There are three types of investors: momentum, valuation and noise. Momentum investors care about trend, valuation investors care about fundamentals and noise investors care about a random assortment of stuff. Many of us are noise investors, even though we wont realise it. Of course, investment approaches do not all neatly fit into such discrete categories.…
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Economists love to tell each other stories about perverse incentives. The “cobra effect” is a favourite. It describes an attempt by the British Raj to rid Delhi of its cobras by paying a bounty for each cobra skin, thus encouraging a thriving cobra-farming industry. The cobra story is probably an urban myth — or a…
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The Holy Grail of trading—the idea that an ideal system exists which delivers consistent results without risk—is a seductive but dangerous illusion. In reality, all trading strategies involve trade-offs between risk, reward, and probability.
In trading, a prevalent cognitive bias known as the arrival fallacy often distorts motivation and impairs ability. Coined by psychologist Tal Ben-Shahar, the arrival fallacy describes the flawed assumption that achieving a specific goal—such as reaching a monetary milestone, becoming a full-time trader, or hitting a percentage return target—will deliver long-term contentment. In reality, the…
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In markets, it’s not just the move—it’s the surprise. Last night, the copper market delivered a textbook case of expectation mismatch. After weeks of pricing in broad-based tariffs on refined copper, the Trump administration announced that semi-finished goods like wires and pipes would face 50% tariffs. Refined copper, scrap, and cathodes were exempted. The Aftermath:…
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Very is the simple answer. Jessie Livermore’s trading career remains one of the most legendary — and cautionary — tales in trading history. To get a sense of his achievement, I have taken a table (which you can click on) that has been floating around the internet and tidied it up by removing multiple entries…
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If I am asked why traders fail, the answer often shocks people. They fail because they want to. Consciously, traders often demonstrate all the outward signs of wanting to be profitable; they go through the motions of designing a robust system, learning about risk management, and even pay lip service to the importance of psychology.…
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The title of this piece is derived from an article in the AFR, which examines what I consider to be a somewhat baffling decision by a reasonably sized local fund to continue shorting CBA despite its strong price growth. The decision by Sage Capital to continue shorting Commonwealth Bank (CBA), despite a +36% rally and…
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In the world of trading, complexity is often mistaken for sophistication. Charts littered with oscillators, trend lines, moving averages, Fibonacci retracements, and exotic indicators can give the illusion of control. But beneath that clutter lies a painful truth: no indicator can tell you what will happen next. They tell you what has already happened—filtered, lagged,…
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