BC TRADING
Saved by @Shubham51ngh

Have you ever had 4-5 profitable trades in a row, and you bet all your profits on your next trade feeling "in the zone" only to lose it all?

That's called as "hot-hand fallacy" bias.

I ran a poll recently to outline two classic biases we have as humans.

Thread below ๐Ÿ‘‡๐Ÿ‘‡

 1/ *Hot-Hand Fallacy* first had its origin in the game of basketball.

If a player shoots few baskets in a row, people generally predict that the next shot will also be a basket.

This is ignoring the fact that each shot is independent of the ones that came prior.
2/ In this poll, 41.1% people voted that the batsman who hit 4 sixes in a row, will hit a sixer in the 5th ball also.

This is classic hot-hand fallacy.

Each ball's outcome is independent.

The probability is not 50% FYI (number of outcomes is not 2).
These 148 people who voted that the next ball will also be a sixer, did so because they believe that the batsman is on a hot streak, and that his streak would continue.

This is an emotional bias and is usually attached to human performance related events only.
3/ 45.3% (162) people voted that the 5th ball would be a dot ball, meaning the batsman wouldn't score anything.

These people displayed the classic "negative-recency" bias, which is also called the "Gambler's Fallacy".
When someone displays gambler's fallacy, they typically predict that the opposite of the previous outcome would happen.

This is more pronounced if the previous few outcomes are the same.

This is like predicting a tail in the next toss if the last few
coin tosses were heads.
4/ Generally people do not believe that inanimate objects can become "hot".

This is why they display the traits of gambler's fallacy with objects and games that are typically not attached to human performance (ex: roulette).
5/ Also, human performance is typically not perceived as random.

People tend to believe that a streak is likely to continue when a person is on a hot successful streak.
6/ This is exactly why you see VCs funding entrepreneurs who recently sold/listed a business successfully. Classic hot-hand fallacy doing its work.

From @kunalb11 to the Bansals, there are many beneficiaries of this fallacy.
7/ What do these two fallacies mean for your trading/investing?

Generally when a trader has had 4 or 5 successful trades in a row, they get a bit more brash, and over-bet on their 6th trade

even though the 6th trade is completely independent of the previous trade outcomes.
For such traders, the 6th trade that they overbet on, turn out to be a loser, taking most of their profits away.

8/ There are other types of traders who when they have had 4-5 successful trades, think the next is most likely to be a losing trade, and avoid that trade.
What could happen is that the next trade goes on to be a banger of a winning trade.

Those who avoided that trade thinking it would end up being a loser, generally turn out to be the suckers.
9/ Typically what you should do to avoid these two fallacies?

Follow a well tested system for betting with whatever strategy you trade. Position sizing is of paramount importance, and dynamic betting is far more complex in trading, and more often than not fails.
10/ Dynamic betting in casinos is usually betting more when a win is highly probable, and less when a loss is highly probable.

It may sound appealing on paper, but determining whether a win or a loss is highly probable in the next trade is not an easy task.
11/ Trading is a game where you stand alongside the law of large numbers and let the system do its work over a large number of trades.

Dynamically breaching the tested betting system because you "feel" or "instinctively know" the potential outcome of the next trade is bad.
12/ The first or second time you do the discretionary breaching, may end up favoring you.

The third time, you'll have the hot-hand fallacy playing within the fallacy. You'll be further emboldened to risk more, and it usually ends up disastrous.
13/ When you let these biases creep in, you expose yourself to the *risk of ruin* - where you either blow your account, or blow just enough to bring the capital to an un-tradeable level.
14/ One may think that long term investors are immune to these.

But they are not.

In fact, since they take 100x fewer bets than regular traders do, they are the ones most exposed to the risks associated with these two fallacies.
15/ For ex:

Some day sooner or later, someone looking at bitcoin doing all this crazy bull run is going to ditch most of his portfolio and put the proceeds into bitcoin.

And bitcoin is going to bomb.

And this particular investor is going to lose everything.
16/ This isn't applicable to experienced investors who limit their bet size to 1/10th or 1/20th of their total available capital per bet.

This is more applicable to newbies and experienced players who let irrationality creep in once (and that one time turns out disastrous).
17/ Have you experienced something similar in your trading/investing?

Share your story in the comments below.

If you want to read more threads like this, click the follow button on my profile.

Going to be doing more of these in 2021.

More from Shravan Venkataraman ๐Ÿ”ฅ๐Ÿš€๐Ÿ’ฐ

Shravan Venkataraman \U0001f525\U0001f680\U0001f4b0
Shravan Venkataraman ๐Ÿ”ฅ...
@theBuoyantMan
A market wizard named Michael Marcus converted a $30,000 initial stake to $80 Million dollars over a period of 10 years.

Here are 28 lessons he considers very important for anyone venturing into trading, from his experience.


1/ The importance of not giving up:

In Fiddler on the Roof, there is a scene where the lead looks up and talks to God.

I'd look up and say, "Am I really that stupid?"

And I seemed to hear a clear answer saying, "No, you're not stupid. You just have to keep at it."

So I did.

2/ On key price levels:

There are key price levels like

- previous day/week/month highs or lows
- round number levels

where you can have 1:5 or more worth RR of trades if you place yourself right.

The key is to hit the crest of the wave, just at the right moment.

If it doesn't work out, you have to get out.

Doing this, you can make several hundred points, risking 1/3rd to 1/5th of what you make.

3/ The secret to getting efficient at trading:

Cut down the number of trades you make.

The best trades are those in which all 3 things check out:

- Fundamentals
- Technicals
- Market Tone
TRADING GUIDES
Shravan Venkataraman \U0001f525\U0001f680\U0001f4b0
Shravan Venkataraman ๐Ÿ”ฅ...
@theBuoyantMan
** MEGA THREAD ON Cryptocurrencies/Blockchain**

I wanted to know the best resources to learn about cryptocurrencies and blockchain for someone with zero knowledge. I asked Twitter, and Twitter answered.

This thread is a compilation of the best resources I was recommended. ๐Ÿ‘‡๐Ÿ‘‡

Let's start with ** BOOKS **

The first thing you should do before you pick up any book:

Learn about Bitcoin & Ethereum by reading the respective whitepapers.

- [Bitcoin white paper](https://t.co/cErOaFn6QL) by Satoshi Nakamoto

- [Ethereum White paper] (https://t.co/0g5kYCGJGq) by Vitalik Buterin

Even if you are not tech savvy, you can get a good grasp about how blockchain functions from these papers.

1) *The Basics of Bitcoins and Blockchains: An Introduction to Cryptocurrencies and the Technology that Powers Them* by Antony Lewis

This book covers topics such as the history of Bitcoin, the Bitcoin blockchain, and Bitcoin buying, selling, and mining.

It also answers how payments are made and how transactions are kept secure.

Other cryptocurrencies and cryptocurrency pricing are examined, answering how one puts a value on cryptocurrencies and digital tokens.
FINANCE
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Shravan Venkataraman \U0001f3a1
Shravan Venkataraman ๐ŸŽก...
@theBuoyantMan
Interpretation of Financial Statements - preliminary filters.

1. Looking for sustainable competitive advantage:

When looking for sustainable moat, you wanna see consistency - in earnings, in having low debt, in having growing earnings, low spending in capital expenditures, etc.

The longer the company has existed, and if it sells you the same product for years (like Coca Cola), it reduces production costs and other costs (R&D, Training, marketing) slowly as the company ages.

When costs are reduced, margins and profits increase.

2. What to look for in an income statement:

Let's take a look at Apple:

i) You want to see earnings grow at a steady pace. Take a look at the net income below.


ii) Another thing that's important is a consistent and high gross margin.

As a thumb rule, Warren Buffett wants to see a gross margin of around 40% or above.

Although not quite 40%, it's around that range with respect to Apple.


Compare this to Apple's competitors.

Samsung's gross margins are around similar range, highest being 45.7% in 2018, and Huawei had a gross margin of 38.6%.
ECONOMY
Shravan Venkataraman \U0001f525\U0001f680\U0001f4b0
Shravan Venkataraman ๐Ÿ”ฅ...
@theBuoyantMan
Do you keep your gold assets in bank locker? You are probably paying some fees every year for your lockers.

Instead, what if you could get a locker for free?

What if I said banks would pay you to keep your gold assets safe?

Time for a thread. ๐Ÿ‘‡๐Ÿ‘‡๐Ÿ‘‡


1/ The major issue with having gold in bank lockers is

- You pay hefty fees on an annual basis to the bank.
- The lockers aren't insured
- There's no real safety/security in case of theft or an unfortunate event.

Is there a work around?

Yes.

Enter "Gold Monetisation Scheme".

2/ GOI introduced the Gold Monetisation Scheme in 2015. The main objective was to cut down India's gold imports.

How it works:

You deposit your gold in bank.
They keep it safe for a fixed number of years.
You get it back as physical gold or cash on maturity.

3/ What should you do to be eligible?

You should take the gold you want to deposit to a Collection and Purity Testing Centre (CPTC). GOI has established over 300 CPTC's across India.

They will take your gold, evaluate its purity, and provide a receipt for the gold quantity.

4/ You take the receipt to your bank.

Create a gold monetisation scheme account in your bank.

Give them the receipt provided by PTC.

Your bank will then convert that receipt to a scheme certificate as part of your GMS account.
FINANCE
Shravan Venkataraman \U0001f525\U0001f680\U0001f4b0
Shravan Venkataraman ๐Ÿ”ฅ...
@theBuoyantMan
In today's round up, I have some amazing threads, resources, and plenty of solid advice for business, finance, career from twitter.

Here's the roundup of 17 of the best and the most useful threads, tweets, and resources I found last week. ๐Ÿงต

1/ How to find spreadsheets on any topic in the


2/ A thread by @wes_kao on making your customers hungry and excited to buy from


3/ Life brings you a lot of afflictions. But if you look around, there's a lot of beauty around you. Most often, drowning in the afflictions, we can't recognise or appreciate the beauty.

@wdmorrisjr wrote a damn good thread on finding beauty around us.


4/ This one is for all the job goers and job seekers.

@SahilBloom who recently hit 500k followers and has several accomplishments to his belt (career wise) wrote this thread on standing out in a hiring
MISCELLANEOUS

More from Trading

Abhishek Kar
Abhishek Kar
@Abhishekkar_
๐‘๐ฎ๐ฅ๐ž๐ฌ ๐จ๐Ÿ ๐ˆ๐ง๐ฏ๐ž๐ฌ๐ญ๐ข๐ง๐  ๐“๐ก๐ซ๐ž๐š๐
The entire thread summarizes some important rules with respect to investing. Inspired by legendary traders,these will not only help you to grow wealth,but also make a smart investor. Hope you would like the thread & shower some love

Rule 1: Bulls, Bears Make Money, Pigs Get Slaughtered so chose your category wisely
Rule 2: It's OK to Pay the Taxes,Dont just wait for a 10% LTCG always. Sometimes you know it won't pay you
Rule 3: Don't Buy All at Once,Have patience market will give enough opportunities

Rule 4: Buy Damaged Stocks, Not Damaged Companies. Understand the diff b/w undervalued stocks and no value stocks. Everything cheap is not bargain,it could be trap.
Rule 5: Diversify to Control Risk,make sure you don't put everything into one stock,one sector or one asset class.

Rule 6: Do Your Stock Homework. You spend 5 hours to buy a cream on Amazon but research for 1 hr based on buying a stock on twitter! Well,do your homework.

Rule 7: No One Made a Dime by Panicking .Invest 2-10% and leave rest. If it falls,pain will be low,if moves,no FOMO haunt

Rule 8: Buy Best-of-Breed Companies,This doesnt mean you have to invest in the most expensive companies,all it means is you need to buy co.s with good earnings,promoters and sustainability
Rule 9: Defend Some Stocks, Not All
Rule 10: Bad Buys Won't Become Takeovers,STOP hoping
TRADING
Sarang Sood
Sarang Sood
@SarangSood
THREAD ON DELTA (The most important GREEK)

Many traders don't indulge in understanding GREEKS because they think they are very complicated.

There are 4 primary greeks:

Delta
Gamma
Theta
Vega

In my experience, understanding DELTA is enough to take benefit of greeks.(1/n)

Delta measures the rate of change of options price based on the directional movement of the underlying.

So this means we can know in advance (theoretically) how much an option will move with the underlying & so we can prepare our strategies accordingly. (2/n)

Value of delta varies between 0 & 1 for calls and -1 & 0 for puts. This figure tells how much an option price will change, when the underlying moves 1 point. So example a delta of .2 of call indicates that for every 1 point change in the underlying, the price will move .2 (3/n)

For option writers who want to trade in neutral strategies like straddle, strangle, ratios, calendar etc, delta can be very helpful. So be it any complex strategy, knowing the NET DELTA can give you an idea of how your strategy will perform in different scenarios. (4/n)

Net delta is just the sum of the deltas of all the bull options (call+ & put-) minus the bear options (call- & put+).

So if we can track this, we will always be in the know of how much exposed our position is. It makes it easier then to adjust our position. (5/n)
TRADING
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Trader knight
Trader knight
@Traderknight007
"A trend once established, is more likely to continue than it is to reverse"

A thread on Trend (Market structure)-


A trend is a path of least resistance, basically the side where the smart money is betting upon.

And our work is to be on their side, to make some money.

Why do we use trend?

In an uptrend, the sum of the rallies will always be greater than the sum of the declines.

In a downtrend, the sum of the declines will always be greater than the sum of the rallies.

How to Find the trend?

There are 3 methods which one can use-

1. Swing points method.
2. Moving averages.
3. Trend lines, channels.

1. Trend identification by using swing points-

โ€ข UPTREND in simple words - Higher highs, higher lows

โ€ข DOWNTREND in simple words - lower lows, lower highs.


โ€ข Flat trend - The price stays in a range
TRADING
Greg Duncan \U0001f981
Greg Duncan ๐Ÿฆ
@GregDuncan_
Many traders have no consistency when sizing their positions.

The pros have this down to a science.

Here's my dead simple, 3-step guide to position sizing (and to outperforming 99% of other traders in the process):

Step 1:

Define how much of your account you're willing to risk per trade.

Personally, I never risk more than 1% of my account equity.

If I have $100,000 account, I will never risk more $1,000.

This ensures I will never blow up my account on one single trade.

There are successful traders who risk 2-3% of their account per trade, but I find it most calming to risk 1% or less.

The first step in this process is completely up to you - only you can dictate how much risk you can tolerate.

Step 2:

Look for entries & exits that are within 5% (preferably less) of each other.

This means if I buy a stock & have a 5% stop loss, I can put a 20% equity position on & still be risking 1% of my equity.

Your account will thank you w/ 20% in a stock that goes up 100%.

Step 3:

Position size using this formula:

Total equity (100%) / Trade Stop Loss %

So, if your stop loss is 4%, here's the math:

100% equity / 4% stop loss = 25% Equity Position Size

(assuming 1% equity risk).

Here's another hypothetical calculation:
TRADING
Kirtan A Shah
Kirtan A Shah
@KirtanShahCFP
Learn about the STEEL SECTOR in this thread

The demand for steel is generally only 1.2 times the GDP & there is no significant growth in our GDP but still the sector has rallied relentlessly, lets try & understand

Do โ€˜re-tweetโ€™ & help us educate more investors (1/22)
#Investing

The metal sector is broadly divided into 2,
-Ferrous is a category of metal that has Iron in it, Steel as an example
-Non-Ferrous is a metal, which does not have Iron content, Aluminum, copper, lead, nickel, Zinc etc.
This thread focuses on Ferrous & hence Steel (2/22)

To start, lets understand with how steel is made (its important).
Iron ore is mined, it is then first converted to Iron & Iron is then converted to Steel. There are 3 processes of making steel
-Blast Furnace
-Scrap Metal
-DRIP/Sponge
We will discuss all three (3/22)
ALL , SECTORLEARNINGS , STEELSECTOR

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SK
SK
@sk_diary1
Sri Sanjeevi Rayar Temple located in Ayyangar Kulam,near Kanchipuram,TN

#Thread

Ancient but beautiful temple dedicated to Hanuman. This temple is a legendary one. According to the Sthala Puranam of Sanjeevi Rayar temple,it is associated with an episode from Ramayana.


Legend story -Hanuman was flying from Himalayas to Lanka bearing Sanjeevi hill to revive Lakshmana during battle between Rama& Ravana, a piece of the Sanjeevi Parvat fell at this place.Many believe this legendary story & even today that no one here dies of any kind of poisoning.

From historical background of the temple it is known that temple was originally built by a great scholar &administrator Kotikanyadanam Lakshmikumara Tatacharya. Temple itself&village were named following name of great scholar Tatacharya, who was then popularly known as Ayyangar.

He was the royal preceptor of Vijayanagara emperor Venkata Raya who had his capital at Chandragiri in AP.Upon returning from a pilgrimage,robbers tried to attack Tatacharya at this place. Being a great devotee of Hanuman,he instantly composed a poem in Sanskrit praising Hanuman.


The bandits immediately ran away &Tatacharya decided to build a temple dedicated to Anjaneya at that very place.This Sanskrit poem is called Hanumad Vimshati, has been inscribed in Grantha script inside this temple.The huge temple tank called Tatasamudram, in honor of Tatacharya.
ALL
Anu Satheesh
Anu Satheesh
@AnuSatheesh5
Guruvayur Sri Krishna & Coconut with Horns.
#Krishnaleela
#Bhakthi
๐Ÿ•‰
Weโ€™ve all grown up listening to stories of Shri Krishna.ย This one is a famous story of Shri Krishna in Guruvayur Temple, also called Dakshina Dwaraka.


There lived a villager who planted coconut saplings and had promised that he would offer the 'first coconut' from each of his coconut trees to "Guruvayurappan". When the trees started to yield coconuts, he collected the first coconut from all the trees in a sack ๐Ÿ‘‡


and set forth to Guruvayur.

On the way he was stopped by a robber who asked all the items in the sack. The villager told the robber that the coconuts in the sack belonged to Guruvayurappan and so he was unable to hand it over.
@SriramKannan77 @Jayalko1


The robber with anger asked the villager "Is Guruvaurappan's coconut any different? Does it have horns ?".
Saying so the robber pulled the sack forcefully out of the villager's hand, and coconuts came out..๐Ÿ‘‡


To their astonishment each and every coconut in the sack had horns! Even today, the coconut with horns are displayed in the temple for devotees to see.

Below Picture is not original, as we cannot take photos inside temple.
Hare Krishna
Guruvayurappa
๐Ÿ•‰๐Ÿ•‰๐Ÿ•‰๐Ÿ•‰๐Ÿ•‰
Shubham
ALL
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Anshul Pandey
Anshul Pandey
@Anshulspiritual
IMPORTANCE, ADVANTAGES AND CHARACTERISTICS OF BHAGWAT PURAN

It was Ved Vyas who edited the eighteen thousand shlokas of Bhagwat. This book destroys all your sins. It has twelve parts which are like kalpvraksh.

In the first skandh, the importance of Vedvyas


and characters of Pandavas are described by the dialogues between Suutji and Shaunakji. Then there is the story of Parikshit.
Next there is a Brahm Narad dialogue describing the avtaar of Bhagwan. Then the characteristics of Puraan are mentioned.

It also discusses the evolution of universe.( https://t.co/2aK1AZSC79 )

Next is the portrayal of Vidur and his dialogue with Maitreyji. Then there is a mention of Creation of universe by Brahma and the preachings of Sankhya by Kapil Muni.


In the next section we find the portrayal of Sati, Dhruv, Pruthu, and the story of ancient King, Bahirshi.
In the next section we find the character of King Priyavrat and his sons, different types of loks in this universe, and description of Narak. ( https://t.co/gmDTkLktKS )


In the sixth part we find the portrayal of Ajaamil ( https://t.co/LdVSSNspa2 ), Daksh and the birth of Marudgans( https://t.co/tecNidVckj )

In the seventh section we find the story of Prahlad and the description of Varnashram dharma. This section is based on karma vaasna.
RELIGION
William
William
@wimgz
๐Ÿ› ๏ธ OPEN BUSINESS IDEAS ๐Ÿ› ๏ธ

Below a list of business/product ideas I had or read about.

They are worthless if they remain ideas and if you don't overcome the challenges in building them, so feel free to copy / tweak / implement them!
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Better: use one and make a MVP during the #24hrstartup challenge!

๐Ÿ˜ปย Product Hunt Time
A clock that displays the time it is @ProductHunt
Also displays what you should do and where you should post, at each specific time during your launch

๐Ÿšงย IndieCrunch - VC free tech news
Techcrunch but only for bootstrapped companies

๐ŸŽงย Kickstarter for audiobooks
A lot of awesome books are not available as audio.
Crowdfund the money to buy the audio rights + a voice actor
MAKERS
Zena Hitz
Zena Hitz
@zenahitz
I just finished Eric Adler's The Battle of the Classics, and wanted to say something about Joel Christiansen's review linked below. I am not sure what motivates the review (I speculate a bit below), but it gives a very misleading impression of the book. 1/x


The meat of the criticism is that the history Adler gives is insufficiently critical. Adler describes a few figures who had a great influence on how the modern US university was formed. It's certainly critical: it focuses on the social Darwinism of these figures. 2/x

Other insinuations and suggestions in the review seem wildly off the mark, distorted, or inappropriate-- for example, that the book is clickbaity (it is scholarly) or conservative (hardly) or connected to the events at the Capitol (give me a break). 3/x

The core question: in what sense is classics inherently racist? Classics is old. On Adler's account, it begins in ancient Rome and is revived in the Renaissance. Slavery (Christiansen's primary concern) is also very old. Let's say classics is an education for slaveowners. 4/x

It's worth remembering that literacy itself is elite throughout most of this history. Literacy is, then, also the education of slaveowners. We can honor oral and musical traditions without denying that literacy is, generally, good. 5/x
CULTURE


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