Below is an excerpt from Investing and the Irrational Mind, where the author highlights a list of words that best characterize a successful trader/investor.
The following is a list of words generated in my work with hundreds of major fund manager as well as proprietary and independent traders. I asked them to write down the three words that best characterized “market wizards”, and the words that appeared most often were: confident, disciplined, analytical, self-reliant, motivated, competent, self-aware, optimistic, intuitive, strategic, patient, hard-working, high-achieving, energetic, objective, proactive, organized, goal-oriented, self-contained, knowledgeable, open-minded, determined, enjoys investing and risk-managing, focused, independent, ambitious, committed.
Wimbledon starts today. I’m looking forward to another two weeks of tennis trading on the grass, full of trading opportunities, similar to what we’ve seen in the pre-Wimbledon tournaments.
But this post is inspired by what took place last night at the EURO Cup when Italy overtook England at a penalty shootout. A victory that can largely be attributed to Pirlo. Why Pirlo?
Here’s why. [continue reading…]
After looking over my last post on the 80/20 rule and also having a discussion with a fellow trader, I’ve decided to write this short post in order to add one more angle to the 80/20 rule, and more specifically, how it relates to – to what I found to be – the best staking staking system and namely the Kelly criterion.
I will not go in full details on the Kelly system, but for those of you who are not familiar, here it is in a nutshell. Your stakes – or the risk you take – are in direct proportion to the probability of your bet or outcome, happening. So the higher the probability, the higher your risk should be and on the flip side, if your probability is low, your stake or the risk you take, should be adjusted accordingly. Or in other words, the higher the value or edge you have the higher the percentage of your total bankroll that you should commit, and if there is no value or edge then there is no bet.
Now, how does this fit in with the 80/20 rule ? [continue reading…]
“How to make more money while trading less” could have been a suitable title for this post as well, because that is what the 80/20 rule is all about, doing or achieving more while working or committing less resources.
What is the 80/20 rule?
Before we go into how the 80/20 rule will help you make more money by trading less, let’s begin by talking a little bit about how this principle got born, what it is, where is it used and why it is so powerful. The 80/20 principle is also know as the law of vital few or the Pareto principle, named after the Italian economist Vilfredo Pareto (1848-1923), who came across it while making research into different patterns of wealth distribution in Italy, discovering that the wealth distribution was very unequal, with 80% of the land being owned by only 20% of the population. This 80/20 pattern that he discovered, turned out to be a predictable pattern that could be charted out and expressed in a formula. He created a relationship between two distinct sets of data, in his case, the total amount of land or wealth and the total population.
The first week of tennis trading this season already brought up some incredible trading opportunities. Some of the most notable are the ones in Chennai were there have been two matches in which a player has come back from one set down and double break down in the second set.
The first match was Gasquet vs Phau; where Gasquet won the first set 6-1 and had a double break in the second, only to lose the match in the end. What is interesting is that you can see this pattern of play at Gasquet over and over again which makes him one of my favorite players to trade. When Gasquet is in the lead he has the tendency to be content to just put the ball back in play and starts to get in his defensive mode, where he plays further and further away from the baseline. In 2010 I remember Gasquet losing from a 2 sets to love lead in the Australian Open against Youzhny. In 2009 I remember a similar type of match, only this time against Fernando Gonzalez, and again at the Australian Open. Again in 2010 at the French Open, Gasquet had a 2-0 lead against Andy Murray but in the end lost the match.