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Politics : High Tolerance Plasticity -- Ignore unavailable to you. Want to Upgrade?

To: kodiak_bull who wrote (22922)	3/14/2005 2:27:24 PM
From: kodiak_bull	Respond to of 23153

Let me expand on the golf analogy (I was thinking about this while walking my dog): You know that MSFT trades now at $25 and somehow you devise a system that says MSFT has only a 1% chance of trading below $15 in 2005. As I noted, this knowledge in equities and options is pretty much useless, but let's suppose that it gives you some sort of trade signal at $25. You buy 1,000 shares at $25, expecting it to go up. It goes down, but you know it statistically will not trade below $15. That doesn't matter because your stop takes you out at $24. But you still know that statistically it won't go below $15, so when MSFT trades down to $17 you load up, and when it trades down to $16 you hold. When it trades down to $15.10 you not only hold, you triple your position, after all you know your statistics. But when it goes down to $13 you bail, bleeding profusely. Why did it go below $15? Because this was the one time when, statistically, it turned out to be the 1% event happened. (Which, see LTCM). If you look closely, you can see that "knowing" that MSFT is statistically unlikely to trade down below $15 is OF NO USE whatsoever in speculation. In golf, you tee off on a 418 yard par 4 with your driver which you expect to hit between 220 and 250 yards. This is your entry, your purchase of MSFT at $25. You hit the ball extremely well and it lies 260 yards straight down the fairway. MSFT trades now at $28. Your next shot is a nice 8 iron shot which you aim toward the green. You use an 8 because you can hit it between 120 and 140 yards on a nice easy swing. You could use your 9 but you'd be swinging hard. Nice shot! MSFT is trading now at $31. You land it a little hard and it rolls about 50 feet beyond the pin. Note that you were very careful with your practice swings so as not to hit the ball backwards. This is like having a stop loss: you never want to go backwards. MSFT is now trading at 35.15. Now you take out your putter and stroke the ball on a line toward the cup with enough strength and direction so that it will roll past the cup 1 foot. You tap in for a par. You've tightened your stop and trade out of MSFT at $34. Of course, you could have dribbled it off the tee and had to recover with a 3 wood which went into the rough, then you'd have to recover with a strong 5 iron over a medium sized tree and then scrambled on the chip and put to try to salvage a 6. Kb

To: kodiak_bull who wrote (22922)	3/16/2005 1:20:06 AM
From: whitepine	Respond to of 23153

Kb How on God's green earth will "knowing" something you call root base, fundamental "value" help you make money? wp--- because it would help greatly by 'knowing' when to buy and when not to sell. It would remove a great measure of risk from B+H style, except for the most extraordinary situations. I could create a portfolio and continue on with other activities in life other than being glued to screens, charts, news, etc., 12x6 for fear that my personal wealth would be Cheeched ala ELN in a moment's notice. BTW, did you look at the 3-2-1 yr charts of Pey/un.to, Hte/un.to, Xom, and the others I listed? Presently I am working about 13 hrs/day on the house, un-doing or re-doing the work of the subcontractors. I would like to continue an active dialogue in a timely manner, but until the sheetrock is installed, I just don't have time to spare. As a former golf coach, I understand your comparison, but I don't think it is useful for me to continue with the analogy. Regards, wp