SCOTT WELSH TRADING BLOG

Trying To Beat Wall Street Goliaths

Trying To Beat Wall Street Goliaths

Nov. 6, 2019

Let’s say we like the idea of a simple strategy.

As regular retail traders, we don’t have any of the advantages that Wall Street has.

We don’t have expensive computers or PhD analysts or flawless, speed-of-light execution.

And we never will.

We can’t win!

Well, that’s not exactly true.

For one, every trader is afflicted with a disease for which there is no cure: our own fear and greed.

That means Wall Street, too.

Furthermore, as Jason Zweig says, “Investing isn’t about beating others at their game. It’s about controlling yourself at your own game.”

The advantage we have is that everyone is at a disadvantage.

If we can keep from screwing up (being emotional or making big mistakes), we can beat others who have more than us.

How do we do that?

We keep it simple.

Simple keeps us from worry and keeps us from chasing temporary anomalies that eventually don’t work anymore.

We can have conviction in our robust system and stay the course. That can win it for us.

There’s just one tiny little problem: simple systems lose.

Casinos have simple systems. They rig the game in their favor and let the percentages play out.

In the long run, they literally can’t lose.

And guess what? They lose!

They can have bad months or bad losing streaks. They can have a whale saunter into town and walk away with millions.

Casinos have an infallible system and yet it still does poorly at times.

Like I said, simple loses.

Well, couldn’t we fix that? Couldn’t we add a filter here, a special rule there, and cut our drawdown/losing down?

Yes. But then it’s not a simple system anymore. Now it may not be robust. Now we may have just opened ourselves up to even more losing, or, worse, losing it all.

If we believe in simple, then making simple complex is not the answer.

So where does that leave us?

Do we just have to take it? Do we just have to steel ourselves for the losing and try to survive?

We could do that. We’d still end up okay (probably).

But we have another weapon at our disposal.

We could add a few friends to the mix.

To make simple more formidable, we could use the oldest trick in the book:

Diversification.

In our next emails, we’ll show details on how to make a simple portfolio with simple strategies.

We’ll try to have our simple cake and beat Wall Street too.

Talk to you soon.

 

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Disclaimer:
It should not be assumed that the methods, techniques, or indicators presented in these products will be profitable or that they will not result in losses. Past results are not necessarily indicative of future results. Examples presented on these sites are for educational purposes only. These set-ups are not solicitations of any order to buy or sell. The authors, the publisher, and all affiliates assume no responsibility for your trading results. There is a high degree of risk in trading.

HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER- OR OVER-COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.