TRYING TO OUTGUESS THE MARKET MOVES

This is a part of human nature to find answers for uncertain things. We always love to create ideologies why the market needs to go down or why it needs to go up. We don’t like the uncertainties in our life, so we hate this in trading too. I have predicted many times in my first period of trading career. But I don’t do that anymore. Why? Because it is not possible to predict the future, we are only guessing. As John Bogle’s old runner colleague said „NOBODY KNOWS NOTHING”.

Most of traders are looking for gurus who always tell the truth. They can’t accept the fact Mr. Market more complex than could be ever forecasted. Beacuse it is dynamic random system always with at least two scenarios.

We use different forecasting systems. Fundamental analysis or technical analysis with hundreds of indicators. But I have never met a person who had 100% hit rate. Nobody knows what holds the future. All type of analysis only tell us what happened in the past or what happens now. But any of them not able to show the future. As George Soros once said ”It's not whether you're right or wrong that's important, but how much money you make when you're right and how much you lose when you're wrong." That is the point. I never care about I am right or wrong. What I only care about is the size of the profit or the loss.

To place a good investing decision we have to accept the uncertainty of markets. If we are honest about it we won’t fight with the market anymore. I found a great statistics that there are no gurus. Mark Hulbert of the Hulbert Financial Digest analysed the top-performing newsletters from 1986 to 2010. They found that they underperformed the SP500 by 2.6%. But still today many investors use them and convinced they have found the way to reduce the uncertainty of Mr. Market. They create a fake sense of certainty.

There is another problem with the gurus, signals and recommendations. You are able to avoid the responsibility for your decisions. You are pushing away that. If you make money you say ok that is great I knew that. But if you lose you will say the bastard guru is made a bad job. So it is not your mistake but the guru, signal or newsletter’s mistake. This is typical approach by human investors.

Accept the fact that Mr. Market is more complex than anybody can predict and realize that no one knows exactly what market will do. As Warren Buffet said “I don’t know what the market does next week or next month or next year. What I only know what will do in 20 or 30 years.”

Take a look at our Swiss fund and begin to invest with us!

The BFM Assets Team.