and in combination with other strategies is also effective. This method is based on the method of plotting sections of the chart during the trading session. Analysis of units on the chart in the form of Japanese candles is the prediction of the next unit of the graph.
The next type of strategy is based on the methods of capital management. After all, absolutely any trading strategy is doomed to failure, if you do not take into account the size of the available capital at the moment. This type of strategy is based on mathematical analysis and probability theory. It is recommended to use it together with other strategies. The most popular method is Martingale’s method.
The hedging strategy is also quite relevant. This tactic involves reducing possible risks. And the risk, as a rule, decreases in parallel with the probability of obtaining a large profit. However, this method justifies itself.
Dear investors, in this edition we decided to include interesting, in our opinion, information for everyone who starts to try their hand at the stock market. Of course, those who were already interested in the history of the formation of stock exchanges, met stories about the greatest financiers of the XIX-XX centuries in various books of different authors or found information on the Internet. We also decided to devote this chapter to small stories from the life of unique professionals who worked in the stock markets of the world.
This chapter was included in the book to introduce you to people who have achieved the highest success in finance and become legends. Perhaps the success stories of these people will help to derive their Law of Success. We do not dare to classify, analyze the life and work of these people, but knowing the history of their lives will allow us to understand the philosophy and methods (approach to business) of their work and, possibly, to find a way to develop their talents, and also to work out tactics (strategy) of work on the modern stock market. Analyzing the personal qualities of the great world of finance, you can not only study them, but also consider yourself. We hope that these stories will help you navigate the modern stock market.
George Soros is a relatively recent phenomenon on the political horizon. Until 1980, this man was not known outside of Wall Street. His connections were limited to the stock exchange. The more interesting is his way, forms, methods and results of both charitable and financial activities. So, we bring to your attention George Soros (nee Derdi Shorosh).
When Soros was awarded an honorary degree in Oxford, when asked how he should be represented, he replied: “I want to be called a financial, philanthropic and philosophical speculator.” Honorary doctor can not refuse a sense of humor. By the way, this feature plays not the last role in this field.
The future financier was born in 1930 in Budapest. His father, a lawyer by profession, was from Russia, survived the October Revolution. In 1947, the family moved to the UK. Here George graduated from the London School of Economics and in 1956 moved to the United States, attracted by opportunities that opened up there for entrepreneurship. His future business “future king of the world’s speculators” began as an exchange broker, playing on the difference between the courses of the New York and London stock exchanges. It did not give big capitals, but he acquired useful experience and connections. In 1961, having obtained American citizenship, Soros began work on the creation of the investment “Quantum Fund”, which became the core of the system of high-yielding funds “Quantum groups.”
These structures were engaged in forecasting market fluctuations in different parts of the world, quickly bought up and sold local currency. Each thousand dollars, invested in “Quantum”, gave by 1994 2 million dollars. Super profits came at the expense of super-risk. For example, once, playing golf, Soros heard that the US-Japanese relations became more complicated. He immediately gave the order an hour and a half before the closing of the exchange to sell the entire package of shares of Japanese companies. The broker begged him to change his mind, to consult with experts, but Soros remained adamant. And won!
The next day, the government imposed restrictions on trade with Japan, and the stock price collapsed. His winnings were huge.
He often won for his clients. And so skillfully and for a long time that by June 1981 from the magazine “Institutional investor” he was awarded the title “The world’s greatest manager of capital.” As a rule, the world of finance is considered rational, and the stock price is necessarily inherent in internal logic. It is necessary only to comprehend this logic, and then you will get rich! Soros considers the world of finance to be rather unstable, and even chaotic. Soros is convinced that mathematics does not rule financial markets. They are ruled by psychology, or rather herd instinct. It is worthwhile to understand, when the crowd rushes behind this or that share, currency or raw materials, and luck itself will find the investor. The prices for stocks, bonds and currencies depend only on people who buy and sell them. In turn, traders often act under the influence of emotions, and not in accordance with the previously adopted trade strategy.
This is in short the theory of George Soros. It remains to add that no one has succeeded so long in the financial markets, like him. Neither Warren Buffett, nor Peter Lynch, nor even D. Gunn, whose history it is time to move on.
“You need to comprehend the chaos, and then you will get rich!” George Soros
Sometimes, he suffered losses: during the stock market crash in October 1987, he incorrectly estimated the trend in the stock market. Then he lost 300 million dollars. His further actions were to reduce losses to a minimum. In 1998, Mr. Soros lost $ 2 billion in Russia
William Delbert Gunn
Delbert Gunn is the greatest man ever seen on Wall Street.
He went down in history, and his methods are still used by successful traders all over the world. No doubt, Gann’s name is legendary in the stock market.
William Delbert Gunn was born June 6, 1878 on a farm in Texas. In his family there were 11 children, they all lived in a very small house without any frills. Young Willy spent three years attending school in Lafkin for seven miles and dreamed of becoming a businessman. But since the work he could perform on the farm was more important for the family, William never graduated from primary or secondary school. As the eldest son, he was given special responsibility, and those years of work on the farm may have initiated his habit of working hard. Several years later, William began working at a brokerage office in Texarkana, and in the evenings attended a business school. In 1903, at the age of 25, he made a fateful move to New York, where he began to trade on the commodity and stock exchanges. In 1908, he opened his own brokerage office “V.D. Gunn and Co.. “(WD
Using his method of technical analysis, Gunn earned more than $ 50 million in profits on stock exchanges! In today’s markets, this would be about $ 500 million! After many decades of incredible success, Gunn moved to Miami, Florida, where he continued his studies until his death on June 14, 1955.
Gann based his methods of trading on “time” rather than “price”, like many of today’s systems. This allowed Gann to determine not only when the trend changes, but also the best price for entering or exiting the market. Gann’s methods were so precise that, in the presence of representatives of the main financial public, he made 286 transactions during 25 trading days in both long and short positions. Of these, 264 transactions were profitable!
In 1933, Gunn made 479 transactions during the year, 422 – were profitable. The return on its capital was about 4000%. In most cases, Gann gave in advance the exact prices at which certain stocks or commodities would be sold, along with prices close to the then prevailing values that were not affected.
During his career, Gunn constantly repeated these incredible trading achievements, giving amazing forecasts for a variety of markets for the year ahead. Gann used the law of nature and geometric proportions based on a circle, square and triangle, which are just as effective today on stock and commodity exchanges as they were 50 years ago. His methods work in any market and time interval. His methods seem to many traders a little unusual and even mystical, but in the last century they were confirmed again and again. V.D. Gunn was a “Scientist of Wall Street,” he could predict the top of the “bull market” for the year. One of his striking achievements was the outlook for the shares for 1922, issued in December 1921.
This forecast indicated the first peak of the bullish wave in April, the second in August and the last peak and end of the bull market in the period from 8 to 15 October. And amazingly, the average prices of twenty industrial shares reached the highest point on October 14 and decreased by 10 points in thirty days from this date. Gunn predicted a big decline during November. He indicated in the forecast: “From 10 to 14 November there will be a panic fall”. During this period, there was a serious decline in shares, many fell by 10 points or more within four days, and on November 14 the lowest average prices for 1,500,000 shares traded on the New York Stock Exchange were achieved.
Gann’s remarkable predictions are based on pure science and mathematical calculations.
Here are the words of William Delbert Gunn, in which, in all likelihood, his entire experience is concluded.
“For the past ten years, I have devoted all my time and attention to speculative markets. Like many others, I lost thousands of dollars and experienced the usual ups and downs inherent in a beginner who enters the market without prior knowledge of the subject. Soon I began to understand that all successful people, whether lawyers, doctors or scientists, spend years studying and studying their profession or profession before earning money on it. “
The words said by Mr. Gunn went down in history forever, as history repeats itself, and greed and desire for big profits are still characteristic of human nature to this day. We can look back to the past and take advantage of the elements of his research, as well as the way of thinking. No doubt, the name of V.D. Ganna is legendary in the world of trade, and his lessons are really valuable to us.
Warren Edward Buffett
Warren Buffett is a great conservative! Evil tongues still claim that he is a terrible scoundrel, probably this is an exaggeration, but, as you know, maybe it was modesty and conservatism that allowed him at the present time to be called a financial guru and a man who discovered money, like “Mozart opened music”.
Warren, Edward Buffett (Warren E. Buffett) was born in 1930 in Omaha, Nebraska. His father was the owner of a brokerage firm and a Republican congressman. As a boy, Warren began to show interest in business.
When he was only six years old, he bought a package of six bottles of Coca-Cola in his grandfather’s store for 25 cents and resold the bottles separately on a five-pointer apiece. So the investor earned his first five cents.
In college, he acted under the pressure of his father. Pennsylvania University young man was dissatisfied, he complained that he already knows more. And two years later he transferred to the University of Nebraska-Lincoln. As a student, Buffett worked full time, which did not stop him from obtaining a diploma in just three years of training. Father insisted on postgraduate education, and Warren once again without special enthusiasm submitted documents to Harvard. The Harvard business school then denied the future billionaire investor with the phrase “too young.” But for Buffett himself, that failure became fatal: he went to New York and entered Columbia University, where he was taught by the famous investor of the time, Benjamin Graham. The meeting with him changed the life of Warren Buffett. Now Benjamin Graham has become the immediate leader of Buffett, who at the end of his studies became the only student who ever received a higher grade (A +) on the Graham course. The influence of the mentor was so great that Buffett was trying to get a job in his office. He was ready to work even for free, but was rejected.
“Too young” – with such a verdict, the Harvard Business School denied Warren Buffett the opportunity to enter.
Buffett returned to his hometown, got married and tried to invest in Texaca gas stations and real estate, but these attempts did not bring him success. However, after a while, luck smiled at him: Benjamin Graham invited Warren to work in his firm. He again moved to New York. Buffett spends whole days analyzing Standard & Poor’s reports in search of investment opportunities. It is then that his views begin to diverge from the philosophy of the teacher.
Making a decision about investments, Graham considered only the accounting statements of the company, having little interest in its management. Buffett, however, was increasingly thinking about another question: how does the company work and what makes it the best among its kind? For six years of work at Graham’s office, Buffett increased his personal capital from $ 9,800 to $ 140,000, after which he again returned to his native Omaha and created his first investment partnership. Interestingly, he was able to convince a group of Omaha investors, each of whom handed him $ 25,000 each. Buffett at the time was able to place only $ 100 of his capital. He is appointed general manager of the company, and the business starts. Warren begins to buy shares, profitable, from his point of view. He set himself the minimum goal: to beat the growth of Dow Jones with his average 10% per year.
The principle of Buffett is to invest only in those companies that he personally likes. Companies such as American Express, Wells Fargo, Coca-Cola, Gillette, Washington Post – impressed him the most. And investments in them almost never failed the billionaire.
In 11 years, Warren made his first step in the stock market. He bought three shares of Cities Service, paying $ 38 for each. Soon the share price fell to $ 27. The young investor had the prudence to wait until the course began to grow again, and soon he was able to sell the shares for $ 40. What was his disappointment when the rate jumped to $ 200. This incident was for Buffett the first lesson of patience.
In 1962, Buffett starts buying shares in New Bedford Mass, or rather, he was interested in a textile plant called Berkshire Hathaway with a price of less than $ 8 per share. At that time, the American textile industry withered under the onslaught of foreign production, but Buffett did not embarrass. He began to develop the capital of Berkshire, including insurance. This turned out to be a classic move by Buffett. At that time, insurance companies were better invested than others. Insurance premiums are payments in advance, which means that cash was provided for the further creation of various funds. Such funds were called “floating”, and soon Berkshire began to produce millions of dollars. The mechanism worked, and it turned out to be the biggest news after the syncope of the country since the 1930s. Buffett was always in search of other values,
However, sooner or later the biggest investor will leave this world. And then what will happen with Berkshire Hathaway? For sure it will be one of the biggest dramas of Wall Street. The high cost of the company’s shares directly depends on the largest shareholder of the stock, as it supports the company’s efficiency. And it is not known whether someone can adequately replace Buffett in this position. Anyway, something will happen with Berkshire Hathaway Inc. or not, but the lesson taught by Warren is already being studied in all parts of the world, and the next small Buffett already contributes to the development of the investment school.
When he was only six years old, he bought a package of six bottles of Coca-Cola in his grandfather’s store for 25 cents and resold the bottles separately on a five-pointer apiece. So the investor earned his first five cents.
Peter Lynch newspaper Wall Street Journal named one of the greatest investors in history for his remarkable work as the manager of the well-known fund Magellan fund (Magellan fund), owned by Fidelity.
Lynch, who grew up in the suburbs of Boston, was forced to work because his father died when he was only 10 years old, and Lynch had to help support the family.
Lynch went to Boston College for a caddy scholarship, then to Wharton, where he received an MBA, and finally, in 1969, was admitted to the Fidelity. Work began as an analyst, specializing in the metallurgical industry. In 1974, he was promoted to the position of director of the research department, and three years later – he was appointed the head of the Majellan fund. Being the manager of the largest fund, in the whole history of the market development, Peter Lynch paid much attention to personal communication with clients and partners. He also preferred to do most of the work himself: appoint 40-50 meetings a month, make dozens of calls every day.
At the same time he spent only 15 minutes per year on market analysis and exactly the same number – on the analysis of macroeconomic indicators. Thanks to Lynch, the market drew attention to such growth leaders as Dunkin Donuts, Pier 1 Imports and Taso Bell. According to Lynch, the best results are achieved due to a slow but steady growth, for example, as shares of companies Chrysler and Stop-n-shop, whose value for 15 years has grown 20 times.
In the 1980s, Lynch despised the mania of mergers that swept the country, preferring to invest in more prosaic opportunities, such as a funeral home network, this is what everyone eventually needs. He advises you to look for such actions near the house, where you contact the goods and services of the companies that produce them every day. In his essay “Stalking the Tenbagger,” he shows how one of such small companies can easily turn into a celebrated tenfold – a company whose shares can potentially grow tenfold.
His simple investment philosophy says: “Choose an enterprise that any fool can manage, because sooner or later a fool will probably lead him.”
Lynch avoided working with options and futures and always believed that the most important thing in investing was to catch a turning point in the fate of each company.
Mario Gabelli, who compares himself with a jet fighter pilot, has built a financial empire that includes an institutional brokerage firm, a mutual fund manager company and a capital management firm advising institutional and private investors. Amazing success and his personal energy brought him the nickname of a supermario.
Like Peter Lynch and some other well-known electors, Gabelli, who grew up in the Bronx, first became interested in the stock market when he worked as a boy on the golf course, serving management companies. After studying at Fordham University, he received an MBA from Columbia University, where he was influenced by a professor who taught the analysis of securities in the spirit of the pedantic and conservative Benjamin Graham.
In 1967, Mario Gabelli began his Wall Street career as an auto parts analyst in the firm Loeb Rhoades, and then at William D. Witter. In 1977, he founded the Gabelli Asset Management. Gabelli, who reads annual reports as others read novels, in the process of creating a firm that manages assets of over $ 10 billion, earned a reputation as a tireless hard worker. “This is not work for me,” he says, “this is my passion. Some people collect works of art or ride horses, or play in castles of Ireland. I like to choose stocks. ” For this purpose, there are many days from 5 am to 9 pm and even occasional staff meetings on Sundays.
Although Gabelli is a workaholic, he also has frivolous sides, which was reflected in the name of the fund focused on global information and entertainment companies – “Gabelli Global Interactive Couch Potato Fund” (Gabelli Global Interactive Couch Potato Fund). In English it sounds roughly like “Gabelli’s Global Interactive Fund”. As for his investment style, in the article “How to win a big helmet” he among other strategies tells how to look for “catalysts”.
One of them is the introduction of the idea of ”private market value,” that is, how much a public company could cost if it became private. He likes to exclude expenses such as taxes, depreciation and interest, in order to obtain more reliable data on net income and assets.
Another idea he presented was to look for something called Gabelli “catalyst”, that is, an event that can raise the price of a company’s shares, for example, a merger or a change in state regulation.
Charles Dow – one of the founders of the newspaper “Wall Street Journal” and the creator of the Dow Jones index for shares of industrial companies – represented a serious half in partnership with the bright Eddie Jones.
Dow was born in Connecticut countryside, his father died when he was only six years old. He spent his entire life in the newspaper business. At the age of 16 he began to work in a local weekly newspaper as a student of a compositor and a reporter. His next job was a daily newspaper in Springfield, Massachusetts. Later, he became a New York correspondent for a daily newspaper in Providence, Rhode Island. Since he preferred research and analysis rather than the work of a free reporter, he settled for another job, where his task was to cover the shares of mining companies for the “New York Mail and Express”. The financial editorial he wrote was reportedly the first in the daily press.
Around 1880, Dow entered the news agency, where he convinced the management to hire his old friend Eddie Jones, who appeared in New York and told Dow he had problems with his debts and with his wife. Jones began to cover the work of the New York Stock Exchange. In the end, in 1882, Dow and Jones decided to set up their own news firm, focusing on the stock market and using boys to deliver news on parcels. Their first office was under an institution selling soda, on the ground floor of No. 15 on Wall Street. They spent most of their working day visiting bankers, financiers and members of the exchange. To monitor the ebb and flow of stock markets, Dow alone created the Dow Jones Index. The first index, calculated on July 3, 1884, was the average price of 11 shares and was called the “Dow Jones Railroad Average”, as 9 out of 11 shares were issued by railway companies. By 1896, Dow had introduced an average industrial index, which was defined as the arithmetic average of the price of 12 shares. The value of the index for the closing of the first day was 69.93 points (the total value of its shares at that time was 769.23). In 1928, the number of shares used to calculate the index was increased to 30, as it remains at the present time. The NYSE (New York Stock Exchange) updates and publishes the DJIA index every half hour throughout the day. In 1928, the index calculation procedure was modified: a special multiplier (current divisor -current divisor) was introduced, designed to prevent distortion of values,
The stock index can characterize both the market as a whole, and a separate branch of the economy (industry, transport, etc.).
The crown of all three indexes to date is the Dow Jones Composite Average.
Dow Jones Composite Average – includes 65 shares, included in other indices of the Dow Jones family and traded on the NYSE.
The methodology for calculating indices for all time was practically unchanged, however, the shares included in the listing changed many times. Of all the indices included in the calculation of shares, only General Electric can boast of enviable stability, while the rest of the shares that were, then came out of it and generally disappeared from the market. It should be noted that in Dow Jones for a long time did not include shares of companies of the “new economy”, their inclusion brought the value of the index a lot of trouble. Although, it is worth admitting, the fact of inclusion increased the representativeness of the indicator and brought its composition closer to the real balance of power in the US stock market. Futures for the Dow Jones are traded in Chicago on the Chicago Mercantile Exchange.