58
Evidence Based Investing (EBI)
The new buzz term complete with books and seminars that one can pay to learn about the newest investment philosophy. According to those that subscribe to EBI, it should provide superior returns without the stress of constant monitoring and timing optimal entry and exit positions.
We know that traders have an active philosophy with respect to entry and exit points. We also know that Technical Analysis uses past patterns to predict trends and future probability. Many traditional (buy and hold) investors will use TA to time entry and exit positions. We also know that hucksters use game theory such as the Monty Hall Problem on bullboards and in social media as well as newsletters/email blasts to try to manipulate enough investors that share prices will move in the desired direction. Whether one actively trades or uses TA is not as critical as understanding how an active trading approach works and understanding if a new share price trend in direction can be explained by technical analysis (short term or a trend). Similarly, recognizing when the scammers are using game theory to manipulate share prices is valuable because it may explain short term price volatility.
From our first article back in early 2016, we discussed the difference between Fundamental Analysis and Technical Analysis and to be successful at investing in the legal cannabis industry just may require a hybrid approach. Fundamental Analysis tends to be more of a buy and hold approach based on understanding the factors of the company and its environment (competitors, political and economic, regulatory, legal status, etc). We pioneered viewing the industry as a vibrant ecosystem and you can see why. It is a simple yet complex view of the system just as it is with any ecosystem that exists in nature. Shocks and changes to the industry were then defined by a word that we createdand that word is “Ecoforming”. Some of the industry’s changes would be natural or using the ecosystem metaphor would be ‘evolutionary’.