QUESTION: Have you ever been wrong?
ANSWER: Since I am human, the obvious answer must be YES! I have stood up and explained at conferences how I made a bunch of money when I was 13 in the metals/coin market. My father thought I was too much of a speculator and told me I should be more conservative and invest in mutual funds. I listened to my father, bought Fidelity Trend at just about the top in 1966, and watched it crash. I turned to my father and asked, “Is this the way conservative people make their money?”
Being WRONG inspired me to figure out what I did wrong. That is what interested me, for there were several crash events in short order: 1966, 1970, 1973, and then 1980. Much of what I write about comes from the experience of being wrong. If we do not learn from our mistakes, we are foolish.
The purpose of developing the computer to do this is a recognition that NOBODY can trade based upon their “interpretation” of anything for they will interpret what they want to see. That is just the way it is. Socrates is in test mode. We are not finished porting everything over. It tends to catch the major trends because everything is functioning in a coordinated manner. When there is noise that something will rally, it fakes out some traders. That is what the markets do. If you get caught up in such swings, you are trading on an emotional basis and that should be a warning.
This is why portfolio management is better than short-term. The more you trade, typically, the lower the profit. That is akin to someone who tries to prevent a loss and in the process creates losses because they do not trade in the proper size to cope with the risk.
There are a lot of tricks to the trade. All come only from experience. Fund management is the classic trap. Someone can make, say 20% with $1 million and lose with $10 million. Why? The more money the harder it is to get in and out. Look at the big hedge funds. The bigger they are, the lower the return in recent years.