Strong Opinions, Weakly Held!

On June 28, I posted a chart that overlaid Silver prices today with Silver prices in 1980 (see here). I saw the two periods as an example of analog price behavior. My conclusion was that — based on price behavior of the 1980s — Silver was headed to $20. At the time of the post I felt strongly about the market prediction.

Then on July 4 I added a post titled, “A potentially bullish development in Silver.” Based on the newly released CFTC Commitment of Traders data, I saw a new development in the Silver market.

Of course I got hit with some snide comments — “How could I be a $20 bear one day and start changing my mind just a week later?”

One of my favorite web posts of all time was by a trader I greatly admire, Barry Ritholtz, author of the blog The Big Picture.  Barry is an astute market participant and observer. The post, from July 24, 2006, was titled “Strong Opinions, Weakly Held.” This blog, and the management philosophies it discussed, perfectly describe why I could hold strongly to a bear bias in Silver one week, and start to think differently just a week later.

Barry ended the post with the following sentence: “The bottom line is that strong opinions, weakly held is a mindset more investors need to familiarize themselves with.” I could not agree more.

Barry’s blog post was founded in the academic work of Professor Robert Sutton who teaches Management Science and Engineering at Stanford. Sutton’s work sought to distinquish between what was “smart” and what was “wisdom.”

As Ritholtz stated, “Being a successful investor often requires you to hold numerous conflicting concepts simultaneously — something many the average phyche has difficulty with. One must think through the best possible analysis for your positions, expend the time and effort to thoroughly test them. You need to be able to strongly argue your position — bullish, bearish or cash — but at the same time, be ready to admitt error and change views.”

When I express an opinion about a particular chart, it is most often a strongly held opinon. Keep in mind that for me a strong opinion does not necessarily equate to a trading position. Trading positions are brought about by a strong opinion PLUS a specific technical set up PLUS a favorable reward to risk relationship.

Strong Opinions, Weakly Held! What a great concept for a trader.

$$Study

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