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Tag: finance

“How we use mathematics to bring order to financial markets…”

Posted on by Michael Covel

Trend following insights:

Once you realised you are forecasting probability distribution conditional upon knowing something, then you can leave the technical analysis behind. You can then research conditional probability distribution on anything.

It is very advantageous to understand the level of uncertainty in the inferences you are making, and this is a fundamental mistake that human investors make.

Obviously, you can try and reduce that uncertainty by knowing more and more about the situation, like Warren Buffett. He reduces the uncertainty as much as he can by knowing as much as it is possible to know. That is a very different style to ours.

We have a much higher level of uncertainty than Warren Buffett when he makes an investment. But we have a much bigger and more dynamic portfolio. There are lots of ways to skin a cat, or lots of roads to Rome. My view is the success of our approach does not invalidate anybody else’s.

That is maybe not the only thing, but that is what I was: sufficiently desperate and needing to prove a point. Having these various motivations is what it takes to make you start a company–it does not just happen over a year and a half.

If you don’t know about this, dive in.

Source: Lawrence Gosling, Winton Capital’s Harding: How we use mathematics to bring order to financial markets. Investment Week, February 24, 2016. See http://www.investmentweek.co.uk/investment-week/interview/2447802/winton-capitals-harding-how-we-use-mathematics-to-bring-order-to-financial-markets.

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The High Priests of Finance

Posted on by Michael Covel

Courtesy of The Economist:

Finance even has its own high priests in the form of the analysts and fund managers who promise their clients heavenly rewards if only they listen to their advice. They preach regular sermons in the form of brokers’ notes and quarterly reports, and they house themselves in vast cathedral-like buildings that dominate the skyline. Each day also has its canonical hours as traders pray for profitable opportunities at the European, American and Asian market openings. Finance has its annual calendar, too, marked with festivals known as results seasons in which the lucky participants receive their temporal (rather than spiritual) dividends.

And like any self-respecting religion, finance has its doctrinal schisms as well. Active fund managers are a bit like the medieval Catholic church, offering eternal salvation to those willing to pay the appropriate sum, which are known in modern parlance as performance fees rather than indulgences. The active-investment sect has its elaborate rituals and language, with a liturgy (“information ratios” and “alpha generation”) as baffling to the layman as the Latin mass was to the medieval peasant. Clients are supposed to listen to their presentations in a reverential hush, trusting that all the mumbo-jumbo will deliver superior results. The passive fund managers, or index-trackers, are akin to early Lutherans. Investors have no need for priestly intermediaries between them and the market, say the index-trackers. All they require is the full text of those companies that are included in the benchmark.

Finance also has its equivalent of holy men, the gurus who pronounce on the market outlook. Not for nothing is Warren Buffett known as the “sage of Omaha”. The faithful conduct an annual pilgrimage to Nebraska every year to attend the annual meeting of his company, Berkshire Hathaway. His folksy demeanour would surely make him the ideal neighbourhood priest, bringing comfort through life’s ups and downs.

Nice.

How can you move forward immediately to Trend Following profits? My books and my Flagship Course and Systems are trusted options by clients in 70+ countries.

Also jump in:

• Trend Following Podcast Guests
• Frequently Asked Questions
• Performance
• Research
• Markets to Trade
• Crisis Times
• Trading Technology
• About Us

Trend Following is for beginners, students and pros in all countries. This is not day trading 5-minute bars, prediction or analyzing fundamentals–it’s Trend Following.