Why You Cannot Trade Even With the Best Model Without Confidence

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QUESTION: Mr. Armstrong. my father attended your technical training seminars in Princeton during the Eighties. He always told me that if I did not understand what I was doing, no matter what model or technique I used, I would fail. He said that was the golden rule you taught back then. Does that still apply today?

Thank you;


ANSWER: Absolutely. It does not matter what model you use. NOBODY will ever do what a model says blindly. During the 1987 Crash, the Brady Commission investigation revealed that most models were saying sell just before the crash. The fund managers did not believe them and did not want to sell the low. Thought there would be a rebound. There was none.

This is why it is so important to explain things from how markets really move. If you do not comprehend what you are really doing, you will not follow any model regardless of the track record.

We removed our model from the office simply because everyone thought if they could just get their hands on it, untold wealth would fall at their door. If you did not understand the model, you could not comprehend what to do. Likewise, You cannot simply hand our model to just any fund manager. Their emotions will interfere and they will over-ride what has to be done because at the extremes, people’s emotions prevent them from becoming good traders.

That is why i say I teach How To Survive Your Own Trading Decisions. I can teach you the model, but you will not be able to trade it without conviction.