Feb 27

Investing in One Lesson

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Investing in One Lesson Wow – Mariusz Skonieczny – ClassicValueInvestors . com
I have read lot of books on investing over the years, but this book is just superb. I won’t say it is the best, but it is in the top 10. I could not put it down. The author explains that even the most successful business owners, doctors, or lawyers, find little success in investing. They fail because they do not understand THE LESSON in this book, which is Wall Street is not Main Street. The business of investing is not the same as investing in a business.

In order to be a successful investor, one needs to understand the business of investing. The moment a company goes public, many things change. The value of the business is no longer equal to its price because its price is set by market participants that “vote” on it each day by buying and selling. Their combined decisions may cause wild fluctuations in prices of individual stocks, even if nothing happens to the underlying businesses.

I borrowed this book from the library, but I immediately bought it after I read because it was so good.

Mariusz Skonieczny, author of Why Are We So Clueless about the Stock Market? Learn how to invest your money, how to pick stocks, and how to make money in the stock market

It would be pointless to repeat all the great things about this book, such as explaining basic consepts of investing by very simple way and explaining many reasons for market fluctuations. Other reviewers have already pointed out the good things in this book, so I took the contrarian task to write about the (few) negative ones.

I think that the title simply promises too much. Already familiar with his magnificent book on the business cycle, “Structure of Production” and his monograph on investing, “Ludwig von Mises goes to Wall street”, I was very happy when this title was released. Maybe I simply expected too much, because I was a little disappointed after reading this work. As a Hayek-Rothbardian libertarian geek I expected something like how to recognise bull and bear markets from the Money Supply data :)

In this book there is unfortunately very little about gold and commodities which is strange because of the ongoing strong bull market in these asset classes and because Skousen himself was one of the first gold bugs (although very reasonable one for his credit) in the 1970’s. Maybe this is because Skousen has affiliated very much with stock market optimists like Jeremy Siegel whose WisdomTree Dividend funds he recommends (for Skousen’s credit he has been superbullish on commodities in his newsletter “Forecasts & Strategies”).

Summa summarum: easy to read, logical, but definitely not the last word on the subject… A good starting place for beginners and a great reference guide, but on the other hand contains maybe too little about recognising actually what to buy and why, especially if you want to buy ordinary stocks and not Mutual Funds. If you love Skousen’s earlier works (like I do) you will find this one valuable and easily accessible anyway. : Mark Skousen, who has built his impressive reputation as one of the industrys best-known investment advisors, passes along his entire investment philosophy, based on his decades of experience, in a single, one-lesson book.
Investing in One Lesson

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Feb 26

The Encyclopedia of Trading Strategies

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The Encyclopedia of Trading Strategies Potentially very harmful: fairly useful section on exits – Scott C. Locklin – Berkeley CA
I hate reviewing books like this. It would be awesome to say, “this is total nonsense; never, ever read it.” However, there is actually good stuff in it, which makes me work at reviewing it.
The good: the section on exits is quite good. It could be better, but I can’t think of anything out there which actually is better. Selecting an exit strategy is *most* of a trading strategy. It matters a lot less when you buy than when you sell if you’re into, like making a profit. I actually bought the book based on the recommendation of someone smarter than me, specifically for the chapters on exits, and I was no disappointed in this part. The sections on technical analysis and standard indicators aren’t bad either, though like most treatments of this sort of thing, TA comes off looking like magic rather than what it properly should be thought of; which is to say, lousy non stationary filters which might inform other traders you should be trading against. His statistics aren’t exactly right, but they’re not always completely insane either.
The bad: this book is mostly an exercise in data mining and hindsight bias. Genetic algorithms? Optimizers? Give me a break! He doesn’t deal with real issues in doing this sort of trading; for example, signal to noise ratios of various kinds. He doesn’t properly deal with issues of overfitting (yes, you must test out of sample, but there is a whole lot more you can do to reassure yourself you haven’t just fit to a bunch of noise). There is a chapter on fitting to solar and lunar cycles, which is, of course, data mining lunacy. The software he uses is of course all antiquated stuff which was out of date before I could legally drink alcoholic beverages; no help there. Risk management? Money management? These are also crucial pieces of any trading strategy: they’re not covered at all here. I guess the book is oriented towards data mining punters who don’t care so much about such niceties, but, well, I find such things important. I’m not sure I’d trust what the author had to say about such things, but it’s something everyone with money on the line should be worrying about. Also: this is hardly anything resembling “an Encyclopedia of Trading Strategies” -so don’t expect it to be, and you might not be disappointed.
So, this book can be useful if you already know enough to know which parts are nonsense. I guess this is an issue with all books and papers dealing with this subject; you can often take a chapter here and a section there, but books of this nature seem to have a lot of red herrings. Sometimes it’s hard to tell if they are there on purpose, or as filler to sell the good sections. I dunno. Anyway, don’t try to make a zillion dollars using genetic algorithms like they talk about in this book: you will fail.
Anyone planing on or currently trading using technical analysis should read this book. The lessens inside can help prevent loss of savings.

This book takes a careful look at various types of technical indicators and trading strategies that use technical analysis, the types of methods commonly found in charting software and technical analysis books. For me the bottom line is that making a consistent income from trading, using technical analysis, is difficult. (Losing money is not so difficult).

The software referenced in the book and available for a relatively small price, is in my opinion very powerful, but difficult to master (C++ source code that must be compiled, debugged for your compiler, and modified to create useful systems). : The Encyclopedia of Trading Strategies is for traders who want to take the next step to consistently profitable trading. The authors–themselves seasoned veterans of the futures trading arena–pinpoint the trading methods and strategies that have been shown to produce market-beating returns. Their rigorous and systematic backtesting of each method, using the same sets of markets and analytic techniques, provides a scientific, system-based approach to system development…to help you assemble the trading system that will put you on the road to becoming a more consistently profitable trader.
The Encyclopedia of Trading Strategies

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Feb 24

Futures Derivatives – Why You Should Let a Broker Assist You

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Are you looking for new ways to make money? If you are, you may want to look into the futures derivatives market. The futures derivatives market involves the trading or buying and selling of commodities, which may be delivered, literally or figuratively, at a later date. Although many future derivatives market participants are able to do their own researching, futures contracts, and such, there are others who need professional assistance from a futures derivatives broker. To determine if you should also use that assistance, you will want to continue reading on.

When it comes to using the assistance of a futures derivatives broker, beginners are the most common users. The trading or buying and selling of future derivatives can be a tricky business, especially if you are unfamiliar with how the market works or if you are uncomfortable with basically predicting the future. To make a profit with futures derivatives, you must make a wise trade or investment, one that can later be used to make you money, but since your “delivery,” won’t go through until a later date, you need predict the value of your purchase at that later date. You will be hoping to make a profit, but that doesn’t necessarily mean that you will.

In fact, the uncertainty is one of the reasons why many turn to a futures derivatives broker for assistance. When purchasing a commodity, such as feed grain, you are essentially agreeing to buy the commodity for today’s price, but at a later date. To make a profit, your goal would likely be to resell the feed grain, but for a higher price than what you paid for, but you are not guaranteed to get that. To determine if a futures derivatives trade or purchase is a good one, you need to know where to look, in terms of researching the expected forecast or value for the commodity in question or other commodities. Inexperienced futures derivatives traders don’t always know how to do this, but experienced futures derivatives brokers do.

If you would like to give futures derivatives trading a try, but you don’t want to go at it alone, you are advised to find a futures derivatives broker to do business with. For a local broker, examine your local phone book. For an online futures derivatives broker, perform a standard internet search. When choosing a futures derivatives broker to do business with, you will want to examine their trading account types, as well as the costs of each of those accounts. You will also want to examine the broker’s reputation and their ability to handle you as a client. In this aspect, it may be better to go with an online futures derivatives broker.

In conclusion, you will need to do business with a futures derivatives broker, even if it is just to help you setup your own, personal online account. Even if you are just setting up an online account, which you will handle on your own, you will still want to make your futures derivatives broker decision wisely, should you later end up needing assistance from a trained and knowledgeable broker.

Ulysses Faust is a writer for Transworldfutures.com where you can find accurate information about Futures Derivatives [http://www.transworldfutures.com/futures-derivatives.php] and other related information.

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