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12 ways the world could end

  
Analysis, Education
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Since the dawn of civilisation people have speculated about apocalyptic bangs and whimpers that could wipe us out. Now a team from Oxford university’s Future of Humanity Institute and the Global Challenges Foundation has come up with the first serious scientific assessment of the gravest risks we face.

Although civilisation has ended many times in popular fiction, the issue has been almost entirely ignored by governments. “We were surprised to find that no one else had compiled a list of global risks with impacts that, for all practical purposes, can be called infinite,” says co-author Dennis Pamlin of the Global Challenges Foundation. “We don’t want to be accused of scaremongering but we want to get policy makers talking.”

The report itself says: “This is a scientific assessment about the possibility of oblivion, certainly, but even more it is a call for action based on the assumption that humanity is able to rise to challenges and turn them into opportunities. We are confronted with possibly the greatest challenge ever and our response needs to match this through global collaboration in new and innovative ways.”

There is, of course, room for debate about risks that are included or left out of the list. I would have added an intense blast of radiation from space, either a super-eruption from the sun or a gamma-ray burst from an exploding star in our region of the galaxy. And I would have included a sci-fi-style threat from an alien civilisation either invading or, more likely, sending a catastrophically destabilising message from an extrasolar planet. Both are, I suspect, more probable than a supervolcano.

But the 12 risks in the report are enough to be getting on with. A few of the existential threats are “exogenic”, arising from events beyond our control, such as asteroid impact. Most emerge from human economic and technological development. Three (synthetic biology, nanotechnology and artificial intelligence) result from dual-use technologies, which promise great benefits for society, including reducing other risks such as climate change and pandemics — but could go horribly wrong.

Assessing the risks is very complex because of the interconnections between them and the probabilities given in the report are very conservative. For instance, extreme global warming could trigger ecological collapse and a failure of global governance.

The authors do not attempt to pull their 12 together and come up with an overall probability of civilisation ending within the next 100 years but Stuart Armstrong of Oxford’s Future of Humanity Institute says: “Putting the risk of extinction below 5 per cent would be wildly overconfident.” (more…)

Jesse Livermore : Trading Quotes

  
  Education
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Speculating

If somebody had told me my method would not work I nevertheless would have tried it out to make sure for myself, for when I am wrong only one thing convinces me of it, and that is, to lose money. And I am only right when I make money. That is speculating.

Risk

If all I have is ten dollars and I risk it, I am much braver than when I risk a million if I have another million salted away.

Personality

Every stock is like a human being : it has a personality – a distinctive personality – aggressive, reserved, hyper, high-strung, volatile, boring, direct, logical, predictable, unpredictable. I often studied stocks like I would study people; after a while their reactions to certain circumstances become more predictable.

Loss

A loss never bothers me after I take it. I forget it overnight. But being wrong – not taking the loss – that is what does damage to the pocketbook and to the soul.

Entry

When I’m bearish and I sell a stock, each sale must be at a lower level than the previous sale. When I am buying, the reverse is true. I must buy on a rising scale. I don’t buy long stocks on a scale down, I buy on a scale up.

General Stock Market

There is only one side to the stock market;….not the bull side or the bear side, but the right side. It took me longer to get that general principle fixed firmly in my mind than it did most of the more technical phases of the game of stock market speculation

Risk intelligence – How to live with uncertainty -One of Best Book on Behavioural finance.

  
  Education
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Risk Intelligence is a special kind of intelligence for dealing with risk and uncertainty. It doesn’t correlate with IQ, and most psychologists failed to spot it because it is found in such a disparate, rag-tag group of people – American weather-forecasters, professional gamblers, and hedge-fund managers, for example.
Dylan Evans PhD, and former senior lecturer in Behavioural Science in the School of Medicine at University of Cork, has written about his work in researching risk intelligence in ‘Risk Intelligence – How to Live with Uncertainty‘. Evans asserts that people in positions which require high risk intelligence – doctors, financial regulators and bankers, for instance – seem unable to navigate what Evans calls the “darkened room”, the domain of doubt and uncertainty.
Risk Intelligence is a traveller’s guide to the twilight zone of probabilities and speculation. Evans shows us how risk intelligence is vital to making good decisions, from dealing with climate change to combating terrorism. He argues that we can all learn a lot from expert gamblers, not just about money, but about how to make decisions in all aspects of our lives. 
I read it once, and re-read it a second time. It is in my opinion, the best, yet least known book, on behavioural finance. 

Position Size Can Be More Important Than the Entry Price

  
  Education
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Too many traders focus only on the entry price and pay insufficient attention to the size of the position. Trading too large can result in good trades being liquidated at a loss because of fear.

On the other hand, trading larger than normal when the profit potential appears to be much greater than the risk is one of the key ways in which many of the Market Wizards achieve superior returns. Trading smaller, or not at all, for lower probability trades and larger for higher probability trades can even transform a losing strategy into a winning one.

For example, Edward Thorp, who started out devising strategies to win at casino games before achieving an extraordinary return/risk record as a hedge fund manager, discovered that by varying the bet size based on perceived probabilities, he could transform the negative edge in Blackjack into a positive edge. An analogous principal would apply to a trading strategy in which it was possible to identify higher and lower probability trades.

Risk

  
  Education
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risk-ASRAt some point traders realize that no one can tell you exactly what is going to happen next in the market, and that you can never know how much you are going to make on a trade. Thus the only thing left to do is to determine how much risk you are willing to take in order to find out if you are right or not. The key to trading success is to focus on how much money is at risk, not how much you can make.

Hallmark of a Position Day Trader

  
  Education
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hallmark-trader

  • Routine and Predictable daily methodology
  • Psychological Control: Discipline, Focus, Patience
  • Macro vs Micro Market Analysis … seeing the Big Picture
  • Comprehensive intraday Hit List analysis
  • Multiple intraday Set-up opportunities
  • Various chart pattern recognition … low risk opportunities
  • Capital preservation = risking less than 50% maximum stop loss.
  • Expectation & Time Exits: Scalp, Breakeven, Profit Target, Let Profits Run
  • Trading Execution Commitment: honoring Set-up signals, not P&L

    • 10 Things that Great Traders have Declared Independence From

      
      Education
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    10 Things that Great Traders have Declared Independence From

    1. Great traders do not have to be right about any one trade, their success is based on winning more than they lose on a large amount of trades.
    2. Great traders do not need trade ideas from other traders, they trade a system and method independent of others opinions.
    3. The best traders are independent of holding on to losing trades stubbornly trying to prove they are right, they cut losses.
    4. The best traders are not prisoners of their emotions they can make clear headed decisions due to trading like it is a business not an ego trip.
    5. Rich traders became rich because they had systems that allowed winning trades to be free to run as far as they would go. They are independent of price targets.
    6. Rich traders trade independently from Blue Channels sentiment.
    7. Great traders trade charts independently of market sentiment.
    8. Great traders trade independently of talking heads on financial television.
    9. Winning traders are independent of market gurus they have proven systems and methods.
    10. Great traders are free from the risk of ruin because they never risk more than 1% to 2% of their total capital on any one trade.

    Trading Rules & Strategy

      
      Education
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    Trading Rules
    • The purpose– a good set of trading rules promote growth they do not create limitations. Not trading during x period of time is not a rule, it is a limitation. Do not get me wrong there are times when you need to limit yourself but that is not all times. If you have a plan, you will be able to understand when you are most at risk of trading poorly. Eventually, you can work through it. Sometimes all it takes is being aware of it.
    • Simple-They need to be simple. They need to hang over and direct all of your actions. The only way you are going to remember and use them to your fullest ability is if you can understand them. Rules are more simple than limitations.
    • Must apply– Rules or a trading plan are only as good as your ability to apply them. Once again, you have to believe in them, you have to make them your own.
    • Cohesive- All rules needs to eventually act as one. Each rule dependent on another. This will make it easier to follow and understand which one you are breaking. This also makes the application easier.

    Strategy (more…)

    How do *your* coping efforts work for you?

      
      Education
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    effortTake a look at how well you trade after a position has gone against you. Do you trade better after a drawdown or worse?

    How about after you have a few winning trades, days, or weeks in a row? Do you trade better or worse? Breaking down your performance as a function of recent performance will tell you a great deal about how effective you are in coping with risk and reward.

    The other excellent indicator of whether your coping is working for you is your emotional experience during trading. If you find that anxiety, overconfidence, frustration, and stress are pushing you into poor decisions, you know that you’re not coping well with the uncertainties of markets.

    Finally, it is helpful to identify the sequences of coping behaviors that you utilize when you’re making good decisions and the sequences when you’re trading poorly. Knowing how your individual coping responses come together to form coping strategies can help you cultivate your coping strengths.

    Tracking how you deal with challenges when you are at your most effective enables you to create a mental model of that coping that you can call upon during periods of high stress. We cannot avoid the stresses of trading, but those do not have to generate distress and biased decisions.

    You Just Might Be …Gambler

      
      Education
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    When does trading become gambling? There is a very thin line. I maintain that most traders ARE gamblers. They use markets as a substitute for a casino.

    1. IF you enter trades without a clear trading plan, you just might be a gambler.

    2. IF you trade just to be trading, you just might be a gambler.

    3. IF you’re bored and enter a trade, you just might be a gambler.

    4. IF you look at potential profit before assessing potential loses, you just might be a gambler.

    5. IF you have no impulse control, you just might be a gambler.

    6. IF you have no methodology, you just might be a gambler.

    7. IF you rely on others for your trading decisions, you just might be a gambler.

    8. IF you do not take full responsibility for your trading outcomes, you just might be a gambler.

    9. IF you increase your risk due to losses, you just might be a gambler.

    10. IF you do not use stop losses or do not adhere to them, you just might be a gambler.

    And my all time favorite

    11. IF you get an adrenaline rush when your entering trades, you just might be a gambler.

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