LG,
I pointed out several things in that post that QCOM needed to do to continue its rise to the lofty levels I was expecting
yes, but you also failed to point out that post in particular, and your first post to me sounded as if you had never made a bad call on QCOM. which you had. and which i pointed out to you.
However, I am smart enough to use "stop loss points" just in case my system does not get me out.
as for things like stop-losses, fib/gann points, and all that fine stuff, if that helps you avoid big losses, it also helps you avoid big gains. if you do not recognize this, then you do not understand statistics. many people on this thread made orders of magnitudes more than you because they were heavily long a stock--QCOM--that was an extreme statistical outlier in 1999. i made more than 100 times my money and many here did a lot better than that.
there's no system that you or anyone else has that could have been back-tested and used to catch QCOM, which is why TA types and fundamental types alike ended up fighting it all the way up (and more generally, fighting the whole market all the way up). many so-called sophisticated traders went bankrupt trying to short QCOM or its calls.
and even the lucky few who shorted it on the way down did not make anything like what the longs made on the way up. why? because "dumb money" with no stop losses and no "re-examining expectations along the way" was the only money which caught the whole move. it was a case of "luck wins".
that is the way it goes for statistical outliers. one problem with TA systems, and for mathematical "money machines" in general (and your system seems to be a purported money machine), is that the Gaussian distribution they try to use is invalid in behavioral finance. the fat tails of the historical distributions have crushed a lot of eggheads. LTCM being the most famous recent example.
those people had a system, no? they were smarter than you, no? they had more money than you, no? they did everything you do, and had everything you have many times over. and yet they had their ashes handed to them royally and almost brought down our entire financial system in the process.
why? alpha always absconds.
meanwhile, those fortunate enough to sit on the fat tails at the right time often make the mistake of thinking they know what they're doing. but it's just luck. so the question becomes: how lucky do you feel?
By the way, I am having a good year, how about you?
compared to my 100+ bagger since 1999, this has not been a good year. compared to the market, this has been a very good year. compared to cash, this has been a pretty good year--meaning my return has been positive in the absolute sense, as well as relative to the market. what comparison does one want to make? and what do you think it proves?
your focus on such short-term returns does not impress me, or indicate to me that you have much understanding of the mathematics behind return distributions.
as to my own returns being better than the market, that is easily explained: i have been mainly in cash and bonds, especially TIPS. and TIPS have done quite well--up some 12-13% on the year. meanwhile, my small equity exposure has been concentrated in areas like emerging markets, small value, and REITs, which have been relative safe havens.
but that could change tomorrow. for all i know, US large-cap growth stocks will go on another five-year tear and outperform all other asset classes (but i doubt it).
while i am always happy to do well on a relative and absolute basis over a short time period, i believe it is a mistake to be focused solely on such a period (this is one of my rare points of agreement with Uncle Frank, who is a fine photographer). after all, the long term returns are much more important to us in the "long run", even if we have strong emotional attachment to the short run (as behavioral finance academics have shown in numerous tests).
indeed, as an individual investor, i think i have a distinct advantage compared to mutual fund managers in that i can have a longer time horizon. this is one of the few advantages individuals have compared to the pros. we certainly do not have an informational or skill advantage (despite what you might think). (and we of course have the advantage of smaller portfolios, which makes it easier for us to move our money around.)
So, I always know up front what my maximum loss will be. In case you have never heard of it, it is called risk management.
sorry LG, but that is a rather funny comment, coming from somebody who thinks he has a money machine. |
