Archives of “January 8, 2019” day
rssTechnical Analysis -A Small Note
Most traders in the markets use charts and technical analysis to establish and exit their positions. Academicians and skeptics point to the random nature of many technical patterns. Here’s a typical chart generated by random numbers. If you don’t tell a trader it’s randomly generated, they’ll come up with all sorts of predictions and patterns that the chart generates. And if you dare to suggest that what they’re doing is mumbo jumbo, they take great offense and beat you on the head with examples of great traders who follow charts, and examples of others who consistently make a fortune by using charts.
There’s a trader from Harvard who uses charts and has made 20 billion who says “using a chart is like a Dr. taking your temperature before a diagnosis.” Another one says that if charts are so useless how come everyone including you looks at it before making a trade. One of the most respected and successful traders, a friend, puts the debate in focus: “There are lots of great tools in technical analysis (some of them in his book like trader’s positions, and breakouts, open interest and spreads). They’re very useful as part of a bigger trading process. There are good saws and hammers but it takes a good carpenter to make them work.”
There’s a guy in Japan who calls himself the Japanese Victor Niederhoffer who has turned $ 10,000 into 5 million by using charts. I hope to meet him in Japan when I visit there for a talk arranged by one who believes in charts, an estimable fellow who combines charts with anthropology, life extension and sports, and perhaps I will become the American Matsohita-Masamichi.
Options values are determined by using random numbers with the same standard deviation and distribution of prices as would be generated with the random number generators I just mentioned. Every trader on the floor uses such generators to predict the price that an option should trade at, and they do very well with this model– until something like the 1987 crash occurs and they go broke.
A famous former academic big options trader and head of the exchange said that almost all the scientific options traders he knew found that when you apply the random walk model to options, it turns out that puts are priced much too highly. He said that he’s watched every last one of them go broke. The problem here is that extreme events tend to occur much more frequently than the random walk model would predict.
'Acche Din' Slogan stolen from former PM Manmohan's Last press conference.
Characteristics of Successful Traders
1. CONFIDENCE: absolutely essential in an environment that feeds on emotional instability.
2. TRUST: if you cannot trust yourself who can you trust? Trust your rules, trust your edge, trust that you will do the right thing-no matter what!
3. FOCUS: you will never learn all there is to learn about the market. Push your ego aside and focus on one market and one edge.
4. ACCEPTANCE: you have to accept what the market is willing to give or you will give the market what it wants to take. (more…)
Thought For A Day
Success is what happens after you've survived all your mistakes
No Fundamentals. Repeat, No Fundamentals
Always in the past, and always in the future, the gatekeepers of information will want investors to consider the yin and yang:
An understanding of that, a consideration of that, anything related to that–has zero to do with having the right entry, exit and position sizing rules.
11 Quotes That Illustrate The Strange, Relentless Genius Of Alibaba Founder Jack Ma
On not giving up: “Today is cruel. Tomorrow is crueler. And the day after tomorrow is beautiful.”
On past mistakes from “the dark days at Alibaba”: “If you don’t give up, you still have a chance. And, when you are small, you have to be very focused and rely on your brain, not your strength.”
On teamwork: “If we are a good team and known what we want to do, one of us can defeat ten of them.”
On having a larger mission: “It doesn’t matter if I failed. At least I passed the concept on to others. Even if I don’t succeed, someone will succeed.”
On perseverance: “We will make it because we are young and we will never, never give up.”
On work: “If we go to work at 8 a.m. and go home at 5 p.m., this is not a high-tech company and Alibaba will never be successful. If we have that kind of 8-to-5 spirit, then we should just go and do something else.”
On competition: “You should learn from your competitor, but never copy. Copy and you die.”
On Alibaba.com’s 2007 IPO: “Alibaba is not just a job. It’s a dream. It’s a cause. Let the Wall Street investors curse us if they want.”
On starting a company: “If you want to grow, find a good opportunity. Today, if you want to be a great company, think about what social problem you could solve.”
On the benefits of his technological ineptitude: “Intelligent people need a fool to lead them. When the team’s all a bunch of scientists, it is best to have a peasant lead the way. His way of thinking is different. It’s easier to win if you have people seeing things from different perspectives.”
On growth: “In carrying out e-commerce, the most important thing is to keep doing what you are doing right now with passion, to keep it up.”
The 4 primary trading fears
Warren Buffett: How I Choose The Next Person To Run Berkshire Hathaway
“Four years ago, I told you that we needed to add one or more younger investment managers to carry on when Charlie, Lou and I weren’t around. At that time we had multiple outstanding candidates immediately available for my CEO job (as we do now), but we did not have backup in the investment area.
It’s easy to identify many investment managers with great recent records. But past results, though important, do not suffice when prospective performance is being judged. How the record has been achieved is crucial, as is the manager’s understanding of – and sensitivity to – risk (which in no way should be measured by beta, the choice of too many academics). In respect to the risk criterion, we were looking for someone with a hard-to-evaluate skill: the ability to anticipate the effects of economic scenarios not previously observed. Finally, we wanted someone who would regard working for Berkshire as far more than a job.
When Charlie and I met Todd Combs, we knew he fit our requirements. Todd, as was the case with Lou, will be paid a salary plus a contingent payment based on his performance relative to the S&P. We have arrangements in place for deferrals and carryforwards that will prevent see-saw performance being met by undeserved payments. The hedge-fund world has witnessed some terrible behavior by general partners who have received huge payouts on the upside and who then, when bad results occurred, have walked away rich, with their limited partners losing back their earlier gains. Sometimes these same general partners thereafter quickly started another fund so that they could immediately participate in future profits without having to overcome their past losses. Investors who put money with such managers should be labeled patsies, not partners. (more…)