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Any thoughts on this article?
- Thread starter shneed
- Start date
This is a very interesting article and shows us that anything can happen on the markets and that there are certainly no certainties.
Many people believe that if they make it it is due to hard work. THis is just an element of the equation. As warren buffett said once, I was lucky to be american and to live in the US. If I were born in The jungle, then may be I would be unknown and I would never have the chance to use my skillsâ¦..
It is like if everybody has its own destiny and that sometimes you are very very lucky and sometimes you are not. That is life. You donât chose your parents, your nationality, your friends sometimes. Your friends are usually people you meet, so may be you could be a VERY good friend of somebody that you have never met⦠Think about it...
Of course I believe strongly in hard work and that you can buikld your future by your own, but this article shows us that it is not always the case.
Many people believe that if they make it it is due to hard work. THis is just an element of the equation. As warren buffett said once, I was lucky to be american and to live in the US. If I were born in The jungle, then may be I would be unknown and I would never have the chance to use my skillsâ¦..
It is like if everybody has its own destiny and that sometimes you are very very lucky and sometimes you are not. That is life. You donât chose your parents, your nationality, your friends sometimes. Your friends are usually people you meet, so may be you could be a VERY good friend of somebody that you have never met⦠Think about it...
Of course I believe strongly in hard work and that you can buikld your future by your own, but this article shows us that it is not always the case.
I donât trust in gurus whatsoever⦠I can even say that I never listen to them. It is key to be independent in this business.
Soros is (was ) a great trader but he often made mistakes⦠I remember in 1999 when he was short dollar and believed that the euro was going to explode. You know what happened to the dollar later on. It made new highs and kept on going up. I was bullish at that time on the dollar and I can tell you that all the economists of the planet were bearishâ¦. Believe it or not.
In march 2000, if you remember, all the fund managers and analysts of wall street were mega bullish on the Nasdaq. At that same date on a technical analysis stand point all the indicators were bearish. The same before September the 11th I was clearly bearish on the market despite several gurus saying the contrary.
Now what I am sure of is that there are no certainties on the market. You can have excellent bullish or bearish set ups with high probability. What niedherhoffer was simply a bad job because he took so much risk and I can tell you that technically everything was not bullish. It shows us that usually when we are on the markets we are often blind whatever our trading skills.
Soros is (was ) a great trader but he often made mistakes⦠I remember in 1999 when he was short dollar and believed that the euro was going to explode. You know what happened to the dollar later on. It made new highs and kept on going up. I was bullish at that time on the dollar and I can tell you that all the economists of the planet were bearishâ¦. Believe it or not.
In march 2000, if you remember, all the fund managers and analysts of wall street were mega bullish on the Nasdaq. At that same date on a technical analysis stand point all the indicators were bearish. The same before September the 11th I was clearly bearish on the market despite several gurus saying the contrary.
Now what I am sure of is that there are no certainties on the market. You can have excellent bullish or bearish set ups with high probability. What niedherhoffer was simply a bad job because he took so much risk and I can tell you that technically everything was not bullish. It shows us that usually when we are on the markets we are often blind whatever our trading skills.
Against Value-at-Risk: Nassim Taleb Replies to Philippe Jorion
© Copyright 1997 by Nassim Taleb.
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Trader Risk Management Lore : Major Rules of Thumb
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Rule 1 - Do not venture in markets and products you do not understand. You will be a sitting duck.
Rule 2 - The large hit you will take next will not resemble the one you took last. Do not listen to the consensus as to where the risks are (i.e. risks shown by VAR). What will hurt you is what you expect the least.
Rule 3 - Believe half of what you read, none of what you hear. Never study a theory before doing your own prior observation and thinking. Read every piece of theoretical research you can - but stay a trader. An unguarded study of lower quantitative methods will rob you of your insight.
Rule 4 - Beware of the trader who makes a steady income. Those tend to blow up. Traders with very frequent losses might hurt you, but they are not likely to blow you up. Long volatility traders lose money most days of the week. (Learned name : the small sample properties of the Sharpe ratio).
Rule 5 - The markets will follow the path to hurt the highest number of hedgers. The best hedges are those you are the only one to put on.
Rule 6 - Never let a day go by without studying the changes in the prices of all available trading instruments. You will build an instinctive inference that is more powerful than conventional statistics.
Rule 7 - The greatest inferential mistake: this event never happens in my market. Most of what never happened before in one market has happened in another. The fact that someone never died before does not make him immortal. (Learned name: Hume's problem of induction).
Rule 8 - Never cross a river because it is on average 4 feet deep.
Rule 9 - Read every book by traders to study where they lost money. You will learn nothing relevant from their profits (the markets adjust). You will learn from their losses.
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© Copyright 1997 by Nassim Taleb.
--------------------------------------------------------------------------------
Trader Risk Management Lore : Major Rules of Thumb
--------------------------------------------------------------------------------
Rule 1 - Do not venture in markets and products you do not understand. You will be a sitting duck.
Rule 2 - The large hit you will take next will not resemble the one you took last. Do not listen to the consensus as to where the risks are (i.e. risks shown by VAR). What will hurt you is what you expect the least.
Rule 3 - Believe half of what you read, none of what you hear. Never study a theory before doing your own prior observation and thinking. Read every piece of theoretical research you can - but stay a trader. An unguarded study of lower quantitative methods will rob you of your insight.
Rule 4 - Beware of the trader who makes a steady income. Those tend to blow up. Traders with very frequent losses might hurt you, but they are not likely to blow you up. Long volatility traders lose money most days of the week. (Learned name : the small sample properties of the Sharpe ratio).
Rule 5 - The markets will follow the path to hurt the highest number of hedgers. The best hedges are those you are the only one to put on.
Rule 6 - Never let a day go by without studying the changes in the prices of all available trading instruments. You will build an instinctive inference that is more powerful than conventional statistics.
Rule 7 - The greatest inferential mistake: this event never happens in my market. Most of what never happened before in one market has happened in another. The fact that someone never died before does not make him immortal. (Learned name: Hume's problem of induction).
Rule 8 - Never cross a river because it is on average 4 feet deep.
Rule 9 - Read every book by traders to study where they lost money. You will learn nothing relevant from their profits (the markets adjust). You will learn from their losses.
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Originally posted by AAAintheBeltway
Rule 4 - Beware of the trader who makes a steady income. Those tend to blow up. Traders with very frequent losses might hurt you, but they are not likely to blow you up. Long volatility traders lose money most days of the week. (Learned name : the small sample properties of the Sharpe ratio).
What does rule 4 mean? I thought that for futures traders making money every day was good? Does this have to do with traders who refuse to take stops and exit a position with only a small gain?