Thread: Buy when there's blood in the streets

If you are waiting for blood in the streets (rather than trading in any kind of weather); then wait for the blood level to start decreasing before buying--for you never know how long the bloodletting will last.

Warren Buffett lived by that rule and did pretty well for himself sure, he hasn't always been right, but when it comes to investing no one is. As long as you're right more often than not

Originally Posted by sniper

As long as you're right more often than not

Well...that sounds good when people repeat it, but there's more to the equation.

For example, some take profits quickly once they're right, but let their losses run when they're 'not right.' If you're losses to wins profit ratio is 3:1, you have to be right MUCH more often than not. (In this case, you'd have to be right 75% of the time to break even...check my math--it's late.)

This is akin to 'pot odds' for us poker players.

Most don't deal with risk/money management or statistics in their trading. At the poker table, we call them 'fish.' They enable the solid players to make profits in that they provide liquidity. The same is true in the financial markets.

EDiT: So, whether you have to be right more often than not; or right A LOT more often than not depends upon how you handle your winning and losing positions. As usual: It Depends.

The hard part is figuring out why an individual stock has crashed and if it has further downside. If we could figure that out, we would all be millionaires.

Originally Posted by jkenjohnson

The hard part is ... and if it has further downside. If we could figure that out, we would all be millionaires.

Right. If we all could figure it out; WE ALL would be millionaires.
Also true: If some figure it out; SOME would be millionaires.