Tag Archives | what other bloggers are saying

What Other Bloggers are Saying

Stephen Dubner, one half of he Freakonomics team, recently posted about

"John Allen
, who writes about
as well as anyone around, has just published another excellent
in the Times Magazine, this one about the strengths
and limitations of relying on data to make decisions in the modern

Paulos provides an excellent example of tricky statistics from the
medical realm."

That example is well worth considering.



Preet Banerjee is giving away an iPad.  To enter, just leave a comment at his blog. Details: WhereDoesALLMyMoneyGo.com

In addition to the giveaway, Preet writes an excellent blog.  Take this opportunity to get acquainted.


For investors who have some of their money invested passively, Michael James on Money raises an important question:

"For investors who maintain constant portfolio allocations to different
asset classes, such as stocks and bonds, there is a debate about when to
rebalance. Most advice is to rebalance periodically, such as quarterly
or yearly. Others suggest a threshold approach where re-balancing is
based on when the allocation gets sufficiently far from the target
allocation. I am in this latter camp."

Me too.  Passive investing is already unsophisticated.  If you are going to play,don't allow a random event, such as the date, influence your investment decisions.


Mark Cuban lays it on the line when discussing: What Business is Wall Street in?

"Lets talk the real problem that regulators, public companies,
investor/shareholders and traders face.  The problem is that Wall Street
doesn’t know what business it is in. Regulators don’t know what the
business of Wall Street is. Investor/shareholders don’t know what
business Wall Street is in.

The only people who know what business Wall Street is in are the
traders. They know what business Wall Street is in better than everyone
else.  To traders, whether day traders or high frequency or somewhere in
between, Wall Street has nothing to do with creating capital for
businesses, its original goal. Wall Street is a platform. It’s a
platform to be exploited by every technological and intellectual means

If you agree, as I do, then it's truly foolish to be invested in the stock market.  It is a big gambling casino and the quants have a big edge.  That doesn't mean you shouldn't trade, but if investing for a retirement that's decades down the road, is the stock market where you want to be?  I don't have any alternatives to suggest.


Eric, in Falkenblog:

"A powerfully bad theory is like a lie–it has many inconsistencies
because it isn't true… One of the
many bad implications of having the delusion that risk begets a higher
expected return is that people invest in the stock market thinking they
then deserve a higher return
, a strategy that worked pretty well in the
US in the 20th century, as long as you implemented a low-cost strategy
that minimized trading and taxes… The idea that a
passive approach to equities implies higher-than-average returns puts
you at the mercy of brokers who … are selling hope."

Can you imagine trusting your financial future on the premise that you deserve a high return?  I recognize hat we all want to believe we are going to get that return, and passive investing adherents seem to believe it's the gospel truth, but why should the future resemble the past?

Knowing how to invest is very difficult.  During bull markets, we always believe that investing in stocks is good, but we reconsider during uncertain times.  Is that the problem right now?  The bull may be ending so some of us tend to pay attention to the doubters?  I don't know.  But I do know that each of us should seriously consider our alternatives, and not just blindly believe we deserve riches.


Free e-book: Introduction to Options: The Basics

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What other bloggers are saying: Becoming a better trader

Here's a comment from Charles Kirk of the Kirk Report.  It's targeted to short-term traders, but the first sentence is appropriate for every trader.  The difficult part is helping new traders understand just how true it is.  So many of them blow their entire trading accounts, and leave the business forever, never recognizing that it was poor risk management that destroyed them.

"Finally, as I've often talked about before, it is my opinion that
what you trade is not as important as how you you manage the trades you

Many people can build high-quality watch-lists but if you
don't know how to spot optimal entry points, how to scale into and out
of positions, have a complete understanding of how to limit loser trades
through position sizing and stop losses, etc. your success will be
modest at best.

Remember, it isn't what you trade that will make you
successful, but rather how you manage the trades you make no matter what
they may be"


This useful advice from Dr. Brett won't be of much help to most of us who trade from home or during lunch breaks at work.  But it's important for anyone who is considering becoming a full time trader. 

There are steps you can take to improve your performance, but it takes a great effort.  Find serious traders in your town.  Have get-togethers to discuss business.  That means shop-talk and minimal social chit-chat.  Share ideas.  I don't truly understand the deep psychological aspects of how it works, but just being with successful people and sharing ideas and being a contributor to the conversation brings results.  Perhaps it's confidence building.  Maybe having someone else express support for your trading style is enough to make a difference.  I don't know why it works, but it works.

The difficult part is finding other traders and convincing each other that you deserve to be in such a group.  And for the vast majority who are not professionals, talented beginners can offer each other guidance as you learn together.  Remember, this is a business group.  It's great if you become friends, but the primary function is to help each other become more successful.

Time and again, I've found that
long-term success in markets is not just a function of who the trader is
and the strategies they trade, but also their trading environment.
Being around successful traders can help you become a successful trader;
having the right tools can help you do the job well. As Steve [Spencer] mentions
in his post, the right technology is crucial; proper resources to
assess and monitor risk can make all the difference in one's eventual
distribution of returns.

But it's like growing up in a
dysfunctional home or without a home at all: It's difficult to generate
the right kind of environment for yourself when you've never
experienced one. This is a particular challenge for independent
traders. If you've never been part of a high performance environment,
it is difficult to weave one from whole cloth.

Environment matters. Few people will
challenge themselves to stay outside their comfort zones. An
environment that stimulates you, challenges you, and backs you up can be
every bit as important as the markets and setups you trade.

Note the challenge to trade outside your comfort zone.  I preach exactly the opposite.  The difference is that the expert trader learns to expand his/her comfort zone.  Trying to do that before you are a competent trader, let alone an excellent trader is far too soon.  To become an expert, I agree with Dr. Brett's advice.  But please – this is for the expert trader, not for the beginner and not for any trader who lacks excellent discipline.


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