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Trading Opportunities Through Analyzing Baseball

  
  Education
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If you got Pennington to find any valuable info when you asked him to develop quantitative analogies between forest life cycles and those of corporations to find some profitable trades you could certainly do the same in finding some numerical formula that could identify trade opportunities by analyzing baseball.

Each team– a stock, the aggregate teams– the market, each player– a corporate division, each salary– an investment made in the division and the company, each relevant performance statistic– a relevant performance statistic. Identify the right decision mix that makes teams perform better over time and improve over time and analyze similarities in companies doing the same.

The greatest liability is  also the greatest asset– human decision and performance permeate the game of baseball from start to finish and one could question whether it’s possible to find a truly consistent system as a result. I would argue that this complexity makes it a perfect analogy to market/company performance. It moves based on imbedded and sometimes unexplainable intellect and experience of its participants. The chaotic human decision making process is pervasive in both.

10 Powerful Psychological Traits of the Rich Trader

  
  Education
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Ten Powerful Psychological Traits of the Rich Trader

  1. They have the ability to admit they were wrong and get out of a trade. They know the place where price proves them wrong.
  2. They have the ability to not only close a losing trade but reverse and go in the other direction when it is called for.
  3. The rich trader is not trying to prove anything about themselves they are focused on making money.
  4. They do not fall in love with an idea, currency, commodity, or stock they will make trades based on price action.
  5. Rich traders know that the market action is their ultimate boss regardless of their opinions.
  6. No matter how sure they are about a trade they still ALWAYS manage the risk.
  7. Rich traders get more aggressive when winning and trade smaller or take a break during a losing streak.
  8. A great trader is one that can admit to anyone that they were wrong.
  9. Rich traders do not believe their own hype, they know they can not really predict the future they can only react to current reality and the probabilities.
  10. Rich traders love what they do, win or lose.

When you are trading like that, it is hard to be beaten. Time is your friend.

Best Practices for Traders

  
  Education
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5 Rules1) Preparation to start the day and week: Having a clearly formulated strategy to guide trading decisions;
2) Keeping score: Using a trading journal to structure learning, document progress, and sustain positive motivation;
3) Managing risk and maximizing opportunity: Trading with more risk/size when trading well and clearly seeing opportunity and pulling back risk when drawing down, trading poorly, and perceiving little opportunity;
4) Taking breaks: Stepping back from markets periodically to gain fresh perspective, reformulate views, and tweak strategies;
5) Treating trading as a business: Limiting overhead, having a clearly defined plan to move toward profitability, focusing on distinctive areas of strengths and opportunity.
So much of what makes traders great is what they do between market sessions, how they do it, and how much of it they do.
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Suffer from Decision Fatigue?

  
  Education
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Three men doing time in Israeli prisons recently appeared before a parole board consisting of a judge, a criminologist and a social worker. The three prisoners had completed at least two-thirds of their sentences, but the parole board granted freedom to only one of them. Guess which one: Answer.

New Trading Rules

  
Analysis, Education, Humour, Life
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Never marry a woman you wouldn’t wish to divorce, i.e. never get into a position you couldn’t get out of with ease, and think of this before you make the commitment. I would add that the selfish wife or selfish price or selfish dog should never marry a man that will leave her in oblivion if things don’t work out. Imagine the great harm that the selfish dog did itself by killing a human. Now they’re all likely to be rounded up.

Never admit to having made a profit, but always emphasize your losses.

Surround yourself with big and powerful players so that your positions will be with the forces when you disseminate or implement them.

Quotes that apply to golf AND Trading

  
  Education
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  1. “Golf is not a wrestle with bogey; it is not a struggle with your mortal foe; it is a physiological, psychological, and moral fight with your self; it is a test of mastery over self; and the ultimate and irreducible element of the game is to determine, which of the players is the more worthy combatant.” –Arnold Haultain

  2. “Golf is the loneliest sport. You’re completely alone with every conceivable opportunity to defeat yourself. Golf brings out your assets and liabilities as a person. The longer you play, the more certain you are that a man’s performance is the outward manifestation of who, in his heart, he really thinks he is.” –Hale Irwin
  3. “If you wish to hide your character, do not play golf.” – Percey Boomer
  4. “I never learned anything from a match that I won.” -Bobby Jones
  5. “Concentration in golf comes out of a combination of confidence and hunger.” –Arnold Palmer
  6. “Golf is deceptively simple and endlessly complicated.” –Arnold Palmer
  7. “Golf is about how well you accept, respond to, and score with your misses much more so than it is a game of your perfect shots.” –Dr. Bob Rotella (more…)

Stupid Things Finance People Say

  
  Education
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Here are a few stupid things I hear a lot.

“They don’t have any debt except for a mortgage and student loans.”

OK. And I’m vegan except for bacon-wrapped steak.

“Earnings were positive before one-time charges.”

This is Wall Street’s equivalent of, “Other than that Mrs. Lincoln, how was the play?”

“Earnings missed estimates.”

No. Earnings don’t miss estimates; estimates miss earnings. No one ever says “the weather missed estimates.” They blame the weatherman for getting it wrong. Finance is the only industry where people blame their poor forecasting skills on reality.  (more…)

Trading Errors

  
  Education
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 Ignoring the downside of a trade. Most traders, when entering a trade, look only at the money they think they will make by taking the trade. They rarely consider that the trade may go against them and that they could lose. The reality is that whenever someone buys a futures contract, someone else is selling that same futures contract. The buyer is convinced that the market will go up. The seller is convinced that the market has finished going up. If you look at your trades that way, you will become a more conservative and realistic trader.

Taking too much risk. With all the warnings about risk contained in the forms with which you open your account, and with all the required warnings in books, magazines, and many other forms of literature you receive as a trader, why is it so hard to believe that trading carries with it a tremendous amount of risk? It’s as though you know on an intellectual basis that trading futures is risky, but you don’t really take it to heart and live it until you find yourself caught up in the sheer terror of a major losing trade. Greed drives traders to accept too much risk. They get into too many trades. They put their stop too far away. They trade with too little capital. We’re not advising you to avoid trading futures. What we’re saying is that you should embark on a sound, disciplined trading plan based on knowledge of the futures markets in which you trade, coupled with good common sense.

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