A little story recently brought to mind.
At the end of the 90s I worked at a bank where the stock went up on a 45 degree angle for the first 5 years I worked there. People all around me marveled at the bank stock, called it âSafeâ and had all of their 401k retirement savings in that bank stock. Then in the middle of 1999 the bank stocks got chopped down by mediocre earnings reports. Our stock dropped off a cliff with the rest. People wept bitterly as they held on to the stock as it plunged. When it eventually came to rest a few months later they had lost half.
Before we had time to collect ourselves the bank merged with another bank (second merger in 2 years) and then shortly afterward our whole IT department was out sourced to a high flying tech. Seeing a chance to get their money back people who had lost in the bankâs stock drop decided to put all of the remainder of their 401Ks in this high flying tech in the new economy. Most were all in by October, 2000.
Shortly after the IT companies stock crashed with the markets. I heard many people almost in tears complain about their big loses as they held on as the stock set new lows. They just knew in the new economy the stock would recover. It never did recover. First the bank⦠Then the IT Companyâ¦some had lost more than 90% of their retirement savings in a matter of months.
Because of greed and fear these people broke all the rules we learn as traders. They had not paid attention to markets, risk, position size and you name it they forgot to do it. These were some of the smartest people I had ever met. A number of these people were geniuses at what they did. Some of these people I still talk to and they are still working to recover those losses. I survived because I was a trader by then and I later retired with most of my funds intact.
Most genius investors or traders never get beyond the concept of markets or market trend much less manage positions or risk. For example count how many traders you know that survived through the bear market that followed the bull market of the 1990s. Many 90âs bull market geniuses lost it all in the bear that followed because they could not trade it. Just like a huge number of profitable traders washed out in 2008.
Markets are a form of Artificial Intelligent with a large rule base and with only some of those rules are in effect at one time. Most geniuses build their rules statically into a strategy based on current markets rules and then trades this market expecting the rules will never change. They do great for a time in the market. Then the market shifts to some new rules in their rules base creating a different version of market. The majority of the geniuses (95%) and their static rules lose money during the market shift. Most geniuses never recover to trade again. A few (5%) are true geniuses because their strategy can trade in any set of market rules.
At the end of the 90s I worked at a bank where the stock went up on a 45 degree angle for the first 5 years I worked there. People all around me marveled at the bank stock, called it âSafeâ and had all of their 401k retirement savings in that bank stock. Then in the middle of 1999 the bank stocks got chopped down by mediocre earnings reports. Our stock dropped off a cliff with the rest. People wept bitterly as they held on to the stock as it plunged. When it eventually came to rest a few months later they had lost half.
Before we had time to collect ourselves the bank merged with another bank (second merger in 2 years) and then shortly afterward our whole IT department was out sourced to a high flying tech. Seeing a chance to get their money back people who had lost in the bankâs stock drop decided to put all of the remainder of their 401Ks in this high flying tech in the new economy. Most were all in by October, 2000.
Shortly after the IT companies stock crashed with the markets. I heard many people almost in tears complain about their big loses as they held on as the stock set new lows. They just knew in the new economy the stock would recover. It never did recover. First the bank⦠Then the IT Companyâ¦some had lost more than 90% of their retirement savings in a matter of months.
Because of greed and fear these people broke all the rules we learn as traders. They had not paid attention to markets, risk, position size and you name it they forgot to do it. These were some of the smartest people I had ever met. A number of these people were geniuses at what they did. Some of these people I still talk to and they are still working to recover those losses. I survived because I was a trader by then and I later retired with most of my funds intact.
Most genius investors or traders never get beyond the concept of markets or market trend much less manage positions or risk. For example count how many traders you know that survived through the bear market that followed the bull market of the 1990s. Many 90âs bull market geniuses lost it all in the bear that followed because they could not trade it. Just like a huge number of profitable traders washed out in 2008.
Markets are a form of Artificial Intelligent with a large rule base and with only some of those rules are in effect at one time. Most geniuses build their rules statically into a strategy based on current markets rules and then trades this market expecting the rules will never change. They do great for a time in the market. Then the market shifts to some new rules in their rules base creating a different version of market. The majority of the geniuses (95%) and their static rules lose money during the market shift. Most geniuses never recover to trade again. A few (5%) are true geniuses because their strategy can trade in any set of market rules.
