Sins of a trader: Impatience

This blog is more of personal discovery than anything else. I write this to gain a stronger understanding and control over my own behavior. I am very interested of the psychological side of trading to understand myself and people acting in the markets.

Sorry for this long gap between posts. My job contract ended and I returned to school at the beginning of this month. Now, once a gain my life is about studying and searching for a good summer job for next year.

We live exciting times right now. Especially this later half of this year has been full of events and volatility, mostly thanks to PIIGS countries and scared investors and speculators taking (or trying to take) advantage of the markets. It isn't easy being a European right now. Politicians are failing to make any real decisions and seeing the future is quite difficult. 

All this volatility and uncertainty has made me notice my problem about being impatient with the markets. I find it hard to see the longer timeline in some cases.

Currently I don't have problems about being patient if I make the investment with the idea that it will take time. A big portion of my money is invested into a start-up company with a timeline of 10 years. I know where my money is and what I expect to happen and that it probably is a damn slow process as well. Before the trade I know that this stock takes time to grow, if it ever does. I have to patiently wait for a long time before making any decisive moves.

Impatience comes along when I don't know how long I might have to wait but I´m expecting it to happen soon. This works with my personal life as well. If I can't see a reason why it can't happen right now then it starts to annoy me. When I´m doing trading in a shorter timeline impatience rises because this huge volatility makes it impossible to know what happens tomorrow or next week or next month. I can be quite certain that with most companies I will get my money back and gain a profit, eventually. Right now nobody knows how long that word really is.. 

Slowly I´m finding targets that suit my level of risk and expected time. Maybe that is how I view things. Risk is a factor that is automated into my mind already. I only focus on expected return and expected time to gain that profit. There are plenty of good companies with very cheap share prices. Still I´m avoiding those. Because I don't have big sums to invest and I don't want to wait for a long time to gain that certain profit. I rather take risks with my money to gain a bigger pile. 

Slowly and by experience I´m gaining understanding of my own head.

Quants: Alchemists of Wall Street

This time I´ll share this fascinating video with you. It tells you about programs and mathematical models that are used in Wall Street. Which are more and more used to estimate bankruptcies, share prices and everything they just can. It also tells us a story of those very intelligent people behind those programs.

In the end I would agree with the opinion that there is too much math being used. Human behavior is a foundation that can’t be properly modeled. Our motives, behavior, our actions can’t be modeled mathematically. Problems eventually rise because of this imperfect modelling.

Quants are the math wizards and computer programmers in the engine room of our global financial system who designed the financial products that almost crashed Wall st. The credit crunch has shown how the global financial system has become increasingly dependent on mathematical models trying to quantify human (economic) behaviour. Now the quants are at the heart of yet another technological revolution in finance: trading at the speed of light. 
What are the risks of treating the economy and its markets as a complex machine? Will we be able to keep control of this model-based financial system, or have we created a monster?
A story about greed, fear and randomness from the insides of Wall Street.