logic check requested

[Warren Whitmore]

My favorite all time investor by far is Benjamin Graham. He made two statements in the same paragraph which although apparently logical do not seem so under poker player type thinking.
"That chart reading cannot be a science is clearly demonstrable. If it were a science, its conclusions would be as a rule dependable; everybody could anticipate tomorrow's or next week's price changes; and hence everone could make money continuously by buying and selling at the right time. This is patently impossible. It follows that there is no generally known method of chart reading that has been continuously sussessful for a long period of time. If it were known, it would be speedily adopted by numberless traders. This very following would bring its usefulness to an end."
Now reread the above replacing chart reading with Mason & Sklansky poker stratagy.
And yet 2 + 2 books do work to give one an edge. I have never considered chart reading yet I am starting to wonder if it is possible.
The reason poker is still profitable is because there is a gap between knowledge and application I wonder if the same could be true of the stock market. I do wish that Mason & David had devoted a chapter to it in thier book gambling for a living.

All comments welcome

[Glenn]

I understand what you're saying, and yes, just because it worked doesn't mean everyone would do it. However, since almost all of the trading (volume and money wise) is done by firms with tons of resources, it is different. That is, the most educated people control the lion's share of the market, while in poker, everyone at the 60-120 table has to bet the same amount of money.

[adios]

I sort of understand your point but my reaction is that using charts to predict future prices is not analogous to applying poker strategy. Let's take something like a head and shoulders top. First we'd have to agree on what constitutes a head and shoulders top in fairly precise terms I would think and then use statistical data to determine the odds of future price declines and their magnitude. With a portion of poker strategy anyway it's fairly easy to determine that the strategy is profitable e.g. raising pre-flop with AA. For utlitizing strategems outlined in the 2+2 books your relying on the advice of experts. I think your point is that if every player starts using the same strategy, then the edge decreases a lot.

I'm not saying that you couldn't be successful reading charts because I really don't know.

[Wildbill]

Chart reading is a worthy aim, but so are many other things. What Graham and the others overlook is that the market moves in tides more than anything and that good chart readers aren't just drones that always make a move when a chart looks favorable. A good stock bought at a bad time in the market often ends up a bad stock right? So the best chart readers tie in a lot of things, various patterns while only picking out confirmed patterns that can signal a certain sentiment level tied in with the general market direction. The last step, something that is almost always overlooked, is logic. Not logic in determining the charts, but logic in determining where the stock stands in its cycle and what might drive its next cycle. A stock might hit resistance on both sides for two years, but if the company is now selling completely different products that are well received and about to undergo expansion then forget the top resistance. What happens in most of the stock picking world is the two sides fire lobs at each other when if they worked together they would do far better. Take a Graham value approach and tie it in with a chartist view of market sentiment and ideal entry points and you have a very good investor IMO. Don't tie yourself to any one theory there is a time and place for everything in the markets.

[scalf]

/images/graemlins/smile.gifi think there are analogies between s + m's books and poker results...and technical analysis and trading profits....

in both, there is a need to study, work, try to see small differences which can lead to different moves along the decision tree...i.e. many who read mason's books will read once try and play, lack experience or discipline to implement correct stategy; and lose more than average...some people jump into technical analysis of commodities and wonder why their house is being sold by court order,(except florida, of course.....

so you have to do the work, have the personality to handle quick changes, and be able to improvise as the field catches up to you...

but not everyone believes in technical analysis; therefore , just by that fact alone, it defies graham's statements...but consider; in addition to usual fundamentalist scoffing; that if you use a method that many people would laugh at in disgust (i.e. astrology)...then you could use the method indefinitely...no one would copy you and therefore ruin it's efficacy.....consider arch crawford having documented hulbert results that beat the market, and all trading services ,for 5 years running; could this happen with a
'scientific approach"...lol


so, imho, if you are trading bellies, att, position and ranks of poker hands, or predicting sports wagering outcomes....ya gotta have an edge, but as
that edge becomes obvious to the general market then it loses much of it's value, but not all; because many people just do not care and fire away at these markets by their own methods. since these decisions are human decisions they cannot be perfect and must be vulnerable to attack by tecnical methods....

jmho..gl /images/graemlins/confused.gif /images/graemlins/club.gif /images/graemlins/blush.gif /images/graemlins/ooo.gif