Avoiding misinformation for a beginner

[Notid]

Hi,

I have read, and I imagine there are many more "Hi I'm a newbie, help me find the Holy Grail" messages. I've looked around this board a bit, but the total amount of information is quite daunting. My hope is that my question is more helpful to me specifically and others like me in getting started.

A little about me: I'm a 27 year old software developer. I've been going at it professionally for 10 years now, and I'm beginning to think I'm coming close to the upper salary limits without a change of career direction. As such, my goal is to starting putting the money I'm making to better use, so that I can, over time, continue grow my income via using my existing income wisely.

I'm a newb when it comes to trading. I've been learning bits and pieces over the last ten years, but haven't put much to use, aside from long term investments in retirement accounts. However, I've studied enough to know some of the arguments on the different sides of the camps that are out there. It seems that information is king when it comes to wise trading, however, it seems like misinformation is a king of foolish trading.

For example, the idea the efficient market hypothesis makes a lot of sense to me, but then, so do the folks that say you can't predict the future with technical analysis. There are folks who say that books are great, and there are folks who say they'll ruin your trading mind.

As for my "trading style", I would say that, being fairly young, I still have a high appetite for risk, but that doesn't mean I want to be foolish. I'm also very keen on the idea of systems that largely go on autopilot, as it can help eliminate human emotion, and I do that kind of thing for a living. It may additionally open doors to things that I otherwise wouldn't have time for (i.e., day trading). I don't consider myself especially smart, but I am disciplined and wary of thoughtless decisions.

So my question to you guys is, what can someone in my shoes be learning that is actually progressive, and not regressive? It seems like the unbiased odds of success are stacked highly against me, and I'd like to learn the right things rather than jump right into shark infested waters. Working with paper accounts until I have a system that works makes sense, but, even then I'm torn on understanding what is actually helpful.

Hopefully this isn't flamewar bait, but rather helpful in sending me down a better path, knowing that it will still be rather bumpy.

Thanks,
Bryce

 

[onelot]

So my question to you guys is, what can someone in my shoes be learning that is actually progressive, and not regressive?

You might try and open yourself to the idea that no learning is regressive. Coming across information, whether misinformation or informed, isn't learning. The learning happens when you sit down and assess the utility of that information. Even if information is coming from a trusted source, if you haven't previously done the work, you really can't ever be sure. So, if you test information thoroughly and often, over time, you'll start to be able to tell the difference.

 

[Notid]

Good point. In that sense, there is no shortcut to learning, which makes good sense. Reading a book on carpentry won't make you able to build a house.

However, I have a hard time understanding what learning is of the highest importance. Especially when you have conflicting information and areas of study.

Thanks!

 

[SplawnDarts]

For example, the idea the efficient market hypothesis makes a lot of sense to me,

Then get the hell off ET, buy 13 weeks, and don't worry about it.

Of course, most markets are woefully inefficient and this is well documented in numerous places, so you'd be dead wrong. But at least you'd be wrong and have your time back which is of no small value.

 

[Notid]

Then get the hell off ET, buy 13 weeks, and don't worry about it.

Of course, most markets are woefully inefficient and this is well documented in numerous places, so you'd be dead wrong. But at least you'd be wrong and have your time back which is of no small value.

Haha, well, I did say "makes sense to me". By that, I merely meant, I've heard of these two camps, they say contradictory things, and both seem to make some sense.

I'd rather learn, and be proven wrong a hundred times over, than merely save some time.

 

[danielc1]

Hmmm, sometimes I read a message on this board that is honest and have a legit question. Let's see if we can be of service:

First of all, nobody knows the correct pathway for you. You must be willing to make mistakes and most of all you have to be willing to change. Change how you think and feel about some of the things you think is good or bad, or wrong or right.

Their is no magic to good trading or investing. It's simple and straight forward. It's how you think about some subjects that it will make complex. Unless you find a method that is completly in tune of how you are right from the start, you are going to strugle.

If I had to start over, I would start with knowing exactly what I want. Objectives, goals and dreams. Then I would look how to accomplisch them, with the time I have and the resources available to me. Then I would read some good books about people you know they are succesfull in trading or investing and see of anything they do fit you and your goals. Then I would look for a mentor with the same trading style and spend money and time to learn everything he is doing. And then I would trade for my own account. Most newb start with the last thing they should be doing: opening an account and start trading.

 

[SplawnDarts]

Haha, well, I did say "makes sense to me". By that, I merely meant, I've heard of these two camps, they say contradictory things, and both seem to make some sense.

I'd rather learn, and be proven wrong a hundred times over, than merely save some time.

Well, if you really need the EMH disproved in general, go look at the Shiller PE data. It shows pretty clearly that future equities performance is a function of current price - ie. that the price series is NOT some independent random walk. Similarly, look at the Case Shiller index on housing - you'll see that housing prices historically have crazy momentum and almost no noise once you seasonally adjust. If housing went up last month, the chance it goes up this month is like 0.95 or something insane like that.

So two HUGE asset classes (US equities and US residential real estate) are completely inefficient. And those are clearly very scrutinized markets. As you might imagine, other things that get less scrutiny are even less efficient. If you move to shorter time frames than Shiller operated on, the nature of the inefficiencies changes but their prevelence does not.

 

[Notid]

Thanks guys. These are helpful thoughts.

I figure that my goals are rather simple and not well defined -- that is something I can refine.

I don't know the things I don't know, so part of identifying what sort of trader I am, and thus the sort of mentor/authors I should look for is, probably a matter of finding what sticks. Or at least, it sounds that way. At least it's encouraging to hear that.

 

[dbphoenix]

Thanks guys. These are helpful thoughts.

I figure that my goals are rather simple and not well defined -- that is something I can refine.

I don't know the things I don't know, so part of identifying what sort of trader I am, and thus the sort of mentor/authors I should look for is, probably a matter of finding what sticks. Or at least, it sounds that way. At least it's encouraging to hear that.

This may be helpful as far as the "what do I want" process is concerned. However, if you already know that you want something automated, this eliminates a vast amount of material that would otherwise waste a lot of your time. There is an automated trading forum here that might be right up your alley.

 

[Notid]

This may be helpful as far as the "what do I want" process is concerned. However, if you already know that you want something automated, this eliminates a vast amount of material that would otherwise waste a lot of your time. There is an automated trading forum here that might be right up your alley.

That is actually quite helpful. Definitely helps me figure out what to be looking for.