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Experimental Trader

 
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  • Fortune's Formula: The Untold Story Of The Scientific Betting System That Beat The Casinos And Wall Street [View article]
    Shannon was actually a very good investor. He never invested other people's money, but the percentage in return of his personal account was at par with Warren Buffett's. And so was Ed Thorp, who ran hedge funds for many years.

    One other thing I want to point out is that the Kelly formula alone does not create the "edge"; it is basically an optimization solution if you have an edge. If you don't have an edge, the Kelly formula won't help.
    Feb 3 11:58 PM | 5 Likes Like |Link to Comment
  • The Day I Sold Everything: Questions Answered [View article]
    SM:

    I was contemplating for quite a while whether leaving a comment on this post. But, I am going to do it anyway, from a very different perspective among the commenters who have shed much of their investment insight.

    First of all, let me say that I am not a long term investor, I am a trader. More precisely, I am a swing trader. I am sure as soon as I said this, I will be met with eyes of disgust. But, guess what, this does not bother me. Frankly, the more the long term investors think traders are voodoo masters, the easier for us to make money.

    I believe you had sold everything. I applaud your decision, but suggest a different action.

    What you have experienced is a typical phenomenon of over-trading. Your portfolio carries too high of the risk that make you very uncomfortable. You made an excellent decision to reduce your risk. Do I (or you) know if the market will go up or down in the next day, next month, next quarter? No, but that does not matter. You sold because you cannot bear the risk.

    This is where, IMO, you are "smarter" than other long term investors. The others hold on, and try to numb themselves with theories of diversification or dividend investment, and sometime they lucked out, sometime they didn't. And when they didn't, the outcome is usually too painful to bear. I congratulate you for avoiding it.

    On the other hand, I think selling everything takes you from one end of spectrum to the complete other end. Your action is saying you believe there is absolute no chance the market will move up from this point on. I don't think this is your opinion. Your action is more a panic reaction than a calculated adjustment. I beg you to think: Do you really need to sell everything? If not, what is the percentage you should hold? Only you can come up this answer if you examine it hard and deep, but I guarantee that it is not 0%.

    Good luck with your investing.


    Jul 27 11:43 PM | 3 Likes Like |Link to Comment
  • Confirmation Bias, Your Investments, And The Seeking Alpha Counterpunch [View article]
    If you are fully invested, where do you get money to buy in a bear market? Your dividend is approximately 4%.

    I don't think I can change many DGI investors' mind. But, I merely point out you probably left some money on the table.
    Feb 11 11:41 PM | 3 Likes Like |Link to Comment
  • Fortune's Formula: The Untold Story Of The Scientific Betting System That Beat The Casinos And Wall Street [View article]
    Not really. One could figure it out if you keep a good and honest trading record of your strategy. For example, if I have a method that I think it has an edge, I will trade the same setup numerous times (>100 at least), at the end I will have good b, p and q estimates. Applying Kelly becomes very relevant.
    Feb 4 12:08 AM | 3 Likes Like |Link to Comment
  • Netflix Remains The Best Short On The Board [View article]
    I am neither long or short NFLX. The difficulty I see here is the lack of edge or catalyst. Short or long, you gamble either way.
    Mar 16 02:32 PM | 2 Likes Like |Link to Comment
  • 'Sell In May And Go Away' Might Come Early This Year [View article]
    I stick with "sell in May". Still one more month to go with the bull run. No hurry to exit. Stay LONG.
    Mar 12 06:47 PM | 2 Likes Like |Link to Comment
  • Confirmation Bias, Your Investments, And The Seeking Alpha Counterpunch [View article]
    Tom,

    I have been reading some of your articles and comments, and shared your thoughts that DGI is a viable investing method. You present a balanced tone in approaching DGI, which I think will serve you well.

    The biggest issue I see with DGI today is that most investors are fully invested. There is no strategy to cushion when the tide "sink" all the boats. DGI investors have a tendency to say that the price does not matter, as long as the dividend remains the same. It is going to be a lengthy and painful process to go through a bear market.
    Feb 11 10:20 PM | 2 Likes Like |Link to Comment
  • Fortune's Formula: The Untold Story Of The Scientific Betting System That Beat The Casinos And Wall Street [View article]
    Exellent article.

    The essence of the Kelly formula is to balance the potential for gain with the reserve for loss, which is very applicable to both active and passive investing methods. This is an essential tool for any investors.
    Feb 3 11:45 PM | 2 Likes Like |Link to Comment
  • All In: Texas Buy And Hold'em [View article]
    Totally agree with all you said, Artful, Go, and Pendragon.

    IMHO, most people lose money because they hold their hands too long, either holding the winning hand too long (and lost the opportunity premium), or the losing hand too long, or simply for the thrill of playing. I wrote down on my desk: if the expected odds is not to your favor, get out! You can always find another stock around the corner.
    Jan 29 09:54 PM | 2 Likes Like |Link to Comment
  • Explanations For The Low-Volatility Anomaly [View article]
    Jeff,

    A fine article pointing readers to where to seek alpha. I have one question, which is probably similar to what varan have just raised. My question is: It seems that there are quite bit overlapping (high correlation) in stock selection between low beta, dividend growth, low P/E, low P/S, etc. By picking low beta, are you really selecting the stocks with low P/E instead? It would be interesting to see the cross correlation analysis between different selection criteria.
    Jan 20 04:18 PM | 2 Likes Like |Link to Comment
  • Dividend Investing: To Diversify Or Not To Diversify [View article]
    IMHO, I think there are two levels of diversification. First, you will need to diversify on your strategy. Don't bet everything on one strategy, because no strategy can give you 100% certainty. If you have two strategies that are not correlated, God bless you, you are a genius investor. If you have only one (for example, Dividend Growth strategy), keep the rest in cash because cash has zero correlation with any asset.

    Once you figure out that, you can further diversify within the strategy. Now you can choose somewhere between 10-20 stocks that within that strategy, and you will be adequately diversified.
    Jan 16 06:25 PM | 2 Likes Like |Link to Comment
  • Building A Simple Trading System To Diversify Your Portfolio: Part 1 [View article]
    Maik,

    Thanks for writing up a detailed explanation and performance metrics for your system. Very helpful.

    The "trick", however, is that the cost of trading commission and slippage is omitted. By estimate, those two add to approximately 0.3%, which will render your system not-profitable.
    Mar 18 04:22 PM | 1 Like Like |Link to Comment
  • A Portfolio For A Young, Aggressive Investor [View article]
    Chris,

    This may not directly toward you specifically but for all young investors.

    Your first priority is to "invest in yourself". That does not mean you have to play in the stock market. Investing requires a lot of time. If at this stage of your life, your time commitment of developing a career is competing with investing, please develop your career first. Passive indexing is the best way to go.

    If you are passionate about investing and willing to commit time, and you have a talent with numbers, you investment goal is to SYSTEMATICALLY make every investment mistakes ever possible. If you can learn from all the mistakes in the next ten years, you still have thirty more years to go and you will be very rich at the end.
    Mar 10 11:52 PM | 1 Like Like |Link to Comment
  • A Major Shift In The Market Just Happened. Did You Catch It? [View article]
    This is a good observation, but there are maybe more to it.

    Usually, vol reduction precedes price recovery. You could wait until vol get below 50 before committing to the investment. This way, you may miss a short initial reversal, but capture most of the long leg with a safer entry point.
    Mar 9 03:39 PM | 1 Like Like |Link to Comment
  • Confirmation Bias, Your Investments, And The Seeking Alpha Counterpunch [View article]
    Yes, totally agree. This was the exact point I try to make.

    As for how much cash allocation is needed, it depends on how good DGI win/loss characteristics is. My preference is a bit higher than 10%, but 10% is definitely far superior than 0.
    Feb 12 12:09 AM | 1 Like Like |Link to Comment
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