Stock Market - What is the nature of this beast?
Stock Market is one of those Complex adaptive systems
Complex adaptive systems are special cases of complex systems. They are complex in that they are diverse and made up of multiple interconnected elements and adaptive in that they have the capacity to change and learn from experience. Simply, it means the Stock Market has a mind of its own.
Stock picking is part science, part art, part luck, part intuition, and always uncertain - "not precisely knowing." (Who say it? Forgotten)
I will discuss the meaning:
Is stock picking an art or a science?
If stock picking is purely a science, then you are better off putting your money into SG bonds. Everything can be done through program trading. Microsoft will stop developing Operating System software and put all its resources to build the world most intelligent, most powerful, fastest trading system, and winning tons and tons of money from forex, commodities, and stocks. However, to be successful, to have that edge, not only you do need the science of stock picking, but you also need to develop the mental edge and the art of stock picking, which hardly any computerised trading systems can consistently do that.
The art of stock picking is the reason that one person can make money with a given system and another person cannot. It is implementing your own strategies, your trading system or methodology to suit your purpose, your risks, your account size, your personality and your time frame. Otherwise, why would great chartists and analysts still working as paid employees by selling reports and give advices?
If stock picking was purely a science, then Isaac Newton could not have lost a fortune during his time.
Do you ever wonder why great Gurus after developing successful Trading System, and in their later years do little trading (showcase??), but switch to teaching, providing market/stocks views and commentaries for a fee instead of quietly and faithfully using their Trading System to make tons of money for themselves and reserve their Trading System for their family members and their future generations.
No, it is not purely science of stock picking, but the art of convincing people that there is a sure way to make money from their trading system. The Gurus know the truth is that there is a risk free and fail-safe way to make even more money for themselves by selling Magic Stones to believers and worshippers.
What is intuition?
Intuition is the apparent ability to acquire knowledge without inference or the use of reason. “The word ‘intuition’ comes from the Latin word 'intueri', which is often roughly translated as meaning ‘to look inside’ or ‘to contemplate’." Intuition provides us with beliefs that we cannot necessarily justify.
When you develop your feel and intuition for the markets, you build your confidence. By doing that, you trust yourself more and you do not feel the urge to follow others including the gurus and naysayers. You are comfortable with your own conclusion even if it goes against the norm and even against the charts and analyst reports. You feel comfortable with the outcome even if it is unfavourable.
Knowing the difference between intuition and emotions is something that will come with experience. If you are making a trading decision and you find that your heart is beating fast or you have regretted after making the decision when the events turn unfavourable, you are probably making an emotional rather than an intuitive decision.
It is luck that you bought when someone happened to be there desperately selling to you and sold when someone eagerly wanting to buy. It is luck or bad luck that the stock suddenly caught your attention out of thousand of them out there.
Remember, stock market is an complex adaptive system and it is always uncertain and not precisely knowing when exactly the market will turn.
If market is certain and precisely knowing, then there will be no traders as nobody can really make money from the market, and there is no reason to trade!
This Simbol(Yin-Yang) represents the ancient Chinese understanding of how things work. The outer circle represents "everything", while the black and white shapes within the circle represent the interaction of two energies, called "yin" (black) and "yang" (white), which cause everything to happen. They are not completely black or white, just as things in life are not completely black or white, and they cannot exist without each other.
The energy, "yin" (black) is what was discussed: the outcome of stock picking is always uncertain and not precisely knowing.
So we need to balance up with the other energy, the "yang" (white).
Coming next ...
Where is the kopi-O ah?
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