One quickly recognizes that market participants were very savvy way back in the day. I’ve always assumed that investors today are more intelligent and armed with better capabilities.

I question that assumption.

We almost certainly don’t have higher IQs, and I think our core understanding of how humans interact in a marketplace to balance their greed for profits and their fear of losses probably hasn’t developed much over the past 100 years. We’ve simply “rediscovered” things that people have identified at other points in time.

Technology and implementation may change, but in the end, capital is controlled by humans who still make the final decisions.

Some things never change.

An old-time book called, “Profits in the stock market,” by H.M. Gartley highlights the point. The book was initially published in 1935, but the discussions and arguments sound eerily similar to the same arguments and discussions that go on in the current market. We won’t comment on the specifics of what Gartley suggests because that isn’t the point of this post (even though he did talk about moving average rules almost a century ago!). What is fascinating about Gartley is his understanding of how investors make investment decisions and the debates in the market over the best approaches and methodologies.(1)

First, the debate over systematic approaches or discretionary approaches (a debate we’ve covered in depth): Our original thinking was that investors didn’t even consider systematic processes back in the “old days,” because they didn’t have computers/data and the body of research on behavioral biases had not been formally documented. Errr. Wrong.

From Gartley:

The difference between losses and profits frequently hinges upon trading in a hit-or-miss fashion, or systematizing one’s speculation…it is the purpose of this course to encourage the reader to…[use] certain systematic methods which have proved profitable to successful traders…

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