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.

 

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The Chairman
Victor Niederhoffer

09/25/2004
Signal, Shoulder, Mirror

This three-word mnemonic is what Drivers’ Ed teaches kids to do before they turn. It prevents them from terrible calamity, it’s fast enough to accomplish in 100 feet, and it's easy to remember. I believe that before every trade it's worth at least a second with a three-worder to preclude financial calamity. The one I came up with is, “Day, Exit, Crarahemruckr." *   

“Day” is, "What did it do the last hour and the corresponding day? In other words, should I wait a bit?”    

 “Exit” is, "How are you going to get out of this, especially if it doesn’t do exactly what you think?

 “Crarahemruckr” is, “What are those who are too smart by half thinking about this trade right now? Better not to follow them.”

Hopefully this three-worder will help keep you safe.

*amalgam of the names of certain very smart market practitioners

9/27/04
Brian Haag Adds:

Along these lines, I use my mechanical systems as indicators. If I have a well-specified system that is historically profitable 60% of the time (the upper limit of plausibility in my opinion), and a signal does not work, I've got small information. If it doesn't work and loses badly, I've got MORE information. Etc. This is one of the wonders of a systematic, quantitative approach. You know when a market is acting "right", and when it's not. It's also why claims along the lines of "95% ACCURATE!" are ludicrous, even if well-intentioned.