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MarketLife Ep 5 – Trading, investing, and gambling: playing the odds and how to do it

 

Podcast-Cover300This episode of MarketLife looks at trading, investing, and gambling, and how people try to put the odds in their favor.

 

 

 

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:

  • Fundamental
    • 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
  • Technical
    • Uses patterns in prices to predict future direction
    • Traditional technical analysis is subjective and visual
    • Many exotic cycles, waves, and methods, of varying usefulness.
  • Quantitative
    • 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:

AdamHGrimes

Adam Grimes has over two decades of experience in the industry as a trader, analyst and system developer. The author of a best-selling trading book, he has traded for his own account, for a top prop firm, and spent several years at the New York Mercantile Exchange. He focuses on the intersection of quantitative analysis and discretionary trading, and has a talent for teaching and helping traders find their own way in the market.
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