A Logical Approach to Investment Strategy Development

By Chris Ciovacco

Professional Coaches Study The Game And Their Opponents

Successful coaches in any sport break down film to better understand the small details that lead to long-term success. The same principles can be applied to the financial markets, trading, and investing.

Michael Lombardi, who worked with NFL coach Bill Belichick for five years in Cleveland, and then during the 2014 and 2015 seasons in New England, on attention to detail via The Ringer:

Belichick treats every game like a Super Bowl; no detail is too small, no possible scenario or situation goes overlooked. No Patriots opponent is underestimated or taken lightly – ever.

Backtesting: One Form Of Market Study

One of the great things about the financial markets is there are countless ways to skin the risk-management cat. One approach involves breaking down “stock market game film” into minute details via a process known as backtesting.

We are currently in the process of backtesting some new front-end screens for our market model. To many, the level of detail being meticulously studied may border on insane, but studying market movements is very similar to reviewing game film; it provides extremely valuable insight and allows investors to be better prepared for countless scenarios. A small portion of one of our backtesting spreadsheets is shown below.

Film Study: Five 2017 Market Tells

This week’s video is based on numerous market tendencies that provide insight into the present day risk-reward equation, ranging from resiliency to skepticism.

After you click play, use the button in the lower-right corner of the video player to view in full-screen mode. Hit Esc to exit full-screen mode.Video

Video

Markets, Like Teams, Have Tendencies

Those who have taken the time to review market film know bullish and bearish tendencies exist just as they do in the world of sports. If history was irrelevant, studying game film would be a waste of time. From The Ringer on Bill Belichick’s preparation before facing offensive coordinator Kyle Shanahan in the Super Bowl:

Don’t underestimate history on Sunday. I suspect Belichick watched every game that his defense has played against anyone named Shanahan, whether it’s Atlanta’s offensive coordinator Kyle or his father (and an old Belichick rival) Mike. Those games will become his compass.

An Open Mind Allows For In Game Adjustments

An important part of any investment strategy or system is remaining flexible and open to changing conditions, a concept that applies to sports as well. From The Ringer:

Of course, adjusting quickly during any football game is just as important. Belichick operates like General George S. Patton, who spent weeks studying the writing of his German adversary, Field Marshal Erwin Rommel, then used that found knowledge to crush him in their epic tank battle in Tunisia. On Sunday, imagine Belichick growling his version of “Rommel, you magnificent bastard. I read your book!”

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