Essence of Trading: Modern Financial Economics Is Just Alchemy In Disguise

Economics is the social science

Many people confuse the economy as a science like physics or medicine. The economy is part of the social sciences. This is not the kind of science that can produce accurate forecasts or accurate predictions. In this sense , most theories come you hear about the economy have no practical value in the trade. When the cars of economists with their economic theories are made, the cars will explode and burn when you drive, even if the car did not move .

Finance is the direction a little further. Like all people with common sense knows the price of everything is determined by a market mechanism by the buyers and sellers is controlled . They can do what they want, but their actions are primarily driven target . To earn the target for each participant in a normal market money. However, economists take on the movement of prices in our markets to be without examine whether the reality matches their care at all random. If the most basic element in the study of finance, the price movement is not even really considered at all, how can we believe that it has a practical value ?

Alchemy The economy is in its current form

With this understanding, it is not surprising that the estimates and projections generated by the labels above disciplines are always contradictory in its practitioners . There is almost always no agreement among economists that the stock market leads . Financial analysts almost always completely apart to give opinions when a stock moves . And worst of all, these supposed leaders in the field of economy all failed to say that the financial crisis would happen in 2008.

We must recognize that the economy in its current form otherwise alchemy. Many of these call or analysts and economists are very poorly alchemists. You do not really know what they are doing. They only guess , imagine , and b * t # LLSH for their livelihood . All kinds of theories with all kinds of bizarre analysis techniques are invented by these guys - the collection of economic data , study the financial statements , analysis of historical prices . These techniques , often borrowed from other disciplines are created , to see if they can explain what happens in a market or the economy as a whole . Due to the origin of these techniques , this air analyzed so complicated that people think they are legitimate. No, they are not, because these unusual things can not produce the consistent results , which correspond to the real world .

Outside the academic world , there is a very good analysis techniques over the years by most people who are affected by the market develops - the participants , such as dealers and market-makers. These techniques focus on the most important - where the price is likely. An interesting fact about these techniques is that they are practical. Their work (or trading methods ) have no fanciful theories behind so there is no glamor or topic of discussion within the party. What these trading methods consistent business results that the participants remain in the market year after year to enable profitable.

During Medieval Times , found out about the alchemists, who were on their way to determine the metal content in the ores , or those who , like you have extracted metals from the ore , the techniques would keep themselves so that they can serve as powerful warlords . They could not understand what they were doing ( and in our eyes, they could in fact have totally messed concepts). But the important thing was that they developed processes and procedures that have achieved consistent, reproducible results .

See the parallel there ?

Alchemy is not bad at all

For Western alchemy , most were eventually flushed and disappeared. A part of the alchemy that works is the basis of modern chemistry. Processes such as distillation, invented by the alchemists . This poor alchemists , things voodoo magic and stimulate theory has now been sentenced forever in history. These alchemists worked real investigation with scientific thinking ( or practice) leaving us with useful knowledge are like the pioneers of modern science involved .

The good sign is that we are seeing improvements in the study of the economy in recent years. University finally succumbing to their mistakes as they . Not only by the most powerful players on the market, but also the general public as stupid and useless they are ridiculous The younger generations of economists have begun to question the foundations of accepted theories in economics . New branches as behavioral economics to address the concepts of the economy from a different angle and showed a lot of promise .

Do not mix trade and economic theories

Understanding the limits of economic theory in its present form will tell you how dangerous it is to make your business ideas from these concepts. I know it's hard to put a block in the head to your dealer your self - self - economist (which we all have opinions , where the economy is going ? ) To separate , but it must be done. Do not make financial decisions based on some good ideas of the image, because it will definitely affect your bottom line.

Remember , the main reason why economic theories fail, in reality , they do not produce accurate projections of the future.

The predictions of leading economists are worse than the weather get you all the days of your local weather man. If these "experts " economy can not produce consistent estimates with their know -how , how can you hope to do something meaningful with their theories ?

Results of the forward-looking

So what tools should be used in commercial or financial decisions ?

The various methods people use now has been producing consistent results.

Make no mistake , these methods , whether playing cards , analyzes the market size or a bunch of reading, are also a form of alchemy.

Comparing the accepted economic theories always fail to predict everything correctly , some of these methods and techniques show consistency in their ability to produce better trading results and forecasts. These are good methods , like the good things in alchemy . Although we do not know the reasons for these techniques as to produce consistent results, it is logical to use the lower economic theories .

You know , these techniques are far from perfect . In fact , you know most of them are borderline cases of alchemy. Therefore, you use them in your decision-making process after careful negotiations experience with methods (ie, back-testing and / or verification of manual card according to your preference ) and can confirm that you are good results .

Techniques , which is not consistent results have to be abandoned.

The most important of all , never trust a method of trading by 100%, although it has worked well for you for a long time . As a merchant , not only do we not get us to our positions , we are not married to trade as well as methods .

PS " An economist is someone who does not know what he's talking about - . , And do you feel it's your fault "

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