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Are trading/investing/management books as effective today as they were back in time ?
Hi,
first of all Congratulations to @Big Mike and the team on 10th anniversary of this forum. second, I'm new, so I don't know what category this question should go in hence I'm just putting it in "Traders' hideout"
Okay, So I was reading "Market Wizards" by Jack Schwager and at some point in the book, I read something that implied that the trend following doesn't yield as much results in today's market as it did back in time(I think it was Michael Marcus' interview). I'm not sure when those interviews were conducted and I'm also not sure what time Michael Marcus was speaking about. But, It brings me to a question I don't seem to figure out on my own since I'm just a beginner. What do you think of the efficiency of the general material presented in books about trading fare in today's market compared to it's efficiency in the market back in time. For example, do you think that trend following is as effective a strategy/system as it used to be ?
When I say, "back in time" I don't mean some fixed point in time, more precisely I meant prior to 10-15 years or so. Just to be clear, I'm referring to books those were preferably written back in time. Since there are very experienced traders/investors participating in this forum, I thought I might ask it here.
Keep in mind the Market Wizard books are from the early 90s. When they say something use to trend they mean in the early 80s on back.
I have heard Jim Simons say something along the same lines that commodities use to trend more but he is referring to the early 80s too.
I wouldn't doubt things were different before people were widely using computers and there was no electronic trading.
People tend to always say trading use to be easier though. There is just so much resources though today for a new trader but there is also so much garbage to sift through too.
I think it is also interesting to look up what the Market Wizards are doing now. Tudor Jones is a master pit trader in the book but Tudor Investments today has a very large venture capital part of their business. He evolved with the times.
Steve Cohen is basically a fraud who was good at getting inside information and is no longer able to take outside money.
I would suggest reading "One Good Trade" by Mike Bellafiore. At the end of the book, he summarizes how he changed his methods during different years. I think this is what it means when the market changes and he emphasized that this is the trader's life, to find what works at the present. I think that those books were written based on the strategy that worked in the market acting at that time.
You could almost make a markets degree with how much stuff there is.
Aswath Damodaran's youtube channel and classes will give you the tools to value any financial asset.
I took Robert Shiller's finance class online that was fantastic.
Then the whole field of data science..The website fast.ai will teach you machine learning for free.
Udemy has classes on whatever you want for 10 dollars.
Book wise I think Marcos Lopez de Prado's book will be seen in time as the greatest trading book ever.
IMO you just have to stay clear of "get rich reading the tape at home with no effort" type material.
Well, reading a lot of different things is generally a good idea, mainly just to get a little context and to understand some of the things that people talk about, but generally books can be a little dangerous. Why? Aside from the obvious (the author may be selling something, or may not know what he's talking about, or the advice may be too old, or, in the case of interview books, you really don't know much about the traders and how they are doing now), there's the fact that taking other people's advice and opinions as if they were factual can be very harmful, even if they know what they are talking about -- if for no other reason than that good advice is not necessarily always going to be good or stay good. Times do change. (Plus, you do need to do your own thinking. )
For instance, as to the "trend following" question, here is a monthly chart of the S&P 500 futures (ES futures) for more than 20 years (from 9/11/1997, as far back as my data goes.)
(Note: since the futures expire, this is a "continuous contract, backadjusted," which simply means it was pasted together from many actual contract dates and the value scale was adjusted to make them fit together.... It's a reasonable proxy for the market and was easy for me to pull up):
Pretty trending, right? Except when it wasn't. Like every other idea, trend following works when it does, and doesn't when it doesn't, but that's not a good thing to put in a book, even if true. It is also true that some of these times trend following would have been profitable, and at other times you would have given it back. (Visually it is possible to fool yourself that the choppy, horizontal range periods are not that important. Suppose you were using something like a moving average to tell you when to trade.... You can see how often you would have given back as price moved back and forth across your MA, whipsawing you each time.) Still, there was some good money to be made some of the times.... but remember this is a monthly chart. Would you have held during the last year and a half while it bounced up and down? And are you confident about what is next? When would you change your mind, and why? Not a simple question.)
I will tell you flatly that if you looked at another chart of any time period you wanted to, you would see the same thing.
So here's yesterday's 1-minute chart of ES, which I just picked randomly:
It's trendy too, except when it isn't.
There is a moral here: yes, read what others have to say, but not too much, and don't take it as necessarily gospel, and do look for yourself.
You can find out what some real traders are doing by reading some of the journals here on FIO -- but, of course, (a) they are pretty much all going to be doing different things, and (b) most will be aspiring traders trying to work out their own way to do it, not usually pros who are profitable consistently -- although some are. Anyway, you will at least get some different perspectives. Just don't jump into every idea or method you see. Try stuff out.
The thing is, you'll really have to do it yourself, even if others can be of help. This applies to any books, good or bad, and to most of what's on the internet, and certainly to what anybody tells you. Myself included.
Since the 90s the speed of the market has changed. What use to take days now takes hours or minutes.
When the market speeds up, the rate of volume change is lost. Corners are sharper, and the market adjusts overnight. To use strategy from the 90's we would need to account for these changes.
When books, courses, etc. are from seasoned floor traders or lifelong students of the market then the content has merit. Those use to come from reputation. Word of mouth.
How many books and other resources do we now have from unknown authors? With the internet anyone can look like a pro. How can we know if the author's reputation is fabricated?
)
Try stuff out.