“I would estimate that 80% of the people trading commodities trade without a clear, systematic or mechanical approach. They just sense something will happen and trade accordingly. They think the price of Gold will go up because of the deficit and the political situation. Or, it will go down because of the deficit and the political situation. In some fashion they observe news and market actitivy, and take a position in the market. That’s not the way I trade because of a fundamental flaw in that approach to the market.
“The flaw is there is no way to quantify or qualify what type of investment success they will have in the future. Just because you guessed correctly in the past or have done your homework for the current trade does not mean your next trade will be correct. You don’t know what the probability of the trade being correct are, your don’t know what percent of the time you are right and wrong. You don’t know what your average profit is, nor your average loss. You have no idea how often you’ll be trading the market. After all, your judgment can change on a daily or even an hourly basis.
“For this reason I long ago decided to systematically and mechanically define commodity trading. Even a rough system was a better way to trade logically than my whims and guesses.”
Williams, Larry. In: “The Definitive Guide To Futures Trading”.
Victor nailed it, revealing why moving averages simply don’t work (although we already knew that, the “why” was yet to be answered).
I ask permition to quote him:
“Not to mention that it is extremely spurious and dangerous to your wallet to see cycles in moving averages.This is due to the Slutsky-Yule effect, a consequence of regression to the mean, creating false cycles.”
Bernardo’s first interaction with technology and music (macbook and piano).
Interesting post on slippage by Max Dama.
Go take a look!
Today is my birthday…
If it’s true that we spent the entire year doing what we did in our birthday, then I’ll spend the year trading, laughing, and enjoying the company of those I love.
Nowadays I’m immersed in a research project that is consuming all the time I have from the moment I open my eyes until I go to bed, late at night.
I’ll be preparing soon the continuation of Victor Niederhoffer’s “The Education Of A Speculator” review (I call it “Late Review” because it seems I was one of the last who read him – things take a while to arrive here in Brazil).
Hang on!
Today I had a most pleasant talk with Prof. Gangineni Dhananjhay, via skype. What was to be a 30 minute talk became a 1 hour + talk, interrupted only by a previous appointment I had.
The topics were all market related, and I believe the talk was benefited us both.
Be always welcome, Professor!
Anyway, those interested in talk can find me in skype: market_timing
Regards to all.
