ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

12 principles of speculation strategies in stocks

Updated on July 17, 2008
 

The author (Max) son of a very wealthy Swiss citizen by name, Franz Heinrich, (whom Americans preferred to call Frank Henry), jotted down all the principles of speculation strategies, particularly in stocks, adopted by his father and his father's several other Swiss friends to make large fortunes on the Wall Street in USA in roaring Eighties. Principles perfected by these Swiss gentlemen have therefore been called "Zurich Axioms" by Max.

Enumerated below are twelve major principles and sixteen minor ones with brief comments on each of them:

First Major Axiom: On Risk

"Worry is not a sickness but sign of health. If you are not worried, you are not risking enough."

Adventure is what makes life worth living. Every occupation has its aches and pains. The rich have to worry about their wealth. But, if there is a choice between remaining poor and worry-free, the selection is obvious. It is better to be wealthy and worried than to be worry-free and poor.

Minor Axiom I:

"Always play for Meaningful Stakes."

If you invest Rs. 1000 and your investment doubles, you have only Rs. 2000 and are still poor! So if you want to be rich, you must increase your stakes.

Minor Axiom II:

"Resist the allure of diversification".

Firstly, diversification negates the earlier principle of playing for meaningful stakes.

Secondly, it may keep you where you began so that your gains on few will cancel out the losses on the other few.

Thirdly, it entails keeping track of many more items leading to confusion and occasional panic.

Second Major Axiom: On Greed

"Always take your profit too soon."

Lay investors having made the investment tend to stay too long on it out of greed for higher profits. But, one must conquer this weakness and book profits soon. If one is less greedy for more profits one will take in more. Don't stretch your luck. In effect, it suggests, SELL sooner than later.

Minor Axiom III:

"Decide in advance what gain you want from the venture, and when you get it, get out. Decide where the finish line is before you start the race".

This is self explanatory and hence needs no comment.

Third Major Axiom: On Hope

"When the ship starts to sink, don't pray, jump"

This axiom is about what to do when things go wrong. Learn how to accept a loss. One should accept small losses to protect oneself from big ones. When the market starts falling, sell, take your money and run!

Minor Axiom IV:

"Accept small losses cheerfully as a fact of life."

Expect to experience several smaller losses while awaiting a large gain.

Fourth Major Axiom: On Forecasts

"Human behavior cannot be predicted. Distrust anyone who claims to know the future, however dimly."

The story of a monkey throwing darts on the stock exchange page of a newspaper, to select the companies to buy, and coming out a winner is too well known to be recited. Recent news from London, further proves the truth, when an untrained chemist's stock selections, in a widely publicized contest open to all and sundry, registered higher appreciation over several full time highly qualified fund managers' well researched selections. Human events cannot be predicted by any method by anyone and, hence, don't trust anybody's predictions.

Fifth Major Axiom: On Patterns

"Chaos is not dangerous until it begins to look orderly."

The truth is that the world of money is a world of patternless disorder and utter chaos. This axiom is a commentary on Technical Analysis - a branch of investment strategies based on charts and patterns. The fact is, no formula that ignores own intuition's dominant role can ever be trusted.

Minor Axiom V:

"Beware the Historian's Trap".

This is based on the age old but entirely unwarranted belief that history repeats itself.

Minor Axiom VI:

"Beware the Chartist's Illusion".

Life is never a straight line. Let us not be hypnotised by a line on a chart.

Minor Axiom VII:

"Beware the Co-relation and Causality Delusions."

Don't be taken in by coincidences in the market.

Minor Axiom VIII:

"Beware the Gambler's Fallacy."

There is a gambling theory which suggests that one should put small stakes initially and test their luck, and if these turn out well one should go for big stakes on the dice table. But this is not correct. It only shows that winning streaks happen. But nothing is orderly about it. You can't know how long it will last or when it will strike.

Sixth Major Axiom: On Mobility

"A putting down roots. They impede motion".

You may feel socially comforting to have roots. But in financial life, roots can cost a lot of money. Have a flexible approach while investing. This axiom implies a state of mind.

Minor Axiom IX:

"Do not become trapped in a souring venture because of sentiments like loyalty and nostalgia."

Do not develop emotional attachment to your investment. You should feel free to sell when desired.

Minor Axiom X:

"Never hesitate to abandon a venture if something more attractive comes into view."

Never get attached to things, but only to people. Otherwise it hits your mobility. Never get rooted in an investment. You should remain footloose, ready to jump away from trouble or into a profitable opportunity as and when circumstances demand.

Seventh Major Axiom: On Intuition

'A hunch can be trusted if it can be explained.'

A good hunch is something that you know but you don't know how to recognise it. When a hunch hits you, try to locate some data in your mind for any familiarity. Then only should you act on it.

Minor Axiom XI:

'Never confuse a hunch with a hope'.

Be highly skeptical. Examine every hunch with extra care.

Eighth Major Axiom: On Religion and The Occult

'It is unlikely that god's plan for the universe includes making you rich'.

You can't only pray that you should be made rich. You will have to work at becoming rich. Mere prayers will not suffice.

Minor Axiom XII:

'If Astrology worked, all astrologers would be rich.'

This is self explanatory. Don't trust predictions.

Minor Axiom XIII:

'As superstition need not be exorcised, it can be enjoyed provided it is kept in its place.'

In your day-to-day financial matters, act rationally. But, when buying a lottery ticket, give it a full play to amuse yourself.

Ninth Major Axiom: On Optimism and Pessimism

'Optimism means expecting the best, but confidence means knowing how you will handle the worst. Never make a move if you are merely optimistic.'

In poker and a lot of other speculative worlds, things are never as bad as they seem - most of the times they are WORSE.

Confidence comes not from expecting the best but from knowing how you will handle the worst. Optimism can be treacherous because it makes you feel good.

Tenth Major Axiom: On Consensus

'Disregard the majority opinion. It is probably wrong'.

It is likely that the Truth has been found out by a few rather than by many.

Minor Axiom XIV:

'Never follow speculative fads. Often, the best time to buy something is when nobody else wants it.'

This is the best way to get a good stock cheaply.

Eleventh Major Axiom: On Stubbornness

'If it doesn't pay off the first time, forget it'.

If at first you don't succeed, try and try again and you will succeed in the end. This is good advice for spiders and kings but not for ordinary persons with regard to financial matters. Every trial is a costly error.

Minor Axiom XV:

'Never try to save a bad investment by averaging down.'

If the price of the stock goes down after your purchase don't buy more to bring down' the average cost of your total holding. Investigate why the price went down rather than put good money in a bad bargain.

Twelfth Major Axiom: On Planning

'Long-range plans engender the dangerous belief that the future is under control. It is important never to take your own long-range plans, or other people's seriously.'

This is self explanatory and hence needs no comment.

Minor Axiom XVI:

'Shun long-term investments.'

If possible try to a long-term investments. The author noticed that the Swiss group never took a long-term view of their stock purchases. They always sold out as soon as their targeted profit was achieved.

Prajna Capital

 

Simple! Sensible!!

Prajna Capital is formed to enhance people's awareness on the range of investment avenues and opportunities available at present modern time.

Investment Planning, Retirement Planning, Tax Planning, Financial Planning, Mutual Funds, Insurance, Wealth Management, Portfolio Management Services, Equity, Stocks, General/Medical Insurance, Travel Insurance, Financial Advisory Services

http://prajnacapital.blogspot.com/

Comments

    0 of 8192 characters used
    Post Comment

    • profile image

      Mansi Karna 

      9 years ago

      fantastic,brilliant, mind-blowing. It's going to plant inme the will to win andwith that the difference.

    working

    This website uses cookies

    As a user in the EEA, your approval is needed on a few things. To provide a better website experience, hubpages.com uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

    For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at: https://hubpages.com/privacy-policy#gdpr

    Show Details
    Necessary
    HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
    LoginThis is necessary to sign in to the HubPages Service.
    Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
    AkismetThis is used to detect comment spam. (Privacy Policy)
    HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
    HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
    Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
    CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
    Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the googleapis.com or gstatic.com domains, for performance and efficiency reasons. (Privacy Policy)
    Features
    Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
    Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
    Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
    Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
    Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
    VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
    PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
    Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
    MavenThis supports the Maven widget and search functionality. (Privacy Policy)
    Marketing
    Google AdSenseThis is an ad network. (Privacy Policy)
    Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
    Index ExchangeThis is an ad network. (Privacy Policy)
    SovrnThis is an ad network. (Privacy Policy)
    Facebook AdsThis is an ad network. (Privacy Policy)
    Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
    AppNexusThis is an ad network. (Privacy Policy)
    OpenxThis is an ad network. (Privacy Policy)
    Rubicon ProjectThis is an ad network. (Privacy Policy)
    TripleLiftThis is an ad network. (Privacy Policy)
    Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
    Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
    Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
    Statistics
    Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
    ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
    Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)