“Good luck making investment decisions on gut feel,” writes Barry Ritholtz and I couldn’t agree more. But I also couldn’t agree less. Because I could flip that statement around and say good luck making investments without your gut feel.

We all know that a systematic, well thought approach to the market is far more effective than the seat-of-the-pants-let-me-see-how-this-goes-method that many of us employ. In fact, there is absolutely no dispute that a simple dollar cost averaging long only investment into the S&P index is the only assured way of making money in the market. This strategy beats 90% of all Masters of Universe hedge fund managers including Ray Dalio, Paul Tudor Jones, David Einhorn, Bill Ackman and anyone else you can think of with the exception of Warren Buffett and George Soros. 

But knowing something is true and feeling it true are two very different things. And although we like to think of ourselves as thinking organisms  that feel, we are actually feeling organisms that think. As a colleague of mine remarked this week in his typical sardonic East European way, “we are just animals with bigger brains.”
 
So the intellectual truth of an idea is not enough. It must be emotionally true as well if we are to accept it.

I fully comprehend the power of indexing - yet I have avoided it all my life because I had the misfortune of starting my “savings career” at the peak of the dot com boom only to have to cash out the money for my son’s education around 2010 when the S&P basically made two round trips to the same place. The disappointment of seeing my money produce zero return for more than a decade colored my attitude towards indexing for the rest of my life. That was a very dumb decision in retrospect. I would have saved tens of thousands of hours of work achieving the very same results that I did by day trading - but history couldn’t have gone any other way. Although I knew intellectually that indexing worked, I didn’t accept it emotionally and therefore for me it would have never worked no matter how many times I would have tried it. I would have inevitably sold at the bottom and bought at the top and never achieved even remotely close results of the passive  index.

Past performance is not indicative of future results. Trading forex carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade any such leveraged products you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading on margin, and seek advice from an independent financial advisor if you have any doubts.

Education feed Join Telegram

Editors’ Picks

EUR/USD retreats toward 1.0550 as dollar rebounds

EUR/USD retreats toward 1.0550 as dollar rebounds

EUR/USD has lost its traction in the American session and retreated to the 1.0550 area. In the absence of high-tier macroeconomic data releases, the dollar is staging a rebound with the US Dollar Index rising above 103.00 and forcing the pair to edge lower.

EUR/USD News

GBP/USD consolidates its weekly gains below 1.2500

GBP/USD consolidates its weekly gains below 1.2500

GBP/USD has extended its sideways grind below 1.2500 into the second half of the day on Friday with the dollar staying resilient against its rivals. Nevertheless, the pair remains on track to snap a four-week losing streak.

GBP/USD News

USD/JPY struggles to gain any meaningful traction despite risk-on, stuck around 128.00

USD/JPY struggles to gain any meaningful traction despite risk-on, stuck around 128.00

USD/JPY attracted buying on Friday and recovered further from the monthly low touched on Thursday. The risk-on impulse undermined the safe-haven JPY and extended support amid modest USD strength. Recession fears held back bulls from placing aggressive bets and kept a lid on any meaningful gains.

USD/JPY News

Editors’ Picks

EUR/USD retreats toward 1.0550 as dollar rebounds

EUR/USD retreats toward 1.0550 as dollar rebounds

EUR/USD has lost its traction in the American session and retreated to the 1.0550 area. In the absence of high-tier macroeconomic data releases, the dollar is staging a rebound with the US Dollar Index rising above 103.00 and forcing the pair to edge lower.

EUR/USD News

GBP/USD consolidates its weekly gains below 1.2500

GBP/USD consolidates its weekly gains below 1.2500

GBP/USD has extended its sideways grind below 1.2500 into the second half of the day on Friday with the dollar staying resilient against its rivals. Nevertheless, the pair remains on track to snap a four-week losing streak.

GBP/USD News

Gold loses traction, drops below $1,840

Gold loses traction, drops below $1,840

Gold came under modest bearish pressure in the American session on Friday and dropped below $1,840. The benchmark 10-year US Treasury bond yield stays quiet above 2.8%, helping XAU/USD limit its losses ahead of the weekend.

Gold News

Bitcoin price will bounce to $36,000, but what happens next will leave you shocked

Bitcoin price will bounce to $36,000, but what happens next will leave you shocked

A brief technical and on-chain analysis on Bitcoin price. Here, analysts evaluate where BTC could be heading next. Does the possibility for a cat bounce make sense?

Read more

PANW shows bullish reversal chart pattern after earnings beat

PANW shows bullish reversal chart pattern after earnings beat

PANW stock benefits from continued strong revenue growth. Palo Alto Networks now nearly services half of the Global 2000. PANW stock is showing a bullish reversal pattern on its daily chart.

Read more

RECOMMENDED LESSONS

7 Ways to Avoid Forex Scams

The forex industry is recently seeing more and more scams. Here are 7 ways to avoid losing your money in such scams: Forex scams are becoming frequent. Michael Greenberg reports on luxurious expenses, including a submarine bought from the money taken from forex traders. Here’s another report of a forex fraud. So, how can we avoid falling in such forex scams?

What Are the 10 Fatal Mistakes Traders Make

Trading is exciting. Trading is hard. Trading is extremely hard. Some say that it takes more than 10,000 hours to master. Others believe that trading is the way to quick riches. They might be both wrong. What is important to know that no matter how experienced you are, mistakes will be part of the trading process.

Strategy

Money Management

Psychology