Poker:
Holds and Folds. An Old Spec writes to his son.
It's all about ability, attitude, and fortitude.
In poker terms your professor was forcing the weak hands to fold. He hit
the students with a hard problem right after the test results came back and
told them to expect more of the same. His action forced their hands (forced
their conviction in their own abilities).
The Strong Hold
I did well, but it could have been better. I made mistakes. I need to
correct those mistakes.
Awakened Hold
I didn't study. I made a mistake. Now I really have to focus on this class.
This test was a wake-up call. I can do it. I'll study that much harder. I
will stick it out.
Hubris Hold
I didn't study because I am so smart I don't have to study. What kind of
irrelevant problems did the professor put on that test? Nothing that was
important as far as I am concerned. But I'm staying just to show him.
The Weak Hold
What a disaster this test was. But I absolutely must pass this class. I have
to get my GPA back. I don't know how, but I will hang on and hope.
The Strong Fold
This is difficult for me right now. I need to study more. I'll quit, take a
refresher and come back when I'm stronger. You win for now. I'll be back.
Hubris Fold
I didn't study because I am so smart I don't have to study. What kind of
irrelevant problems did the professor put on that test? Nothing that was
important as far as I am concerned. I'm outta here.
The Scared Fold
This is beyond my abilities. I better find a new major and fast.
The Weak Fold
I'll never get this. Besides Animal House is on and it's Miller Time. I
quit.
Relative to stocks, the Weak Hold is usually followed by the Scared Fold.
This combination can empty your wallet quickly.
Dad
By Nigel Davies
Grandmaster
Southport, UK
One of the most humbling experiences in chess is to study your
own games. Recently I started doing this with a computer analysis
module switched on the background to pick up additional errors.
The results are, let's say ... sobering. You might be feeling very
pleased with yourself and think you played well, but you discover
flaws in your reasoning an analysis from beginning to end.
Assumptions are made and moves overlooked by both players. The
games may contain a poetic storyline but the overwhelming
impression is one of error.
Now chess is a just a game in which the moves are clear, we have
a limited set of moves, a limited sphere of conflict and a limited set
of outcomes. If our human reasoning is flawed there it makes me
wonder just how bad it is in situations in which very little can be
measured and we have no limits with either our moves, sphere of
conflict or outcomes...
Just how far from 'the truth' can we wander in such cases? Using
the chessboard as a 'sample', my guess is that it's a very, very
long way. But the problem with many things is that it's very difficult
to establish a benchmark for reality and therefore find the mistake.
And it seems to me that the mistakes might easily get repeated
and compounded as people develop their beliefs....
By Bonnie Lo, trader
The seven elements of art are Line, Colour, Form, Shape, Texture, Value and Space.
Elements are those things that have some sort of measurability and are
always the basis for a great work. These must be met to achieve a base
level of a pleasing effect (do not suggest and get me started on a certain
genre of modern art that is actually garbage - dead animals? I mean come
on.)
Line: The chart and prices, I also think of a line as being able to take out
noise.
Colour: The mood of the market, sentiment. But more defined than in
Contrast, listed below. Reflection or absorption of light and waves,
therefore reflection of prices and orders.
Form: Bull or bear, up or down?
Shape: For the quants out there, the shape of the residuals, distributions,
skewness or tails?
Texture: So many ways to interpret this, but I think of it as the little
bumps and dips along the way for individual securities or industry
movements, the flavour and environment of a security.
Value: Well, obviously fundamentals come to mind, although the creative
meaning is the brightness or dullness of a color - perhaps the strength or
weakness of an underlying value or input.
Space: Now I imagine this as the liquidity and volatility of the market, the
negative image versus positive image.
My problem is that I keep thinking too much of the principles of design:
balance, contrast, proportion, pattern, rhythm, emphasis, unity, and variety.
Principles, much like theory. These concepts were more difficult for some
students to use in art, especially when asked to differ between Pattern,
Rhythm and Unity.
Balance: No, not there, how does one determine that there is the correct
balance in the market?
Contrast: Maybe only in the sentiment again, the sells and buys or bid-ask.
Proportion: While the Golden Rule applies to art and architecture, it's a
difficult fit for the market. I've tried drawing using Fibonacci and fractal
patterns too. Pretty on paper. I'm willing to stretch that out to guess it
wouldn't be pretty for trading or for the portfolio either.
Pattern: I could draw zigzags all over the page and maybe someday I will
match what I have on page with what's going one, but it'll be too late by
the time I figure it out.
Rhythm: The sound of the market, the hum and noise and the swish of the last
hour, last half-hour of trading as the drum beat intensifies to culminate in
the ring of the gong. I feel as if I'm on a 4/4 pattern in a 5/4 market beat
lately. A little off, drawing the lines too closely.
Emphasis: Where do I seek strength, or weakness? Where are the lemmings and
what are they concentrating on?
Unity: My art teacher got frustrated defining this one. We were given a
project to define the difference between this and pattern. No, no, no she
said, your objects are in a pattern, I'm not looking for a pattern but a
unifying factor.
Variety: I am thinking of shifting trading styles; the definition I have is
that the variety of a artwork comes from placing a different subject or
focus in the painting that accents, creating a certain style. Must find the
perfect accent, offset, the anomaly in the whole work that is so part of the
piece.
By Jack Tierney, Chairman of the Old Speculators’ Association
If Aubrey's anticipated battle is taking place far out to sea (where wind and
weather conditions can remain constant for extended periods), maintaining the
weather gage is largely determined by crew work and the relative manuverability
of the competing ships.
Closer to shore, where many sea battles did take place, maintaining the weather
gage involves a little more than factoring in the tide. A few other things
things Aubrey had to consider:
Off Shore Wind - As the wind leaves the shore it increases in strength and veers
(goes the same direction as the sun). This gentle bend to the right can extend
for some distance but becomes more less noticable further off shore. Inshore
ship now has weather gage. (Not the commonest of occurrences, might be viewed as
a counter-trend.)
On Shore Wind - No directional change in wind near the shoreline. Generally very
little change in velocity of direction further out. Outer ship maintains
advantage but gains little. (Trend remains in place.)
Gusts - Surface air heats up and rises, often forming cumulus clouds as it does.
It is replaced by cold air being dragged down, bringing the stronger winds from
above. Water gets darker due to rippling caused by wind (in very light wind,
ripples are replaced by "cats' paws"). Gusts occur between the clouds. Head for
ripples and cat's paws, stay away from clouds. Advantage to luckiest ship. (Only
the pros can play this with any hope of success.)
Rain Clouds - Usually darker than cumulus clouds. If rain is falling under a
cloud, then air is being cooled. That air will be falling and the wind will be
stronger. Head for dark raining clouds. Advantage to weather ship if clouds hit
it first, to other ship if not. Luck again. (A major event; time to either throw
up all your sails and run like hell with the wind, or time to batten down the
hatches.)
Cloud base lowering to windward - Major concern for ship with weather gage as it
has to prepare first for onset of storm. Front is approaching and winds increase
as it gets closer and is marked by heavy rain. Head into storm on port tack as
the wind will have backed (gone to left) with the approach of the rain. As the
cloud base rises behind the deluge, tack onto starboard because the wind will
veer by as much as 900! Ship closest to shore has time to run while weather ship
makes these moves, BUT must get clear enough of land so as not to be driven onto
lee shore. (An outside reversal with a major trend shift that may or may not
hold...none but the brave can afford the fare.)
Thunder storms, marked by anvil shaped clouds - Air is forced upwards at an
enormous rate. It is heated rapidly and surges back down, hits the water and
fans out in very strong gusts. Frequently includes hailstones. Advantage to
luckiest boat. (A fat tail; few get out without some damage.)
Sea breezes - Generally occur in morning when the air temperature over the land
is higher than the air temperature over the sea. Heated air over the land rises
and is replaced by colder sea air. In turn the risen heated air flows out to sea
and, as it cools, falls to take the place of the air moving towards the shore.
Sky is generally cloudless at sea but cumulus clouds are in abundance over land.
Sea breeze veers gradually, and can have shifted by over 400 by mid-afternoon.
Dies away during the evening as land cools off. Slight advantage to ship closest
to shore. (usually good days to ignore market and do laundry.)
Note: All characteristics attributed to veering and backing assume action is
taking place in northern hemisphere.
Jt
By Leonard Kreicas
Sometimes a fly goes straight out a window, but usually it follows an almost
Brownian path. It flies in three dimensions, whereas ants
travel in two. Geese fly in a straight-path formation which
makes shooting one
down relatively easy if the hunter has the necessary skills.
If a stock, currency, commodity, etc. travel in one
dimension, i.e. trend, it's
very easy to make a profit as they continue their path. If
prices travel in two
dimensions then catching the price we want becomes trickier.
When they fly in
three dimensions then selling (buying) for a profit becomes
harder still.
If prices are evasive, how do we catch profits? The
"clap of death" says we use
a two-prong attack. Another approach is the set-up method of
waiting for a fly to
clean its wings. Another is slowly encircle it in a zen-like
motion. Another is
using a net (fly swatter) which has a large area. Another is
using fly paper
that (which is a different way of catching a fly). One trait
I gather from these
brilliant responses is not to try catching a fly in motion,
but wait until it's
at rest. Neither are all flies or markets the same, i.e.
some are slow and easy
to catch, while others nimble enough to survive for another
day (which for a fly
is a long time).
If markets are evasive then the more degrees of freedom they
have the harder
it's to get the price we want. In a straight line the future
price is easy to
predict. The more routes to escape the harder the assignment
is. But then it
shouldn't be difficult to out think the market's fly
mentality, should it?