Posts Tagged: irrationality

Don’t make assumptions.

20 January 2014 - 10:15 am
 

This one is huge. As the saying goes, “When you assume, you make an ass out of you and me” — though often as a trader it is just you. Foolish assumptions have swallowed up entire oceans of profit. The habit of assumption is born of laziness — lack of due diligence, lack of proper investigation and verification. It also stems from a lack of creativity, e.g. the inability to see an alternative range of scenarios — and sometimes emotional bias, meaning irrational predisposition to an expected or demanded outcome.

The number of questionable assumptions traders can make — and DO make, on a routine basis — is veritably endless. From unexamined notions of how a market works, to blinding ideological zeal, to unjustified confidence in a methodology with substantial gaps in process, theory and execution, to casually misguided assignment of blame for a bad result (see agreement #2), there are a thousand ways for foolish assumptions to contribute to a money-losing outcome — which is why, in fact, more traders lose than win.

20 Trading Insights from Paul Tudor Jones

26 September 2013 - 15:35 pm
 

paultudor1. Markets have consistently experienced “100-year events” every five years. While I spend a significant amount of my time on analytics and collecting fundamental information, at the end of the day, I am a slave to the tape and proud of it.

2. I see the younger generation hampered by the need to understand and rationalize why something should go up or down. Usually, by the time that becomes self-evident, the move is already over.

3. When I got into the business, there was so little information on fundamentals, and what little information one could get was largely imperfect. We learned just to go with the chart. Why work when Mr. Market can do it for you?

4. These days, there are many more deep intellectuals in the business, and that, coupled with the explosion of information on the Internet, creates an illusion that there is an explanation for everything and that the primary test is simply to find that explanation. As a result, technical analysis is at the bottom of the study list for many of the younger generation, particularly since the skill often requires them to close their eyes and trust price action. The pain of gain is just too overwhelming to bear.

5. There is no training — classroom or otherwise — that can prepare for trading the last third of a move, whether it’s the end of a bull market or the end of a bear market. There’s typically no logic to it; irrationality reigns supreme, and no class can teach what to do during that brief, volatile reign. The only way to learn how to trade during that last, exquisite third of a move is to do it, or, more precisely, live it.

6. Fundamentals might be good for the first third or first 50 or 60 percent of a move, but the last third of a great bull market is typically a blow-off, whereas the mania runs wild and prices go parabolic.

7. That cotton trade was almost the deal breaker for me. It was at that point that I said, ‘Mr. Stupid, why risk everything on one trade? Why not make your life a pursuit of happiness rather than pain?’

8. If I have positions going against me, I get right out; if they are going for me, I keep them… Risk control is the most important thing in trading. If you have a losing position that is making you uncomfortable, the solution is very simple: Get out, because you can always get back in.

9. Losers average down losers

10. The concept of paying one-hundred-and-something times earnings for any company for me is just anathema. Having said that, at the end of the day, your job is to buy what goes up and to sell what goes down so really who gives a damn about PE’s? >> Read More

 


muk25INDIA’S richest man has lost $5.6bn (£3.6bn) in the last few months as the rupee’s record slump erased 24 per cent of his fortune. Mukesh Ambani, chairman of Reliance Industries Ltd, the operator of the world’s biggest oil refinery complex, is now left with a net worth of $17.5bn (£11.23bn), according to the Bloomberg Billionaires Index.

 
Although India was once seen as a rising economic power similar to China, the Indian rupee is now the worst-performing major currency in the world. The currency has been in a continuous downslide in recent weeks and yesterday fell to a record low of 64.55 per dollar.
 
Ambani’s younger brother, Anil Ambani, has also suffered heavy losses. Anil, the country’s eighth richest man, lost 17 percent of his net worth, or $1.3bn (£834m), leaving him with $6.3bn (£4bn), Bloomberg reports.
 
Since the announcement in May that the Federal Reserve was slowing down and would eventually end its quantitative easing scheme, there has been a rush from US investors to sell their emerging market holdings.  >> Read More

Loss Aversion

12 June 2013 - 19:33 pm
 

There’s a short Danny Kahneman interview at the Daily Beast here.  He notes why your best friends may not be your best advisors:

 Friends are sometimes a big help when they share your feelings. In the context of decisions, the friends who will serve you best are those who understand your feelings but are not overly impressed by them. 

 That’s the Kahneman I love to read, profound and interesting. But then he follows with this sentence:

For example, one important source of bad decisions is loss aversion, by which we put far more weight on what we may lose than on what we may gain.  >> Read More

 

I see the younger generation hampered by the need to understand and rationalize why something should go up or down. Usually, by the time that becomes self-evident, the move is already over.

There is no trading – classroom or otherwise – that can prepare for trading the last third of a move, whether is the end of a bull market or the end of a bear market. There is typically no logic to it; irrationality reigns supreme, and no class can teach what to do during that brief volatile time. The only way to learn how to trade during that last third of a move is to do it, more precisely, live it.

Paul Tudor Johnes

 Overvalued, undervalued, expensive, and cheap are the most overused and abused terms in the stock market. For the most part, growth stocks couldn’t care less about valuation, and the people who buy the fastest-growing companies do not focus on valuation either.Stocks that are trending up will always be considered “expensive”. In both good markets and bad, there is only a limited supply of good companies.—-Howard Lindzon

-Yesterday Boldly written :Below 5863 level it will slide to kiss 5852-5833 level.It kissed  5838 & taken U-turn !!

Our Intraday Buy Call @ 5879 with Target of 5920-5930-5950————5960  !!

Do U know in just 15 minutes it kissed High of 5950 level and closed at  5928

No Need to Change levels :Just Read ,Remember & Save it ! 

6010 is Laxman Rekha-Three Consecutive close above this level +Weekly close above this level will take to 6349-6462 level.

http://www.anirudhsethireport.com/nifty-future-laxman-rekha-6010-next-target-new-high-yes-nonstop-rally/

http://www.anirudhsethireport.com/nifty-future-12th-week-29th-month-will-see-unexpected-levels-short-term-heading-towards-6349-6462/

Our Crucial Support at 5863.Break & Close below this level for 2 Days……….Nonstop Slide upto  5779-5751 level very soon.

-Above 5930 level ,Our Target is of 5961—————-5971 !!

Yes ,Now Crossover and stays above 5971 for 15 minutes or more will take to 6003-6013 level.

Support at 5915.Break will take to 5894—-5887 level.

-9th Week (From Coming Monday )will see Unexpected level in Nifty Future !!!

-More Details ,Intraday levels to our Subcribers-

Updated at 8:12/19th Dec/Baroda/India

13 Insights From Paul Tudor Jones

11 December 2012 - 13:00 pm
 

PTJ is not only a successful hedge fund manager and philanthropist, but also very original and clear thinker. Here are some of his best market-related insights:

1. Markets have consistently experienced “100-year events” every five years. While I spend a significant amount of my time on analytics and collecting fundamental information, at the end of the day, I am a slave to the tape and proud of it.

2. I see the younger generation hampered by the need to understand and rationalize why something should go up or down. Usually, by the time that becomes self-evident, the move is already over.

3. When I got into the business, there was so little information on fundamentals, and what little information one could get was largely imperfect. We learned just to go with the chart. Why work when Mr. Market can do it for you?

4. These days, there are many more deep intellectuals in the business, and that, coupled with the explosion of information on the Internet, creates an illusion that there is an explanation for everything and that the primary tast is simply to find that explanation. As a result, technical analysis is at the bottom of the study list for many of the younger generation, particularly since the skill often requires them to close their eyes and trust price action. The pain of gain is just too overwhelming to bear.

5. There is no training — classroom or otherwise — that can prepare for trading the last third of a move, whether it’s the end of a bull market or the end of a bear market. There’s typically no logic to it; irrationality reigns supreme, and no class can teach what to do during that brief, volatile reign. The only way to learn how to trade during that last, exquisite third of a move is to do it, or, more precisely, live it. >> Read More

 

Zero is Bottom

The markets have a clearly defined zero-value. This has several important implications. First, traders often discount the possibility of something becoming absolutely worthless (i.e. going to zero) – so the more the price goes down, the greater the traders’ tendency is to believe that it has a higher probability of going up again. The temptation to catch the bottom and go long becomes compelling (despite its irrationality). Traders must realize that how they are hardwired to think as people is not necessarily the way they should think as a trader. There is a reason why 90% of everyone who attempts to make a living as a trader ends up failing and it’s not because of intelligence, information, technology or effort. In a nutshell, I believe failure in trading is due to a lack of self-awareness. The solution is to compartmentalize your thinking. When you are interacting in society or at home, let yourself think like a person; but when you sit down to trade, you need to think objectively by evaluating risk/reward as a trader should.

-Yesterday ,Again it was not able to break 5340 level and Intraday zoomed passed high of 5415,made high of 5425 & fallen back.

-Now ,Just see its not breaking 3DEMA …So Forget about 7DEMA….Crucial Support.

Above 5403 level if able to cross with volumes and closes then last and final Hurdle at 5457 level.

-Not crossing High of 5425 & remains below 5405 level then ?????

-Slide upto 5344—-5324 on card.

7DEMA @ 5312 level.

Now if Breaks 5312 with volumes then ?Will Update more to our Subscribers.

-Above 5403,No worry…..Above 5425 if trades with volumes will take to 5457 level.

 

Our Weekly TGD indicates -20th Week will see UNEXPECTED level in Nifty Future !!-Save this line ,First Time Today writing & Every week will reduce one week !

 

-If Everything goes Right then very soon will see NIFTY FUTURE crossing and kissing 5650-5700 level !!

 

-Above 5234 level…………..Bull’s will have UPPERHAND ,OPEN CHALLENGE to anybody !!

 

-More Details ,Intraday levels ,Reversal points to our Subscribers.

Updated at 6:35/09th Feb/Baroda/INDIA

Quotes by Paul Tudor Jones II

30 November 2011 - 10:30 am
 

Paul Tudor Jones II is one of the most successful hedge fund managers. He has never suffered a losing year. His fund has returned 23% annualized gain since its inception in 1986. Paul Tudor is a momentum trader, who believes that price move and trend unfold only because of investors’ behavior.

Markets have consistently experienced “100-year events” every five years. While I spend a significant amount of my time on analytics and collecting fundamental information, at the end of the day, I am a slave to the tape and proud of it.

I see the younger generation hampered by the need to understand and rationalize why something should go up or down. Usually, by the time that becomes self-evident, the move is already over.

There is no training — classroom or otherwise — that can prepare for trading the last third of a move, whether it’s the end of a bull market or the end of a bear market. There’s typically no logic to it; irrationality reigns supreme, and no class can teach what to do during that brief, volatile reign. The only way to learn how to trade during that last, exquisite third of a move is to do it, or, more precisely, live it.

Fundamentals might be good for the first third or first 50 or 60 percent of a move, but the last third of a great bull market is typically a blow-off, whereas the mania runs wild and prices go parabolic.

 

General Electric, one of the largest corporations in America, filed a whopping 57,000-page federal tax return earlier this year but didn’t pay taxes on $14 billion in profits. The return, which was filed electronically, would have been 19 feet high if printed out and stacked.

The fact that GE paid no taxes in 2010 was widely reported earlier this year, but the size of its tax return first came to light when House budget committee chairman Paul Ryan (R, Wisc.) made the case for corporate tax reform at a recent townhall meeting. “GE was able to utilize all of these various loopholes, all of these various deductions–it’s legal,” Ryan said. Nine billion dollars of GE’s profits came overseas, outside the jurisdiction of U.S. tax law. GE wasn’t taxed on $5 billion in U.S. profits because it utilized numerous deductions and tax credits, including tax breaks for investments in low-income housing, green energy, research and development, as well as depreciation of property. >> Read More

Lifestyle & Improvement

31 October 2011 - 5:21 am
 

  • Understanding self-control and irrationality (Dan Ariely)
  • How to be less busy (zenhabits)
  • Why you should meditate (Inc.)
  • 10 unusual ways to get in the top 1% (James Altucher)
  • What did Steve Jobs read? (Farnam)
  • How your brain leads you astray (Michael Mauboussin)
  • The Stockdale Paradox (Niall Doherty)
  • Wise words from the Dalai Lama (Twitpic)
  • The case for dietary supplements is collapsing (WSJ)
  • The belief that one is using a pro’s tool can actually improve performance (Guardian)
  • There are no limitations other than the ones you place on yourself on what you can really do (YouTube)

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Technically Yours,
Team ASR,
Baroda, India.