skip to main | skip to sidebar

The Federal Reverse

Stocks



Forex

Treasury bonds

Twitter feed

Blog Archive

  • ►  2014 (1)
    • ►  January (1)
  • ►  2013 (13)
    • ►  December (2)
    • ►  March (2)
    • ►  February (4)
    • ►  January (5)
  • ▼  2012 (71)
    • ►  December (2)
    • ►  October (3)
    • ►  September (10)
    • ►  August (7)
    • ►  July (6)
    • ►  June (9)
    • ▼  May (11)
      • A tale of exponential interest
      • On sociopaths, sheep and truth seekers
      • BFA-Bankia update: converging to fair value
      • Debunking Jim Rogers on farming
      • BTFD
      • Listen to people who have something to say
      • In life, follow your heart. In trading and investi...
      • The turning point and the next leg in Gold
      • Long EURUSD (small) position opened
      • The college bubble
      • Short EURUSD position closed
    • ►  April (13)
    • ►  March (10)

Categories

  • altcoins (1)
  • Android (1)
  • Astronomy (1)
  • banks (8)
  • Bernanke (2)
  • BFA-Bankia (3)
  • biology (2)
  • Bitcoin (1)
  • Bonds (8)
  • bubble (6)
  • CDS (2)
  • Central banks (14)
  • Chavez (1)
  • chinese phones (1)
  • college (1)
  • commodities (9)
  • compound interest (1)
  • corn (2)
  • corralito (2)
  • cotton (1)
  • Credit (12)
  • credit rating (2)
  • crisis (18)
  • Crisis Trivia (1)
  • currency (5)
  • debt (16)
  • deflation (9)
  • degree (1)
  • ECB (14)
  • Economics (13)
  • Economy (20)
  • Energy (10)
  • ESM (1)
  • Euro (9)
  • Europe (24)
  • EURUSD (7)
  • farming (5)
  • Fed (8)
  • finance (12)
  • Forex (3)
  • France (2)
  • futures (4)
  • Germany (14)
  • Gold (19)
  • Greece (11)
  • hed (1)
  • hedge funds (2)
  • hum (1)
  • humor (12)
  • Huxley (1)
  • Iberia (1)
  • IMF (1)
  • India (1)
  • inflation (22)
  • interest rates (6)
  • Internet (1)
  • investing (3)
  • Iran (1)
  • Jack Andraka (1)
  • Jim Rogers (3)
  • lies (1)
  • LTRO (1)
  • Marc Faber (5)
  • mone (1)
  • Money (17)
  • normalcy bias (4)
  • oil (2)
  • Orwell (2)
  • OWS (1)
  • Portugal (2)
  • real estate (5)
  • regularization (1)
  • Silver (9)
  • society (19)
  • sociopaths (19)
  • Spain (22)
  • speculation (5)
  • splines (1)
  • stocks (1)
  • trading (15)
  • UK (2)
  • university (1)
  • USA (8)
  • Venezuela (1)
  • wages (3)
  • Wealth (8)
  • welfare state (2)
  • wheat (2)

Daily read

  • Bloomberg
  • FT's Seeking Alpha
  • Silver Gold Silver
  • The Fundamental View
  • Zero Hedge

The Federal Reverse

Loading...
Powered By Blogger
Powered by Blogger.
  • Main page

World Statistics

SlideME CrisisTrivia

Get the Crisis Trivia Android app from SlideME.

Followers

Search This Blog

Thursday, May 10, 2012

In life, follow your heart. In trading and investing, don't

Markets play with investors' (but more so with speculators') psychology. They can only exist because of this psychology. The brain is a machine that learns patterns. However, most of the patterns presented in life are contextual and regular. This is, a situation has some conditions that can be described with a model such as "my boss started yelling at us and the atmosphere became tense so I employed carefully chosen words and adopted a cautious attitude". The regularity is identified in the brain as a tense situation, and the contextuality is presented as it comes, the boss started yelling and the situation became more tense. As the situation becomes less tense, we react differently, with more ease.

Markets do not offer the same patterns that life has presented to us in one million years of evolution. Continuous moves lead to sharp reverals and volatility clusters in an unmanageable way. Thus, we identify regularity in clustered directional moves and contextuality when these have already happened. And that is when the reversal comes.

It is not surprising that relatively few people can master this. As the experimental physicist can master something so far away from basic evolution as the manipulation of particles beyond the atom, prominent investors identify patterns different from what life provides.

I read an interview to Rick Rule (yes, despite appearing a lot in KWN) sums up the previous ideas. The summary is taken from Zerohedge (link):
What's important is that good markets are for selling and bad markets are for buying; it's counterintuitive. Your perception of how events will play out in the future is determined mostly by your experience in the immediate past; and if the last three investment decisions that you've made have rewarded you – if you feel good about your precepts – you begin to do something natural, which is confuse a bull market with brains, and you begin to become very aggressive. If your last three decisions – irrespective of whether they were well thought out – haven't played out so well, you become cautious. What you need to do is teach your brain to overwhelm or overrule your heart and understand that cheaper is better and more expensive is less good. It's difficult, but it must be done. Many things that are rewarding are difficult.
This is the idea underlying my decision to open a long position in EURUSD. There initially was a bounce and I saw no strength (I hoped it closed the gap 1.3050 - 1.31, which it did not), but I made the mistake of marrying that position and then it became a losing one. Since this position is extraordinarily small under 10K EUR long, I can afford the luxury of retaining it and use a spike to close it. It will count as a fail and the marriage mistake and consequent overview of the lack of strength is noted.

 "The time to buy is when there's blood in the streets"
Baron Rothschild in the 1800's
Posted by Analytic Bastard at 4:32 AM
Labels: EURUSD, speculation, trading

0 comments:

Post a Comment

Newer Post Older Post Home
Subscribe to: Post Comments (Atom)

Energy


Precious metals

gold coin prices junk silver coins

Popular Posts

  • Debunking Jim Rogers on farming
    Jim Rogers has been speaking a lot about farming being the profession of the future. Now, I love his insights and I regard him as one of the...
  • Spanish housing bubble and economic annihilation
    I came across this wonderfully made video that would be a total LMFAO if there were no people suffering from the topic it talks ...
  • Beware Chinese phones!
    I recently bought a "Quad core 1 GB" "Huawei" "Mate Mini" phone from Ali Express. I use quotes because none of...
  • The truth about Jack Andraka
    The truth about Jack Andraka is... that I don't know it, obviously, I am a normal citizent with my mundane whereabouts and I am geograph...
  • Towards a thermodynamical theory of Economics
    Even though Economics is a topic studied at every college and university, I believe their core fundamentals are not only misunderstood but a...
  • British go home... XD
    This was at Barajas airport Contextual update later today... Update: Last year Iberia was merged/sold to British Airways. Workers w...
  • That raid of mine proved to be wise after all
    For those of us who live in Euroland, it is very important to observe Gold/EUR correlations, since an extreme deviation from linear correlat...
  • A tale of exponential interest
    Imagine you have a savings account and you deposit an amount. The bank transfers the interest to your account and the next time you get inte...
  • I got myself some gold yesterday (with an outlook)
    I often follow the stock in Geiger Edelmetalle , since they show the coins they have and the number of each when you place your order. Here...
  • Inflationary concerns
    Zerohedge has regularly been reporting the ECB's deposit facility that the banks use as storage, much in the same way a cust...

Worthy analyses

  • SeekingAlpha.com: Home Page
    Alexandria Real Estate: Behind Fantastic Dividends, 3 Key Facts To Understand Its Resilience
    34 minutes ago
  • Humble Student of the Markets
    The Animal Spirits are Back in Charge!
    1 day ago
  • mathbabe
    We should not describe LRM’s as “thinking”
    1 week ago
  • FOFOA
    Happy New Year!
    6 months ago
  • The Fundamental View
    Desain Bentuk Rumah Adat China dan Penjelasannya
    11 months ago
  • Shadow Government Statistics
    Flash Commentary No, 1460b
    4 years ago
  • www.zerohedge.com/fullrss2.xml
    The Oil Refinery Crisis Will Worsen This Winter
    4 years ago
  • Jim Rogers Blog
    Financial Markets Will Move To Asia
    5 years ago
  • Kyle Bass Blog
    Kyle Bass On China
    9 years ago
  • Big Picture Agriculture
  • SilverGoldSilver
  • Harvey Organ's - The Daily Gold and Silver Report
  • Marc Faber Blog

Label cloud

Europe (24) Spain (22) inflation (22) Economy (20) Gold (19) society (19) sociopaths (19) crisis (18) Money (17) debt (16) trading (15) Central banks (14) ECB (14) Germany (14) Economics (13) Credit (12) finance (12) humor (12) Greece (11) Energy (10) Euro (9) Silver (9) commodities (9) deflation (9) Bonds (8) Fed (8) USA (8) Wealth (8) banks (8) EURUSD (7) bubble (6) interest rates (6) Marc Faber (5) currency (5) farming (5) real estate (5) speculation (5) futures (4) normalcy bias (4) BFA-Bankia (3) Forex (3) Jim Rogers (3) investing (3) wages (3) Bernanke (2) CDS (2) France (2) Orwell (2) Portugal (2) UK (2) biology (2) corn (2) corralito (2) credit rating (2) hedge funds (2) oil (2) welfare state (2) wheat (2) Android (1) Astronomy (1) Bitcoin (1) Chavez (1) Crisis Trivia (1) ESM (1) Huxley (1) IMF (1) Iberia (1) India (1) Internet (1) Iran (1) Jack Andraka (1) LTRO (1) OWS (1) Venezuela (1) altcoins (1) chinese phones (1) college (1) compound interest (1) cotton (1) degree (1) hed (1) hum (1) lies (1) mone (1) regularization (1) splines (1) stocks (1) university (1)

Machinomics

Machinomics
Visit my blog about data analysis, financial applications and science