|
||||||||
|
||||||||
|
||||||||
|
|
 |
Why Things Fail
I have just started reading the book by economist Paul Ormerod "Why Things Fail" - although his focus is on businesses I saw some immediate correlations to trading in the opening chapters.
For instance, he suggests that business failures, both large and small are often caused by some kind of unexpected shock in their particular market that knocks the money flow possibilities of that particular business off kilter (presuming the business actually made money at all). The "shock" could be anything such as a new technological innovation, a scandal within the company etc. Ultimately however the company goes under because it runs out of money. The parallels are obvious. A trader is like a one man business, buying and selling. All businesses are really built to trade something. Hence every trade is really a business decision, and price shocks happen in the market day in day out. The trader loses money by either making bad decisions or else getting chewed up by market shocks. (Note that the importance of risk management shines out when viewed from this perspective). Ultimately he goes "out of business" when his account gets margin called. One other interesting point is that he says in the area of business there are always gurus attempting to reduce successful business practices down to a few rules that "anyone can apply" to their business to make millions. "Business-school thinking has fallen into the trap of standard economics: everyone can use the same rules and prosper. But most of the firms in Tom Peters' In Search of Excellence later failed to maintain their excellence, to say the least..." Rings a bell huh? |
|
|
| PREMIER SPONSORED LINKS |
Any information or material contained in the websites owned and operated by The Connors Group, Inc. (the "Company"), including but not limited to the THEFXMARKETS.COM, TRADINGMARKETS.COM, and THEMONEYBLOGS.COM websites (collectively, the "Websites"), and in the related services and products is provided for informational and educational purposes only. The information or material is NOT a recommendation or solicitation to buy or sell any security or other investment vehicle. Please review our full Disclaimer prior to using the Websites. Furthermore, your use of the Websites and all related services constitutes a legally binding agreement under the Company's terms and conditions. Please review the Terms and Conditions of Use. To better comprehend the Company's other practices and policies, please review the Privacy Policy and the Editorial Policy.
Copyright © 2008 The Connors Group, Inc.
<< My Home | The FX Markets Blog Home