Like I said, I’ll get the data first, but I don’t see why it can’t work. People game systems all the time to make a buck.
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Lots more people try to game the system and get gamed. I know a grand won’t break you in half, but you’re more likely to lose it than not. Either way, let us know how it works out. [/quote]
to be fair … the higher risk the higher the (expected) reward
I, however, agree with you Lanky; he’ll most likely lose than gain[/quote]
Not really because there’s nothing risky about this, it’s just dumb. Investing in an IPO is risky, following some behavioural finance strategy grounded on a weak argument doesn’t follow that law.
But hey, it’s not my money I actually want to see how this works out IRL.
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Risk is embedded in the market and any investment … you don’t see people “investing” in low return savings accounts because of the inherently low risk (hence the low return).
The average joes watching cramer are not market movers. The hedge funds that already have this information and make millions of trades a day are.
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This, the market movers don’t care what he says.
I do a bit of investing, made a 50% return in the past 6 months. No gimmicks or fancy techniques. Just do some research, find companies you think are undervalued, don’t be swayed by minor market movements. And most importantly don’t get overly greedy, if you are up a decent amount get out.
Most individual investors lose money or don’t make as much as they could by seeing a stock they own rise, get excited, and get greedy and don’t sell soon enough.
I commend you of sorts for trying to develop a thesis and explore the trading opportunities it may present. However, 2-3 months will produce nonrepresentative results—and probably excessively favorable results. You must take favorable and unfavorable periods together, and taking the performance averaged over all stocks recommended.
For your theory and trading method implored to be judged a success, it must advance in good times and hold ground or give ground grudgingly in the bad times.
How much of a positive expectation does your thesis have? That is the real question.
Even though your method can be expected to stagnate or retreat for lengthy periods, to be a viable proposition it should have a steady positive expectation. To draw any statistical valid conclusions you will have to go far beyond 2-3 months. You need results over a much longer time period.
If you can attain a sufficient data base, I personally would recommend about 2-1/2 years.
Also, pre-selection for a favorable result is a common error among researchers with a theory they would like to see vindicated. [quote] but I don’t see why it can’t work
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Once you’ve reached your results…you have to research how far they are removed from pure chance. Null hypothesis. Assume chance to be the cause of a result unless there is evidence to the contrary.
Take your observed data and compare them to a relative frequency distribution of average rates of return from precise simulated trading using random price sequences. You are trying to determine if your results are outside normal chance limits that with confidence you can reject the null hypothesie in favor of a conclusion of nonrandomness.
Any test will always be nonrepresentative to a degree… you do have to use some common sense. You must also allow for slippage and poor trade execution, even if its on the part of the operator.
So your plan is to buy alongside all of these other stupid people? Have you verified any of these studies? Your belief is that one’s celebrity is bigger than the market?
MSG is up over 100% since its gap up in November of '11 with, in my view, a couple of minor reactions along the way. I’m sure the fact that it is a fairly solid company had nothing to do with it.
I have known many a trader to avoid any stock Cramer recommends. I have known many a trader to get quite antsy if they are already in a stock he recommends. Cramer followers I perceive are generally skittish.
I personally hold nothing against Cramer. I don’t watch his shows, and couldn’t care less what his thoughts are on a stock.
Good luck to ya. But I don’t think that is a trading philosophy that will work and make money over time. There is a definite lack of regression in trading performance. Chance can be ruled out. Figures of losers in the 90% range are regularly quoted. Consistent winners in trading are a bit rare. There are distinct modes of behavior exhibited by the losers versus the winners.
As long as you can find an edge, develop the proper psychological makeup required (dealing with uncertainty and handling risk), and develop the proper mode of behavior in your trading…