Sunday, June 9, 2013

"You Don't Know the Future---Trust me": a classic from www.tastytrade.com:

In a quick overview of financial education by Trader Bob last week on Tasty Trade, which broadcasts at www.tastytrade.com he mentioned that in traditional instruction, as limited as it is for our high school and college graduates...there is the learned behavior of having a "belief" about the future...as in ,,,after analysis I believe that...a) the market is going down, or b) or going up or c) going sidewise.....ditto for individual stocks. In reality, when listening to the pundits on tv, they mostly just recite the data points from the past and point to "interesting" and "foreboding" signs,,,maybe giving them a "double top" or such magical name to impart some meaning to the lines and formations....and in the end, making you believe that because they have shown you this funny little diagram, they know something very deep and profound about the future----and to which, Trader Bob says----"Trust me--you do not know the Future". As a test for me of his instruction, I have begun placing both bullish and bearish option positions on a "paper" trading platform called "Think or Swim". Immediately after placing the positions, I have been carefully noting that one of the positions is profitable, and one unprofitable literally seconds after putting the trade on...and mostly, it does not go as I presume...and I think...and as I believe...merging my belief and my knowledge....and well...it all has added up to squat...and in the end...it is best that I get "agnostic" or "sanguine" or in Trader Bob's favorite term---"Delta Neutral."