Amongst investors these days, there are a number of lively debates going on. Fundamental analysis versus technical analysis, the role of behavioral finance, or where the best investment ideas come from. Pulling no punches here, I maintain that in today’s modern stock market, you are either part of the Charting Age or you are in the Stone Age. The divergence of investor opinions on these subjects is not unlike similar debates in other fields.
In the scientific community, a significant number of pivotal ideas have historically come from “outsiders” who are not bound by the inbred conventions of a specific scientific discipline. In business school, I was taught to look for breakthrough ideas by surveying customers, interviewing market players and analyzing competitors’ strategies. On other fronts, various authors have written about the need to find your own individually stimulating space in which to ferment your own thoughts and thereby breed ideas either by the “slow hunch” approach or via the “aha moment” approach. Some have even suggested the bathtub or a fishing boat as creative options!
As a trader, I’ve found all of these woefully inappropriate. Revisiting my trading journal to find my most profitable trades, I realize that my best ideas have not resulted from some creative incubated hunch. Invariably, they have been the result of specific step-by-step disciplined investigation. My objective has not been to come up with unique undiscovered investment opportunities in the stock market. Generating new ideas like that yields a low probability trade for an individual investor. Instead, my objective has been to uncover what creative institutional investors deem as their most investable opportunities.
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