BarroMetrics Views: The More Things Change….
The More Things Change…. the more they remain the same.
I recently purchased a two-volumes set, A Collection of 24 Stock Speculation Classics’ 1880 - 1938. I received the volumes only a few days ago and have only previewed the first six or so books. Still I could not help thinking that as traders we don’t seem to be quick learners.
We have a plethora of innovation aimed at improving our edge - the latest whiz bang charting tools; we have advances on how the brain works; we have fresh insights on how to learn; but the failure rate among traders is still in the 90% zone.
Take the first book (well today it would be called an e-book. It is only 12 pages long) by Dickson G Watts: “Speculation As A Fine Art and Thoughts on Life“:
Watts outlines four absolute rules. I quote
- Never Overtrade. Take an interest larger than the capital justifies is to invite disaster….
- Never ‘Double Up’; that is never completely and at once reverse a position…
- “Run Quickly” or not at all….act promptly at the first approach of danger, but failing to do this until others see the danger, ….close out part of the interest.
- Another rule is, when doubtful, reduce the amount of the interest.
All the rules are worth considering…
- This goes without saying. Yet in Singapore, ads appear daily touting of the huge returns attained in a short time. The only way the returns would be possible would be to overtrade. When you do that, all is hunky dory as long as you win. It only takes one trade to ruin months of work.
- This one needs some thought. I’d agree with it if the ’stop and reverse’ is done as a ’spur of the moment’ thingy. Generally in that situation, we’ll be holding on until the pain becomes too great and we stop and reverse. Somehow that point seems to be the moment that the market decides to move in the original direction.
- The rule seems to be for those without a pre-planned exit strategy. I would prefer to determine beforehand what would have to happen for me to exit the trade.
- Related to (1) and I could not agree more.
This ‘book’ was written in 1880 and most of what Watts had to say applies today. The More Things Change…. the more they remain the same. If we traders would learn from history, perhaps the failure rate would not be so high.
By the way: the two volumes set is available from Rob Kirkconnnell, readingcopy@gmail.com. The cost is US$23.95; in Hong Kong postage cost me US$12.00.
Usual Disclaimer: I receive no benefits from Rob for posting this. I just find the two-volumes set great value and wanted to share - especially with traders who have the same love for reading as I do.
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