1 Comment

1. 

   Larry Staples on June 14, 2010 at 5:19 am

   Greetings from CANADA David,

   And Now For Something Completely Different….. (Yeah we share that
   heritage)

   First off, my thanks to you for all your assistance – some free, some paid
   for.

   Truth be told we both know it’s far easier to make money Telling people how
   to make money, than it is to actually Make money.

   BUT as far as that goes, your advice is most assuredly in the value added
   category, and I Commend and Thank You.

   Reading your latest email I came across a quote I just couldn’t let go.
   “There is a saying “When the student is ready, the teacher will appear.”

   But the Primary Aim of your efforts and Real Quote, must ultimately be –
   “There is a saying “When the student is ready, the teacher will disappear.”

   And that, my friend, is the place I find myself at the moment.

   To explain: Please allow me a moment to share the current wisdom of my ten
   year journey as a retail investor. In order of importance.

   1) Buy and Hold truly is “Investing For Dummies”

   2) All Fundamental Analysis is pretty much a waste of time – period. It
   describes – in the long run – what a company should be worth between now and
   then. Apart from the lies and misdirection, the important point is that a
   lot of stuff can happen between now and then. To keep things current, just
   ask British Petroleum. And to keep things Australian, how about Nassim
   Taleb’s “The Black Swan” as the final word on this point.

   INTERMISSION: All smiles so far, but….

   3) LOTS of time can be pissed away – Canadians like beer as much as
   Australians- by Over Complicating technical analysis. As much as we all
   deny it, we All of us can’t help but search for the Holy Grail (Do you think
   a swallow could fly all the way from Canada to Australia carrying a pint of
   Alexander Keith’s India Pale Ale? If I thought it could I’d strap one on and
   send it to you straight away – yes I’m from Nova Scotia- New Scotland, Brits
   weren’t too keen on that crowd either as I understand, and this point is
   totally irrelevant, but I feel I owe ya…)

   4) Any REASONABLE technical analysis system will, in the long run,
   outperform your average financial planner by a significant margin. And to
   elucidate what reasonable means – Asked to pick one of the following as your
   Only TA window on the markets, what would you pick. MACD or ADX? This is in
   part why it takes a while to progress – the sheer volume of TA
   gems/nonsense.

   And now for the Finale…

   5) Select the TA method that resonates with you. THEN MOST IMPORTANTLY.
   Realize that your method is akin to a baby’s blanket or a cherished Baby
   Bear (OK hang on, for the all the Longs make that a cherished Baby Bull).
   The absolute most important aspect of trading is Risk Control. Spend more
   time on developing a Risk Control strategy than you do a TA strategy.

   6) Don’t bounce all around trying to over-optimize a system (or myriad of
   systems). Really Study the chosen system and how it reacts to different
   markets – become the best friends, get to know each other well.

   7) Read number 5 and 6 again….

   This has been my strategy for survival. And I’ve seen enough. I started my
   investing career at the Peak of the Tech Boom, the heady days of the COMPQ
   at the turn of the century. Only to watch the lemmings jump off a cliff. I’m
   not overly rich, but I’m still here – as primitive as my risk control ideas
   were at the time, they were my salvation.

   Once again David – thank-you for your help (Then and Now) on my journey.

   Cheers,
   Larry

   PS. My latest TA effort is centered on simplicity, yet complicated. Three
   separate mechanical systems, each with the constraint of two, at most, TA
   indicators, with the demand that each system, on a stand-alone basis, must
   be considerably more profitable than buy and hold. The 3 variables are what
   the market offers – Price, Volume, Market Breadth (Yes this is an
   Index/Sector based ETF system) – Speaking of risk control why not eliminate
   Company specific risk, now just Market and/or Sector risk to worry about.
   Then each system is assessed for strengths and weaknesses in each of the
   three market conditions: Up, Down, Flat. And all will finally be combined in
   a synergistic manner such that the whole is greater than the sum of the
   parts. This mechanical system will be then be integrated with a
   discretionary pattern based system into a “MetaSystem” :). And the last word
   … speaking of pattern based systems, I strongly believe that a Hard
   Working technical analyst with simple tools and using a combination of eyes
   and brain can still, for the moment at least, outperform any computer based
   system currently affordable to the retail and mid level institutional
   investor.