Everything we do in financial markets is a bet. Hopefully an educated bet, hopefully a smart bet, but it’s all only a bet on the odds.
- We are going to be wrong sometimes, so it’s important to limit how much we lose when we are wrong.
- Don’t “bet the farm” or you will eventually lose the farm!
- We must have some way to put the odds in our favor, or there’s no reason investing.
Four ways people try to put the odds in their favor:
- Seeks to understand value
- Top down or bottom up
- Macro (or Global Macro)
- “Big picture fundamentals”
- Making investments based on forecasts of economic and geopolitical developments
- Uses patterns in prices to predict future direction
- Traditional technical analysis is subjective and visual
- Many exotic cycles, waves, and methods, of varying usefulness.
- Using mathematical tools to understand statistical tendencies in markets
- Can use price as an input, but also can incorporate other factors
- Is there a way to blend quantitative and technical (or fundamental) approaches?
Also, if you like the music for this podcast, then be sure to check out Brian Ashley Jones, my friend, and a fantastic singer-songwriter. He has a new CD out, Out of the City (or here, on iTunes) that you might enjoy!
Enjoy the show: