Can Mathematicians Beat the Markets?

If all it took to beat the markets was a Ph.D. in mathematics, there'd be a hell of a lot of rich mathematicians out there.

Posted in Traders' Delusions, Submitted by Trading Critic on Mon, 2006-08-07 15:46.
If all it took to beat the markets was a Ph.D. in mathematics, there'd be a hell of a lot of rich mathematicians out there.

Does it take a genius to beat the markets? Can a mathematician act quickly in the fast moving forex markets or better yet, pick out the best stocks to invest in? The markets are all about numbers, percentages, mathematical valuation modelling and so on... So it should make perfect logical sense that if a mathematician tried their hand at trading the markets, they would find it easy to succeed in consistently beating the markets. But is it true?

Have you heard this quote?

If all it took to beat the markets was a Ph.D. in mathematics, there'd be a hell of a lot of rich mathematicians out there.

The quote is from Bill Dries a commodity trading advisor from "Futures" published on August 1995.

Have you seen a rich mathematician? A glance through the Australian BRW rich list and all I see is a bunch of successful entrepreneurs - many with their own rags to riches stories. When I attend those trading seminars: those gurus all claim to be ex accountants, financial advisers, engineers or psychologists.

I don't doubt that there are no masterful mathematician traders out there, but mathematical intelligence is not a prerequisite to successful trading. To be able to trade the fast moving forex markets or simply the stock market takes guts. You need to be a risk taker yet calculating to manage that risk. Any trader that beats the market is a hard worker, actively reflecting on each and every trade, recording what went right and what went wrong. Great traders are passionate about their profession. Yes, mathematicians can beat the markets if they also possess these aforementioned qualities. Risk taker. Risk manager. Calculating. Passionate. Systematic. Reflective.

Submitted by Rich (not verified) on Mon, 2006-08-14 21:00.

I have begun trading forex and it is beating the shit out of me. I have read all i can and more. Studied charts trends fibonaccis macd and all other manner of chart reading but I cannot get it right. I don't know what to do next. I am using their money right now but that is only because i made 350 bucks and at a dollar a point I thought I had a good buffer. It is evaporating.

is there a technique or websites or tips and tricks.


Submitted by Trading Critic on Wed, 2006-08-16 15:28.

Well Rich, you've come to the right place.

There a plenty of losers out there and I'm glad you have the courage to face the music and declare your loss! A lot of traders who lose simply don't talk about it and disappear from the scene altogether!

There are a lot of gurus out there claiming that their technique is the right way.

Let me tell you there is no "right way". If there was a "right way" then we'll all be millionaires right now. Forex trading isn't easy.

With forex you can either trade it three ways:
1) With insider information (which is rare for retail traders like you and me)
2) With fundamental information - like economic data and news
3) Technical information - from what I hear you are using.

I can go on an on forever... But I have some simple advice for you:
1) Have a trading plan (test it, use it)
2) Have a risk management plan (which tells you when to exit - in profit or in loss)
3) Have fun at it and keep learning!

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