Archives of “January 2019” month

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James Simons: Conquering Wall Street with Mathematics

  
Analysis, Education, Video

Video Segments:
0:00 Introduction
4:25 Early Life
8:04 MIT
10:35 Road trip to South America
12:18 Berkley
13:18 First investments
18:20 Urge to do something different/ First business
20:26 Back to academia
26:09 Opposing the war/ Getting fired
30:45 Stony Brook University
36:26 Managing money
39:39 Becoming a trader
45:53 Renaissance technologies/ What makes it successful
49:40 Simons foundation
54:04 Mathematics as a refuge
55:40 Retirement
57:19 Guiding principles
1:00:45 Start of Q&A
1:01:12 When not to do something?
1:02:20 Thoughts on hedge fund industry today?
1:04:31 Why do you focus on collaborative goals?
1:06:30 How did your parents help foster your mathematical knowledge?
1:07:15 When you look back, would you change anything?
1:08:14 Do you think you should share your knowledge?
1:09:52 Thoughts on mathematics education?
1:17:55 Bourbaki movement?

Does Your Financial Guru or Doomster Resemble A Cult?

  
  Education
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Does your financial Guru or Doomster resemble a cult? To satisfy your curiosity, it might be worth taking  simple test that will give you an idea whether what you thought was innocent objective altruistic financial advice and unbiased analysis is actually something more nefarious that wants to control your mind, your trades, and empty your bank account.

 1. Does your Guru always make out like he’s right?

2. Does you Guru paint a picture that the other [non-disciples] are always wrong?

3. Is there any exit from the Guru’s philosophy without following the philosophy?

4. Does the Guru’s group use its own “Cult-speak”?

5. Does “group-think” dominate, suppressing dissent and enforcing conformity of thinking?

6. Is Guru’s advice irrational at times, contradicting previous or other tenets of Guru advice?

7. Does Guru’s philosophy suppress disbelief?

8. Does Guru’s philosophy denigrate competing ideas, schools of thought, and other Guru’s?

9. Does Guru make personal attacks upon critics?

10. Does Guru believe non-followers need “fixing”?

11. Does Guru insist that his interpretation is the only correct way? (more…)

Benjamin Graham on RISK

  
  Education
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“It has been an old and sound principle that those who cannot afford to take risks should be content with a relatively low return on their invested funds. From this there has developed the general notion that the rate of return which the investor should aim for is more or less proportionate to the degree of risk he is ready to run. Our view is different. The rate of return sought should be dependent, rather, on the amount of intelligent effort the investor is willing and able to bear on his task.”

—-Benjamin Graham, The Intelligent Investor (New York: HarperBusiness, 2003), p. 88.

RISK

  
  Education
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“Ancient man had no risk management. Everything was left to ‘fate’ and the whims of the gods. Because ancient man felt that he was merely a victim of circumstance he did not see a need to plan for the future. Therefore, he had no future. In his book Against The Gods: The Remarkable Story Of Risk, Peter Bernstein plots out the history of man’s discovery of the law of probabilities and risk management. Suffice it to say, economic progress seems to run parallel with man’s ability to discover, quantify, and manage risk. Risk and reward are two sides of the same coin. One is not present without the other. You cannot receive the reward unless you are willing to take the risk and you cannot expect to keep that reward unless you learn to mange that risk. It is imperative to master both subjects if you expect to be successful in any endeavor, especially the arena of investing/trading.”

Letting Winners Turn in to Losers

  
  Education
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Trading problem that I want to focus on is allowing winning trades to turn in to losers. Many of us have probably had a time when a trade was making big loot, and we started to count the profits like they were ours before we exited the trade. When the stock started to lose the ground it had gained, we avoided selling because we had built up an emotional attachment to the paper profits we had seen. Instead of selling the stock to lock in some gain, we opted to hold out for the stock to go back to where it used to be, promising to sell when it came back to the point where we felt good about the trade. The stock drifts lower, and eventually the gain turns in to a loss. We ultimately sell it at the bottom, swearing never to do it again. But without some reprogramming, we probably will.

The Solution

Like Kenny Rogers used to sing, “Don’t count your money, when you are sitting at the table, there will be time enough for counting, when the dealing’s done.” Do not calculate your profits before you lock them in. Avoiding the profit watch will help you avoid an emotional attachment to the paper profits, giving you greater clarity to take the exit door when the market tells you it is time to do so.

I hope this outline of mental problems and some solutions helps you become a better trader. The difference between those who succeed in trading and those who fail is not the system they play, but how well they play it. Your mind is a powerful thing, don’t let it beat you in the market.

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