Video Link : https://youtu.be/xE79WpU2Dkg
In this episode, Guy Spier was asked in his eight rules of investing, number six was, "never trade when the market is open," why that's one of the rules?
In this episode, you’ll learn:
What Guy Spier meant by, "try not to trade when the market is open."
The false impression of investing in stocks.
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AUDIENCE MEMBER 00:00
In your eight rules, I was curious, number six was, "Never trade when the market is open." I was just curious why that's one of the rules?
GUY SPIER 00:07
Yeah, so one of the rules is, "Never trade when the market is open."
If it said never then I should correct it, because what I should say is, "try not to trade when the market is open," because I think there are, you know, in the real world, there are always exceptions that you want it – so I try to leave myself the freedom to break those rules.
But, the – you know, so who –
Trade station, you know, you get your monitor, you get your access, you can trade at any time, you can react to prices. I mean, it gives this completely false impression, at least of what I'm trying to do. And I think that it's selling people false hope.
I think that the traders that make money – somebody I know was a chief – he recently left his job, but he was a chief currency trader for Goldman Sachs, for Citigroup. Citigroup gets huge flows and they work hard on getting those flows. They are not making money because they have any – they're make money because they can charge a bid-ask spread, and because they have temporary knowledge of a huge order that's just come in, that they can sort of like price away from the market a little bit, and then they can resell it to somebody else.
So maybe if you're a chief currency trader at Citigroup that trading idea works, or that approach to the markets work. But I think in the vast majority of circumstances – I mean, I'm trying to buy something today that will go up ideally 3x over three years or 4x like very, very large movements in price.
And I am blown away by the number of times that I, who at the time thought was rational, I now know better, would be dissuaded by the price movement on the day. So you know, the thing is priced at 10 and we know in retrospect that it was going to go to 50 and I didn't buy it because it was trading up by two, you know, by two basis points or something, and that really impacts you, and it's crazy.
So there's a – I found that it's just simpler. And it's actually, it's not I found, I learned it directly from Mohnish Pabrai. He showed me the rule and it was obvious to me the minute he said it.
Just don't allow yourself to trade when the market's open, decide the night before what you're going to do and then put the trade in. Decide – I mean, that doesn't mean you shouldn't put limit orders in or find some way to make sure that – but think about it in a quiet environment and then allow it to happen.