The Best Investment Advice George Soros Ever Gave. Here it is:
“Economic history is a never-ending series of episodes based on falsehoods and lies, not truths. It represents the path to big money. The object is to recognize the trend whose premise is false, ride that trend and step off before it is discredited.” ~ George Soros
Think about that statement for a minute. For everyone who is in the so-called bear camp, and thinks the current “recovery” belongs in quotation marks, this is an exceptionally meaningful quote.
Of course, everyone who has been bearish on the markets since 2009 has largely lost money, and been quite aggravated in the process. Had trillions in stimulus and quantitative easing not been injected into the economy (the big banks for the latter), our economy would have simply restructured and our markets would have bottomed at values far lower than they did. Bearish market participants have been investing with the philosophy that this will still happen.
Many bearish market participants have recognized the dynamic that there are long-term structural deficit and various economic issues, and that the economy is simply being goosed by trillions in cash and dangerously low interest rates. In other words, the bears scream that “the economy is unsustainable;” If and when rates rise, servicing trillions in debt is going to require even more debt issuance, leading to ever higher rates and a crowding out of the private sector. At this point, people draw different conclusions as to what happens next.
Others note that the euro is going to break apart, and it too is only being held together by programs like LTRO and other central bank intervention.
Regardless, many have come to the conclusion that our equity markets are fundamentally overvalued and do not discount the structural issues we face. The best argument I’ve heard for overvaluation is that corporate profit margins will contract rapidly when the U.S. government needs to start cutting its budget; we may be approaching that day with the creeping “fiscal cliff” at the end of the year. (more…)
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rss12 Quotes From ‘Trading In The Zone
I spent hours reading and re-reading this book, and eventually made a summary of all the key quotes. In a series of posts I’ll be sharing these quotes with you, and hopefully they will inspire you to take your trading to the next level. I hope you enjoy my first selections:
1. You will need to learn how to adjust your attitudes and beliefs about trading in such a way that you can trade without the slightest bit of fear, but at the same time keep a framework in place that does not allow you to become reckless.
2. Trading is an activity that offers the individual unlimited freedom of creative expression.
3. The unlimited characteristics of the trading environment require that we act with some degree of restraint and self-control, at least if we want to create some measure of consistent success.
4. The hard reality of trading is that, if you want to create consistency, you have to start from the premise that no matter what the outcome, you are completely responsible.
5. One of the principal reasons so many successful people have failed miserably at trading is that their success is partly attributable to their superior ability to manipulate and control the social environment, to respond to what they want. (Unfortunately) the market doesn’t respond to control and manipulation (unless you’re a very large trader).
6. The tools you will use to create this new version of yourself are your willingness and desire to learn, fuelled by your passion to be successful. Successful traders have virtually eliminated the effects of fear and recklessness from their trading.
7. Attitude produces better overall results than analysis or technique. (more…)
Quotes from Trading Legends :Paul Tudor Jones-Gary Bielfeldt-Richard Dennis
Paul Tudor Jones:
“We have tested every system under the sun and, amazingly, we have found one that actually works very well. It is a very good system…(under the realm of) trend following. The basic premise of the system is that markets move sharply when they move. If there is a sudden range expansion in a market that has been trading narrowly, human nature is to try and fade that price move. When you get a range expansion, the market is sending you a very loud, clear signal that the market is getting ready to move in the direction of that expansion.”
“The most important rule of trading is to play great defense, not great offense.”
“I don’t really care about the mistakes I made three seconds ago in the market. What I care about is what I am going to do from the next moment on. I try to avoid any emotional attachment to a market.”
” I always believe that prices move first and fundamentals come second.”
Gary Bielfeldt:
“The best thing that anyone can do when starting out is to learn how a trend system works. Trading a trend system for a while will teach a new trader the principle of letting profits run and cutting losses short. If you can just learn discipline by using a trend-following system, even temporarily, it will increase your odds of being successful as a trader.”
Richard Dennis:
“You should expect the unexpected in this business; expect the extreme. Don’t think in terms of boundaries that limit what the market might do. If there is any lesson I have learned in the nearly twenty years that I’ve been in this business, it is that the unexpected and the impossible happen every now and then.”
“A good trend following system will keep you in the market until there is evidence that the trend has changed.”
“The correct approach is to say: ‘This structure is up, and this structure means no more, but never that this structure means up this much and no more’.”
“I could trade without knowing the name of the market.”
“The market being in a trend is the main thing that eventually gets us in a trade. That is a pretty simple idea. Being consistent and making sure you do that all the time is probably more important than the particular characteristics you use to define the trend. Whatever method you use to enter trades, the most critical thing is that if there is a major trend, your approach should assure that you get in that trend.”
12 Quotes From ‘Trading In The Zone'
1. Attitude produces better overall results than analysis or technique.
2. Positive winning attitude = expecting a positive result from your efforts, with an acceptance that whatever results you get are a perfect reflection of your level of development and what you need to learn to get better.
3. Winning in any endeavour is mostly a function of attitude.
4. Losing and being wrong are inevitable realities of trading.
5. The market has no responsibility towards the individual trader. Taking responsibility means acknowledging and accepting, at the deepest part of your identity, that you – not the market – are completely responsible for your success or failure as a trader.
6. If you perceive the endless stream of opportunities to enter and exit trades without self-criticism and regret, then you will be in the best frame of mind to act in your own best interest and learn from your experiences.
7. You will need to learn how to adjust your attitudes and beliefs about trading in such a way that you can trade without the slightest bit of fear, but at the same time keep a framework in place that does not allow you to become reckless.
8. Trading is an activity that offers the individual unlimited freedom of creative expression.
9. The unlimited characteristics of the trading environment require that we act with some degree of restraint and self-control, at least if we want to create some measure of consistent success.
10. The hard reality of trading is that, if you want to create consistency, you have to start from the premise that no matter what the outcome, you are completely responsible.
11. One of the principal reasons so many successful people have failed miserably at trading is that their success is partly attributable to their superior ability to manipulate and control the social environment, to respond to what they want. (Unfortunately) the market doesn’t respond to control and manipulation (unless you’re a very large trader).
12. The tools you will use to create this new version of yourself are your willingness and desire to learn, fuelled by your passion to be successful. Successful traders have virtually eliminated the effects of fear and recklessness from their trading.
Evidence Based Trading
The late Ayn Rand emphasized that philosophy was the most practical of disciplines: it governs the ideas that lie behind all we do and think. The philosophical premises we assume affect how we approach trading.
A beautiful example of this is David Aronson’s new book, “Evidence-Based Technical Analysis”. It’s a well-written, thought-provoking text, with many practical examples of how to conduct data analysis in an objective way.
Starting with the premise that knowledge consists of statements that are found to be true, Aronson, writing in the positivist tradition of philosophy, excludes subjectivity as knowledge. He explains:
“The most important consequence of TA adopting the scientific method would be the elimination of subjective approaches. Because they are not testable, subjective methods are shielded from empirical challenge. This makes them worse than wrong. They are meaningless propositions devoid of information. Their elimination would make TA an entirely objective practice.” p. 148
This is bound to rub many traders the wrong way, but it’s an important challenge. What is knowledge? How do we know what we know in the markets? How can we demonstrate that knowledge is such, and not illusion? (more…)
Evidence Based Trading: Why Philosophy Matters
A beautiful example of this is David Aronson’s new book, “Evidence-Based Technical Analysis”. It’s a well-written, thought-provoking text, with many practical examples of how to conduct data analysis in an objective way.
Starting with the premise that knowledge consists of statements that are found to be true, Aronson, writing in the positivist tradition of philosophy, excludes subjectivity as knowledge. He explains:
“The most important consequence of TA adopting the scientific method would be the elimination of subjective approaches. Because they are not testable, subjective methods are shielded from empirical challenge. This makes them worse than wrong. They are meaningless propositions devoid of information. Their elimination would make TA an entirely objective practice.” p. 148
This is bound to rub many traders the wrong way, but it’s an important challenge. What is knowledge? How do we know what we know in the markets? How can we demonstrate that knowledge is such, and not illusion?
Once we start with the premise that all knowledge consists of explicit propositions that can be tested for truth, we necessarily are led toward trading that is rule-based and rigorously backtested.
Is there another, *valid* form of knowledge and trading? Can we prove that?The late Ayn Rand emphasized that philosophy was the most practical of disciplines: it governs the ideas that lie behind all we do and think. The philosophical premises we assume affect how we approach trading.
Learn From Paul Tudor Jones: Risk Size Is Key
We’ve all heard the “experts” preach to us that we should only take trades which offer at least a 2:1, or better yet a 3:1 reward to risk ratio and on the surface this seems like sound advice, but is it really?
RETHINK YOUR STRATEGY
I used to be one of those educators who would jump on the risk/reward bandwagon until one day when I stepped back and took an objective look at what trading is and how I can best optimize my chances of success. When I did this I realized that not only was the whole risk/reward premise false but that it had the potential to ruin chances for trading success by keeping me out of some of the best trades.
YOUR WINNERS CAN RUN….IF YOU LET THEM
The proponents of risk/reward ratios say that in order to be successful the trade must out produce the amount of money you have at risk by at least double or triple your risk amount but what they fail to take into consideration is that the reward side of any trade is unknown.
WHAT YOU CONTROL
You see the only part of the trading equation that you have any control over is the risk side of the trade. The reward side of any trade is a complete mystery. Oh sure, we all have our best guesses as to where the market might go next, but in the end it’s really just a crap shoot. Sometimes we’re right and sometimes we’re wrong and if we’re honest with ourselves we will admit that we really don’t know where the market is going next. (more…)