John Murphy's Ten Laws of Technical Trading

StockCharts.com's Chief Technical Analyst, John Murphy, is a very popular author, columnist, and speaker on the subject of Technical Analysis. John's "Ten Laws of Technical Trading" is the best guide available anywhere for people who are new to the field of charting. I urge you to print out this page and refer to it often.

Which way is the market moving? How far up or down will it go? And when will it go the other way? These are the basic concerns of the technical analyst. Behind the charts and graphs and mathematical formulas used to analyze market trends are some basic concepts that apply to most of the theories employed by today's technical analysts.

John Murphy, StockCharts.com's Chief Technical Analyst, has drawn upon his thirty years of experience in the field to develop ten basic laws of technical trading: rules that are designed to help explain the whole idea of technical trading for the beginner and to streamline the trading methodology for the more experienced practitioner. These precepts define the key tools of technical analysis and how to use them to identify buying and selling opportunities.

Before joining StockCharts, John was the technical analyst for CNBC-TV for seven years on the popular show Tech Talk, and has authored three best-selling books on the subject: Technical Analysis of the Financial Markets,Intermarket Analysis and The Visual Investor.

His most recent book demonstrates the essential visual elements of technical analysis. The fundamentals of John's approach to technical analysis illustrate that it is more important to determine where a market is going (up or down) rather than the why behind it.

The following are John's ten most important rules of technical trading:

1. Map the Trends
2. Spot the Trend and Go With It
3. Find the Low and High of It
4. Know How Far to Backtrack
5. Draw the Line
6. Follow That Average
7. Learn the Turns
8. Know the Warning Signs
9. Trend or Not a Trend?
10. Know the Confirming Signs

1. Map the Trends

Study long-term charts. Begin a chart analysis with monthly and weekly charts spanning several years. A larger scale map of the market provides more visibility and a better long-term perspective on a market. Once the long-term has been established, then consult daily and intra-day charts. A short-term market view alone can often be deceptive. Even if you only trade the very short term, you will do better if you're trading in the same direction as the intermediate and longer term trends.

2. Spot the Trend and Go With It

Determine the trend and follow it. Market trends come in many sizes – long-term, intermediate-term and short-term. First, determine which one you're going to trade and use the appropriate chart. Make sure you trade in the direction of that trend. Buy dips if the trend is up. Sell rallies if the trend is down. If you're trading the intermediate trend, use daily and weekly charts. If you're day trading, use daily and intra-day charts. But in each case, let the longer range chart determine the trend, and then use the shorter term chart for timing.

3. Find the Low and High of It

Find support and resistance levels. The best place to buy a market is near support levels. That support is usually a previous reaction low. The best place to sell a market is near resistance levels. Resistance is usually a previous peak. After a resistance peak has been broken, it will usually provide support on subsequent pullbacks. In other words, the old "high" becomes the new low. In the same way, when a support level has been broken, it will usually produce selling on subsequent rallies – the old "low" can become the new "high."

4. Know How Far to Backtrack

Measure percentage retracements. Market corrections up or down usually retrace a significant portion of the previous trend. You can measure the corrections in an existing trend in simple percentages. A fifty percent retracement of a prior trend is most common. A minimum retracement is usually one-third of the prior trend. The maximum retracement is usually two-thirds. Fibonacci retracements of 38% and 62% are also worth watching. During a pullback in an uptrend, therefore, initial buy points are in the 33-38% retracement area.

5. Draw the Line

Draw trend lines. Trend lines are one of the simplest and most effective charting tools. All you need is a straight edge and two points on the chart. Up trend lines are drawn along two successive lows. Down trend lines are drawn along two successive peaks. Prices will often pull back to trend lines before resuming their trend. The breaking of trend lines usually signals a change in trend. A valid trend line should be touched at least three times. The longer a trend line has been in effect, and the more times it has been tested, the more important it becomes.

6. Follow that Average

Follow moving averages. Moving averages provide objective buy and sell signals. They tell you if existing trend is still in motion and help confirm a trend change. Movingaverages do not tell you in advance, however, that a trend change is imminent. A combination chart of two moving averages is the most popular way of finding tradingsignals. Some popular futures combinations are 4- and 9-day moving averages, 9- and 18-day, 5- and 20-day. Signals are given when the shorter average line crosses the longer. Price crossings above and below a 40-day moving average also provide good trading signals. Since moving average chart lines are trend-following indicators, they work best in a trending market.

7. Learn the Turns

Track oscillators. Oscillators help identify overbought and oversold markets. While moving averages offer confirmation of a market trend change, oscillators often help warn us in advance that a market has rallied or fallen too far and will soon turn. Two of the most popular are the Relative Strength Index (RSI) and Stochastics. They both work on a scale of 0 to 100. With the RSI, readings over 70 are overbought while readings below 30 are oversold. The overbought and oversold values for Stochastics are 80 and 20. Most traders use 14-days or weeks for stochastics and either 9 or 14 days or weeks for RSI. Oscillator divergences often warn of market turns. These tools work best in a trading market range. Weekly signals can be used as filters on daily signals. Daily signals can be used as filters for intra-day charts.

8. Know the Warning Signs

Trade MACD. The Moving Average Convergence Divergence (MACD) indicator (developed by Gerald Appel) combines a moving average crossover system with the overbought/oversold elements of an oscillator. A buy signal occurs when the faster line crosses above the slower and both lines are below zero. A sell signal takes place when the faster line crosses below the slower from above the zero line. Weekly signals take precedence over daily signals. An MACD histogram plots the difference between the two lines and gives even earlier warnings of trend changes. It's called a "histogram" because vertical bars are used to show the difference between the two lines on the chart.

9. Trend or Not a Trend

Use ADX. The Average Directional Movement Index (ADX) line helps determine whether a market is in a trending or a trading phase. It measures the degree of trend or direction in the market. A rising ADX line suggests the presence of a strong trend. A falling ADX line suggests the presence of a trading market and the absence of a trend. A rising ADX line favors moving averages; a falling ADX favors oscillators. By plotting the direction of the ADX line, the trader is able to determine which trading style and which set of indicators are most suitable for the current market environment.

10. Know the Confirming Signs

Include volume and open interest. Volume and open interest are important confirming indicators in futures markets. Volume precedes price. It's important to ensure that heavier volume is taking place in the direction of the prevailing trend. In an uptrend, heavier volume should be seen on up days. Rising open interest confirms that new money is supporting the prevailing trend. Declining open interest is often a warning that the trend is near completion. A solid price uptrend should be accompanied by rising volume and rising open interest.

"11."

Technical analysis is a skill that improves with experience and study. Always be a student and keep learning.

- John Murphy

Definitions: Leonardo Fibonacci was a thirteenth century mathematician who "rediscovered" a precise and almost constant relationship between Hindu-Arabic numbers in a sequence (1,1,2,3,5,8,13,21,34,55,89,144,etc. to infinity). The sum of any two consecutive numbers in this sequence equals the next higher number. After the first four, the ratio of any number in the sequence to its next higher number approaches .618. That ratio was known to the ancient Greek and Egyptian mathematicians as the "Golden Mean" which had critical applications in art, architecture and in nature.

Stochastics - an oscillator popularized by George Lane in an article on the subject which appeared in 1984. It is based on the observation that as prices increase, closing prices tend to be closer to the upper end of the price range; conversely, in down trends, closing prices tend to be near the lower end of the range. Stochastics has slightly wider overbought and oversold boundaries than the RSI and is therefore a more volatile indicator. The term "stochastic" refers to the location of a current futures price in relation to its range over a set period of time (usually 14 days).

How to Make Money in the Sharemarket

Isn't earning a good return on our money a very essential consideration? Yes I think most would agree. We want to build our retirement money-machine because we all know you need piles of the stuff and if we are going to enjoy retirement then we better have a GOOD PLAN!

CONSIDERATIONS
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Real Estate: You make your money when you buy!

Small Business: You make your money when you sell your money-making system.

Shares: You make your money when you can!
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My favourite game is playing the sharemarket and I will admit to you from the start it's not always money in your bank account - why? Simply because it's a game where the one who who knows the most makes the money.

If you want to join me then start your education now! Learn how, do the training and master your emotions you you will do well.

LOOKING BACK
It wasn't till I lost my advisor that I really learned about making money. Now I'm not saying sack your advisor - I would never say that! You have to make your own decisions.

An advisor can tap into situations that you would not be aware existed. You can also learn from them. Just be careful as to who gives you advice and make your own
decisions.

Don't trust anyone to make money for you. No one cares about your money the way you do. Advisors in most cases are just sales people who need to get clients so that they can pay their bills. At the best of times you do not rate that highly in their priorities.

If you lose or win, it's nothing to them - they hope they will still get to keep their jobs. It is easy to understand - make them a lot of money and they might let you know what is happening to your account, but this depends on who is more important than you today. We all want advice and we all ask the opinions of others, but don't become dependent on someone solving your problems - you are alone! Now live with it! The sooner you take full responsibility the better.

The people who make excellent returns are those that see trading as a business and realize that they will always be a pupil who needs to keep learning, be self-motivated and resilient, because losing at some stage is inevitable.

There are going to be more people that lose money than make money. I have had strings of losses, where position after position has had to be closed. Now you don't need that to happen too many times to wipe out your capital. This is the reason for keeping your positions small. You must decide how much time you will be willing to invest to learn how to make your fortune and keep it. The less time you're willing to
devote to learning, the less money you should put into the sharemarket.

The gambler will eventually give his winnings back to the house because they do not have a plan and trading rules which help them develop self-discipline. The most important quality to develop if you seriously wish to be successful in the sharemarket is self-discipline. Although this is easy to write in words I assure you that developing personal discipline is very hard and to carry out actions without involving emotion can be next to impossible. We are often ruled by emotion and
we hate to admit we have made a loss - thus, often we won't do what we should to rescue our remaining capital. This is how a little loss becomes a big loss over time.

Master yourself - your emotions will help you lose money. The more you think with your emotions and the more you make decisions with your emotions, the more you will lose.

NO ONE CAN PREDICT WHAT WILL HAPPEN IN THE MARKET!

If anyone can predict with any accuracy it won't be you and if you must predict what is going to happen, don't put any money on your bet. Next, if your broker could predict what was going to happen he/she would not be a broker - they would be living the life of Riley. If the money is coming out of the market then for god's sake take notice. This may be as close as you get to insider trading.

The stockmarket is like a sport. Everyone wants to see the great players and witness all the action, but not everyone is going to win the game. It is up to you to learn how to play the game. You need to learn the rules and learn the tactics and strategies to help you score more goals.

There are many different plays you can make in the market, but learning the less risky plays and those that reduce risk will make you more money.

Less risky to some......using options to make money

Examples might include:

1. Writing puts when the market is going up instead of buying the stock. If you're exercised then you can decide whether to buy the stock or act earlier to prevent the exercise by closing out your put position when the put price drops(buy the same put series and close it out).

2. Writing calls over your shares when it looks like the stock price is ready to fall.

3. Buy calls or puts depending on which way the market is going. Up market might indicate buying a call to cature the upside. A falling market may indicate buying a put to capture the rising value created by people buying protection.

The first strategy many people will see as too risky, but it really depends on your level of education in options, whether you can handle the risk and how much spare cash you have to meet your obligation if your puts are exercised. If the total cost of exercise is $50 000 and you have the money then in the case you do get exercised you will be able to buy the shares.

Get protection for your shares

Buy Puts
Let's say you protect your position by buying a put, then if the price drops you will cap your loss, or alternatively, you could sell the put/s, which may result in a profit and thus make up for any lost value in the share. Covering your position may be an on-going requirement. There will always be a price to pay - that's life!

Making money buying puts

Write Puts
If you write puts then you'll be obliged to buy the stock in the event you are exercised and so having sufficient cash is essential. You can also buy another series to cap your potential loss to the spread between the two series.

If you wrote $10.00 puts and bought $9.50 puts your loss would be partly covered by having that cover if the price drifted lower.

So we can make what looks risky, less risky, by knowing more about what is possible and then choosing our exit strategy. If I am exercised my contingency plan might be to write calls over my new shares and if I preferred, I could go back to put writing, by letting myself be exercised.

If I wanted to keep the shares then I would write calls that are further out of the money. I can even buy calls in a different series so that in the case the share price goes up I capture some of the increase, or I can cancel the contract by buying calls in the same series.

During May 2002 I used this same strategy with NCP. I wrote puts at $12.50. I watched the share go down to $9.68. I let myself be exercised and met my obligation by paying
$12.50/share - risky? You bet, because all the worst conditions for put writing came together in June 2002, the month I wrote puts.

It fell to $8.44. NCP makes up 10% of the Australian All Ordinary Index, so you could expect such an important stock will get serious attention. However at the time big media companies were not the flavour of the month - all the flavours had turned sour!

Following the purchase of the stock I wrote covered calls. There is nothing wrong with the strategy, but timing is your most important variable - thus a contigency plan is required. Keep in mind that 1 month in the market is a long time and 3 months is an eternity. Things can change very quickly from panic to ecstacy for no apparent reason. Someone always raises their hand with an explanation to satisfy the crowd - wouldn't we be disappointed if someone couldn't tell us. I think we'd probably get very worried!

Writing calls is a good idea when you think the stock price will fall. My contingency in the event I was exercised was to write calls and make up the difference I had lost - I didn't intend buying back the calls, as I felt there was little risk of losing the stock because the $10.50 level would remain out of the money.

The resulting action suggested that a better plan would have been to buy/write regularly - buy the calls back sheep(cheap) and write deer(expensive). Waiting first for the stock to peak then writing the call.

I could have closed out my contract by purchasing puts in the same series. I could have bought puts in another exercise price series to cap my loss. I chose a different way and regretted my choice. Holding the stock was not the easiest choice I could have made and in fact it held me back from making a lot more money.

Once I had the stock I had to protect it. If I then sold the protection I could have found the stock slipping further in value, so I kept the protection in place and missed the profit as the stock moved back up. So even though I inially lost by having been exercised I lost more by not being in a position to be more flexible. A further complication was my stock was purchased with a margin loan.

What should I have done?
I could have sold the protection , made a profit and then looked at buying the same protection cheaper. I could have done this at least 4 times in 4 months.

This brings us to the topic of increasing the flexibility of our thinking.

If you make money only in one direction you will reduce your trading results drastically. The market does not always go up! Sometimes it goes down or moves sideways.

We all need to be on the right side of the market. Believe me the alternative is no fun!

Happy Trading,
Joseph Sgro
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Copyright(C) Joseph Sgro 2003
Further this discussion by reading:
"10 Simple Rules to Make Serious Money in
the Sharemarket and Keep it!"
http://www.tutorhelp.com.au/sharemarket.html
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4 Types Of Indicators FX Traders Must Know

Read more: http://www.investopedia.com/articles/forex/10/indicators-fx-traders-must-know.asp#ixzz1WHQOlH1d

Many forex traders spend their time looking for that perfect moment to enter the markets or a telltale sign that screams "buy" or "sell". And while the search can be fascinating, the result is always the same. The truth is, there is no one way to trade the forex markets. As a result, successful traders must learn that there are a variety of indicators that can help to determine the best time to buy or sell a forex cross rate.

Here are four different market indicators that most successful forex traders rely upon.

Indicator No.1: A Trend-Following Tool
It is possible to make money using a countertrend approach to trading. However, for most traders the easier approach is to recognize the direction of the major trend and attempt to profit by trading in the trend’s direction. This is where trend-following tools come into play. Many people misunderstand the purpose of trend-following tools and try to use them as separate trading systems. While this is possible, the real purpose of a trend-following tool is to suggest whether you should be looking to enter a long position or a short position. So let’s consider one of the simplest trend-following methods – the moving average crossover.

A simple moving average represents the average closing price over the number of days in question. To elaborate, let’s look at two simple examples – one longer term, one shorter term. (For related information on moving averages, see Exploring The Exponentially Weighted Moving Average.)

Figure 1 displays the 50-day/200-day moving average crossover for the euro/yen cross. The theory here is that the trend is favorable when the 50-day moving average is above the 200-day average and unfavorable when the 50-day is below the 200-day. As the chart shows, this combination does a good job of identifying the major trend of the market - at least most of the time. However, no matter what moving average combination you choose to use, there will be whipsaws.

Figure 1: The euro/yen with 50-day and 200-day moving averages

Figure 2 shows a different combination – the 10-day/30-day crossover. The advantage of this combination is that it will react more quickly to changes in price trends than the previous pair. The disadvantage is that it will also be more susceptible to whipsaws than the longer term 50-day/200-day crossover.

Figure 2: The euro/yen with 10-day and 30-day moving averages

Many investors will proclaim a particular combination to be the best, but the reality is, there is no “best” moving average combination. In the end, forex traders will benefit most by deciding what combination (or combinations) fits best with their time frames. From there, the trend - as shown by these indicators - should be used to tell traders if they should trade long or trade short; it should not be relied on to time entries and exits. (For additional information, check out Forex: Should You Be Trading Trend Or Range?)

Indicator No.2: A Trend-Confirmation Tool
Now we have a trend-following tool to tell us whether the major trend of a given currency pair is up or down. But how reliable is that indicator? As mentioned earlier, trend-following tools are prone to being whipsawed. So it would be nice to have a way to gauge whether the current trend-following indicator is correct or not. For this, we will employ a trend-confirmation tool. Much like a trend-following tool, a trend-confirmation tool may or may not be intended to generate specific buy and sell signals. Instead, we are looking to see if the trend-following tool and the trend-confirmation tool agree.

In essence, if both the trend-following tool and the trend-confirmation tool are bullish, then a trader can more confidently consider taking a long trade in the currency pair in question. Likewise, if both are bearish, then the trader can focus on finding an opportunity to sell short the pair in question.

One of the most popular – and useful – trend confirmation tools is known as the moving average convergence divergence (MACD). This indicator first measures the difference between two exponentially smoothed moving averages. This difference is then smoothed and compared to a moving average of its own. When the current smoothed average is above its own moving average, then the histogram at the bottom of Figure 3 is positive and an uptrend is confirmed. On the flip side, when the current smoothed average is below its moving average, then the histogram at the bottom of Figure 3 is negative and a downtrend is confirmed. (Learn more about the MACD in A Primer On The MACD.)

Figure 3: Euro/yen cross with 50-day and 200-day moving averages and MACD indicator

In essence, when the trend-following moving average combination is bearish (short-term average below long-term average) and the MACD histogram is negative, then we have a confirmed downtrend. When both are positive, then we have a confirmed uptrend.

At the bottom of Figure 4 we see another trend-confirmation tool that might be considered in addition to (or in place of) MACD. It is the rate of change indicator (ROC). As displayed in Figure 4, the red line measures today’s closing price divided by the closing price 28 trading days ago. Readings above 1.00 indicate that the price is higher today than it was 28 days ago and vice versa. The blue line represents a 28-day moving average of the daily ROC readings. Here, if the red line is above the blue line, then the ROC is confirming an uptrend. If the red line is below the blue line, then we have a confirmed downtrend. (For more on the ROC indicator, refer to Measure Momentum Change With ROC.)

Note in Figure 4 that the sharp price declines experienced by the euro/yen cross from mid-January to mid-February, late April through May and during the second half of August were each accompanied by:

The 50-day moving average below the 200-day moving average

A negative MACD histogram

A bearish configuration for the ROC indicator (red line below blue)

Figure 4: Euro/yen cross with MACD and rate-of-change trend confirmation indicators

Indicator No.3: An Overbought/Oversold Tool

While traders are typically well advised to trade in the direction of the major trend, one must still decide whether he or she is more comfortable jumping in as soon as a clear trend is established or after a pullback occurs. In other words, if the trend is determined to be bullish, the choice becomes whether to buy into strength or buy into weakness. If you decide to get in as quickly as possible, you can consider entering a trade as soon as an uptrend or downtrend is confirmed. On the other hand, you could wait for a pullback within the larger overall primary trend in the hope that this offers a lower risk opportunity. For this, a trader will rely on an overbought/oversold indicator.

There are many indicators that can fit this bill. However, one that is useful from a trading standpoint is the three-day relative strength index, or three-day RSI for short. This indicator calculates the cumulative sum of up days and down days over the window period and calculates a value that can range from zero to 100. If all of the price action is to the upside, the indicator will approach 100; if all of the price action is to the downside, then the indicator will approach zero. A reading of 50 is considered neutral. (More on the RSI can be found in Relative Strength Index Helps Make The Right Decisions.)

Figure 5 displays the three-day RSI for the euro/yen cross. Generally speaking, a trader looking to enter on pullbacks would consider going long if the 50-day moving average is above the 200-day and the three-day RSI drops below a certain trigger level, such as 20, which would indicate an oversold position. Conversely, the trader might consider entering a short position if the 50-day is below the 200-day and the three-day RSI rises above a certain level, such as 80, which would indicate an overbought position. Different traders may prefer using different trigger levels.

Figure 5: Euro/yen cross with three-day RSI overbought/oversold indicator

Indicator No.4: A Profit-Taking Tool
The last type of indicator that a forex trader needs is something to help determine when to take a profit on a winning trade. Here too, there are many choices available. In fact, the three-day RSI can also fit into this category. In other words, a trader holding a long position might consider taking some profits if the three-day RSI rises to a high level of 80 or more. Conversely, a trader holding a short position might consider taking some profit if the three-day RSI declines to a low level, such as 20 or less.

Another useful profit-taking tool is a popular indicator known as Bollinger bands. This tool adds and subtracts the standard deviation of price data changes over a period from the average closing price over that same time frame to create trading “bands”. While many traders attempt to use Bollinger bands to time the entry of trades, they may be even more useful as a profit-taking tool.

Figure 6 displays the euro/yen cross with 20-day Bollinger Bands overlaying the daily price data. A trader holding a long position might consider taking some profits if the price reaches the upper band, and a trader holding a short position might consider taking some profits if the price reaches the lower band. (Refer to The Basics Of Bollinger Bands for more information on this tool.)

Figure 6: Euro/Yen cross with Bollinger bands

A final profit-taking tool would be a “trailing stop.” Trailing stops are typically used as a method to give a trade the potential to let profits run, while also attempting to avoid losing any accumulated profit. There are many ways to arrive at a trailing stop. Figure 7 illustrates just one of these ways.

The trade shown in Figure 7 assumes that a short trade was entered in the forex market for the euro/yen on January 1, 2010. Each day the average true range over the past three trading days is multiplied by five and used to calculate a trailing stop price that can only move sideways or lower (for a short trade, or sideways or higher for a long trade).

Figure 7: Euro/yen cross with a trailing stop

The Bottom Line
If you are hesitant to get into the forex market and are waiting for an obvious entry point, you may find yourself sitting on the sidelines for a long while. By learning a variety of forex indicators, you can determine suitable strategies for choosing profitable times to back a given currency pair. Also, continued monitoring of these indicators will give strong signals that can point you toward a buy or sell signal. As with any investment, strong analysis will minimize potential risks.

Dr. Ben Carson: Great Risks Bring Greater Success

Dr. Carson is a neurosurgeon renown for his intricate and delicate surgeries to separate the brains of conjoined twins. In his new book, he takes a look at risk. Whenever he faces a hard or risky situation in life, personally or professionally, he asks himself four key questions, and based on those answers, he makes a reasoned decision. Greater risks bring greater success. With risk there is the chance of failure.

In Dr. Carson's case, some of the conjoined twins he operated on didn't make it. Dr. Carson participated on the team to separate Ladan and Laleh Bijani, the rare case of the 29-year-old Iranian lawyers who didn't survive. They decided that no matter what, they wanted to go through with the surgery to live separate lives. But those who do make it go on to a better life. Risk-takers dream big, aim high, and move with confidence and reap rewards.

Risk is nothing new. All important discoveries in this world came from people who took risks. There are even plenty of Biblical examples. Our society is obsessed with risks. We are always taking risks no matter what we do. Parenting is a great risk. Driving a car is risky. A truth about risks is that everything is risky.

A recent study has shown that 35% of stories in U.S. newspapers, and about 47% of front page articles deal with various risks of contemporary life. There are people in this world who are risk adverse and the other group takes the wrong risks. Whether to actively take risks or even stand back and do nothing, there is an element of risk involved in both options.

The key is figuring out which risks to take. Some people may seem like they "have it easy" or are "more successful" than others, but usually success in risk taking is not by accident. People make their own luck by taking the right advantages and making the right choices. This process involves asking the right questions.

THE BEST/WORST ASSESSMENT

One of the ways to identify and choose acceptable risks is to ask yourself four questions, or do what Dr. Carson calls a Best/Worst Analysis (B/WA):


* What is the best thing that can happen if I do this?

* What is the worst thing that can happen if I do this?

* What is the best thing that can happen if I don't do it?

* What is the worst thing that can happen if I don't do it?

By the time you've thought through those four questions, usually you've analyzed the risks thoroughly enough to make a reasoned decision. The first reactions to these four questions help focus and direct your thinking. If you find you need additional knowledge and wisdom, you need to ask yourself the additional questions of: Who? What? Where? When? Why? How?

If you do meet with failure in a recurring situation, the outcome may change if the answers to the questions start to change. Usually, the worst mistakes happen when decisions are made when a risk analysis isn't done –when the outcome isn't fully thought through.

PERSONAL FAITH

Dr.Carson praises God for his accomplishments in life. God, he says, can take people from any circumstances and "make them into anything." He cites his life as living proof of one's ability to overcome obstacles, with determination and the help of and faith in God. His personal relationship with God developed through his association with the Seventh Day Adventist Church, which his mother joined shortly after her divorce, when Dr. Carson was eight-years-old. Today, he and his family are active members of the church.

Dr. Carson prays and reads the Bible every day, praying as well before every surgery. God, he says, seeks to empower human beings. To know God's will, and benefit from His guidance, one must enter into a relationship with Him. In interviews with the media, in his books, and before audiences, he thanks and praises God for his abilities to help children and their families. His hand-eye coordination, essential for a brain surgeon, is a gift from God, he says, but one he was fortunate to discover and develop. He calls upon all individuals to search for their callings in life, and to seek answers and strength in God.

MORE ON DR. CARSON

Benjamin S. Carson, Sr., M.D., had a childhood dream of becoming a physician. Growing up in a single parent home with dire poverty, poor grades, a horrible temper, and low self-esteem appeared to preclude the realization of that dream until his mother, with only a third-grade education, challenged her sons to strive for excellence.

Young Ben persevered and today is a full professor of neurosurgery, oncology, plastic surgery, and pediatrics at the Johns Hopkins Medical Institutions, where he has directed pediatric neurosurgery for nearly a quarter of a century.

Some career highlights include the first separation of craniopagus (Siamese) twins joined at the back of the head in 1987, the first completely successful separation of type-2 vertical craniopagus twins in 1997 in South Africa, and the first successful placement of an intrauterine shunt for a hydrocephalic twin. Although he has been involved in many newsworthy operations, he feels that every case is noteworthy – deserving of maximum attention. He is interested in all aspects of pediatric neurosurgery and has a special interest in trigeminal neuralgia (severe facial pain) in adults.

Dr. Carson holds more than 40 honorary doctorate degrees. He is a member of the Alpha Omega Alpha Honor Medical Society, the Horatio Alger Society of Distinguished Americans, and many other prestigious organizations. He sits on the board of directors of numerous organizations, including Kellogg Company, Costco Wholesale Corporation, the Academy of Achievement, and is an Emeritus Fellow of the Yale Corporation, the governing body of Yale University.

He was appointed in 2004 by President George W. Bush to serve on the President’s Council on Bioethics. He is a highly regarded motivational speaker who has addressed various audiences from school systems and civic groups to corporations and the President’s National Prayer Breakfast.

In 2001, Dr. Carson was named by CNN and TIME Magazine as one of the nation’s 20 foremost physicians and scientists. That same year, he was selected by the Library of Congress as one of 89 “Living Legends” on the occasion of its 200th anniversary.

He is president and co-founder of the Carson Scholars Fund, which recognizes young people of all backgrounds for exceptional academic and humanitarian accomplishments. The Fund is currently operating in 16 states and the District of Columbia. He also co-founded Angels of the OR, which provides grants to assist families with non-covered medical care expenses involving both adult and pediatric neurosurgery. Both programs are in national expansion mode.

Dr. Carson has been married for over 30 years to his wife, Candy, and is the father of three sons. And yes, his mother, Sonya Carson, who made all this possible, is alive and well.

John Templeton- The Triumph of Optimism

Sir John Templeton passed away yesterday. He died, much as he spent his life, peacefully.Geoff Gannon (and it is great to have him back in the blogosphere) has an extensive list of articles outlining Templeton's life as well as a list of his books. John Bethel of Controlled Greed also has a good post on Templeton, with reminiscences about Templeton's appearance on Wall Street Week immediately following the October 1987 crash.

Templeton's life was one of great inner reflection and his original sale of Templeton, Dobbrow and Vance was motivated partially by his resolve to never let himself get so busy in managing clients that he ran out of time to think, not only about investments, but also about the larger world, especially spiritual matters and religion. His investment career became focused on just one thing, a small Canadian domiciled mutual fund that Piedmont Management, the buyer of the rest of his firm had declined. So at age 56, Templeton started his career with a clean slate and a single client, the mutual fund.

I believe there is a valuable lesson in Templeton's life, the importance of keeping your perspective. The distance from his home at Lyford Cay to the floor of any global stock exchange was measured in psychological light years, not unlike the distance from Buffett's Kiewit Plaza office to those exchanges.John Train, in his book Money Masters describes this as "a silent reproach to excitement and hyperactivity."

One of the best books about Templeton's investment approach is,at least in my opinion, The Templeton Touch by William Proctor, published in 1983.In it, he highlights twenty-two maxims that Templeton said were his enabling principles. Let me highlight them:


1.For all long-term investors, there is only one objective-"maximum total real return after taxes."
2.Achieving a good record takes much study and work, and is a lot harder than most people think.
3.It is impossible to produce a superior performance unless you do something different from the majority.
4.The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell.
5.To put "Maxim 4" in somewhat different terms, in the stock market the only way to get a bargain is to buy what most investors are selling.
6.To buy when others are despondently selling and to sell what others are greedily buying requires the greatest fortitude, even while offering the greatest reward.
7.Bear markets have always been temporary. Share prices turn upward from one to twelve months before the bottom of the business cycle.
8.If a particular industry or type of security becomes popular with investors, that popularity will always prove temporary and, when lost, won't return for many years.
9.In the long run, the stock market indexes fluctuate around the long-term upward trend of earnings per share.
10.In free-enter[rise nations, the earnings on stock market indexes fluctuate around the book value of the shares of the index.
11.If you buy the same securities as other people, you will have the same results as other people.
12.The time to buy a stock is when the short-term owners have finished their selling, and the time to sell a stock is often when the short-term owners have finished their buying.
13.Share prices fluctuate more widely than values. Therefore, index funds will never produce the best total return performance.
14.Too many investors focus on "outlook" and "trend." Therefore, more profit is made by focusing on value.
15.If you search worldwide,you will find more bargains and better bargains than by studying only one nation. Also, you gain the safety of diversification.
16.The fluctuation of share prices is roughly proportional to the square root of the price.
17.The time to sell an asset is when you have found a much better bargain to replace it.
18.When any method for selecting stocks becomes popular, then switch to unpopular methods. As has been suggested in "Maxim 3," too many investors can spoil any share-selection method or any market-timing formula.
19.Never adopt permanently any type of asset, or any selection method. Try to stay flexible, open-minded, and skeptical. Long-term top results are achieved only by changing from popular to unpopular the types of securities you favor and your methods of selection.
20.The skill factor in selection is largest for the common-stock part of your investments.
21.The best performance is produced by a person, not a committee.
22.If you begin with prayer, you can think more clearly and make fewer stupid mistakes.
Templeton was never afraid to maintain cash reserves when he got edgy about market opportunities, though he always said he had little ability to time markets. He was a pioneer in international investing, as much at home in Japanese and Canadian exchanges as he was in American exchanges. His funds frequently had positions in small, less familiar names.Basically, it came down to this:

"Search among many markets for the companies selling for the smallest fraction of their true worth."

He was always ware of socialism and regulation, which he viewed as disguised expropriation...entanglements that inhibit business and destroy the investor's incentive.

Like Buffett, he greatly feared the impact of inflation on his investments and sough beneficiaries of inflation, companies that possessed the ability to pass through cost increases.

A confident optimistic outlook and a willingness to not follow the crowd over the cliff with momentum stocks served his clientele very well.

And hopefully, following such discipline will continue to serve all of us well. I am grateful for the contribution he made to to world.

May he rest in peace.

Natural Remedy for Lactose Intolerance

Lactose intolerance is inability to digest lactose (milk sugar). This inability results from a shortage of the enzyme lactase, which is normally produced by the cells that line the small intestine. Lactase breaks down milk sugar into simpler forms (glucose and galactose) so it can be absorbed into the bloodstream. When the lactose is not split, it remains undigested in the intestinal tract. It retains fluid and ferments in the colon, producing gas, diarrhea, and abdominal cramping. Although it can cause digestive disruption and discomfort, lactose intolerance will not produce dangerous results. Fortunately, it can easily be controlled through careful diet.

Causes:
•Certain digestive diseases and injuries to the small intestine can reduce the amount of lactase enzymes produced. In rare cases, children are born without the ability to produce lactase.
•For most people lactase deficiency is a condition that develops naturally over time. After about the age of 2 years, the body begins to produce less lactase. However, many people may not experience symptoms until they are much older.


Symptoms: The severity of symptoms varies depending on the amount of lactose each individual can tolerate. Symptoms generally begin 30 minutes to 2 hours after consuming dairy products.
•Diarrhea, gas, and abdominal cramps.
•In infants, symptoms include foamy diarrhea with diaper rash, slow weight gain and development, as well as vomiting.

Natural Remedies:

•Studies indicate that cocoa powder and sugar, or chocolate powders, may help the body digest lactose by slowing the rate at which the stomach empties. The slower the emptying process, the less lactose that enters your system at once. That means fewer symptoms.
•Never drink milk alone: take it with solid food (such as whole-grain cereal).
•Since you cannot drink milk, eat foods which are rich in calcium. This includes sardines, canned salmon (or any other canned oily fish with bones), tofu, broccoli, carrots, dark green leafy vegetables, nuts, cooked dried beans, dried apricots, and sesame seed products.
•Take supplemental calcium powder (calcium citrate, calcium gluconate; but do not take calcium lactate).
•Take a lactose supplement (in drops, capsules, or tablets) along with a milk product at a meal, to help digest that milk. When several drops of the enzyme in the supplement are mixed with a quart of milk and then refrigerated for 24 hours, about 70% of the lactose in the milk will have been predigested before you drink it. To speed up the process, heat the milk to 90°F before the enzyme is added.

Important things to know if you are lactose intolerant:
•Avoid all milk and dairy products. This includes ice cream, frozen yogurt, powdered milk, whipped cream, creamed soups.
•Beware of products which contain small amounts of added milk ingredients. Such as "milk solids. "Lactose is added to many processed foods, including cookies, pancake mixes, breads, canned and powdered soups, flavored coffee, powdered drink mixes, processed meats, hot dogs, milk chocolate, non-dairy creamers, protein powder drinks, biscuits, candies, snacks, and ranch dressing.
•Many pharmaceutical drugs contain lactose as a filler.
•During a lactose attack of diarrhea, do not eat any solid food. Just drink lots of good water and replace lost minerals.
•Acidophilus milk does not help the person with lactose intolerance because the acidophilus works to improve conditions in the colon.
•If you can't avoid drinking milk it is best to drink it hot because it is better tolerated by the stomach than the cold ones.
•Good milk substitutes include soy milk, rice milk, almond milk, or a milk product which contains the lactose-digesting enzyme, lactase. It is also safe to consume small amounts of plain yogurt, goat's milk, or fat-free milk because they have smaller amounts of lactose and allergy-causing components of whole milk.

Sensitivity test: To find out if you are sensitive to milk, cut out all dairy products for 10 days and see how you feel. If your symptoms disappear during those 10 days, and then return when you start drinking it again, you probably have milk sensitivity. During the test, it is best that you only eat food you have prepared yourself at home.

Infections that can result in lactose intolerance: irritable bowel syndrome, regional enteritis, and ulcerative colitis.

Warning: If you are pregnant and there is lactose intolerance in your family, plan to breast feed your child or give him a nondairy formula (such as soy milk).