tactical trader

I doubt this will go down in any history books, but today is the first post in my first blog ever!

A bit of background to who I am, what I am about and why I am posting in this blog..

I have a full time job in a Management Consultancy firm (though this will soon be changing!) and I have been trading for about 5 years on a part time basis…

Well it’s been a while since I mentioned warrant trading and I’ve just realised I never posted an update about my experiments. Unfortunately at the end of April I was hit by a pretty nasty stomach bug that took me out of action for almost a week. The good news is that I lost a stone in weight and much to the annoyance of my constantly dieting friends and family I’ve managed not to put it back on…

I imagine most traders will feel depressed after reading this book. It’s not that it is dull (it’s not) or overly complex (except in a couple of places), it’s that in the end this book confirms what we all know deep down: it is impossible to make money from trading.

Well maybe that is a bit extreme but reading this book, which as the title suggests looks at the markets from a mathematical perspective, really did show me that it doesn’t matter how clever I am, how well I understand probability, or how level-headed I am, trading really all comes down to luck. It also demonstrates how crazy the markets are, with a particularly good example in the first chapter:

John Maynard Keynes, arguably the greatest economist of the twentieth century, likened the position of short-term investors in a stock market to that of readers in a newspaper beauty contest (popular in his day). The ostensible task of the readers is to pick the five prettiest out of, say, one hundred contestants, but their real job is more complicated. The reason is that the newspaper rewards them with small prizes only if they pick the five contestants who receive the most votes from readers. That is, they must pick the contestants that they think are most likely to be picked by the other readers, and the other readers must do the same. They’re not to become enamored of any of the contestants or otherwise give undue weight to their own taste. Rather they must, in Keynes’ words, anticipate “what average opinion expects the average opinion to be” (or, worse, anticipate what the average opinion expects the average opinion expects the average opinion to be).

Some of the mathematical examples in the book took me a couple of attempts before they made sense, but on the whole the light-hearted style of writing made this an enjoyable read. It won’t teach you how to make millions from the markets, but then it doesn’t promise to. Although, if recent market action has left you in a fragile state, you might be better avoiding this book for the time being as it might just push you over the edge!