“A ship in the harbor is safe – but that is not what ships are for” – John Shedd

“All progress is based upon a universal, innate desire on the part of every organism to live beyond its income.” – Samuel Butler

Eric Falkenstein’s Criticism of Taleb: Must Read

The bumper sticker “shit happens” is kind of funny, kind of true, but hardly profound.

And joy is, after all, the end of life. We do not live to eat and make money. We eat and make money to be able to live. That is what life means and what life is for. -George Mallory

“Economic history is a never-ending series of episodes based on
falsehoods and lies. The object is to recognize the trend whose premise
is false, ride the trend, then step off before the premise is
discredited.”
- George Soros

Never believe anything until it’s officially denied.

“To be conscious that you are ignorant is a great step to knowledge” – Benjamin Disraeli

The first rule of research is that more research is always needed. You
don’t see too many papers that end with “Yep, that’s everything”

Our greatest glory is not in never falling, but in rising every time we fall. – Confucius

“To think is easy. To act is difficult. To act as one thinks is the most difficult of all.”

John wolfgang von goethe (1749-1832)

• “If a betting game among a certain number of participants is played long enough, eventually one player will have all the money. If there is any skill involved, it will accelerate the process of concentrating all the stakes in a few hands. Something like this happens in the market. There is a persistent overall tendency for equity to flow from the many to the few. In the long run, the majority loses. The implication for the trader is that to win you have to act like the minority. If you bring normal human habits and tendencies to trading, you’ll gravitate toward the majority and inevitably lose.” – William Eckhardt

• “It’s much easier to learn what you should do in trading than to do it. Good systems tend to violate normal human tendencies.” – William Eckhardt

• “One common adage on this subject that is completely wrongheaded is: you can’t go broke taking profits. That’s precisely how many traders do go broke. While amateurs go broke by taking large losses, professionals go broke by taking small profits. The problem in a nutshell is that human nature does not operate to maximize gain but rather to maximize the chance of gain. The desire to maximize the number of winning trades (or minimize the number of losing trades) works against the trader. The success rate of trades is the least important performance statistic and may even be inversely related to performance.” – William Eckhardt

• “The people who survive avoid snowball scenarios in which bad trades cause them to become emotionally destabilized and make more bad trades. They are also able to feel the pain of losing. If you don’t feel the pain of a loss, then you’re in the same position as those unfortunate people who have no pain sensors. If they leave their hand on a hot stove, it will burn off. There is no way to survive in the world without pain. Similarly, in the markets, if the losses don’t hurt, your financial survival is tenuous.” – William Eckhardt

• “I know of a few multimillionaires who started trading with inherited wealth. In each case, they lost it all because they didn’t feel the pain when they were losing. In those formative first few years of trading, they felt they could afford to lose. You’re much better off going into the market on a shoestring, feeling that you can’t afford to lose. I’d rather bet on somebody starting out with a few thousand dollars than on somebody who came in with millions.” – William Eckhardt

• “In many ways, large profits are even more insidious than large losses in terms of emotional destabilization. I think it’s important not to be emotionally attached to large profits. I’ve certainly made some of my worst trades after long periods of winning. When you’re on a big winning streak, there’s a temptation to think that you’re doing something special, which will allow you to continue to propel yourself upward. You start to think that you can afford to make shoddy decisions. You can imagine what happens next. As a general rule, losses make you strong and profits make you weak.” – William Eckhardt

• “If you’re playing for emotional satisfaction, you’re bound to lose, because what feels good is often the wrong thing to do. Richard Dennis used to say, somewhat facetiously, “If it feels good, don’t do it.” In fact, one rule we taught the Turtles was: When all the criteria are in balance, do the thing you least want to do. You have to decide early on whether you’re playing for the fun or for the success. Whether you measure it in money or in some other way, to win at trading you have to be playing for the success.” – William Eckhardt

• “Trading is also highly addictive. When behavioral psychologists have compared the relative addictiveness of various reinforcement schedules, they found that intermittent reinforcement – positive and negative dispensed randomly (for example, the rat doesn’t know whether it will get pleasure or pain when it hits the bar) – is the most addictive alternative of all, more addictive than positive reinforcement only. Intermittent reinforcement describes the experience of the compulsive gambler as well as the future trader. The difference is that, just perhaps, the trader can make money.” However, as with most affective aspects of trading, its addictiveness constantly threatens ruin. Addictiveness is the reason why so many players who make fortunes leave the game broke.” – William Eckhardt

• “Don’t think about what the market’s going to do; you have absolutely no control over that. Think about what you’re going to do if it gets there. In particular, you should spend no time at all thinking about those rosy scenarios in which the market goes your way, since in those situations, there’s nothing more for you to do. Focus instead on those things you want least to happen and on what your response will be.” – William Eckhardt

“Play the game with more than you can afford to lose…only then will you learn the game.” – Winston Churchill

An elephant. A mouse built to government specifications.

Avoid making irrevocable decisions while tired or hungry. N.B.: Circumstances can force your hand. So think ahead!

If it can’t be expressed in figures, it is not science; it is opinion. It has long been known that one horse can run faster than another — but which one? Differences are crucial.

Never appeal to a man’s “better nature.” He may not have one. Invoking his self-interest gives you more leverage.

A human being should be able to change a diaper, plan an invasion, butcher a hog, conn a ship, design a building, write a sonnet, balance accounts, build a wall, set a bone, comfort the dying, take orders, give orders, cooperate, act alone, solve equations, analyze a new problem, pitch manure, program a computer, cook a tasty meal, fight efficiently, die gallantly. Specialization is for insects.

-Robert Heinlein

You’re only as good as your last trade.

Capitalism is unequally divided riches while socialism is equally divided poverty

“Man looks in the abyss, there’s nothing staring back at him. At that moment, man finds his character. And that is what keeps him out of the abyss.”

—Lou Mannheim, in the 1987 movie, “Wall Street”