BC TRADING
Saved by @Mollyycolllinss

The Baltimore Stockbroker Parable

How one stockbroker managed to achieve a 100% success rate in predicting stock movements

/THREAD/

 1/ One day you receive an unsolicited newsletter from a stockbroker in Baltimore.

It contains a tip that a certain stock will soon rise sharply.

A week passes, and as he predicted, the stock goes up.
2/ The next week, you get another newsletter from the stockbroker, this time with a tip about a stock that will fall.

And next week, the stock craters.
3/ Ten weeks go by, and each week you receive a tip about a stock that will go up or down.

Every time the prediction comes true.
4/ On the 11th week, you get a solicitation to invest your money with the Baltimore stockbroker for a hefty commission, justified by his successful predictions.

That sounds like a great deal, right?
5/ This stockbroker seems to know what he is doing.

It is incredibly unlikely that a complete buffoon with no special knowledge would have gotten 10 correct stock predictions in a row.
6/ In fact, you grab a pen and paper and compute the probability of him getting 10 correct predictions in a row.

For a 50-50 chance of being right or wrong, and 10 picks, the calculation is (1/2) in the power of 10.

This comes down to 1/1024, less than 0.1%.
7/ This is so minuscule, that you think that this guy can't be so lucky and he must be the real deal.

But things look different from the stockbroker's side.
8/ In the 1st week, you weren't the only one who received the newsletter.

He sent out 10,240, half with the prediction the stock will rise and half with the opposite prediction.

The 5,120 who received the incorrect prediction never heard from him again.
9/ This continues every week.

The recipients that got the correct prediction, receive another newsletter.

Half the recipients get the "correct" prediction and half of them the "incorrect".
10/ After 10 weeks, there are 10 "lucky" people who received 10 correct predictions in a row.

Ten people who think the stockbroker from Baltimore is an investing genius.

Ten people from whom he expects to collect hefty fees.
11/ The closest this parable came to reality, was in a 2008 reality TV show.

A British magician, Derren Brown, pulled off a similar stunt, mailing various horse-racing picks to thousands of people, eventually convincing one that he had created a foolproof prediction system.
12/ However, this parable is alive and well in the financial industry.

When an investment firm launches a mutual fund, they often maintain it in-house before they open it to the public.
13/ This practice is called incubation.

Typically, these firms incubate dozens of funds at the same time, experimenting with different strategies and allocations.
14/ The funds that show great returns are quickly made available to the public, with detailed documentation of their performance.

The ones that fail, are thrown into the trash can, and the public never notices they even existed.
15/ However, once the public starts investing in these successful mutual funds, they do not maintain their excellent performance.

Instead, they offer the same mediocre returns as all the other mutual funds in the market.
16/ So how do all these affect your investment decisions?

It means you would be better off resisting the temptation of the hot new funds with the excellent track record and incredible returns over the past couple of years.
17/ Instead, follow the unsexy financial planning advice.

Stop looking for the stock magician with the golden touch and put your money in a low-cost index fund and forget about it.

https://t.co/l9sb5X2z2F
18/ When you put your life savings into the new hot fund with the eye-popping returns, you are like the person who received the newsletter from the Baltimore stockbroker.

You have been lured by the impressive results, but you don't know how many chances they had to get them.
19/ The same applies to all the internet gurus, who tell you how good they are because they suggested buying $AMZN 15 years ago.

But they never tell you how many predictions they have made.

/END/
If you liked this thread click below and retweet the first tweet, and follow to stay updated.

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For more educational threads on financial independence and investing for beginners see below for a collection of threads πŸ‘‡πŸ‘‡πŸ‘‡

https://t.co/6o3A2IQCMs

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This year I started writing daily on Twitter about finance and investing and gained more than 500 followers in 2 weeks

Here are the main things I learned on Twitter growth

1. Brand
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1. Brand
You need to find a niche you are interested in and focus on it
E.g. finance, fashion, travel, etc.

Adjust your profile by adding a profile picture and banner that will show someone what your profile is about and why they should follow you.

Add a linktree that will have all the links for your blog, website, newsletter, etc.

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The Mother of All Squeezes

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1/ At the peak of the 2008 financial crisis, Volkswagen was considered a very likely candidate for bankruptcy.

Heavily indebted and already financially struggling before 2008, with car sales expected to plummet due to the ongoing global crisis.


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If you are not familiar with stock shorts and short squeezes check my thread


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This was a surprise to many who were led to believe that Porsche wasn't planning a takeover of VW, based on the company's announcements.


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The British Railway Mania

How a disruptive technology created the biggest speculative bubble in the history of England

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1/ Railways were the most disruptive technology of the 19th century, known as the "railway age", transforming England from an agricultural to an industrialized nation.

2/ The development of railway infrastructure and locomotives started at the end of the 18th century but experienced immense growth after 1830.


3/ Hundreds of railway related bills were passed every year with proposed rails totaling 10,000 miles, a third of which was never built due to poor financial planning, competition, or fraud.

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Companies to AVOID

/THREAD/

Some tips by Peter Lynch, one of the most successful investors of all time, on which companies to avoid investing in


1. Hottest stock in the hottest industry, with nothing but hope and thin air to support them (MJ stocks in 2017, internet stocks in 2000, electric vehicles in 2020)

Deteriorating balance sheet.

When analysts predict double-digit growth forever, the industry goes into decline.

2. Product/service, not protected by patent or niche, easy to be replicated by competitors, especially in a high-growth industry.

3. The "Next Something"

Everyone wants the next $TSLA, $AMZN, $GOOG

Most likely you won't find a company to replicate their business with that success.

4. Diversification = companies wasting capital on foolish acquisitions, in new sectors they do not understand, and in companies that are overvalued.
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Charles Ponzi and the Postal Service

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1/ Carlo Pietro Giovanni Guglielmo Tebaldo Ponzi, a.k.a. Charles Ponzi, was an italian swindler and con-artist.

Born in 1882 in Italy, he became notorious for his money-making fraudulent schemes in North America in the 1920s.


2/ He arrived in Boston in late 1903 with $2.50 in his pocket.

After many professional failures, he moved to Montreal in 1907 and started working as a bank teller at Banco Zarossi, where he rose to the position of bank manager.


3/ This is where he first witnessed the bank's scheme, where Zarossi was funding interest payments using deposits from newly opened accounts instead of investment profits.

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DON'T ENTER A TRADE WITHOUT DETERMINNG THE FOLLOWING.

Please share.

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2. Stop Loss.

The price in the opposite direction of the trade where the trade is exited, at a loss.

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Target is the next path of least resistance from where the price might reverse.

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Collaborated with @niki_poojary

1/ Free Multi Timeframe Analysis

Step 1. Download Vivaldi Browser

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I do not have the paid version of trading view.


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How a retail trader trades-

A trader named Rahul, He know all the basics of markets, He also has made a system which gives signals on nifty, he has also encorporated good Risk management and Position sizing into his system.

One day he gets a signal to buy Nifty at 13500 with stop at 13450, he wanted to take the trade, but he wanted to get sure that the trade he has take should be a winner.

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level, then again he wants to check another indicator named MACD, he wanted to get sure man, Now he do the most intelligent thing to get sure he gets right.

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