Can someone explain?

This is a discussion on Can someone explain? within the Economic & Fundamental Analysis forums, part of the Methods category; Originally Posted by Martinghoul Right, first let me say that I strongly disapprove of shortcuts that you describe. For me ...

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Old Aug 15, 2011, 3:35am   #9
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Re: Can someone explain?

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Originally Posted by Martinghoul View Post
Right, first let me say that I strongly disapprove of shortcuts that you describe. For me the ONLY way to do anything is to understand it from the bottom up. You don't qualify to be a macro punter until you understand every detail of the thing you're punting. This is one of my most fundamental beliefs and I would discourage you from doing anything quick and dirty, in the strongest possible manner. I could properly wax poetic about this, which is one of my most important guiding principles. I have seen too many "legends" blow up on little things that they neglected to understand properly. The reason is that there's absolutely nothing in the mkts that follows pre-defined rules. Correlations change, liquidity rises and falls, models break down, etc. The only way you can navigate all this is with thorough understanding, which can only be obtained through hard work and experience (and you'll never achieve perfect understanding, as things in the mkt always evolve and change). So I would suggest you stop looking for shortcuts and work on all these confusing details and formulas, because only if you understand them will you be able to do the whole macro stuff.

All that said, my normal recommendations are these two:
"Fixed Income Securities" by Tuckman
"Understanding the Yield Curve" series of papers by Antti Ilmanen
Wow ok, so you know all the hundreds and thousands of formulas to do with everything you trade? And that helps with your trading? Interesting. I don't see how knowing these formulas is going to help me in making trades that last a few seconds to minutes. I barely understand all the nitty gritty details of a car, yet I understand the basics and trust my life in it. I know markets are always evolving and changing, correlations change, models break down, models based on formulas, I'm not trying to be a "macro punter", just trying to get a more traders perspective rather than an academic one from a book as I don't believe formulas will help me read the market on a very short term basis. I'd rather learn the nitty gritty of how people work and think, how traders think and what positions they're likely to take if X happens, not the formulas of what they're trading down to that much detail. Sure you need to know about what you're trading, but I don't see how knowing formulas of some miniscule detail is going to help my decisions, but you're much more experienced than me and you're obvioulsy right, so mabye I'm a fool. I'm not looking for a shortcut, just a different perspective to those in the books, because I highly doubt if those that wrote the books are actual traders. I'll keep reading and pushing.

Thanks for the book recommendations and answers to the questions, much appreciated
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Old Aug 15, 2011, 8:53am   #10
 
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Re: Can someone explain?

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Wow ok, so you know all the hundreds and thousands of formulas to do with everything you trade? And that helps with your trading? Interesting. I don't see how knowing these formulas is going to help me in making trades that last a few seconds to minutes. I barely understand all the nitty gritty details of a car, yet I understand the basics and trust my life in it. I know markets are always evolving and changing, correlations change, models break down, models based on formulas, I'm not trying to be a "macro punter", just trying to get a more traders perspective rather than an academic one from a book as I don't believe formulas will help me read the market on a very short term basis. I'd rather learn the nitty gritty of how people work and think, how traders think and what positions they're likely to take if X happens, not the formulas of what they're trading down to that much detail. Sure you need to know about what you're trading, but I don't see how knowing formulas of some miniscule detail is going to help my decisions, but you're much more experienced than me and you're obvioulsy right, so mabye I'm a fool. I'm not looking for a shortcut, just a different perspective to those in the books, because I highly doubt if those that wrote the books are actual traders. I'll keep reading and pushing.

Thanks for the book recommendations and answers to the questions, much appreciated
No problem... I am glad to be of help and don't hesitate to ask more questions (while reading those books).

As to your points, yes, I do know the formulae that describe all the things I trade. This, obviously, limits me to a relatively small set of products/securities, but I know them relatviely well (again, I am still constantly learning new things). And no, it doesn't help me with my trading, it's absolutely essential to it. Obviously, if you intend to be a sort of "high-freq" trader, that's a completely different line of business and your knowledge may have to be different in this case. I am not too familiar with it, so you may want to ask others here.

As to the car parallel, I don't think it's appropriately framed. If you're a trader, you're not like a guy who's just driving the car to get from point A to point B. You're a professional and more like a race car driver. Do you think the top F1 drivers don't know and understand every little bit of their cars?

My point is that, in my opinion, to get to a point where you can be a good "macro punter" and make decisions about how mkts react to this or that development you always need to start from the bottom and work your way upwards. To be sure, this is just my opinion, but it's one that's near and dear to my heart. Maybe there are other people who would have a different view, so that you can form a more complete view.
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Old Aug 15, 2011, 10:08am   #11
 
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Re: Can someone explain?

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Martinghoul - What a nice and giving chap.
Still hasn't made the thread he promised though has he
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Old Aug 15, 2011, 10:41am   #12
 
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Re: Can someone explain?

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Still hasn't made the thread he promised though has he
What a f*ckhead he is (MG, I mean, to be sure)!

I'll do it, honest.
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Old Aug 15, 2011, 10:43am   #13
 
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Re: Can someone explain?

I'm coming for you if you don't innit bled.
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Old Aug 15, 2011, 11:27am   #14
 
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Re: Can someone explain?

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I'm coming for you if you don't innit bled.
I iz trembling in my wee little boots...
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Old Aug 15, 2011, 11:42am   #15
 
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Re: Can someone explain?

smart guy.
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Old Aug 15, 2011, 3:26pm   #16
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Re: Can someone explain?

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Originally Posted by Martinghoul View Post
No problem... I am glad to be of help and don't hesitate to ask more questions (while reading those books).

As to your points, yes, I do know the formulae that describe all the things I trade. This, obviously, limits me to a relatively small set of products/securities, but I know them relatviely well (again, I am still constantly learning new things). And no, it doesn't help me with my trading, it's absolutely essential to it. Obviously, if you intend to be a sort of "high-freq" trader, that's a completely different line of business and your knowledge may have to be different in this case. I am not too familiar with it, so you may want to ask others here.

As to the car parallel, I don't think it's appropriately framed. If you're a trader, you're not like a guy who's just driving the car to get from point A to point B. You're a professional and more like a race car driver. Do you think the top F1 drivers don't know and understand every little bit of their cars?

My point is that, in my opinion, to get to a point where you can be a good "macro punter" and make decisions about how mkts react to this or that development you always need to start from the bottom and work your way upwards. To be sure, this is just my opinion, but it's one that's near and dear to my heart. Maybe there are other people who would have a different view, so that you can form a more complete view.
Thanks and I most likely will have more questions

Okay, I see your point, but again even you're dedicated in a certain few products/securities so knowing your products more in depth would be understandable. I guess neither of us can try and force our points because we specialise in different areas.

Funny you should mention the professional race driver as I'm a huge fan of motorsport, and to be honest, yes I would not be surprised if the F1 drivers didn't know every detail about their car, sure, obviously they are the best at reading what their car is doing, how its feeling, where it needs work, they are the communicator to the engineer(who would know all the nitty gritty) but I highly doubt whether the driver actually knows the fomulae that makes up the components of his Formula 1 car, obvioulsy he knows the basics, what each component is called and its main task, suspenion, KERS, wing angles etc. But he doesn't need to know the formulas and complicated systems required to make the component, and he probably doesn't care, that is what he has a team and a group of people back at the factory that design and create the cars, I very highly doubt an F1 driver could make a car on his own(or have the knowledge to make the car at least), same as the engineer wouldn't be any good at driving the thing.(same as the people that created the financial instruments wouldn't be able to trade them better than a seasoned trader who doesn't know the formulas they used in the creation of it).

I am like the driver, I don't know the miniscule details but I don't think I need to, the driver needs to know that okay, my car is doing X mid-corner so I need more camber for example or this is doing this so I need to Y, same as I'm trying to find out if X yield spread does Y I need to do Z. But the drivers knows how to extract the most out of it, knowing what formulae was used to create the angle on his wing or something, doesn't help his driving at all, he just knows that if its raised or lowered it will give him the ability to corner faster or slower. Back to the X happens, so I can do Y thing again.

Vodafone actually released a video a while back where Lewis Hamilton and Jenson Button had to try and build the car themselves, and it was just basic parts, and the body shell, the core of the car was already put together, and they still couldn't do it, took them ages and they questioned where most parts went, laughing and questioning where the parts were supposed to go so I highly doubt they know about the nitty gritty details and formulas used in the creation of the core components.

Anyway, just providing the other side viewpoint, not having a go, I understand your side of things as well and respect that.

Yeah I see and you're probably right for someone who wants to be a "macro punter" but I don't want to be one, I just want to see if its possible to find the traders(drivers) perspective on what effects things have(if X is changed on his car, it has Y effect).

What a boring world if we all had the same opinion hey . That being said, I will still study and read books on the subject, I was mainly investigating if there was such a perspective that I was after but it seems that it might be more difficult that I first thought, thanks again. I'll be back soon with more questions no doubt . Couldn't agree more on the constant learning thing, its one big never ending learning curve, and probably if/when one ever thinks he knows it all, is most likely when he will be bitten hard probably
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