Static versus dynamic, investing versus trading

In many of previous posts, I highlighted the necessity of asymmetric trading ie. a reward/ risk ratio that is as big as possible. Even in today’s very complicated markets, with millions of news per minutes, the random static trading model that I have shared is working beautifully. It is is static because it only based on an ‘observation’ period. The dynamic counterpart is about analyzing how a stock or index behave over an observation period with respect to a specific moving average, here we enter the realm of Laplacian distributions, too complicated to explain on a blog but the news is that I am progressing on my eBook writing and I plan to release it by end of the year! It will be extremely expensive but definitely worth it! Will prevent you being on the wrong side of markets!

Asymmetric investment is a totally different job. You don’t rely only on mathematics to make your decisions. You need to have a vision, anticipate what may happen, … Very few services are capable to do it! And you can see it through the performance of investments funds, most of them never beat index performance. Investing on index fund (what I call static) for next five ten years is probably the worst idea you may have these days. Economic crisis has barely started, though you already know for sure some good businesses that are now worth zero because they can not open to customers. So what should you do for long term? I can not help you too much here except recommend NoHypeInvest (click on picture!). I get no commission!

They share a lot of advice for free and if your portfolio is big enough, it is worth subscribing to their premium service. It is not for tender at heart, they are looking for 3 digits gains over a few years, even if they are true only 25% of the time. As explained earlier, this means you can have a long series of loosing trades, don’t blame them, you are warned! They are however capable to explain the key elements sustaining their reasoning.

Speaking of of vision, take a look at Chris’s forecasts for the coming years. Don’t say he is conspiracy theorist, and look at all laws being voted in your country and you will see he is right… unless we, folks, do something!

OK, man, but what are we doing? It is the same subject I called for you to think multiple times on this blog. Open your brains and don’t take every bit of news for granted. When you have a Facebook account, FB knows everything about you, even things you don’t know yet. Same for Google. They have started to decide what you can say, what you can not say, …. and they sell the data you have given for free for huge profits. So it is time to either leave or scramble their data and make it worthless: change you GPS positioning, address, name, encrypt data, … In Google database, I am weed and alcohol addict, looking at pink elephants in Sahara desert right now, which of courses gets me some hilarious advertisement!

Those looking for alternatives software or websites can look here for instance

That’s it. Until next time, trade safely!

Undistorting investing reality at the speed of light!

I am sure you are wondering what I am going to talk about with such a post title! But let me start by asking a question: Can you tell me what is speed of light with good accuracy? I will be back after this break:

Whatever answer you give me (ideally should be: 299792458 meters per second), what I did is just awake part of your brain that deals with math, physics, … or intelligence to summarize. It is very important for next question:

Why do you invest your money for?

  1. To save planet from crazy climate evolution
  2. To help companies being more socially responsible
  3. To make as much money as possible
  4. To help out spot aliens if case they come to vicinity of earth

See you can not lie any more to me or to yourself, the only possible answer is number 3. Your brain orders you to take that answer.

Now think about you last meeting with your banker (didn’t I write bankster?). You were surely told how we need to build a safer and green planet, how it is difficult to have profitable investments…

Had your banker started by asking you my initial question, the meeting would have much more complicated for him, you would most likely have told him “give me 10%, I know you can do it!”

Can he really do it? Not in straightforward manner but short answer is yes. The theory is simple. All the countries will need pay for the money they have printed for the pandemics, and the way they will do it is by applying deep negative rates to accounts, maybe down to -5% or -6%. Whaouh! <Add more interjections here!> It will go slowly for acceptance by people but it will happen. But wait, here we are discussing treasury bonds! When interest rates go down, the price of bonds goes up. When the rate is down by 1%, bonds prices go up by 6% or more!

See that one graph below (US treasuries bonds futures). While your bankster now charges you negative rate, he invested your money in treasury bond, yielding a cool 29% over the last 2 years, 9% for 2020 YTD. Ouch, that hurts!

Now go and see your banker, ask him to put treasury bonds in your portfolio (of course, consider there is some risk level involved here), keep as little cash as needed if you get negative rates. Enjoy the face that your banker will make! Especially if rates go down, deep down, very deep down, …

The same goes for trading. You are told to use indicators with preset parameters recommended usually by the guy who created it. I have explained many times the fraud that the Gaussian distribution is, it actually causes distortions of reality. Indicators are the same: they let you see the reality through a specific prism, and if they are not based on sound mathematical principles, they will mislead your investment decisions. The popular MACD falls into such category (I will let you look at the formula), though it might be efficient when used in specific market conditions but also with right parameters. See Ferrari below, MACD with default parameters is flat for most of the growth this year:

As mentioned many times, an investing or trading action must be linked to an ‘observation’ period. You want to earn x% over the next y months. The parameters should be set in such a way that you can follow your trade easily : entry point, target price, exit time. Say I want to capture most of the up trend over several months, I change the default parameters to 48 and 80. Look at MACD now, close to perfect!

It does not take too much intelligence to uncover a trading strategy that works. Just wake up your brain by wondering what is the speed of light!

That’s it! Until next time, trade safely!