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Inside this Book – Loyal admirers can be convinced. One day, our delusional patient escapes from the mental institution and discovers not a single soul who believes him to be Napoleon. This of course is because he never was Napoleon. He was merely deluded and had convinced others of his delusional belief. Perhaps he will never be convinced that he is not Napoleon. Perhaps there are still people who remain convinced that synthetic Collateralized Debt Obligations (CDOs) on pools of subprime mortgages circa 2005 should still be trading at par value. Despite their conviction to the contrary, those synthetic CDOs are still worthless. Furthermore, much like our deluded, Napoleon-impersonating mental patient, despite the temporary delusional valuation of these synthetic CDOs at par by various financial institutions during the 2005 housing market bubble, the synthetic CDOs were, in fact, always worthless. Nevertheless, just because the majority are delusional and prices are temporarily out of sync with value, this book is for traders, not long-term investors, and traders must wait for evidence that our mental patient has escaped from the hospital before trading against irrational, bubble-induced price levels. We wait for evidence in the form of lower prices because irrationally priced markets tend to become even more irrationally priced— this is the nature of an inefficient, fat-tailed market—before crashing, and no one can know where the top is until after that top has been proved through the printing of lower prices. As John Maynard ?eynes said, “Markets can remain irrational a lot longer than you or I can remain solvent,” or as I like to say, “Don’t anticipate, just participate.” Wait for the evidence of a top to start selling and wait for evidence of a bottom to start buying. The history of markets is littered with graves of those who were prematurely right.
Inside this book –Trade Like a Casino PDF Book by Richard Weissman – In speculative trading, many are obsessed with pursuit of the elusive sure thing. Chapter 1 specifically addressed the development of positive expectancy models because they are the single most important ingredient for success as a trader. But even the most robust positive expectancy models cannot guarantee a profit on every single trade. In fact, the only sure thing—aside from the cyclical nature of volatility, which is examined in Chapter 4—in trading is that there is no sure thing. Since there is no such thing as a sure thing we must assume that each and every trade we take will be a loss. In this manner, we are always prepared for the worst and can never be surprised when the worst occurs. Many traders find this expect-and-prepare-for-the-worst attitude toward trading pessimistic and discouraging. Some even feel that such an attitude invites bad luck and failure. This is part of what makes successful trading so challenging. Traders must have unwavering confidence in their positive expectancy models, while simultaneously expecting and preparing for failure on every single trade. Remember, our goal is to trade like a casino. Casinos never abandon their table limits. Not once. No exceptions, ever. Why? Because they always assume that any particular spin of the roulette wheel will result in a win for the player despite simultaneously knowing that probability is always skewed in their favor. It has nothing to do with luck or pessimism or displeasing the trading gods. As financial mathematicians like to say, “It’s not magic; it’s just math.” Play the odds, manage the risk, and you succeed. Fight the odds or be lax in managing the risk and you will fail. Some will overstate the importance of risk management by claiming it is the single most important ingredient for success in trading. This is not true. You can be the greatest risk manager in the world, but without a positive expectancy model, your superior risk management skills will only mean that you will eventually lose all of your money in a methodical and orderly fashion. That stated, the only thing that can dismantle adherence to a positive expectancy model is failure to manage the risk. This being the case, why would anyone possessing a positive expectancy model not manage the risk? Greed kills and speed kills. We abandon safe, prudent risk parameters because of impatience and lack of discipline. We cannot wait to safely grow rich from speculation and so we rationalize ourselves out of risk management. Once we have $100,000 or $500,000 or $1 million or $5 million, then we will adhere to strict rules of risk management. In the meantime, as long as we are diligent in playing the probabilities and as long as we are lucky, everything will work out for us.
Trade Like a Casino by Richard Weissman PDF : eBook Information
- Full Book Name – Trade Like a Casino
- Author of this Book -Richard Weissman
- Language – English
- Book Genre –
- Download Format – PDF
- Size – 10 MB
- eBook Pages – 298
- Price – Free