Two
Speed World: Gerald Ashley
The Impact of
Explosive and Gradual Change - Its Effect on You and Everything Else
Gerald Ashley: Two Speed World - Part 2
Gerald Ashley, author of Two
Speed World and Financial
Speculation, talks to Kenny of www.tradersdaytrading.com.
Gerald is an advisor, a writer and a speaker on business risk and
decision making. Gerald has over thirty years of experience in
international finance, having once worked for Baring Brothers in London
and in Hong Kong, as well as for the Bank for International Settlements
in Basel, Switzerland
The Gerald Ashley Interview Continued....
Kenny: Are there
patterns to this behaviour and if so what creates these cycles?
Gerald:
Yes - essentially these were examined at
least a century ago and still hold good. As Jesse Livermore said Wall
Street never changes because human nature never changes. I cover much
of this in Financial Speculation
Kenny: Are any of these cycles
more important than others?
Gerald:
I think the Business Cycle can be tied to the major asset
classes, it’s not perfect but the same overall patterns repeat time
after time. The trouble is they are often of long duration, sometimes
10 years plus, and the collective market memory is far shorter. Also
the credit Cycle is particularly persistent, dare one say predictable?
Kenny: How reliable are these
cycles in the financial markets?
Gerald:
Reasonably, they are better suited to long term asset allocation than
the usual trading horizons though.
Kenny: How do we cope when it goes
wrong and the market action does not conform to the current
cycle?
Gerald:
Badly - because we are wrong and most players rather be right
than necessarily make money. Cycles "fail" usually when we over
optimise them, try to make ludicrous pin point decisions and lose
patience.
Kenny: Is there a
difference between Risk management and money management, or are they
effectively different terms for the same thing?
Gerald:
They are essentially the same thing, and the hardest part of the
business. I always say trading is 10% direction, 20% timing and 70%
money management. In fact in Financial Speculation I recall how used to
trade by tossing a coin AND then managing the resultant position!
Kenny: How important is risk
management to a trader and what can happen if we don't understand risk
management properly?
Gerald:
It is pretty much the only thing that counts. It is often
fairly easy to call the direction, and it is possible to be average or
lucky with timing - but money management is a brutal discipline that
takes years to master.
Kenny: So why is it that
some traders are more successful than others, what qualities make the
difference between being successful or not?
Gerald:
Successful traders have three qualities, patience, realistic
expectations and a ruthless ability to admit when they are wrong and to
take action. They are not attached to positions or ideas and can cut
losses very easily.
Kenny:
Can we learn to become a successful person or is it something
that we either have or do not have within us?
Gerald:
Yes - BUT it is extremely hard. It takes hard work, dedication and
discipline to develop the skills I mentioned above.
Kenny: So, is there a formula that
we can use to become successful, a systematic process for analyzing
problems to come to the right decision?
Gerald:
Possibly but I sense that it is different for each individual. You have
to understand a lot about yourself before you can successfully trade.
We all see problems through a personal prism,that is why it’s so hard
to create a "formula" for successful trading. Each individual will have
a different approach.
Kenny: Coming back to
current markets, how have we managed to get ourselves into such an
economic mess?
Gerald:
.......Continue
to Two
Speed World-3: The
Gerald Ashley Interview Part 3
2 Speed World
by Gerald Ashley
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