MarketLife Ep 5 - Trading, investing, and gambling: playing the odds and how to do it
This episode of MarketLife looks at trading, investing, and gambling, and how people try to put the odds in their favor.
Everything we do in financial markets is a bet. Hopefully an educated bet, hopefully a smart bet, but it’s all only a bet on the odds.
- We are going to be wrong sometimes, so it’s important to limit how much we lose when we are wrong.
- Don’t “bet the farm” or you will eventually lose the farm!
- We must have some way to put the odds in our favor, or there's no reason investing.
Four ways people try to put the odds in their favor:
- Fundamental
- Seeks to understand value
- Top down or bottom up
- Macro (or Global Macro)
- “Big picture fundamentals”
- Making investments based on forecasts of economic and geopolitical developments
- Technical
- Uses patterns in prices to predict future direction
- Traditional technical analysis is subjective and visual
- Many exotic cycles, waves, and methods, of varying usefulness.
- Quantitative
- Using mathematical tools to understand statistical tendencies in markets
- Can use price as an input, but also can incorporate other factors
- Is there a way to blend quantitative and technical (or fundamental) approaches?
Also, if you like the music for this podcast, then be sure to check out Brian Ashley Jones, my friend, and a fantastic singer-songwriter. He has a new CD out, Out of the City (or here, on iTunes) that you might enjoy!
Enjoy the show:
