6 ms·

No matter what kind of investment, you have to have a system with clear entry and especially an exit strategy, all part of your solid risk/money management. In

by SirLJ 9y ago

No matter what kind of investment, you have to have a system with clear entry and especially an exit strategy, all part of your solid risk/money management. In any event of a market down turn I'll be out long before the bottom and will be probably in some sort of alternative investment which will rise, because the money will seek to go into something else, maybe gold for example. I strongly recommend to look into systematic stock trading systems like trend following for example and to have a plan in place when the stock market turns down from the Friday all time high... Also i makes the greatest life style business with no customers, no employees and no investors and will run on autopilot as long as the stock market exists...

stouset 9y ago
Assuming you are not some kind of savant who can time the market, how exactly do you anticipate being able to reliably get out "before the bottom", without advance knowledge of where exactly the bottom will be? How, exactly, do you know what other assets will be inversely affected? And why do you believe you'll get in on those alternative investments before other panicked investors with equal access to information as you dogpile into them as well, raising the price you need to pay to enter into a position? What you're saying sounds suspiciously like a common yet mistaken belief that you can time the market.
- SirLJ 9y ago
  Test for yourself, one strategy is called trend following, you follow the trend up and down with the market, it is not a secret... There a lot of strategies that are outperforming the market for years, the best example is probably Renaissance Technologies: https://en.wikipedia.org/wiki/Renaissance_Technologies https://en.wikipedia.org/wiki/Renaissance_Technologies
  - stouset 9y ago
    Better-than-market returns are possible. You, personally being able to beat the market on risk-adjusted returns with any sort of predictability is the part I find difficult to believe. RenTech has a legion of Ph.Ds and billions of dollars at their disposal — advantages I suspect you are not likely to have. And they are only one of a very, very select few who've reliably demonstrated the ability to beat the market.
    - SirLJ 9y ago
      Absolutely, I am personally beating the market on a constant basis, it is actually easier when trading 5,6,7 digits account because of liquidity... but that is not important, the important part is that you can do it too, just test few simple trend following strategies against S&P 500 (symbol SPY) for example and you'll see it clearly...
      - stouset 9y ago
        Then start a hedge fund and become a billionaire. Seriously. If what you're saying is true, you essentially have a license to print money. So what's stopping you? Although it's infinitely more like you've just a) been lucky and will revert to the mean, or b) have simply been at a more aggressive point on the risk/reward curve, and have seen returns commensurate with the level of assumed risk (and will likely see losses commensurate with it too). Trend following is just a basic application of technical analysis, which is the farcical notion that you can predict where a stock will go based on what it did yesterday, last week, last month, and last year and looking for patterns. It's essentially numerology applied to the stock market. If it worked, the effect would be priced out of the market by people with orders of magnitude more money and access to the markets to you before you had a chance to make trades based on the information. Good luck to you though.
        SirLJ 9y ago
        The more I work, the luckier I get :-) Just to clarify few points, trend following is not technical analysis in a sense of chart/pattern reading – maybe it can work for someone, but I have tested a lot of patterns and they do not work for me... the reality is we cannot predict what the weather is going to be tomorrow, let alone the stock market next week. But if you agree that the market is not efficient and trend do emerge, then you can find a quantitative strategy that will let you to follow the rent in up and down markets and make money doing it, you’ll never catch the top or to bottom, but will catch the majority of the trend in the middle... Why bother opening a hedge fund, look for investors and clients – just the regulatory paperwork would be nightmare, when I am leaving comfortable life, plan to travel the world and will leave a nice "lifestyle business" to my kids... Let me tell you what, why not take and read one of the Ed Thorp books, maybe it will inspire you to look at the markets in t a different way – I think it is a great risk reward, your are risking few hours from your time and the potential reward can be life changing...
- airbreather 9y ago
  I agree, but a well set trailing stop (% behind based on volatility) is probably the next best thing and lets you sleep at night and go on holidays without worrying.
  - ThrustVectoring 9y ago
    Why bother with that when you can buy an index fund and hold onto it for twenty years? If the S&P 500 halved tomorrow, what I'd do is literally nothing.
    - SirLJ 9y ago
      Last 20 years we had 2 times when the market fell in half, and if you are retired to recover from 50% loss, you'll need a 100% gain... why lose money when you can make a killing on the way down? In Japan, the second strongest economy at the time they are still half way down from the top with no recovery in sight and a lot of retirees loosing their savings in the process of "buy and hope trading strategy"
      - stouset 9y ago
        Because any such strategy to make a killing when the market goes down by 50% either requires advance knowledge of this event, or runs the risk of misfiring when the market recovers earlier than expected, forcing you to double down and hope for another crash or buying back in at a loss.
        SirLJ 9y ago
        No advanced knowledge needed, just follow the trend in up or down markets...
    - stouset 9y ago
      Exactly. If you're worried about your portfolio halving, you're either too heavily invested in risky assets for the timeframe you wish to start drawing down, or you're not and you need to stop looking at the day to day performance of financial markets. Your automatic order is just as likely to misfire and sell just before a recovery than it is to prevent you from losing everything. And worse, you need to realize that just because the markets have fluctuated, you haven't actually lost anything but paper value — you still own the same number of shares in the same number of companies. Selling those during a downturn is just cementing that loss in real dollars. And so say you've sold. That's only half the problem. Now you still need to figure out when to buy into the market again, unless you're planning on just hoarding the cash under your mattress.

by SirLJ 9y ago

stouset 9y ago

Assuming you are not some kind of savant who can time the market, how exactly do you anticipate being able to reliably get out "before the bottom", without advance knowledge of where exactly the bottom will be? How, exactly, do you know what other assets will be inversely affected? And why do you believe you'll get in on those alternative investments before other panicked investors with equal access to information as you dogpile into them as well, raising the price you need to pay to enter into a position? What you're saying sounds suspiciously like a common yet mistaken belief that you can time the market.

SirLJ 9y ago
Test for yourself, one strategy is called trend following, you follow the trend up and down with the market, it is not a secret... There a lot of strategies that are outperforming the market for years, the best example is probably Renaissance Technologies: https://en.wikipedia.org/wiki/Renaissance_Technologies https://en.wikipedia.org/wiki/Renaissance_Technologies
- stouset 9y ago
  Better-than-market returns are possible. You, personally being able to beat the market on risk-adjusted returns with any sort of predictability is the part I find difficult to believe. RenTech has a legion of Ph.Ds and billions of dollars at their disposal — advantages I suspect you are not likely to have. And they are only one of a very, very select few who've reliably demonstrated the ability to beat the market.
  - SirLJ 9y ago
    Absolutely, I am personally beating the market on a constant basis, it is actually easier when trading 5,6,7 digits account because of liquidity... but that is not important, the important part is that you can do it too, just test few simple trend following strategies against S&P 500 (symbol SPY) for example and you'll see it clearly...
    - stouset 9y ago
      Then start a hedge fund and become a billionaire. Seriously. If what you're saying is true, you essentially have a license to print money. So what's stopping you? Although it's infinitely more like you've just a) been lucky and will revert to the mean, or b) have simply been at a more aggressive point on the risk/reward curve, and have seen returns commensurate with the level of assumed risk (and will likely see losses commensurate with it too). Trend following is just a basic application of technical analysis, which is the farcical notion that you can predict where a stock will go based on what it did yesterday, last week, last month, and last year and looking for patterns. It's essentially numerology applied to the stock market. If it worked, the effect would be priced out of the market by people with orders of magnitude more money and access to the markets to you before you had a chance to make trades based on the information. Good luck to you though.
      - SirLJ 9y ago
        The more I work, the luckier I get :-) Just to clarify few points, trend following is not technical analysis in a sense of chart/pattern reading – maybe it can work for someone, but I have tested a lot of patterns and they do not work for me... the reality is we cannot predict what the weather is going to be tomorrow, let alone the stock market next week. But if you agree that the market is not efficient and trend do emerge, then you can find a quantitative strategy that will let you to follow the rent in up and down markets and make money doing it, you’ll never catch the top or to bottom, but will catch the majority of the trend in the middle... Why bother opening a hedge fund, look for investors and clients – just the regulatory paperwork would be nightmare, when I am leaving comfortable life, plan to travel the world and will leave a nice "lifestyle business" to my kids... Let me tell you what, why not take and read one of the Ed Thorp books, maybe it will inspire you to look at the markets in t a different way – I think it is a great risk reward, your are risking few hours from your time and the potential reward can be life changing...
airbreather 9y ago
I agree, but a well set trailing stop (% behind based on volatility) is probably the next best thing and lets you sleep at night and go on holidays without worrying.
- ThrustVectoring 9y ago
  Why bother with that when you can buy an index fund and hold onto it for twenty years? If the S&P 500 halved tomorrow, what I'd do is literally nothing.
  - SirLJ 9y ago
    Last 20 years we had 2 times when the market fell in half, and if you are retired to recover from 50% loss, you'll need a 100% gain... why lose money when you can make a killing on the way down? In Japan, the second strongest economy at the time they are still half way down from the top with no recovery in sight and a lot of retirees loosing their savings in the process of "buy and hope trading strategy"
    - stouset 9y ago
      Because any such strategy to make a killing when the market goes down by 50% either requires advance knowledge of this event, or runs the risk of misfiring when the market recovers earlier than expected, forcing you to double down and hope for another crash or buying back in at a loss.
      - SirLJ 9y ago
        No advanced knowledge needed, just follow the trend in up or down markets...
  - stouset 9y ago
    Exactly. If you're worried about your portfolio halving, you're either too heavily invested in risky assets for the timeframe you wish to start drawing down, or you're not and you need to stop looking at the day to day performance of financial markets. Your automatic order is just as likely to misfire and sell just before a recovery than it is to prevent you from losing everything. And worse, you need to realize that just because the markets have fluctuated, you haven't actually lost anything but paper value — you still own the same number of shares in the same number of companies. Selling those during a downturn is just cementing that loss in real dollars. And so say you've sold. That's only half the problem. Now you still need to figure out when to buy into the market again, unless you're planning on just hoarding the cash under your mattress.