No seriously. As a favor to others on this thread, please don't try to have a conversation with Jack Hershey here. Start a Boolean algebra thread or something. I don't have to see him anymore, but not everyone has him on ignore. Dude is crazy.
It's applied like this... If a, b and c, criteria are not met, then '0' Therefore no signal to go on. If a, b and c, criteria are met, then '1' Therefore supply signal to go on. Predominantly used in auto trading but there is no reason this system cannot be used to assist with discretionary type systems via a spreadsheet check sheet. eg, If fast MA is not crossing slow MA, '0' (no trade) If fast MA has crossed slow MA, '1' (place trade) The spreadsheet function 'IF' is used predominantly. http://en.wikipedia.org/wiki/Algorithm There are only a couple of things required to trade, either go, wait or stop. Go = 1 Stop =0 Wait = 0
Thanks Mickey,for the clarification.So I suppose there are a lot of "IFS" in the case of the markets,and they should be nsync.The main point is to know the correct criteria.By saying that only Boolean Math is applied to the markets,I'm trying to understand,what a person has in mind?That one should have a certain set of criteria,related to the Math?Other words,if I know Boolean Math,I don't need anything else,correct?
Let's not digress further. I'd suggest start your own thread as it is not really on topic as such. I'm happy to contribute to queries on your own separate thread. This thread by darkhorse is too interesting, let's keep it on track. Thx
No, in the real world Ken Fisher's books are terrible -- an awful combination of smugness, vapidity and fluff -- and if you like them then your eye for quality is terrible. This is a subjective opinion, of course, but an informed one from someone with taste and a discerning eye. You can argue with me, but in doing so you take the equivalent stance of someone who says Barry Manilow is good music. You're entitled to your opinion, but your opinion is crap. Below is an Amazon review I wrote some years ago of Fisher's book "The Only Three Questions That Count." He actually got one of his staff to hector Amazon until they took the review down, which shows how the guy rolls. ~~~ I have no fixed opinion regarding Mr. Fisher's investing chops -- brains in a bull market, inherited name and all that -- but he is undoubtedly the heavyweight champ when it comes to asset gathering. (This theme is central to the review, as I shall demonstrate in my conclusion.) Back when I was an avid reader of RealMoney (no longer the case), I marveled at the relentless ubiquity of Ken's advertising presence. At times it seemed he had singlehandedly bought up more than 50% of the banners on both sites. I was beginning to wonder at what point TSCM would announce itself a wholly owned subsidiary of Fisher Investments. I have also received numerous pieces of laudatory junk mail over the years--through no expressed desire or inclination of my own--tracking the rise of Fisher's AUM from single-digit billions to the tens of billions he brags of running today. Clearly, the man is relentless. As for this tome, how shall I put it... the book is a giant tease. The cover suggests powerful and penetrating insights. Specificity is not promised, exactly, but it is certainly implied. In reality, the "three questions that count" are vaguely posed, rooted in convention, and so general in nature they hardly "count" as three distinct inquiries at all. Once you get past the opening self-accolades (was Cramer's foreword not enough?), the first chapter is at least interesting--in an eyebrow raising, head shaking, conceptual train wreck sort of way. Fisher leads off the book with a foolhardy and patronizing argument. His urgent message is that investing is not a craft. You have probably failed in your investment efforts, dear reader, because you erroneously viewed it as such. Such penetrating insight! Lest you think I exaggerate, consider the section header that reads--quoting word for word here--"Because Mr. Crafty, It's Not a Craft." Fisher is dead wrong. Investing is absolutely a craft, at least as far as the American Heritage Dictionary defines the term: "Skill in doing or making something, as in the arts; proficiency; an occupation or trade requiring manual dexterity or skilled artistry." Fisher's manufactured retort is that investing is best considered a "scientific" affair; that in order to be a successful investor, you must give up your crafty ways and learn to "think like a scientist." This is an utterly false dichotomy. The scientific aspects of successful investing do not rule out craftsmanship at all. If anything, the science relies heavily on the craft. Don't agree with me? Fine. Try arguing the point with Albert Einstein, who said this: "After a certain high level of technical skill is achieved, science and art tend to coalesce in aesthetics, plasticity, and form. The greatest scientists are always artists as well." Or consider this from Lee Humphries: "Within their areas of competence, experts have many more categories of awareness than novices. The perception of subtleties is what Michael Jordan, Warren Buffett, and Yo-Yo Ma have in common." Or this from Bruce Lee: "The height of cultivation is really nothing special. It is merely simplicity; the ability to express the utmost with the minimum. It is the halfway cultivation that leads to ornamentation." These are all worthy expressions of, and appreciations for, the value of craftsmanship. I trust the point is made. Arguing that investing is "not a craft" is, in a word, dumb. Pitting craftsmanship against scientific rigor--as if the two were mutually exclusive rather than mutually supportive--is myopic and disingenuous. It's just a silly argument, and one that leaves a bad taste in the mouth. I suspect Fisher started off this way, though, because he has so few craftsman-like insights to offer. Instead, the bulk of the book is dedicated to naked data points, dubious statistical riffs, and sophomoric rhetorical tricks. Duly encouraging the reader to approach investing "like a scientist," all this bland minutia is supposed to impress. As for the "three questions" themselves... I won't list them here, but I will say this. Each "question" is little more than a philosophical generality--of the type that sounds profound on the surface, but is so vague as to have application in a million different directions. Nor are the "three questions" intrinsically related to investing per se. They could all be posed verbatim in a freshman-level philosophy class. Fisher's questions have been pondered and pontificated on, in some form or another, by the likes of Hume, Kant, Popper, and others. (Not to put this book in such company!) My point is that the incredible broadness of said inquiries gives them potential application to fly fishing, or labor negotiations, or sports medicine, or any other human endeavor which surpasses a relatively modest subtlety / complexity threshold. I'm all for philosophical inquiry--the world needs far more of it. But that isn't what we have here. What we do have is a sort of Farmer's Almanac of basic generalizations and boring statistical assertions: three pseudo-inquiries into the nature and fallibility of knowledge hooked up to a few decades of pompously authoritative Forbes columns. We are told--or perhaps handed--"the truth" about high PE ratios, government budget deficits, supply and demand curves, the strength of the US dollar, and on and on and blah blah blah. (What, you were expecting some genuine craftsmanlike insights? Silly you... investing isn't a craft, remember?) I intimated earlier that Mr. Fisher's true calling is gathering assets. In my opinion, this book is little more than another chapter, or rather agglomeration of chapters, in service to that never ending saga. I readily admit that my cynicism could be misdirected; this book was probably not written for me. It was written for novice investors, those who struggle mightily with the art of separating wheat from chaff. After all, who else would send their investment dollars to a man who already has thirty billion of them to manage? I'm reminded of Crocodile Dundee's response when asked whether he'd consider moving to New York: "Nah--I'd just make it more crowded." The deleterious effect of performance drag on excessive funds under management is very real, especially when the fund in question is restricted to public equity strategies (unlike, say, a Berkshire Hathaway, which does some very interesting and unconventional things). On the whole it is very hard to manage thirty billion of anything effectively, let alone via conventional mandate on the long-only side. I am amused by these gigantic mutual fund managers' efforts to paint themselves as nimble and selective, when in reality they are like supertankers trying to negotiate a narrow strait. Paradoxically, my criticisms point out the marketing savvy of this book. I predict its readership will prove self-selecting, with those who find the tome worthwhile largely the same group set to endow Mr. Fisher with his next few billion. If a more serious effort had been made to reach discriminating types like me, the all-encompassing asset gathering goal might have been compromised. Thus, out of respect for sheer Machiavellian efficiency and ruthless singularity of purpose, I award "The Only Three Questions That Count" a second star.
LMFAO!!! As Ken Fisher returns to his mansion or yacht, the struggling wannabes keep throwing stones and missing the value. You folks just don't "get it". surf
Wow. Really? You're going to go in that direction now? If you're going to do the gradeschool thing, why not just call me a big dork poopyhead while you're at it? Friendly advice: When you find yourself in a hole, stop digging. Re, Fisher's mansion or yacht, if my dad was Phil Fisher I would have bumped my net worth to "super-rich" status a lot faster too. As it stands, my path started from scratch. Further in that regard, I wonder: Which of us has a better shot at being worth +$10 million by 40, +$100 million by 50, and +$1 billion by 60? Care to bet against me bitch? Oh how I wish you could. p.s. "You folks?"
Trading Wisdom 41: Why Mutual Funds Don't Beat the Market "I spoke with a professional whom I consider one of the best in the business, a friend I'll call Bob (even though his real name is Rich). Bob is in charge of $12 billion of U.S. equity funds at a major investment firm. For some perspective, if you went to the racetrack and placed a bet with $100 bills, $12 billion would stack twenty World Trade Centers high (needless to say, a bet that would almost certainly kill the odds on your horse). According to Bob, the bottom line and measure of his success is this: How does the return on his portfolio stack up against the return of the Standard & Poor's 500 on average? In fact, Bob's record is phenomenal over the past ten years as his average annual return has exceeded the return of the S&P 500 by between 2 and 3 percent. "At first blush, the word "phenomenal" and an increased annual yield of 2 or 3 percent seem somewhat incongruous. Though it is true that after twenty years of compounding even 2 percent extra per year creates a 50 percent larger nest egg, this is not why Bob's returns are phenomenal. Bob's performance is impressive because in the world of billion-dollar portfolios, this level of excess return is incredibly hard to come by on a consistent basis. Some quick calculations help expose the limitations imposed on Bob by the sheer size of his portfolio. Imagine the dollar investment in each stock position when Bob sets out to divvy up $12 billion. To create a 50-stock portfolio, the average investment in each individual stock would have to be approximately $240 million; for 100 stocks, $120 million. "[Circa late 1990s] there are approximately 9,000 stocks listed on the New York Stock Exchange, the American Stock Exchange and the NASDAQ over-the-counter market combined. Of this number, about 800 stocks have a market capitalization over $2.5 billion and approximately 1,500 have market values over $1 billion. If we assume Bob does not care to own more than 10 percent of any company's outstanding shares (for legal and liquidity reasons), it's likely that the minimum number of different stocks Bob will end up with in his portfolio will fall somewhere between 50 and 100. If he chooses to expand the universe from which he chooses potential purchase candidates to those companies with market capitalizations below $1 billion, perhaps to take advantage of some lesser followed and possibly undiscovered bargain stocks, his minimum number could easily expand to over 200 different stocks. "Intuitively, you would probably agree that there is an advantage to holding a diversified portfolio so that one or two unfortunate (read "bonehead") stock picks do not unduly impair your confidence and pocketbook. On the other hand, is the correct number of stocks to own in a "properly" diversified portfolio 50, 100, or even 200? "It turns out that diversification addresses only a portion (and not the major portion) of the overall risk of investing in the stock market. Even if you took the precaution of owning 9,000 stocks, you would still be at risk for the up and down movement of the entire market. This risk, known as market risk, would not have been eliminated by your "perfect" diversification... after purchasing six or eight stocks in different industries, the benefit of adding even more stocks to your portfolio in an effort to decrease risk is small... "From a practical standpoint, when Bob chooses his favorite stocks and is on pick number twenty, thirty, or eighty, he is pursuing a strategy imposed on him by the dollar size of his portfolio, legal issues, and fiduciary considerations, not because he feels his last picks are as good as his first or because he needs to own all those stocks for optimum portfolio diversification. "In short, poor Bob has to come up with scores of great stock ideas, choose from a limited universe of the most widely followed stocks, buy and sell large amounts of individual stocks without affecting their share prices, and perform in a fish bowl where his returns are judged quarterly and even monthly. "Luckily, you don't." - Joel Greenblatt, You Can Be a Stock Market Genius JS Comment: As with "How to Get Rich" by Felix Dennis, "You Can Be a Stock Market Genius" is another excellent book with a silly title. The book quickly developed a cult following in the late 1990s, in part because of the highly useful material -- a focus on special situation investments such as spin-offs, mergers, stub stocks, restructurings etc -- and in part because of Greenblatt's track record with hedge fund Gotham Capital, which achieved 40% annual returns over a 10 to 20 year period. The traditional mutual fund industry is essentially a fee and asset-gathering exercise, as Greenblatt's example makes it plain to see. From an incentive perspective, huge size is logical for a mass-market business model, but not for individual investors within the funds. The other major problem, for the average individual investor, is not enough real talent to go around. When trillions have to be put to work, and truly performance-oriented managers are deliberately restricting their size, likely running hedge funds limited to accredited investors, and are relatively few in number in the first place, there is little Joe Sixpack can do other than take the mass-market option... which in turn provides the research data that most academic theory is based on. On the bright side, what does this say about inherent potential for the skilled and nimble practitioner, unencumbered by the shackles of institutional size, the burden of committee-vetted mandates, and the straitjacket nature of benchmark risk? Buy You Can Be a Stock Market Genius on Amazon Get Trading Wisdom via e-mail