Where is the correct answer?

──────────────────────────────

Series "Trading Philosophy"……10

──────────────────────────────

Should the red bean paste in taiyaki extend all the way to the tail?

If a debate on such a topic occurred, it would itself be interesting, wouldn’t it?

But there is no conclusion. It’s a matter of preference.

In the first two installments of the series "Trading Philosophy," we explained the Efficient Market Hypothesis.

In short, about whether stock market prices are efficient or not, there are arguments for and against the idea that “there is room to predict accurately.”

The fact that already happened but is not generally recognized—that is, a clearly existing change that is not reflected in market prices—the viewpoint of “considering the future of prices” advocated by the late Peter Drucker.

If the market were completely efficient, there would be nowhere for “the future that has already happened” and active management that selects promising stocks would not function.

Both are correct; that is the answer.

There is no need to clearly split into white and black.

If you think there is “hidden information” when looking at prices, you will go astray.

Because you would doubt the current price and all past price movements.

This part assumes that “the market is efficient.”

However, if it were 100% efficient, there would be no breakthrough to earn profits.

• Overly optimistic trends, i.e., situations of being overly sold or overly bought
• A bubble (the entire market being bought at a certain period)
• Anomalies (unexplainable seasonal rises and falls or cyclical fluctuations)
• Sudden changes

Searching for these is the breakthrough that yields results surpassing other participants.

Is the market efficient?

Academic considerations are also “hypotheses” or “claims.”

In practice, they must inevitably become more ambiguous.

Furthermore, rather than dedicating all attention to “how to predict,”

“Follow your own hypotheses in trading and adapt to price movements”

“Occasionally hit a predictive mark and secure a reasonable profit”

“Even if you are occasionally mistaken, you won’t suffer large losses”

is the philosophy proposed by the Haru Investment Research Institute’s theory of market technique.

By the way, the part that says “do not think there is hidden information when looking at prices” is an important current-awareness. If you do not take past facts at face value, the act of looking at charts itself would be denied.

We will explain this in the next issue of the series.