Article/Sina Financial Opinion Leader (WeChat official account kopleader), institutional column, author of RIH reading session, President Tan
People are overconfident, so although your prediction accuracy is only 50%, you will selectively remember your mistakes and only remember your correctness. For a period of time, you will mistakenly think that your accuracy rate is more than 50% and that you are awesome.
Why is the stock god doomed to be killed? Good morning, casting friends!
The A-share market rebounded strongly yesterday, and the headmaster said he was very happy. Because you can boast again.
Yesterday morning's RIH reading conference clearly pointed out that the rebound was about to begin, and for the first time since the beginning of the stock crash 3.0, 21 gold stocks were recommended to everyone.
If you don't believe it, see here: 21 gold shares you can buy on your own initiative| Entropy College Timing Report 0202
It seems that the last time I pushed stocks was when the rebound just started last September.
Is this attitude not obvious enough?
As a result, it rose sharply yesterday. Hmm, I'm so naive.
President, you are indeed wise, powerful, and jade tree facing the wind... I am the leader!
Well, that's the end of today's boasting. Now let's begin to talk seriously.
Actually, there is nothing to brag about. The reason is very simple. If you are always in the market, you must be able to say right a few times occasionally.
Today, the headmaster would like to emphasize once again that prediction is a very dangerous thing.
Why? Please listen to me.
You know the coin toss game. If the sample size is very small, such as only throwing ten times, then several of them are totally unpredictable.
In extreme cases, ten times in a row may be positive, or ten times in a row may be negative.
Because in a small sample, the probability is failure.
Therefore, the basic law of probability in statistics is called the law of large numbers, because it is only valid in large samples.
If you toss a coin 10000 times, you will find that the probability of positive is basically stable at about 50%.
Well, let's go back to the market forecast.
If you are a person who does not understand the stock market at all, it is exactly the same for you to predict the rise and fall of the market as to toss a coin.
Then in a small sample, you may get it right several times.
For example, if you only predict once a year, for ten consecutive years, it is equivalent to tossing a coin ten times.
Well, even if the prediction is correct for ten years, it doesn't mean too much. Maybe you are lucky enough.
Because in a small sample, the probability is basically invalid, and luck dominates.
And those who have been able to predict correctly for ten years in a row, not to mention ten years, will be able to hold their head in the stock market for three or five years. But do you dare to believe such a god?
If it is in a large sample, for example, if you forecast the market every day, it will be regarded as a large sample after thousands of predictions over the past ten years.
In a large sample, theoretically your prediction accuracy will be stable at about 50%. That is to say, half right, half wrong.
Is this prediction meaningful?
On the surface, it seems that the prediction is half right and half wrong. Although it doesn't make much sense, it should at least be harmless.
But looking at this problem more deeply, this kind of prediction is very harmful. The reasons are as follows:
1、 People are overconfident Therefore, although your prediction accuracy is only 50%, you will selectively remember your mistakes and only remember your correctness. For a period of time, you will mistakenly think that your accuracy rate is more than 50% and that you are awesome.
2. When you think your accuracy rate exceeds 50%, you will start to take risks and increase leverage. Once you encounter a black swan, such as the stock market crash in the second half of last year, you may lose money after adding leverage.
3. The so-called accuracy rate of 50% is still an ideal situation. In fact, your accuracy rate may not even reach 50%. Because the stock market is a more complicated system than a coin toss, and many of the information is contradictory, which will seriously interfere with your judgment.
4、 The bigger challenge comes from emotional interference. Originally, the efficiency you predicted was 50%, but from the prediction to the actual execution of the transaction, you also faced many disturbances from greed, fear and other emotions. This process will encounter a lot of losses. Finally, when implemented, 30% efficiency is good. Excuse me, is 30% worth it?
5. Forecasting will cost you a lot of learning costs. You have spent a lot of time, energy and resources, running on the right road every day. In fact, there are no eggs.
6. Frequent transactions caused by continuous prediction will bring great transaction costs.
7、 Constant prediction and failure will bring you huge psychological costs. Let your happiness index decrease, let you grow old quickly
8. Even if you are one in a million, you are gifted. The accuracy rate of prediction can reach 55% (higher is basically impossible), but with various losses, the final efficiency is difficult to exceed 50%.
9. And the most deadly one. If you make a wrong prediction once, you will lose 50%. If you make a correct prediction once, you will earn 50%. Is this a fair rule? So the result is like this: the principal is 100000 yuan, and the prediction is wrong once, and it changes to 50000 yuan. Then the prediction was correct once, and it became 75000.
oh my ladygaga！ Even if the prediction accuracy rate reaches 50%, it will be stable in the long run!!!
After reading these, you should understand. Those so-called stock gods who are so accurate in prediction are doomed to be killed. Do you dare to make predictions?
Of course, the whole market has a huge demand for forecasting. It's like a lonely boat floating on the boundless sea, always eager to see a lighthouse. Even if that lighthouse is wrong, it took you into the ditch. It's better to see the lighthouse guided than to float alone.
This is based on human needs and cannot be changed.
But what the headmaster wants to tell you is that if you want to make a long-term stable profit, this matter has nothing to do with forecasting a dime. (It is possible for anyone to do it several times in the short term)
Investment is anti human. Don't come to play if you can't stand it.
So, what? What should we do without forecasting?
And it will be decomposed in the next step.
As for the judgment of the market before the festival, yesterday's article has made it very clear that today I will not be wordy.
The latest signals in the timing report 0203 of Entropy College are:
CSI 300 : short position (the signal occurred at the close of June 6, 2016)
GEM: short (the signal occurred at the close of January 5, 2016)
Small and medium-sized board: short position (the signal occurred at the close of January 5, 2016)
(If you don't know about the timing system of Entropy College, please stamp here [RIH original] Major benefits for investors! RIH will launch the No.1 timing system of Entropy College)
Entropy secretary is a person who grasps the general trend and will not change so easily.
The headmaster believes that this round of rebound will have certain operability. But whether to operate depends on you.
(The author of this article introduces: senior financial media person, founder of RIH investment reading conference, and quantitative investor. The original Entropy College timing system accurately grasped all the big trends of A shares in history. WeChat official account RIH118.)
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