This correction-type thingy...

Damage

Thrugelmir wrote: »

Unless you've a crystal ball or have access to inside information (pre release) then "reading" price movements is random. As you've no idea what might happen (not least while you are asleep). Simply too many variables. Volatility is part and parcel of any marketplace.

My point doesn't concern the ability (or otherwise) to see into the future; it simply concerns the relative abilities of those who participate in the market, and within that range of abilities, at one end of the scale, are people who can successfully beat the market on a regular basis.

It's not very helpful to deny the existence of that fact by stating that it is impossible to see into the future, because we all know that anyway. Furthermore, it's not very helpful to deny the existence of that fact (the existence of regular market-beating traders) because quite simply they exist. We all know that too.

So, the explanation as to these traders' market-beating abilities must lie somewhere other than something that we all know not to exist (seeing into the future, and crystal ball usage, etc). It seems apparent to me that the explanation lies in how their minds work. They do it better than we can, and we can't do it because our minds don't work in the required way, otherwise we'd all be doing it.

Simply too many variables, as you say, is true - for us, not them. For them there aren't enough variables to prevent them from beating the market on a regular basis.

grey_gym_sock

Damage wrote: »

Well, some people can beat the market, and they do it on a regular basis - beyond the point that can be explained simply by luck or chance. It is clearly a well-documented fact.

can you refer us to the studies which show this? AFAIAA, it is not at all clear whether this claim holds up. it is clear that most of the variation in investment/trading performance can be explained by chance; the more difficult bit is trying to discern whether there are a few ppl who are actually skilled among a much larger number of ppl who have been lucky so far.

in professionally managed funds, you can see the cycle of a huge number of funds being launched, some of which are not initially publicized or open for investments from most investors; some do well, others averagely, others badly; the ones that have done well tend to be more heavily publicized and attract more money; the ones that have done badly are often closed down or merged into other funds. crucially, the evidence is that there is very little persistence in returns: funds that do well in 1 year (or over 5 years, or 10) have little if any difference in their chances of doing well in the next period; but there are so many funds launched that some are bound to continue to do well over even 20 years, if they are kept going for that long (but they are only likely to be closed when the performance record becomes bad, so they all have their chance).

there may be some skilled fund managers out there, but it is hard to tell AFAIAA.

there is a similar cycle in day trading. some traders are bound to get lucky initially, and they will probably keep going until their luck ends and they've lost all their initial profits and a good bit more. more will start by losing money (because of the cost hurdle for day trading), and when they've lost a certain amount, will stop. others will not measure their performance accurately, and will keep losing money at a fairly steady rate, while telling themselves (and other ppl) that their hobby is profitable.

i would be surprised to see any evidence that there are any day traders who are skilled. because the cost hurdle is huge.

there are a few categories of investor/trader, in which you can look for evidence that any are skilled: professional fund managers, day traders, private investors. so if the claim is that some can outperform, which kind(s) of investors can? (surprisingly, 1 answer seems to very cheap mid/small-cap tracker funds: vanguard's (US) extended market ETF has outperformed its index by 0.11% per year over 10 years: https://advisors.vanguard.com/VGApp/iip/site/advisor/investments/performance?fundId=0965 )

A_Flock_Of_Sheep

I have no investments at all at the moment and have just seen that the markets have taken a bit of a tumble and thought - ahhh I bet there is a crash-esque thread on MSE. Lo and behold. Here it is....

A_Flock_Of_Sheep

I just have a feeling in my fleece that we will see the 100 index fall into the 5,000s

Damage

grey_gym_sock wrote: »

can you refer us to the studies which show this? AFAIAA, it is not at all clear whether this claim holds up. it is clear that most of the variation in investment/trading performance can be explained by chance; the more difficult bit is trying to discern whether there are a few ppl who are actually skilled among a much larger number of ppl who have been lucky so far.

There are around several dozen accounts of such individuals in Jack Schwager's books, 'Market Wizards' and 'The New Market Wizards' (I have only read the second book though). I would have trouble attributing those varied accounts simply to instances of chance, but you may have more success than me there!

These would appear to be the few skilled people amongst the much larger number who don't succeed.

Incidentally, in one interview, the trader in question gives historical examples of when considerably long buy and hold periods would have resulted in significant loss. Also, regarding my previous point about technical analysis, he gave a simple example of a how a small amount of technical analysis enabled considerably better performance compared with an equivalent period of buy and hold. I'll dig out the relevant passages if anyone is interested.

Thrugelmir

Damage wrote: »

My point doesn't concern the ability (or otherwise) to see into the future; it simply concerns the relative abilities of those who participate in the market, and within that range of abilities, at one end of the scale, are people who can successfully beat the market on a regular basis.

It's not very helpful to deny the existence of that fact by stating that it is impossible to see into the future, because we all know that anyway. Furthermore, it's not very helpful to deny the existence of that fact (the existence of regular market-beating traders) because quite simply they exist. We all know that too.

So, the explanation as to these traders' market-beating abilities must lie somewhere other than something that we all know not to exist (seeing into the future, and crystal ball usage, etc). It seems apparent to me that the explanation lies in how their minds work. They do it better than we can, and we can't do it because our minds don't work in the required way, otherwise we'd all be doing it.

Simply too many variables, as you say, is true - for us, not them. For them there aren't enough variables to prevent them from beating the market on a regular basis.

Care to share some insight? As in all my years of share trading never heard of the invincible investors. Worked with traders in several industries yet to meet one who was pitch perfect.

Damage

Thrugelmir wrote: »

Care to share some insight? As in all my years of share trading never heard of the invincible investors. Worked with traders in several industries yet to meet one who was pitch perfect.

Yes, I am referring to the traders featured in the books mentioned in my previous post ('Market Wizards' and 'The New Market Wizards').

A_Flock_Of_Sheep

Dear Damage,

You don't really need to worry yourself with all the nause, headache and worry of trading and short term buying. Simply invest in Vanguard LifeStrategy.

You just set it and forget it.

A_Flock_Of_Sheep

Or be really brave and plough all your dough into mining stocks.

Damage

A_Flock_Of_Sheep wrote: »

Dear Damage,

You don't really need to worry yourself with all the nause, headache and worry of trading and short term buying. Simply invest in Vanguard LifeStrategy.

You just set it and forget it.

As it happens, Vanguard LifeStrategy is the one I intend to invest in for my long-term investments, unless I find any better alternatives! I'm interested in the 80 or the 100 for the earlier part of my investment period.