5 ms·

So if I understand it First you must be right. Second you must be right while others are wrong (or no-one will take the other side). Third you must believe

So if I understand it First you must be right. Second you must be right while others are wrong (or no-one will take the other side). Third you must believe enough to bet big. Fourth you must bet big. Fifth, you must have been right at step one.

pavlov 2y ago
And if you get lucky this way enough times in a row, you'll start believing yourself a genius who deserved the extraordinary success. Journalists will call you up to hear your excitingly contrarian views on topics you know nothing about. As you grow older and observe the world from your suburban mansion, you grow increasingly irate that people didn't listen to you. You made your own fortune, but so many people just ask for handouts nowadays. Time to get involved. If you donate enough money to the other rich guy who is running for office, he'll make you ambassador to Italy, at least...
- dennis_jeeves2 2y ago
  >As you grow older and observe the world from your suburban mansion, you grow increasingly irate that people didn't listen to you. I wonder why these successful people don't pick people and pay them to do a strategy. It can be a win-win. I know why they don't - deep down they know that luck was a major factor. ( I'm aware of one such situation - I think it was called called the turtle trading or something, that was done in the 80s)
TimMurnaghan 2y ago
> Fourth you must bet big. No. You must bet right - and it depends on how right you are. Look up the Kelly criterion. Bet 1 - 2*probablity of losing of your current pot - will maximize expected return (but is a bit volatile for some tastes)
- Etheryte 2y ago
  It is pretty well agreed upon that the Kelly criterion strongly overestimates bet sizes for continuous bets where accurate probabilities are hard to determine, like the stock market. It has given rise to many variations such as Half-Kelly, Kelly minus constant, etc, which is a pretty good tell that it's an inaccurate approximation. Using Kelly to invest in the stock market is roughly like using half the Black-Scholes formula to invest in options. You'll get good results when the market agrees with your direction, but spectacular failures when it doesn't.
deleted 2y ago
[deleted]
ben_w 2y ago
But also never forget: "Markets can remain irrational longer than you can remain solvent" - John Maynard Keynes
- bluGill 2y ago
  that quote has been attributed to many over the years. I can find an origional surce.
- ac29 2y ago
  Yes, the missing point is that you need to have the timing right as well. Even if you are correct about the direction and magnitude of price movement, if you are wrong about how long it will take you can lose money. This is true for both short and long positions.
beyondCritics 2y ago
>Fourth you must bet big Big blunder. Killing every profitable trade. You have to account for the fact that loosing hurts comparatively more than winning. Keyword is "log optimal".
- lifeisstillgood 2y ago
  So this is the Kelly criteria etc (https://en.m.wikipedia.org/wiki/Kelly_criterion https://en.m.wikipedia.org/wiki/Kelly_criterion). Yes I get it - but take the example on the page - 60% chance of a win and get back same bet size, I guess most people would be reluctant to bet 1/5 of their bankroll each time. Esp if you are not sure about the 60%. I think most people would see 1/5 as betting big. Is what I am saying. If you see it as betting small, maybe I would like to understand
dennis_jeeves2 2y ago
Sound similar to how one needs to succeed as an entrepreneur: First you have to be smart, an IQ of less than 100 won't do Second you have to pick the right product/service. Third you have to persevere long enough. One cannot give up too soon, But persevering too much would be a case of sunken case fallacy. Forth you have to time your product/service. Too early or too late, it will affect your parents. etc...
teo_zero 2y ago
> So if I understand it This is not what TFA says at all. Especially this one: > Fourth you must bet big. is explicitly listed as a common mistake all the involved students exhibited.

pavlov 2y ago

And if you get lucky this way enough times in a row, you'll start believing yourself a genius who deserved the extraordinary success. Journalists will call you up to hear your excitingly contrarian views on topics you know nothing about. As you grow older and observe the world from your suburban mansion, you grow increasingly irate that people didn't listen to you. You made your own fortune, but so many people just ask for handouts nowadays. Time to get involved. If you donate enough money to the other rich guy who is running for office, he'll make you ambassador to Italy, at least...

dennis_jeeves2 2y ago
>As you grow older and observe the world from your suburban mansion, you grow increasingly irate that people didn't listen to you. I wonder why these successful people don't pick people and pay them to do a strategy. It can be a win-win. I know why they don't - deep down they know that luck was a major factor. ( I'm aware of one such situation - I think it was called called the turtle trading or something, that was done in the 80s)

TimMurnaghan 2y ago

> Fourth you must bet big. No. You must bet right - and it depends on how right you are. Look up the Kelly criterion. Bet 1 - 2*probablity of losing of your current pot - will maximize expected return (but is a bit volatile for some tastes)

Etheryte 2y ago
It is pretty well agreed upon that the Kelly criterion strongly overestimates bet sizes for continuous bets where accurate probabilities are hard to determine, like the stock market. It has given rise to many variations such as Half-Kelly, Kelly minus constant, etc, which is a pretty good tell that it's an inaccurate approximation. Using Kelly to invest in the stock market is roughly like using half the Black-Scholes formula to invest in options. You'll get good results when the market agrees with your direction, but spectacular failures when it doesn't.

deleted 2y ago

[deleted]

ben_w 2y ago

But also never forget: "Markets can remain irrational longer than you can remain solvent" - John Maynard Keynes

bluGill 2y ago
that quote has been attributed to many over the years. I can find an origional surce.
ac29 2y ago
Yes, the missing point is that you need to have the timing right as well. Even if you are correct about the direction and magnitude of price movement, if you are wrong about how long it will take you can lose money. This is true for both short and long positions.

beyondCritics 2y ago

>Fourth you must bet big Big blunder. Killing every profitable trade. You have to account for the fact that loosing hurts comparatively more than winning. Keyword is "log optimal".

lifeisstillgood 2y ago
So this is the Kelly criteria etc (https://en.m.wikipedia.org/wiki/Kelly_criterion https://en.m.wikipedia.org/wiki/Kelly_criterion). Yes I get it - but take the example on the page - 60% chance of a win and get back same bet size, I guess most people would be reluctant to bet 1/5 of their bankroll each time. Esp if you are not sure about the 60%. I think most people would see 1/5 as betting big. Is what I am saying. If you see it as betting small, maybe I would like to understand

dennis_jeeves2 2y ago

Sound similar to how one needs to succeed as an entrepreneur: First you have to be smart, an IQ of less than 100 won't do Second you have to pick the right product/service. Third you have to persevere long enough. One cannot give up too soon, But persevering too much would be a case of sunken case fallacy. Forth you have to time your product/service. Too early or too late, it will affect your parents. etc...

teo_zero 2y ago

> So if I understand it This is not what TFA says at all. Especially this one: > Fourth you must bet big. is explicitly listed as a common mistake all the involved students exhibited.