Niederhoffer thinks "follow the trend" sucks
- Thread starter GloriaBrown
- Start date
My post answered the question that I quoted. Marketsurfer asked if trends existed. I think I presented a reasonable case that they do.
You are asking something else. So let me try to accommodate you. You cannot predict the future. It cannot be done. The few times you may think you did are just setups for your next "learning experience." So the question is, how do you deal with not probability, but uncertainty, the murkier cousin. Since trends exist in the past, it follows they will exist in the future. If one is present by predefined criteria that you have tested for yourself (you're a smart guy, you can figure that out for yourself) and ideally at an early stage within the context of your time frame, then it follows that it may (or may not) continue. Since trends have shown to persist for a time, the duration of which cannot be predicted because the future cannot be foreseen, it makes sense to go along with them while they are still in play in the present. The only thing you can do is look for what another poster adroitly identified on the first page of this thread:
And that's something each trader has to work out for himself. Beyond that point it is all about managing that trade, recognizing that whatever "edge," if any, you may have in timing your trades can be swamped by the random luck factor of the unanticipated once you are in. And that is why stops need to be relatively tight and initial positions relatively small; because "edges" (or whatever you want to call them) are small. But if you call it right, then you go with it.
Talk of "expected value" of a trend in the future is not a topic of serious discussion. It is a non sequitur in trading. I know this may rub some folks here the wrong way if they use price targets. However, I believe the use of predefined price targets is akin to predicting the future, which I do not believe can be done. Entries are not based on predicting the future; they are based on reacting to the present, as should be managing the trade.
And now, MrN, insofar as your clever use of my username is concerned, I suggest that if you want respect, then you should show some yourself. I may have disagreed with you but I have not shown disrespect, even when you were talking out of both side of your mouth in another thread where first you wrote the following about a certain fellow:
And then, in that same thread and about the same fellow, you wrote:
You do not earn the respect of others by treating them as fools.
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Like I said, I'm a trend follower through and through, but personally given a choice between:
- being a great dad, a loving family man, a person who was at peace with their god*, and having enough money to support your family comfortably but not extravangently and give money to charity.
and
- being an extremely successful hedge fund manger with a few hundred million, or a few billion, bucks.
I'd choose the former.
GAT
* BTW I thought Vic was jewish. Not that precise place of worship is relevant - same god ultimately.
"You also don't have to calculate an expected value for future. I never do, because I don't believe in it and am not capable to achieve this"
"...then try to find a system that can announce (that means predict) with high probability that a trend might occur"
Your second statement qualifies as calculating expected value for a discretionary trader. You have some method, analysis, insight, or intuition that tells you when to trade. If you are making money over time above throwing darts you have a positive expected value to your decisions, that is what I meant. The second thing is that naive extrapolation of the price move that just occurred is generally not a great way to get a positive expected value. The fact that most traders are looking to do this and with no mechanism for defining their folly is a big reason why the game is harder than it should be for so many. For example if the market is down and closes low it does not tell you, "the trend is down, I should be short" or whatever. In fact in indexes it on averages tells you just the opposite. What just happened does not automatically tell you the edge for the next period, that is where some insight or analysis is needed - to see what is the correct inference given the situation, if one can be made at all.
I think the conversation is very prone to getting lost because it is too abstract, without specific examples people get lost.
The sense I said "just started" was in relation to my goals or objectives, not in relation to the time I have been trading which is nearly 18 years.
Please realize I am not here to answer your questions and I definitely don't need your lessons on how to think about trading.
I merely addressed what you wrote. (And where you wrote inconsistently, I asked for clarification, which you chose not to provide. However, I recognize that you are perfectly within your right to be and remain inconsistent and/or nonresponsive.)
I didn't come here to give lessons. I came to voice my opinion. That is what these message boards are about. And in the last instance, I responded to the problem you had with my prior explanation in response to marketsurfer's request for information. Perhaps unlike you, I sought to clarify. I thought we were engaged in a discussion.
You, on the other hand, appear to have arrived with lecture notes in hand, with the expectation of subservience from those whom you deign to address:
Perhaps you would get a better reception all around if you spoke less in absolutes and with less condescension.
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Exactly what @Buy1Sell2 keeps saying.
How did such a great speculator like Victor Niederhoffer blow up 2 times despite a long superb track record?
He got caught in two of the last three major market downturns.
He said he was too leveraged and too concentrated in both instances. He summarizes his mistakes this way:
In both cases I was in over my head. I didn't have the capital to be strong enough to provide a backup in the case of unforeseen events. I didn't have a proper foundation. I was playing with adversaries who were stronger than me and who actually made the rules. My base of operations was not diversified enough, and I was vulnerable to forces I couldn't withstand. I was too vainglorious. In my opinion, those are recurring errors behind most disasters.[3]
Further, there were instances where he wasn't sufficiently knowledgable about the investments he was making.
He bet on the Thailand in 1997 during the Asian currency crisis, and lost a lot of money, later admitting he didn't know enough about Thailand.[2] Here's a quote from him.
I thought that because my method worked in markets that I knew about and had quantified, I could apply the same methods to something I didn't know about. And I had as an example [George] Soros, who would always say, "I made the most money in things I don't know about."[3]
He said of his Thailand losses:
I reached for things that had a qualitative, but not quantitative similarity [to previously successful strategies][4]
He believes that many people knew he was in a vulnerable position and traded against him, forcing him to endure losses so severe that he'd have to liquidate.
I still think that the crash of Oct. 27, 1997, was basically due to brokers running my position against me, knowing that I was on the ropes. The market had its greatest drop in the previous 10 years that day. And then the next day, once they were able to force me out, it went up more than it dropped.[3]
He lost a lot amidst 2007 stock market volatility. Here's a key quote from him:
The movements in volatility were greater than I had anticipated. We were prepared for many different contingencies, but this kind of one we were not prepared for.[1]
Here's how he described his latest fund prior to its blowup.
We identify anomalies in the empirical distribution of current prices — then exploit these in a risk controlled way.[4]
One thing he did well when his fund was working was to test ideas:
Victor and his crew would spend all day testing ideas: What historically happens to the market on a Fed day? What happens on options expiration day if the two prior days were negative? Do stocks that start with the letter “x” outperform? Nothing was beyond testing.[5]
Here's how he put his 2007 losses in perspective.
My basic ideas about the creative power of the market, buying in panics, buying on weakness—I don’t think what has happened has anything to do with that stuff. I am going to keep going, for better or worse.[1]
http://www.quora.com/How-did-such-a...up-2-times-despite-a-long-superb-track-record
How did such a great speculator like Victor Niederhoffer blow up 2 times despite a long superb track record?
He got caught in two of the last three major market downturns.
He said he was too leveraged and too concentrated in both instances. He summarizes his mistakes this way:
In both cases I was in over my head. I didn't have the capital to be strong enough to provide a backup in the case of unforeseen events. I didn't have a proper foundation. I was playing with adversaries who were stronger than me and who actually made the rules. My base of operations was not diversified enough, and I was vulnerable to forces I couldn't withstand. I was too vainglorious. In my opinion, those are recurring errors behind most disasters.[3]
Further, there were instances where he wasn't sufficiently knowledgable about the investments he was making.
He bet on the Thailand in 1997 during the Asian currency crisis, and lost a lot of money, later admitting he didn't know enough about Thailand.[2] Here's a quote from him.
I thought that because my method worked in markets that I knew about and had quantified, I could apply the same methods to something I didn't know about. And I had as an example [George] Soros, who would always say, "I made the most money in things I don't know about."[3]
He said of his Thailand losses:
I reached for things that had a qualitative, but not quantitative similarity [to previously successful strategies][4]
He believes that many people knew he was in a vulnerable position and traded against him, forcing him to endure losses so severe that he'd have to liquidate.
I still think that the crash of Oct. 27, 1997, was basically due to brokers running my position against me, knowing that I was on the ropes. The market had its greatest drop in the previous 10 years that day. And then the next day, once they were able to force me out, it went up more than it dropped.[3]
He lost a lot amidst 2007 stock market volatility. Here's a key quote from him:
The movements in volatility were greater than I had anticipated. We were prepared for many different contingencies, but this kind of one we were not prepared for.[1]
Here's how he described his latest fund prior to its blowup.
We identify anomalies in the empirical distribution of current prices — then exploit these in a risk controlled way.[4]
One thing he did well when his fund was working was to test ideas:
Victor and his crew would spend all day testing ideas: What historically happens to the market on a Fed day? What happens on options expiration day if the two prior days were negative? Do stocks that start with the letter “x” outperform? Nothing was beyond testing.[5]
Here's how he put his 2007 losses in perspective.
My basic ideas about the creative power of the market, buying in panics, buying on weakness—I don’t think what has happened has anything to do with that stuff. I am going to keep going, for better or worse.[1]
http://www.quora.com/How-did-such-a...up-2-times-despite-a-long-superb-track-record
On ignore. U are too annoying for me to deal with.