|
|
|
|
 |
Daily Speculations The Web Site of Victor Niederhoffer & Laurel Kenner Dedicated to the scientific method, free markets, deflating ballyhoo, creating value, and laughter; a forum for us to use our meager abilities to make the world of specinvestments a better place. |
Write to us at:
(address is not clickable)
Baseball and the Markets
Spec Columns on Baseball:
11 Stock-Slugging Tips from Ted Williams 3/13/2003
Baseball's Lesson: Invest in Home Runs 7/12/2001
On baseball, strategy and the technology revolution, 6/16/2000
Spec Song on Baseball: "What Should I Trade?" (to the tune of "What Is a Man?" from Pal Joey)
Our March 13, 2003, column on Ted Williams' book, The Science of Hitting," elicited many comments:
Daniel V. Grossman,
Victor’s sagacious business
partner for some 30 years, writes that the stock market has an advantage over
baseball: "Call strikes count against you in baseball, while there are no call
strikes in stock trading. You can be offered all kinds of interesting stock
opportunities one after the other and pass them up for the one you really want
to bite on, without having to worry that you'll be out on call strikes."
James Lackey:
"Well, you can sit there all game long
and wait for the perfect pitch. However, sooner or later the manager of the
team or the investor in your fund is gonna say, 'What the Hades you doing
sitting in cash?'
'Waiting for a good pitch sir. I did not see anything good to hit,' says the hitter.
'Well, Mr. Looking-for-a-Walk, Mr. Biggs just hit the long ball on to Waveland Avenue after the other three, and the leadoff man singled. I can't hit in the pros and I know it; that is why I hired you. However, I can stand up here and at least look alike a hitter and go down swinging. Please send me my funds back. Seeing you are in cash and see nothing good to hit, I have a real estate venture that is already up 10%. Ya can't lose in real estate.'
Mike Buchsbaum:
"In my view, Daniel Grossman's view of call strikes is
inaccurate. There are called strikes in investing. They are when you are caught
looking and fooled by the direction and or movement of a stock and you stand pat
with your portfolio on your shoulder and fail to acknowledge your mistake. The
market acknowledges your mistake by decreasing the wealth count in your
portfolio via marking to the market."
James Altucher:
"Different types of pitches need to be hit
differently. For the fastball its important not to swing too late. For the
slider, which looks like a fastball and then breaks down and to the left its
important to not be fooled by the initial movement. In the markets, a
fastball occurs when a stock moves down 20% in a day from the close the day
before. Perhaps there was an earnings warning, or a negative FDA announcement or
maybe even an SEC investigation. Regardless, the market is throwing a fastball
and the key is not to swing too late. We looked over the past year at all Nasdaq
100 stocks and what happened if you bought exactly when a stock was 20% down
from the close the day before and then sold at the close. There were 96
occurrences over this past year with an expected value of 1.5% per trade. 60% of
the trades had a favorable result. A slider happens when the market is up
greater than 2% one day then gaps up at least a half a percent the next
open, luring people into a mini-bull before breaking down and to the left.
A short at the open on such a gap with a cover at the close the next day
results in an average gain of 0.61% on the QQQs over the past three years.
"
James Lackey
There are 3 factors for home long ball home run
hitting. Pitch speed, bat speed and angle of bat. This is a simulator that
factors and allows change of all speeds. A 95MPH fastball takes 4 tenths of a
second to go from the pitcher to home plate at . The batter must react by 2nds
of a second for a hit. Anything under is a home run ball. Anything over .2
reaction is a base it any thing over is a strike by miss according to this
simulator. Major league pitcher can throw a baseball up to 95 miles per hour --
some can move it even faster. At this speed it takes about four-tenths of a
second for the ball to travel the 60 feet, 6 inches from the pitcher's mound to
home plate, where the batter, with muscles as tense as coiled springs, like a
predatory animal about to pounce, waits for the precise moment to swing at the
ball. Baseball is a game played at the edge of biological time, just within the
limits of a human's ability to react. Charley Metro: "It's a very difficult
thing to do, to hit a moving ball at 95 miles an hour in one-tenth of a
second!"
Gregory G Dess:
Very interesting! As a Williams fan, one other
thing we can learn is to focus on what's important. After all, they paid him to
hit, not to pander to the press........
Jon Markman:
Most common cause of not hitting the ball correctly
is a/ not reading the location or type of pitch fast enough and b/ swinging too
slow. The ball comes at you in a half a second and you have two-tenths of a
second decide whether to swing or not, and if so where to swing. This is why you
have to practice so much as you have to read the pitch by intuition and
instinct, there's not enough time to make a conscious "decision".
Steven Cole Chambers:
Great article on the hitting strategies. I
would add one more rule though, timing. If you swing to early you miss and if
you swing to late you miss. Being able to judge the optimal point of impact, or
best entry point for a position is crucial. If the timing is off your trade will
not make the expected profit.
Leonard:
What the hitter thinks doesn't matter. A great hitter
knows what the pitcher is thinking. If a hitter doesn't have a good idea what
the next pitch is he'll won't make it to first. Of course a good pitcher knows
that also but a pitcher has a slight advantage because he knows if he has a
slight blister, sore toe or hangover. The astute hitter picks up these clues.
That increases his probabilities because he knows which pitch the pitcher will
have a difficult time delivering. I need to judge the mood of the market since
some days it might have a hangover from foreign markets, suffer data feed
slowdowns, have extra cash pumped in from paychecks (bonuses were skimpy last
December), etc. By knowing which pitch the market can't deliver, my chances of
getting a hit increase.
Peter R. Gardiner:
Enjoyed the Science of Hitting" column
very much. There is another point in the book I found very interesting on
looking for the pitch with which you have trouble. Pp. 31: "If you are
having a problem with a particular pitch, say a slider, a way to solve it is to
always anticipate a slider. The last twelve years of my career I looked for a
slider almost every pitch because I felt I could do that and still take care of
the other pitches." The application here is in dealing with your own weakness(es). For example, I tend to get chopped up trading in go nowhere
environments, when there is too little emotion to reverse or too fews clues
about anything else to justify doing anything. Trading - often frequently - on
those days leaves me exhausted, frustrated, angry, and poorer. But to approach
each day as if it will be this kind, allows me to keep my expectations in check
and to wait for the high fast ball to show itself. When "framing" the
day in this way, the signal jumps out from the noise - when it comes - and I
have more of a chance of avoiding the thousand slash death day, at the same time
feeling by looking for it, I have actually accomplished something in avoidance.
When I do it, it makes me feel good. (I wish I did it more.)
Dr Suresh:
Excellent article. The 11 rules are not only good for
baseball hitters and stock market makers but for all gamblers. Basically aren't
we all gamblers trying to make money the easy way. I am writing from India and
follow your articles. Keep it up.