Wednesday, July 21, 2004

Financial market truisms

On average, the following are true (corrolory in italics):

Stock prices move up and down for all the wrong reasons.
You can't anticipate the reason why a stock price will move next.

With currencies, all you know is what just happened.
You can't predict the direction in which a currency will move next.

Bonds and stocks are being traded by the same dumb people.
All traders are not as smart as they should be.

Tomorrow's news is today's news.
Don't trade on news you read in the printed press.

Taking risk is inevitable.
Don't expect to see your initial investment again.

Time is the hardest thing to buy.
Use all of the time you have to your advantage.

The only information that matters is private.
Don't trade on something you read about in the public domain.

Always confirm what your instincts tell you, never trust them.
Think, then act!

Read all the news, even the made-up stuff.
Be aware of what everyone else knows.

Don't do the same thing you did yesterday.
Avoid making systematic errors.

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