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Instead, he keeps his ears open in chat rooms and his eyes glued to bid-ask screens, on which he monitors the market’s appetite for its 300 most heavily traded stocks. If there’s one basic principle, he says—repeatedly and slowly, as if instructing a child—it is this: “Buy stocks that are being bought, and sell stocks that are being sold.”
That’s more profound than it sounds, according to Hersh Shefrin, professor of behavioral finance at Santa Clara University in California and author of Beyond Greed and Fear, a 2007 book about the role of psychology in investing. The human mind is hard-wired to bet on reversals, Shefrin says.
It’s a phenomenon called the gambler’s fallacy. At a craps table, for example, players tend to shift their bets toward numbers that haven’t come up, even though the odds don’t change with each roll of the dice. In the same way, even the savviest investor has a built-in bias for buying when stocks fall and selling when they go up."
Sooooo... Vol Buzz, Market earnings or news... Jump on the trend or breakout. Small account - Scalp a few seconds 100's of times a day first couple years. With bigger capital swing trade. Worked for him... not for everybody.
I know this hurdle painfully. I also know that day-traders as a genre prefer shorting over buying whereas investors generally prefer buying but hate selling, but I had never made the gambler's fallacy connection before, thanks. I have also spent a few hours marking up punctuation corrections (for readability and a muscle memory exercise..) to a paper print out of a summary of TTZ (by a Brian somebody) that I've had on my alt-desk for years, and then just this minute discovered your TTZ thread on NexusFi (formerly BMT), thanks for that as well, it's been quite a synchro weekender.
Before them, there was Sumida Hiroshi who was on the other side of a lot of Nick Leeson's ill fated trades in Nikkei options. Seems other people's problems help to launch many a great trader in Japan.
Seems too good to be true, but you never know.
So he is a momentum trader, follows trends. Sounds easy, but super hard to implement I would say from my own experience. You need to have a big account, you can´t just read the book and make +5% all the time, the tape will tell you to sell out 100 times before you would ever reach +5%. There are occasions when this is not true, but they will not make up for the losses.
