The Predictors

I'm currently reading The Predictors by Thomas A. Bass

Here are some snippets from the 1999 First Edition hardback that I liked.

p30: The best human traders are correct only forty percent of the time. It's just that they make more money when they're right than they lose when they're wrong.

p38: Ownership in the company was strictly egalitarian. Anyone who donated labor, money, or ideas to the project received a slice of something called the Eudaemonic Pie. The pie, consisting of winnings plucked off the roulette tables in Las Vegas, was occasionally sliced up and served to pie holders in proportionate pieces.

I really enjoyed that book, and have a quote from it up in my trading room.

What is the quote that you have Jim?

Here are some more as I make my way through it:

p68: Where biology takes billions of years to evolve, financial systems recombine and mutate right before your eyes.

p90: Economists claim that prices move in a random walk. They reflect the activity of rational, logical, and always equally well-informed investors. I don't know about you, but I'm not always a rational human being, and I think this is a pretty far-fetched view of the world.

p102: If the market makes numbers out of information, one should be able to reverse the process and get information out of numbers.

I knew you were going to ask that. The one I like is far different from yours.

"A lot of people have found stuff on paper, but that's worlds apart from going out and making money. There's a huge gap between signals and real trading, where you measure profit and loss at the end of the day." From The Predictors by Thomas A. Bass

It so well keeps fresh in my mind how much there is to a 'Trading Plan', and why I only put about 10%-20% of my emphasis on the setup (what I call the 'potential trade area', the PTA, and here they call the signal). In vendorland the emphasis seems to be between 90%-99% setup.

Successful trading, in my opinion, is a vast assortment of skills (some psychological), of which the setup is only one small part. This is a lot more critical for the style I have (trend trading) than it is for the style most traders in here use (where things like profit targets and moving stops to breakeven are feasible, and fairly easy to implement).

I always say I don't think there is a way to get a big edge (at least not sustainably), so I try to get a group of small edges across the 'Trading Plan', from PTA to entry to 'context' to various management aspects, and so on. There are a lot more skills needed to be a trader than to be an analyst, or a signal generator, in my opinion, and this quote so clearly points that out.

That's good. Reminds me a bit of the part where Doyne does a presentation to Citcorp and the trader says that no matter what the statistical testing shows he's always going to divide the expected results by two and a half. That's his rule-of-thumb. (p98)

it might interest you to note that though i am the most active poster at jim's forum, my use of the tools is 180 from jim's. for me the entry is everything.. i call the method i use'' just give me the trade''(expletive deleted)knowing that i always trade at the extremes and always with a minimum 5/1 reward risk. i am a day trader( in the specific 3 part day i define it)so i have no interest in capturing larger swings, which jim's methodology excels at.

p157: "I'm not a gambler in the sense of liking the action for the sake of the action," he says, drawing a distinction between calculated risk taking and raw gambling. "I like to analyze a game and find a way to beat it. I love uncertain environments because that's where the opportunities are. That's where you can out-analyze other people."

p187: Everything has been working brilliantly. But as soon as the flip the switch to live trading, the system explodes.

p188: They learned a hard lesson from their experience in Las Vegas. If you have a winning system, the worst thing you can do is be timid about playing it...failed to make them rich, not because the didn't succeed in beating roulette, but because they were afraid to trust themselves. Instead of playing their edge, the hung back. They kept collecting more data and running more tests, when they should have gone for broke.

p231: Most of us enter the investment business for the same sanity-destroying reasons that a woman becomes a prostitute. It avoids the menace of hard work, is a group activity that requires little in the way of intellect, and is a practical means of making money for those with no special talent for anything else. - Richard Ney

Wonderful daytrading...Ney espoused on the market makers from my reading which albeit was about 10 years ago....

Don't waste time on research and logic...just buy low and sell high and sell high buy low....3day/ 6/7 day rule. Look at a longer term chart. Pts come easier that way.

Good luck

p244: Most so-called anomalies in the markets don't seem anomalous to me. They seem like nuggets from a gold mine, found by one of the thousands of miners all over the world. - Fisher Black

I've finally finished ready The Predictors by Thomas A. Bass

It was a good read. I've been reading a number of books in parallel and have just finished a few of them including this one.

One of the characters that was mentioned throughout the book and particularly on p282 was Rafael deNoyo. He wasn't an employee or member of The Prediction Company but had a colorful personality and sounded like the sort of person who would be interesting to follow just to see what kind of trouble he's going to end up in next. Has anybody heard of Rafael deNoyo recently? At one point I believe that he owned www.alphatrade.com but I couldn't determine from the web site if he was still involved with it - I'm guessing not.