About Trading
UEA has studied and practiced multiple theories of stock trading and finds some sort of work, most sort of don’t and all of them are an unlikely way to make a living unless two things are true: 1) the trader has an awful lot of time to read, study, analyze and decide what trades to execute when, and 2) they’re trading with a lot of money, usually belonging to someone else. Having a strong predilection to keeping food on the table and roofs over our heads, UEA has arrived at several conclusions about trading:
- Some trading strategies can work, particularly the ones that rely on market psychology such as momentum trading. Markets do not work, in the short term, by any rational, sensible, sane or manageable manner, they work on psychology. If a trader can find a stock or combination of stocks which perform reasonably predictably because of some discernable psychology, a profit can be made until the psychology shifts (which it will).
- Most (almost all) trading strategies are bunk.
- Technical Analysis is wonderful in hindsight and useless as a predictor.
- Most (if not all) books on trading strategies, technical analysis or any other market predicting element either prove that trading strategies are bunk or are designed to fool you into giving your money to the author instead of your broker.
We do not deny there are many people, playing with their own money, who claim to earn very handsome livings as stock traders. Most of them we meet while they're waiting on our tables in restaurants, behind the wheels of their taxicabs, or while they’re panhandling a meal on the street corner. We don’t recall meeting one yet on a yacht or getting out of his or her own Bentley.
For the many (we’re sure millions) of others who really do make a living on their short term stock trades, we applaud and encourage them. Their trades keep the market alive, volatile and interesting not to mention inflating the bottom line of whatever broker or service they use. In the meantime, if any of them choose, they can contact us with verifiable results of their trading and let us feature them in a very profitable book (keeping their technique a secret, of course) that will make them very rich heroes for the rest of us to admire.
Until one of those successful ones show up, we will keep plugging away, investing for the long term, buying good stocks cheap and selling good stocks at a profit just like Benjamin Graham, Peter Lynch, William Bernstein, John Bogle, and Andrew Tobias taught us to do.