When Things Change, from anonymous

September 29, 2011 |

One posits that dependency on the past is sacrosanct to all trading/ investing, and when past relationships break down there is always the question whether the current instance is a temporary state or regime change. (2008-09 contained many such, as well as a few more recent examples).

This reduces further to how well success in markets (life, etc) tightly correlate with intelligence, learning from study and experience, and discipline, and what happens to successful trend followers (which all living creatures are) when the trend dies and nature deals out an extinction. The quaint notion that fear is conserved in the genome for a reason.

Ralph Vince writes: 

As the Old Frenchman would have put it, stamping out his Gitane on the dashboard itself, "Adaptation…..The first rule of survival."

anonymous writes: 

Clearly, it would be best to know in advance if things that worked in the past stop working. But aside from a very very few circumstances (true arb is the only one that comes to mind, and even that relies on technology working), do traders ever have this knowledge? Instead, isn't money management of some sort used?

With respect, for example, enter a tiny amount, if it works, put on more, if it doesn't work, but the idea remains the same, take off some and wait for a truly outrageous spread to try again, if it never works, exit and take it off the screen or something etc.

Ralph Vince talks about not needing to predict movement to make money and I keep thinking about this.


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