The other day I wrote about the problem with learning in real time. There is also a problem with trusting the process. When trying to create stability from chaos there are several dangers and one of the main risks is that chaos is chaotic. One of the things I dislike more than anything is relying on other people, and while trading in the stock market appears to be an individual effort it is entirely dependent on other people.
The market’s prices are based on if more buyers or sellers show up on any given day. The number 10 bus could run into heavier than usual traffic carrying a load of buyers will all the sellers took the subway and everyone bearish on stock XYZ has already sold it before any of the buyers arrive and then mass panic takes over and the sell-off is on until the number 10 bus deploys its load of buyers. If none of them change their mind then maybe they end up buying double what they expected because of the depressed prices or half change their mind because of the new prices or they all simply go home for the day.
Afterwards CNBC and The Wall Street Journal attempt to make sense out of nonsense and start throwing buzzwords around when the real problem for the day was the number 10 bus ran into extra traffic and no one has any real explanation.
That is about what it is like on a day to day basis. Movement happens and a story is presented to why it happened for each company and everyone reacts either positively or negatively to the new story until that story is challenged or their is an earnings call, but even that isn’t a certainty. A company could double their earnings and come in way over expectations but then the market deems it unsustainable and a sell-off occurs anyway.
It is a strange thing watching this weird creature on a day to day basis. There is a calmness in long term investing, but with limited resources my best way of getting more money is to use the systems of the market to mine this chaos. The biggest issue is that chaos can be chaotic, and even when we have a process that makes the punishments less harmful than the rewards are beneficial we still feel the harm more.
This is why emotion is the enemy, logic is our friend, and always have an exit strategy.
David Huzzard Writes 