Final post on my notes with my comments in italics
Earlier posts on the same book here,here, here and here
The thirteenth chapter discusses how robust systems can be developed. Systems which work in varying market situations are robust. The author gives an example from biological systems. He refers to the concept of simplicity and diversity. Simpler organisms are most resilient than complex ones which are adapted to specific environments. Also nature develops diverse organisms so that the ecosystem is shielded from the effects of a radical change in the environment. So systems or approaches built on these two concepts are more robust.
An investor following a simple and diverse approach will be more successful than others. For example, a value investor (simple approach) following a graham style approach, aribtrage and DCF based approach (diversity) can be fairly successful in varying market circumstances.
The fourteenth chapter discusses about the role of ego in investing. The simple rules discussed in the book are effective and profitable. However these simple rules do not feed the ego. When beginning traders use descretionary trading and use their own judgement, any win feeds the ego and feels good. You can now brag to your friends on how smart you are. The author mentions that this behavior is prevalent on online trading forums.
The same is applicable for value investors too. Value investing is a very effective and simple approach. However very few have the discipline to follow it consistently.
The author makes a very valid point for traders (and investors) that one should not wrap his ego around every trading win or loss. A failed trade or investment does not mean that you are an idiot or that a winning trade or investment does not mean that you are a genius. One should view failure and success in the market in the right perspective and not take it too personally (although it is easier said than done)
The last chapter discusses the Turtle trading rules in detail. It is however difficult for me to discuss them in detail here.
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