What is surprising is not the magnitude of our forecast errors,but our absence of awareness of it. This is all the more worrisome when we engage in deadly conflicts: wars are fundamentally unpredictable. Owing to this misunderstanding of the causal chains between policy & action
“It is impossible for our brain to see anything in raw form without some interpretation. We may not even always be conscious of it.”
Beware of bias.
“The reason free markets work is because they allow people to be lucky, thanks to aggressive trial and error, not by giving rewards or "incentives" for skill. The strategy is, then, to tinker as much as possible and try to collect as many Black Swan opportunities as you can.”
“You can rationalize all you want; the hippocampus takes the insult of chronic stress seriously, incurring irreversible atrophy. Contrary to popular belief, these small, seemingly harmless stressors do not strengthen you; they can amputate part of your self.”
“Once your mind is inhabited with a certain view of the world, you will tend to only consider instances proving you to be right. Paradoxically, the more information you have, the more justified you will feel in your views.”
“Everything studied about social life focuses on the “normal,” particularly with “bell curve” methods of inference that tell you close to nothing. Why? Because the bell curve ignores large deviations, cannot handle them, yet makes us confident that we have tamed uncertainty.”
“It takes considerable effort to see facts (and remember them) while withholding judgment and resisting explanations.”
“Perhaps the wise one is the one who knows that he cannot see things far away.”
“This, perhaps is true self-confidence: the ability to look at the world without the need to find signs that stroke one's ego.”
“An ad hominen attack against an intellectual, not against an idea, is highly flattering. It indicates that the person does not have anything intelligent to say about your message.”
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10 lessons from the book “Market Wizards” by Jack Schwager
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“ A way to determine the direction of the general market is to focus on how the leading stocks are performing. If the stocks that have been leading the bull market start breaking down, that is a major sign the market has topped.”
“Another important factor to watch is the Federal Reserve discount rate. Usually, after the Fed raises the rate two or three times, the market runs into trouble.”
Top lessons from “How to Make Money in Stocks: A Winning System in Good Times or Bad:
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“Be completely objective and recognize what the marketplace is telling you, rather than trying to prove that what you said or did yesterday or six weeks ago was right. The fastest way to take a bath in the stock market is to try to prove that you are right & the market is wrong.”
“The whole secret to winning big in the stock market is not to be right all the time, but to lose the least amount possible when you’re wrong.”
10 Top Lessons From the Book “Reminiscences of a Stock Operator”
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“A man must believe in himself and his judgment if he expects to make a living at this game.”
“After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight!”
Ed Seykota’s 10 Top Trading Principles that made him a fortune and a legend:
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Seykota was long through bull markets.
“If I am bullish, I neither buy on a reaction, nor wait for strength; I am already in. I turn bullish at the instant my buy stop is hit, and stay bullish until my sell stop is hit. Being bullish and not being long is illogical.”
Ed traded a system that fit his own personality.
“Systems don’t need to be changed. The trick is for a trader to develop a system with which he is compatible”
William J. O’Neil’s 10 trading principles that made him a fortune and a legend:
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He sells a stock he is holding after it has gone down 7% from his purchase price.
“I make it a rule to never lose more than 7% on any stock I buy. If a stock drops 7% below my purchase price, I will automatically sell it at the market – no second-guessing, no hesitation”
One of the major keys to his profitable trading was only having small losses when he was wrong.
“The whole secret to winning in the stock market is to lose the least amount possible when you’re not right.”
In trading less is more, less activity generally leads to more profits and smaller positions sizes leads to better odds of keeping profits over the long term. Less activity in trends allows an easier way to make money. Less position size leads to smaller losses when wrong.
It is better to specialize in trading, pick a market, pick a method and master it. It is better to be a master of one set up, pattern, stock, market, or system, than to dabble in many.