New Rule

Discussion in 'Trading' started by ByLoSellHi, Apr 20, 2007.

  1. Whether you're a permabull, permabear, or neither, you can make any statement or prediction you want, as long as you include this caveat:

    "...I could be absolutely, utterly and totally wrong, however, and in fact, there's at least a 50% chance that I will be wrong, and there's an even greater chance that if I am wrong, any percentages or nominal numbers I've cited may be wrong by an unlimited magnitude."
  2. infooo


    Amen :)
  3. hels02



    And what does that teach you:p?
  4. The way I see it is that if you make directional predictions then you have a 33% of being correct and 66% of being wrong.

    This is particularly important when trading options.
    1/3 the price stays the same, 1/3 the price goes up, 1/3 the price goes down....

    just my 2 cents
  5. since there is pretty much 0% chance that the price will remain the same for ever. you know it either has to go up or down sometime in the future. so that would be 50% up / 50% down .. no?
  6. yes you are correct. But the truth of trading is that for a trade to be worthwhile it must move in a reasonable/expected amount of time. Otherwise, you would have lost money you could have made on other opportunities.

    My point is particularly important when you consider a dated contract such as an option or warrant. You can't wait an indefinite amount of time just to have a 50% chance of making money. Heck, in these situations every day it doesn't move in your direction means a loss.
  7. The last thing I want to sound like is someone who pats himself on the back. I hate that. People that have to tell you how great they are aren't that great.

    I have to take a moment though and pat myself on the back for one thing. I don't know what spooky ESP, planet related, tied into my general paranoia spirit overwhelms me but I am a soothsayer on general market direction! I feel corrections coming, I spot myself making mistakes a times that click in mistakes of prior times when markets were peaking and when everyone is so positive often I am in a very bad mood around the house- for I will begin feeling opposite. Even when botching trades I can tell you up and down days, weeks, months. So if I had the balls or inclination to use options and just spend my life an emini guy- by now I would be VERY rich.

    The stress levels are too high for me. I prefer to fall in love with stocks and have them disappoint me. It's a love hate relationship. Over the years I have learned to acquire better quality stocks and most importantly I have used my market timing abilities to know when to be high beta or in cash... midcap or largecap...

    So I would say that for some- I can't be alone -the odds are more like 75% of the time we are right on the direction of the market, it's a sense of money flow that you just get after many years investing.

    Now your job next week. Is to (1) get through Texas Inst which is never easy and (2) pay attention each day when the EUROPEAN markets close. That's when you punch the longs in our market. A great flood of overseas money is swamping our shores-- buying our stocks. The direction is UP. And for Tech- it's now or never> The S&P is back to it's old high and the Nazdogy is half way back.. it doesn't take a genius to know where the outpreformance will come from in the next 2 years. ~ stoney.
  8. Here's how the pros do it... live and learn. ;)

    "As did every firm on Wall Street, Morgan Stanley had a strategist, Byron Wein. Here was another guy who had outlived his usefulness.

    Byron was a nice old man, whose shtick was that he had been around the block a few times and knew everything. Like all strategists, he had a proprietary model that would say if the market was over-valued or under-valued, but Byron never really told anyone how his model worked. I think he rolled dice in his office. To be fair, I am biased against most strategists' top down work. You just can't model the stock market, because there are too many inputs changing too quickly.

    Byron had this nasty reputation of taking another analyst's work as his own. "I am adding Intel to my recommended list today." Great, it's already been on mine. If it worked, he took credit, if it didn't – it was my fault, the perfect hedge.

    Byron was also famous for his year-end, top ten predictions for the coming year. He would bill the list as bold and provocative predictions that had only a 30% chance of happening. He claimed his success rate was 70-80% each year. It took me a while, and then I finally figured out how he did it. They weren't so much predictions, but instead a series of conflicting statements. Something like, "The stock market will go up 10-20% next year, unless S&P earnings disappoint and then the market will be flat to down." This statement is ALWAYS true, even though it contains a bold prediction of an up 20% market. The guy was a walking hedge. I accidentally had a hedge in my first report on LSI Logic, with a Hold on the cover and a Buy inside. This guy did it on all his calls.

    Over the years, I have read Byron's quotes in the New York Times and the Wall Street Journal, and he hasn't changed a bit. He continues the never wrong double-speak, and is almost always right because he never actually takes a risk by saying anything. Maybe I was just jealous, as I actually had to say Buy or Sell and was judged with every tick of the tape."

    Andy Kessler, Wall Street Meat, p. 99
  9. feb2865


    Excuse my ignorance but there still permabulls/permabears outhere???
  10. re Something like, "The stock market will go up 10-20% next year, unless S&P earnings disappoint and then the market will be flat to down." This statement is ALWAYS true, even though it contains a bold prediction of an up 20% market. The guy was a walking hedge.

    Isn't this the problem with all these technical types? There is a show I only get in Fire Island on tiny WLIE (I think as low on am dial as you can go) it's really fun to listen to in the summer pre market- two guys take all their listeners stock picks and do just what you describe they punch it up and say yes it's a buy but it might retrace to so and so and then if there's volume and the MACD D turns up then it's a buy I'd buy it then. so in fact they are saying the stock is going down and up!

    Jim Cramer has this thing about $ cost averaging because how can you possibly think you are right 100% and the stock is going up. What a stupid ass attitude that's EXACTLY what I think everytime! If that makes me conceded or delusional so be it. When I tell you to buy a stock there's no if's and's or but's as I'm sure you all have figured out by now.

    Qualifiers are the great cop out.
    #10     Apr 21, 2007