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Trading Psychology, Primal urges & embedded mentality in price action
nipper
post Posted: Dec 19 2018, 08:16 AM
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Stan Druckenmiller says algorithms are robbing markets of signals
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Billionaire Stan Druckenmiller is glad he's no longer in the hedge fund business now that algorithmic and quantitative trading have taken over markets.

"I made 30 per cent a year for 30 years. Now, we aren't even in the same zip code, much less the same state," he quipped of his recent returns in an interview with Bloomberg Television.

Druckenmiller, 65, explained that his investment process has always involved divining so-called market signals. But quantitative funds, which now account for $US1 trillion in assets, have muted or even silenced those cues, making it a lot less clear what's behind price moves.

"I think the message over eight or nine months is still great,' said Druckenmiller, who converted his hedge fund to a family office after closing Duquesne Capital Management in 2010. 'I just think over a week or two, you're getting noise that used to mean something, and now it doesn't mean anything.'

The return of volatility was long heralded as key to a rebound in hedge fund performance. Yet the recent wild swings in stocks aren't helping Druckenmiller because they haven't been accompanied by any discernible trends. And after four decades in the financial markets, he said he's never seen an environment in which changes of direction have been so extreme.

"Volatility is only good if it's part of the trend and it's giving you entry points within a trend," he said. "When you're going up and down, but there's no real trend, that's a nightmare. You might think that a volatility move is the beginning of a trend and get yourself whipsawed."

Even without those headwinds, Druckenmiller was already bearish on the prospects for his former industry. He recalled that in 1981, when he started Duquesne, there were only a handful of hedge funds and clients expected returns of 20 per cent a year, no matter how challenging the environment.

The lack of competition made it easier to find profitable trades. But as demand for hedge funds grew and more smart investors entered the field, returns got harder to generate. This year, HFR's Global Hedge Fund Index is down more than 6 per cent, and has underperformed the S&P 500 Index every year since the financial crisis.

"I'm not surprised at all by the hedge funds not doing well," Druckenmiller said. In the future, "there's probably going to be 10 to 20 of them that are great," and the rest shouldn't be charging traditionally high fees.

For those intrepid traders who still want to try their hand at managing hedge fund money, Druckenmiller ticked off three requisite qualities: Be intellectually curious, open-minded and have the courage to bet big and fight your emotions.

"I've never made a buy at a low that I didn't just feel terrible and scared to death making it," he said.

And for all his complaints about algorithms, one thing Druckenmiller says traders don't need to know is coding; but "you better know what they're doing because they influence the markets."
Bloomberg

"Be intellectually curious, open-minded and have the courage to bet big and fight your emotions." - uniqueness is, by definition, a point of differentiation; one of the few that can deliver



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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne

Said 'Thanks' for this post: myshares  early birds  
 
mrbear
post Posted: Jul 1 2018, 02:43 PM
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In Reply To: triage's post @ Jul 1 2018, 08:19 AM

Hi triage,any fool wins with hindsight,only the ones who post before the event and regularly win are worth any salt.

How much tax you have to pay at the end of each year dictates how well you do graduated.gif ,cheers mrbear





Said 'Thanks' for this post: triage  
 
joules mm1
post Posted: Jul 1 2018, 12:23 PM
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In Reply To: triage's post @ Jul 1 2018, 08:19 AM

in the immortal words of one futures trader "mate, ya just doin it wrong, nothing to do with confidence!"
suggested reading from Nick Radge might help www.thechartist.com.au
think less on the ultimate 'investment' and think more on application, process, technique
competence is itself a hindsight conclusion after the input of application. process and technique
so if those are lacking you appear to lack competence but really you lack the right plan
competence is not a reflection of self it is a reflection of knowledge extent and the practise of that knowledge
all traders take losses the only question is how well you manage risk
if you were to break down the parts that frame competence you'll find the same steps are required to form the idea of having

competence....



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. . . . . . . . everything has an art.....in the instance of the auction process, the only thing, needed to be listened to; price

Said 'Thanks' for this post: triage  
 
triage
post Posted: Jul 1 2018, 08:19 AM
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I often find reading hotcopper threads quite deflating: so much absolute knowledge, such unbridled confidence, so many investors who manage to jump from stock to stock to stock with perfect timing who in hindsight claim perfect foresight. Even though I know there is a selection bias and a massive bullshit bias to all those who, like Mr Trump, must get sick of winning all the time I come away being less confident of my own attempts at managing my investment assets. sadsmiley02.gif sadsmiley02.gif

In fact one of the few things that gives me any confidence is that my lack of confidence suggests I am not deluding myself.

As David Dunning of the Dunning Kruger Effect theory says:

What’s curious is that, in many cases, incompetence does not leave people disoriented, perplexed, or cautious. Instead, the incompetent are often blessed with an inappropriate confidence, buoyed by something that feels to them like knowledge.

https://kottke.org/18/06/the-dunning-kruger...onfident-idiots


So for fleeting moments I take comfort that I am not blind to my investing incompetence like some of the hc fools ... only to come back to the brick-wall realisation that simply knowing I am incompetent does not alter the fact that I am most of the time quite incompetent. Ah well, maybe I'll strike it lucky instead. Anyway, all the best to the ss community in the forthcoming financial year. wink.gif




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"The market can stay irrational longer than you can stay solvent." John Maynard Keynes

"The crisis takes a much longer time coming than you think, and then it happens much faster than you would have thought." Rudiger Dornbush

Mozart fixes everything and Messi is a dog

Said 'Thanks' for this post: henrietta  tombeet  
 
triage
post Posted: Aug 26 2012, 09:58 AM
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Some observations about markets and trading psychology from George Soros.

He has copped heaps of ridicule from the likes of The Economist magazine for his reflexivity ideas but whilst the theory may not be robust enough to stand up to academic scrutiny it is good enough to see him through what has been a very long and successful career as an investor ...

...(though of course it could all be a total crock and he has just been one of the lucky ones [even his son admits that in a crunch Soros tends to rely on whether his chronic back pain is worse or better rather than on all his highferlutin theories]).

I particularly like this snippet:

QUOTE
Financial markets constantly anticipate events, both on the positive and on the negative side, which fail to materialise exactly because they have been anticipated.


To me it gives an explanation of why the eurozone keeps managing to do just enough to step around a series of critical junctures that so many pundits were predicting as being the unavoidable last straw eg Spain defaulting when the long term bond rate broke through the 7% barrier. In the end it may well be something entirely unexpected or dismissed as unimportant that could trigger the onset of the final stage of crisis there (?) precisely because it was not anticipated by the markets and authorities (??).

http://ivanhoff.com/2012/08/23/a-look-at-9...m-george-soros/



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"The market can stay irrational longer than you can stay solvent." John Maynard Keynes

"The crisis takes a much longer time coming than you think, and then it happens much faster than you would have thought." Rudiger Dornbush

Mozart fixes everything and Messi is a dog

Said 'Thanks' for this post: arty  
 
jwlkr
post Posted: Apr 4 2011, 11:42 PM
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Some more personal observations...

The context fallacy -

In Jan 2010, ASX:ELD shares increased by a factor of 10. Early last month, CSR shares went from 1.74ish to 3.23ish. Has anyone else ever confused consolidation with actual gains?

Just before a company goes into compulsory liquidation, it will tend to hit rock bottom before making a false resurgence. Don't buy into the resurgence. FEA, WFL, BrisConnect.

Unprecedented higher highs is also a difficult time. Greed may be good for some but it makes me high, unreasonable and stupider than usual. In time, I am slowly becoming familiar with the notion of studying the contracts and agreements in place which underline those rises. If it is speculation of the possible, I bail. If it is expectation of the probable, I usually sell half. The 80:20 rule comes in handy. The drawdown also depends on the availability of alternative investment opportunities. These days, I tend to have a preemptive shortlist of potential alternatives on hand just in case I need to lower my exposure in a particular stock.

CAPM and portfolio theory rules the day. Capital management and asset allocation > TA, charting, stock selection. Mind you, I'm not bashing TA. I have great respect for some of the affluent posters - arty, mistagear, EB, hungry, danville and rosella the div trader. I'm just a lousy punter. Can't pick a winner even if it's staring straight at me down an alley. Strategic diversification allows me to have cake and eat some of it too.

Final thought:
I have learnt to never stray too far from the asx200. This means less than 20% is in the 200-400 range. There should be compelling reason to invest in a penny dreadful. That said, ISF went up 188% today. I made my annual salary in a single day. That said, the risk borne probably wasn't worth it. In hindsight, I broke some fundamental rules to make the punt. It definitely won't happen in future; luck and recklessness is a toxic combination. Have preset rules - customised to suit your personal style - and stick with them.

I'm posting these thoughts more for my own benefit than others as it clears my head helps me put things in perspective.

Safe trading all. Priority #1 is to stay in the game.


Said 'Thanks' for this post: Varmi  seeker4it  
 


wolverine
post Posted: Apr 1 2011, 08:59 PM
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In Reply To: mrbear's post @ Apr 1 2011, 08:46 PM

Talent

laugh.gif laugh.gif



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TOO MANY CHIEFS

NOT ENOUGH INDIANS
 
mrbear
post Posted: Apr 1 2011, 08:46 PM
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In Reply To: wolverine's post @ Apr 1 2011, 07:18 PM

Do you hold the silver light screen or the ky duty wolver,cheers mrbear laugh.gif wink.gif

 
mpl
post Posted: Apr 1 2011, 07:21 PM
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In Reply To: wolverine's post @ Apr 1 2011, 07:18 PM

LOL biggrin.gif graduated.gif blink.gif .

Good one Wolvie



 
wolverine
post Posted: Apr 1 2011, 07:18 PM
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In Reply To: mrbear's post @ Apr 1 2011, 09:26 AM

I trade/invest as it takes my mind off the mundane life at work, day in day out, always the same, always stressed and under pressure to perform.

I am sick of working in the adult film industry.



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TOO MANY CHIEFS

NOT ENOUGH INDIANS
 
 


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