conversation with anon

[16:12:00] A Jansen: sup mate
[16:12:32] B: Hey thanks for doing this buddy
[16:13:13] A: np
[16:14:11] B: So correct my flawed understanding here  You said pick a stock and compare it with its moving avg price over a certain period  and accordingly  if the avg price is higher short the stock
[16:14:24] B: Is that right and what about index fund then
[16:16:06] A: you don't pick stocks but index funds, index funds france 40 for my example are basicly the total of a country's mort renowned stocks.
[16:16:23] A: you can look at it like a dice game
[16:16:50] A  : lets say low is low price and high is high price
[16:17:09] A  : if you roll 1 dice you don't know your next roll
[16:17:38] A  : but if you roll 40 dice and they all come up a six, you can be pretty certain that next roll the total will be lower
[16:18:03] A  : (unless someone rigged them/changed the game/politics)
[16:18:19] B: Ok got it ? So compare the current price of S&P 500 with its avg moving price over 60 days. Current price is let's say 100 and the avg price is 98  so basically I short the index fund expecting it to come to 98 or lower
[16:19:37] A  : well almost, you take the 64 (for better applicability), 32, 16, 8, 4, 2 day averages
[16:19:51] A  : and if it reaches a price above all those, then you take the short
[16:20:35] B: You mean current price is more than the avg price for all those periods ?
[16:20:47] A  : yes
[16:21:15] B: Noob question why are we taking multiple of two
[16:21:22] A: Just curious
[16:26:34] A  : not a noob question, you can take 3 as base value as well, the important point is that every next period is atleast twice the size so you compare the the lower day average to a significantly higher day average for a realistic view).
this way you compare the current average to the previous one (if the 1 day average is higher than the 2 day it rose even more above the average, and the same goes for 8-16 etc).
, the reason for the +- 60 longest average is that it seems to give a good indication for the longer term trend, so you can avoid stocks that are rising indefently (i'll get you an example)
[16:28:22] B: Oh great point. Do you think this is applicable only to index funds and not individual scripts ?
[16:31:21] A  : I think this is applicable to any fund for which there is no bias in which stocks make up the fund, so that the bias can't be wrong because of changes that aren't politcal(since politcal changes most of the time are forseeable (brexit and its conditions for example isn't something that is decided overnight by a policy/CEO change)
[16:33:03] A  : I would not reccommend individual stocks/scripts because of vulnerability(if one stock crashed and burned or went through the roof in a country the other companies will make the overall change less of a breakthrough and thus safer)
[16:34:14] A  : when shorting for example (with the dice again) the just is a higher chance of 1 six than 5 sixes (that are unrelated except for their location on a table))
[16:34:22] B: Ok got it. What are some of the indicators I should be careful of when comparing the avg price to current price. Can you give an example of the point you made about calculating avg price and the period chosen
[16:34:56] A  : sorry what do you mean?
[16:35:06] A  : the 3 days to a week period you mean?
[16:35:48] B: A - Today 8:56 PM
> the important point is that every next period is atleast twice the size so you compare the the lower day average to a significantly higher day average for a realistic view).
this way you compare the current average to the previous one (if the 1 day average is higher than the 2 day it rose even more above the average, and the same goes for 8-16 etc).
, the reason for the +- 60 longest average is that it seems to give a good indication for the longer term trend, so you can avoid stocks that are rising indefently (i'll get you an example)
[16:42:00] A  : say, we take two dice, the outcomes for a period are 1-6, 3-5 3-4  2-5 1-6 4-3 etc, this gives an average that doesnt rise or fall so it's relatively safe to trade in because apparently the conditions are stable, if another set of dice ar going 2-2 1-3  3-2 2-4  4-4 5-5 it looks like tere is something going on in the area, the rules are changing so you stay away
[16:42:32] A  : the 60day average is just what i've founf to be a reliable indacation for the average of these changes
[16:43:44] B: Thanks for the great explanation dude.
[16:43:49] A  : the reason why you want twice the size or more is that if you don't you essentially give more importance to the present (which is also a strategy) which could be biased
[16:44:27] B: Do you know about the value area investment model the 80% rule
[16:45:20] A  : got something vague popping up, sec I'll look it up
[16:46:04] B: Ok
[16:46:17] A  : you mean the pareto principle?
[16:46:43] A  : or this?
[16:46:44] A  : https://marketdelta.com/blog/wp-content/uploads/Strategy-80PercentRule.pdf
[16:46:50] A  : nvm page not found
[16:48:58] B: Oh yea the market Delta model
[16:49:14] B: You couldn't get the page to load ?
[16:49:17] A  : nope
[16:49:24] B: Oh ok
[16:49:48] B: Let me ask you with your strategy what is the success rate
[16:50:23] A Jansen: bout 80%
[16:50:33] B: That's pretty good mate
[16:50:55] B: Can I ask you what do you do and if you've made money through this
[16:50:59] A  : meh, could be better if I was less emotional
[16:51:21] B: Lol what are the pitfalls and things I should look for then ?
[16:52:02] A  : executing the short order while making a loss if there have not been developments indication a change of the game
[16:54:37] A  : it happens quite often that the price will rise a bit more than the price you estimated, but generally it will come down (for example you see a 40 euro loss on investment and are like "this isn't what I expected it will probably get worse!" and then sell. this will cause you to loose money(since if there really would be a reason for a rise it would have been reported somewhere because it's about the whole country))
[16:55:38] A  : I study AI at uni currently, made 280 euros profit from my starting point of 400
[16:55:44] B: So again it's about not panicking and keep sentiments in control
[16:55:49] A  : yep
[16:56:02] B: This was over what period ?
[16:56:10] A  : 2 and a half months
[16:56:22] B: You just started ?
[16:56:35] A  : well, I just quit the dummy trading
[16:56:41] B: Curious how did you get into it and learn this fast if you have just started
[16:56:55] A  : I just started trading
[16:57:02] A  : I didn't immidietly start
[16:57:14] A  : was about to reply to a post on biz where I got my knowledge from
[16:57:23] A  : >>1651491
stanford economy courses (financial markets by robert shiller specificly, it's on youtube), the alchemy of finance (by george soros so don't let the title fool you), general statistics& distributions at uni, 2 years of dummy trading and merchanting for 4 years on runescape.
[16:58:02] B: Impressive man what is merchanting on RuneScape
[17:00:25] A  : Runescape is an online game I used to play(MMORPG), and I decided to make money (ingame money) to be able to do thingas in the game  by buying things for a price and reselling higher, this got amped up when the Grand Exchange feature was introduced (which is basicly a global items exchange)
[17:01:05] A  : what I do now is basicly a refined extension to this
[17:01:36] A  : got introduced to it when I was 11 and took a liking to it
[17:02:00] B: AI is the shit you must be smart af to be doing that I can tell you'll do great
[17:04:19] A  : AI being hard is a meme, math, physics etc are a lot harder, that's the reason I do this next to uni, I find AI just interesting, but especially with al the hype& promotion I think it will be hard to even get a job.
[17:05:37] B: They say automation is the future and to make automation a success AI has to be a big part of it
[17:06:41] A  : true, but once you know the basics you see it is a lot of datamining used for more and more things and less of actual new things
[17:07:39] A  : I can literally explain almost every concept in AI to a highschooler and he will understand, it's just pretty obscurely formatted with the formulas so it's hard to understand from the ouside
[17:08:16] B: I'm an underwriter and half of our work is not done by auto underwriting with built in controls so that we don't have to work on insurance proposals which system can identify and process according to set controls.
[17:08:37] A  : my point basicly is that it will be big buisness for developing countries doing work for the wast, but that westeners shouldn't seek work there (atleast if the companies are smart)
[17:08:39] B: Half of our work is done i meant
[17:09:14] B: Oh yea I think easy routine work will get automated like clerical stuff
[17:09:40] A  : the most prominent example is the applicability of google deepmind
[17:09:46] B: But I don't see cars being driven on the city streets that easily I'm sure it will happen but not so soon
[17:11:56] A  : we could do that already honestly but the public concensus prevents it being economicly viable. point is that if even they are safer, once one AI controlled car makes a crash (even if the chances of it happening are only 1/100 th size) the company is completely ruined if not backed by MAJOR funders (see what happened to tesla)
[17:12:18] A  : so it is just not really a safe bet to go into that industry right now, public consensus has to change first
[17:13:53] B: You're right there are business interests and then political interests which are major reasons for many things not taking off like electric cars or alternate power fuel
[17:14:09] A Jansen: exactly
[17:14:31] A  : mind if I post our conversation on biz by the way, as a sort of FAQ?
[17:14:53] B: Sure go ahead
[17:15:17] B: Can you remove my Skype name tho ?
[17:15:59] A  : now about you though, what drove you to biz?, I use it to study bias (all the ETH/XDN/Bitcoin shilling etc)
 [17:16:04] A Jansen: ofc*
[17:18:43] B: Mainly coz i have lots of time on weekend and finance and investment is an area of interest. Most blogs and content on internet is companies trying to sell their stuff like pump and dumb so I don't wanna get into that. Biz is just people who want to post their ideas and engage with ppl who have similar interests
[17:20:16] A  : if it's a point of interest I'd reccomend university lectures, they're available free at YouTube generally
[17:21:17] B: Right but I find those lectures to drag on like it's for people who are starting out or people with some knowledge in the subject
[17:21:43] B: People like me who know basics are stuck coz it seems like a drag on
[17:22:18] B: Then there are high end lectures which I don't understand at all
[17:23:41] A  : true, I watch most lecture series two times for that reason, it's a bit of a drag, but It counters the high entry level because the first time around you start to understand the words/theories and the second time around you understand the theory behind it, that and Wikipedia/Investopedia are your friend.
[17:24:19] A  : I just have the luck that all my interests coincide with one another so I can understand things by examples from other disciplines
[17:24:45] B: Investopedia is for people like you lol
[17:24:59] B: I find them not noob friendly
[17:26:38] A: everything in the world isn't noob friendly :P,
 I find it is best to start with the top tier things even if you are a noob, things that are simpler are often too simple and cause you to have to unlearn things again
[17:27:44] B: Point taken lol
[17:28:30] B: You said something about CFD honestly I heard it for the first time but is it related to the strategy we discussed here ?
[17:29:10] A  : my general interest just happens to be social relations/group dynamics which really encompasses everything from economics to AI to biology, logic and psychology/sociology
[17:29:30] A  : well CFDs if basicly a kind of trading platform
[17:29:48] A  : take the  plus500 company for example
[17:30:45] A  : it is a company that allows you to take positions while not paying the price of the stock/fund but a lower price, while still profiting from the real changes
[17:30:55] A  : leverage essentially
[17:31:48] A  : for example instead of 10500 for GER 30, you can pay 30 for a position
[17:32:14] A  : if however it rises or falls 500 the amount will be added or deducted from your account at the company
[17:33:10] A  : if you don't know what you're doing you can pretty much instantly loose everything because you think trading with your whole capital is a good idea (which is done when you actually buy stocks instead CFD's)
[17:33:54] A : but otherwise it gives you a wider choice to profit from and the possibility to amplify profits/losses
[17:35:29] B: It's basically like buying options ?
[17:37:52] A  : kind of, with options the profit is the change of a stock* the amount in the options contract - the price you paid for the option, while for cfd its literally the change (exluding buy/sell spread)
[17:38:33] A  : options are safer for this reason because the maximum payment is what you pay for the option, but it is also more expensive due to this if you actually make profit
[17:39:17] A  : (for cfd's the maximum cost is whatever you have on your account, since something will autoclose on loss in that case "to prevent you from debt")
[17:39:56] A  : option contracts are generally for larger amounts of stocks though, so the entry prices are higher
[17:40:08] A  : options also expire after a while, while cfd's do not
[17:40:23] B: Ok I think I get an idea but I'll have to read more on it