Quotes from Jim Paul

We hope the future will turn out well, but we fear it won't. As members of the crowd we will always take these emotions to extremes. When the herd instinct combines with hope and fear in a market environment, we get panics and manias.

On Death and Dying, by Elisabeth Kübler-Ross.

the author of Beat the Dealer and a mathematics professor who devised a winning card-counting system on a high-speed computer.

The gambler isn't playing a game; he is just playing.

So instead of trying to monitor yourself for all the different emotions and what they might mean, simply monitor yourself for the few stages of crowd formation. By avoiding the tell-tale symptoms that accompany becoming part of the crowd, you will automatically avoid emotionalism.

A DANGEROUS COMBINATION As the epigraph to this chapter indicates, most people don't know whether they are engaging in inherent- or created-risk activities. Couple this with people's failure to distinguish between the two types of loss-producing events, continuous and discrete, introduced at the end of the last chapter, and you have a disaster waiting to happen.

The minute it doesn't feel good, stop doing it. It's that simple.

In betting and gambling games if you stop acting and do nothing, the losses will stop. But when investing, trading, or speculating, if you're losing and stop acting, the losses don't stop; they can continue to grow almost indefinitely.

then speculating, and therefore having a plan, is the only way to deal with the uncertainty of the future in the markets. Given this definition, for the remainder of the book Speculator (capitalized) will be used to include investors, speculators, and traders, all of whom are Speculating.

The sequence of thinking before acting is the exact definition of the word plan. Therefore, speculating and planning are the same thing. A plan allows you to speculate with a long time horizon (as an investor), a short time horizon (as a trader), or on a spread relationship (as a basis trader or hedger).

In order to be speculating, by definition you must have a plan.

Betting and gambling are suitable for discrete events but not for continuous processes. If you introduce the behavioral characteristics of betting or gambling into a continuous process, you are leaving yourself open to enormous losses.

But when investing, trading, or speculating, if you're losing and stop acting, the losses don't stop; they can continue to grow almost indefinitely.

1. The first psychological fallacy is the tendency to overvalue wagers involving a low probability of a high gain and to undervalue wagers involving a relatively high probability of low gain. The best examples are the favorites and the long shots at racetracks.

We live in the world we made up.

Smart people learn from their mistakes and wise people learn from somebody else's mistakes.

A fool must now and then be right by chance. —WILLIAM COWPER

Speculating is the application of intellectual examination and systematic analysis to the problem of the uncertain future.

All I'm trying to say is that if you're not willing to observe this, if you're just going to condemn it, you're never going to see it. It's there, whether you like it or not. This is stupid life-force we're dealing with here," he said. "Think how old it is, Jim. Think how huge it is. Understanding it doesn't make any difference.

Personalizing successes sets people up for disastrous failure. They begin to treat the success as a personal reflection rather than the result of capitalizing on a good opportunity, being at the right place at the right time, or even being just plain lucky.

Success can be built upon repeated failues when the failures aren't taken personally; likewise, failure can be built upon repeated successes when the successes are taken personally.

There's nothing worse than two people who have on the same position talking to each other about the position.

Weber sandstone a billion years old. This rock was Precambrian, I read, a term like postmodern, suggesting that what it names is so mysterious as to require identification by what it isn't.

Speculating (and this includes investing and trading) is the only human endeavor in which what feels good is the right thing to do.