Born in 1960, Nassim Nicholas Taleb is a Lebanese-American mathematical statistician, author, risk analyst, and options trader. His work focuses on problems of uncertainty, randomness, and probability. He created the risk-hedging technique 'Tail risk hedging' or 'Black swan protection' that aggregates portfolio exposure in order to hedge against extreme market volatility. According to the Sunday Times, his 2007 book 'The Black Swan' is one of the twelve most influential books since World War II.
NASSIM NICHOLAS TALEB TRADING TIPS
■ Knowledge is in dealing with what we do not know
Knowledge and discovery are not so much in dealing with what we know, as in dealing with what we do not know.
- We are trained to take advantage of the information that is lying in front of our eyes, ignoring the information that we do not see
■ What characterizes real speculators like Soros from the rest
What characterizes real speculators like Soros from the rest is that their activities are devoid of path dependence. They are totally free from their past actions. Every day is a clean slate.
- My lesson from Soros is to start every meeting at my trading boutique by convincing everyone that we are a bunch of idiots who know nothing and are mistake-prone but happen to be endowed with the rare privilege of knowing it.
- George Soros, when making a financial bet, keeps looking for instances that would prove his initial theory wrong.
Read more: Nassim Nicholas Taleb (Derivatives Trader & Author)
Born in 1945, Victor Sperandeo is an American commodity and derivatives trader, known as “Trader Vic”. Sperandeo traded, particularly in the energy and metals sectors. He is the CEO of Alpha Financial Technologies, LLC (AFT). It is said that until 1990, he had 18 profitable years in a row with an average return of 72%. Victor Sperandeo takes a trade only when the odds are in his favor. For example, he believes that a typical bullish swing on the Dow Jones Industrial is 20%. After the Dow has performed 20% the odds for further continuation are diminishing.
VICTOR SPERANDEO TRADING TIPS
■ Knowing the stage of the market matters the most
Trading the market without knowing what stage it is in is like selling life insurance to twenty-year-olds and eighty-year-olds at the same premium.
■ You have to know when the odds are in your favor
Gambling involves taking a risk when the odds are against you. For example, betting on a lottery or playing a slot machine are forms of gambling. I think successful trading, or poker playing for that matter, involves speculating rather than gambling. Successful speculation implies taking risks when the odds are in your favor. Just like in poker, where you have to know which hands to bet on, in trading, you have to know when the odds are in your favor.
■ The two-hundred-day moving average (200 MA)
In the stock market, the one indicator I give the greatest weight is the two-hundred-day moving average (200 MA).
Born 1959, Linda Bradford Raschke is an American trader, operating mostly as a futures trader. Linda started her trading career in 1981 making markets in options. Later, she became a registered CTA (Commodity Trading Advisor) and founded LBR Asset Management.
LINDA BRADFORD RASCHKE TRADING TIPS
■ The ability to perceive patterns in the market
I believe my most important skill is an ability to perceive patterns in the market. I think this aptitude for pattern recognition is probably related to my heavy involvement with music.
■ Be contrarian to the panic
Some of the best trades come when everyone gets very panicky. The crowd can often act very stupidly in the markets. You can picture price fluctuations around an equilibrium level as a rubber band being stretched... if it gets pulled too far, eventually it will snap back. As a short-term trader, I try to wait until the rubber band is stretched to its extreme point.
■ The accuracy of a prediction drops off dramatically, the more distant the forecast time
I believe that only short-term price swings can be predicted with any precision. The accuracy of a prediction drops off dramatically, the more distant the forecast time. I'm a strong believer in chaos theory.
Born in 1944, Peter Lynch is a legendary equity trader, author, and mutual fund manager. Between 1977 and 1990, he averaged a 29.2% annual return working for the Magellan Fund at Fidelity Investments.
PETER LYNCH TRADING TIPS
■ Discipline yourself to ignore your feelings. Stand by your position as long as the fundamental story hasn’t changed
The trick is not to learn to trust your gut feelings, but rather to discipline yourself to ignore them. Stand by your stocks as long as the fundamental story of the company hasn’t changed.
- There is always something to worry about. Avoid weekend thinking and ignore the latest dire predictions of the newscasters. Sell a stock because the company's fundamentals deteriorate, not because the sky is falling.
- Good information is useless without the willpower.
■ Be contrarian to the herd
Over the past three decades, the stock market has come to be dominated by a herd of professional investors. Contrary to popular belief, this makes it easier for the amateur investor. You can beat the market by ignoring the herd.
- Dumb money is only dumb when it listens to the smart money.
- Small investors tend to be pessimistic and optimistic at precisely the wrong times.
■ When to put your money in the bank
If you can't find any companies that you think are attractive, put your money in the bank until you discover some.
