"Chaos is not dangerous until it begins to look orderly. "Minor Axiom V
"Beware the Historian's Trap."Gunther states that "The Historian's Trap is a particular kind of orderly illusion. It is based on the age-old but entirely unwarranted belief that history repeats itself.. . . Don't fall into this trap."
Minor Axiom VI
"Beware the chartist's Illusion"Gunther..."The Chartist's Ilusion is often a graphic extension of the Historian's Trap. "
Minor Axiom VII
"Beware the Correlation and Causality Delusions."Minor Axiom VIII
"Beware the Gambler's Fallacy."Gunther: "The Gambler's Fallacy is a peculiar variety of orderly illusion. In this case the perceived order is not in the chaotic work all around, but inside, in the self. . . you are temporarily in a state in which random events will be influenced in your favor."
Gunther's Speculative Strategy: The Axiom warns you not to see order where order does not exist. This doesn't mean you should despair of ever finding an advantageous bet or a promising investment. On the contrary you should study the speculative medium in which you are interested. . . and when you see something that looks good, take your best shot.
"But do not be hypnotized by an illusion of order. Your studying may have improved the odds in your favor, but you still cannot ignore the overwhelmingly large role of chance in a venture."
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I have a confession. I read this Axiom when I was overly enamored with technical analysis. In hindsight, I realize how true this Axiom is. And what's also contemporary about writing this Axiom V this p.m. is that it dovetails with the Fisher admonitions of embedded in the three questions.
The technicians/chartists got things horribly wrong this year. My over reliance on the "magic" of technical analysis and charts was foolish. But as a novice, I really didn't know. It seemed so "fool-proof". Well, I'm the fool that proved it otherwise! A wiser fool.
6 comments:
Best advice/system/technique of all remains: buy low, sell high. :-)
(I know, I know: You're going to send me to the corner -- without dinner -- for that one.)
I like Bill Cara's buying when the RSI (m/w/d) falls below 30. That helps with the probabilities that you have bought low and limited downside risk.
No corner for you!
Y'all should take a look at this site:
http://www.cxoadvisory.com/blog/
It is (sort of) a blog. The authors are a little too random-walky for my taste, but they have many many posts (with back up academia papers) on the usual failure of technical analysis, pundits, etc.
My little boy (age 3) got into the sugar bowl this weekend and blew (he probably wanted to make it snow) sugar everywhere. He then coated himself and every doornob downstairs with a slick coat of sugar. He looked like a little glazed donut. All of this was done without a whisper of noise until he asked for help in washing himself.
I was unable to predict this event. Another instance where technical analysis was of no use.
http://www.cxoadvisory.com/blog/reviews/blog12-11-06/
This is one of their technical analysis specific postings. It also has links to other discussions on the topic.
Russell, thanks for this website. I've visited them before. I think a poster on Cara's website mentioned.
Thanks for your site postings, Russell: I'll visit later.
Leisa, you're right about the RSI. I, too, learned about it on Bill Cara's site and darned if there isn't a nice correlation. Any time I'm thinking of buying, I check to see if the RSI is below 50. If so, I get reeeeeeeally interested. If not, and it's a really good company, I exert that other quality that a very wise man told me is absolutely essential to long-term investment success: patience.
I wait.
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