DislikedHi everyone. I am a new member and this is my first posting. After playing around in the markets and losing more than winning for 18 months, I have decided to take it more seriously and start researching FX properly. Ihave read and learned a great deal from these forums and would like to thank all the experienced people who contribute their thoughts and suggestions.
There is no way I will be trading in ten years time if I am not making money (even a little). There are many crucial elements necessary to become a successful trader and MM is one...Ignored
http://www.amazon.com/Random-Walk-Do.../dp/0393315290
A RANDOM WALK DOWN WALL STREET, by Malkiel.
A Mathematician Plays the Stock Market ,John Allen Paulos
The accounting scandals involving ?WorldCom, Enron, and others derived
from the data being selected, spun, and filtered. A scam I first
discussed in my book Innumeracy derives instead from the recipients of
the data being selected, spun, and filtered. It goes like this.
Someone claiming to be the publisher of a stock newsletter rents a
mailbox in a fancy neighborhood, has expensive stationery made up, and
sends out letters to 68 John Allen Paulos potential subscribers
boasting of his sophisticated stockpicking software, financial acumen,
and Wall Street connections. He writes also of his amazing track
record, but notes that the recipients of his letters needn't take his
word for it. Assume you are one of these recipients and for the next
six weeks you receive correct predictions about a certain common stock
index. Would you subscribe to the newsletter? What if you received ten
consecutive correct predictions? Here's the scam. The newsletter
publisher sends out 64,000 letters to potential subscribers. (Using
email would save postage, but might appear to be a "spam scam" and
hence be less credible.) To 32,000 of the recipients, he predicts the
index in question will rise the following week and to the other
32,000, he predicts it will decline. No matter what happens to the
index the next week, he will have made a correct prediction to 32,000
people. To 16,000 of them he sends another letter predicting a rise in
the index for the following week, and to the other 16,000 he predicts
a decline. Again, no matter what happens to the index the next week,
he will have made correct predictions for two consecutive weeks to
16,000 people. To 8,000 of them he sends a third letter predicting a
rise for the third week and to the other 8,000 he predicts a decline.
Focusing at each stage on the people to whom he's made only correct
predictions and winnowing out the rest, he iterates this procedure a
few more times until there are 1,000 people left to whom he's made six
straight correct "predictions." To these he sends a different sort of
follow-up letter, pointing out his successes and saying that they can
continue to receive these oracular pronouncements if they pay the
$1,000 subscription price to the newsletter. If they all pay, that's a
million dollars for someone who need know nothing about stock,
indices, trends, or dividends. If this is done knowingly, it is
illegal. But what if it's done unknowingly by earnest, confident, and
ignorant newsletter publishers? (Compare the faithhealer who takes
credit for any accidental improvements.)
Similar to the newsletter scam, but with a slightly different twist,
is a story related to me by an acquaintance who described his father's
business and its sad demise. He claimed that his father, years before,
had run a large college-preparation service in a South American
country whose identity I've forgotten. My friend's father advertised
that he knew how to drastically improve applicants' chances of getting
into the elite national university. Hinting at inside contacts and
claiming knowledge of the various forms, deadlines, and procedures, he
charged an exorbitant fee for his service, which he justified by
offering a money-back guarantee to students who were not accepted. One
day, the secret of his business model came to light. All the material
that prospective students had sent him over the years was found
unopened in a trash dump. Upon investigation it turned out that he had
simply been collecting the students' money (or rather their parents'
money) and doing nothing for it. The trick was that his fees were so
high and his marketing so focused that only the children of affluent
parents subscribed to his service, and almost all of them were
admitted to the university anyway. He refunded the fees of those few
who were not admitted. He was also sent to prison for his efforts. Are
stock brokers in the same business as my acquaintance's father? Are
stock analysts in the same business as the newsletter publisher? Not
exactly, but there is scant evidence that they possess any unusual
predictive powers. That's why I thought news stories in November 2002
recounting New York Attorney General Eliot Spitzer's criticism of
Institutional Investor magazine's analyst awards were a tad
superfluous. Spitzer noted that the stock-picking performances of
most of the winning analysts were, in fact, quite mediocre. Maybe
Donald Trump will hold a press conference pointing out that the
country's top gamblers don't do particularly well at roulette.