Originally Posted by joesxm
I have been studying poker about 3 years. I think I am learning a lot by playing poker that better helps me understand investment concepts - mainly in the areas of probabilities vs risk and having the discipline to follow a strategy.
I don't actively trade stocks, but a lot of the skills seem to overlap. I read this book a while ago. It covers the topic of managing probabilities and sticking to a strategy, even to the point of randomly buying stocks and running winners hile cutting losses and still making money. I found it really interesting.
Amazon.com: Trade Your Way to Financial Freedom: Books: Van K. Tharp
Long term, I don't think that strategy can work. It may work to some extent with commodities. But usually there will be enough random movement to sink those filter rule strategies, which is what you are talking about.
I think you have to study and have an opinion. Then take a position hoping to keep it a while. I rarely if ever sell a stock becaue it has gone down. Usually I buy them in part becaue they have gone down- how would the stock know that it had better stop going down now that I have taken a position?
My damage control is usually from very careful research, plus diversification. I am not afraid to heavily overweight a sector, but I usually try to avoid overweighting an individual security, Unfortunately sometimes I screw up on that last one.