Month: May 2010

Markets are changing all the time

You have to have the ability to change and see how the markets are changing and adapt to it. That’s a constant process. That’s why I think you see some people do well for four or five years and then just disappear.

History can be a useful benchmark but only if everything  is put into the right context. Markets are dynamic and people’s reactions are different. It is much more subtle and nuanced than looking at what happened the last time.

Cristian Siva-Jothy

No setup works all the time and in all types of market environment. The success rate of any setup fluctuates in cycles – there are periods when it is high and periods when it is low. Most successful speculators have specialized in a small number of setups. The question is, do you change when the market dynamics change and do you adapt new setups or do you wait for the proper market environment to come back before you risk any money?

Jim Leitner on Confirmation Bias

Humans in general are biased and look for confirmatory evidence. When someone is bullish on oil, they tend to pick the pro-oil arguments in whatever they read. Very few people train themselves to look for dis-confirming evidence.

It is very difficult to practice the latter, but you should train yourself to ask why you believe your longs might go down, not why they should go up.

Discipline

If you don’t see anything, you don’t initiate a new position. You take risk only when you see an opportunity. Make it a habit to ask yourself for each trading or investing decision – do you have an edge or do you just hope to be right. Hope is not a strategy.