THE ZURICH AXIOMS

[rickjust]

hi,
i have been reading a book called the "zurich axioms "
i am sure many of you have heard of it . it is by far the best book i have read on speculating and getting rich .
here are the 12 axioms and their 16 minor axioms thanks to tradersvic.com for typing them out. enjoy



The 12 Major and 16 Minor Axioms
The book Zurich Axioms contains a set of principles providing a practical philosophy and trading psychology for the realistic management of risk. These common sense principles is available everyone and can be practised anyone - the man in the street and not just the expert.

Although many of the axioms go againts the conventional belief and traditional wisdom of the investment advice business, those who master the meanings and implemented the concepts will be successful - just like the enterprising Swiss speculators who devised them became rich, while many investors who follow the conventional path do not.

Major Axiom 1: On Risk
Worry is not a sickness but a sign of health. If you are not worried, you are not risking enough.

Put your money at risk. Don't be afraid to get hurt a little. The degree of risk you will usually be dealing with is not hair-raisingly high. By being willing to face it, you give yourself the only realistic chance you have of rising above the great unrich. Worry is the hot and tart sauce of life. Once you get used to it, you enjoy it.

Minor Axiom I
Always play for meaningful stakes.

Minor Axiom II
Resist the allure of diversification.
(Because it forces you to violate precept minor axiom 1.)
(Because it creates situation where gains and losses cancel each other out.)
(Because you end up with too many balls in the air.)

Major Axiom 2: On Greed
Always take your profit too soon.

Sell too soon. Don't hope for winning streaks to go on and on. Don't stretch your luck. Expect winning streaks to be short. When you reach a previously decided-upon ending position, cash out and walk away. Do this even when everything looks rosy, when everyone else is saying the boom will keep roaring along.

The ONLY reason for not doing it would be that some new situation has arisen, and this situation makes you all but certain that you can go on winning for a while.

Except in such usual circumstances, get in the habit of selling too soon. And when you've sold, don't torment yourself if the winning continues without you.

Minor Axiom III
Decide in advance what gain you want from a venture, and when you get it, get out.

Major Axiom 3: On Hope
When the ship starts to sink, don't pray. Jump.

Learning to take losses is an essential speculative technique. MOST never learn it. Take losses at once and move on. Take small losses to protect yourself from the big ones.

Beware the 3 obstacles to jumping ship:

Fear of regret (that the loser will turn out to be a winner when you've bailed-out)
Unwillingness to abandon part of an investment (become willing to abandon)
Difficulty of admitting you made a mistake.
Minor Axiom IV
Accept small losses cheerfully as a fact of life. Expect to experience several while awaiting a large gain.

Major Axiom 4: On Forecasts
Human behavior cannot be predicted. Distrust anyone who claims to know the future, however dimly.

Nobody has the foggiest notion of what will happen in the future. Nobody. Never lose sight of the possibility you have made a bad bet.

Major Axiom 5: On Patterns
The Emperor Axiom
Chaos is not dangerous until it begins to look orderly.

Do not look for order where order does not exist. Do not overlook the large role chance takes in any speculation. Study information in whatever speculative medium to improve chances and take your best shot. Stay light on your feet ready to jump this way or that. You are dealing with chaos, as long as you are alert to that fact you can keep yourself from getting hurt.
Internal Monolog goes:
"OK. I've done my homework as well as I know how. I think this bet can pay off for me. But since I cannot see or control all the random events that will affect what happens to my money. I know the chance of me being wrong is large. Therefore I will stay light on my feet, ready to jump this way or that when whatever is going to happen happens."

Minor Axiom V
Beware the historians trap.
The Historian's trap is a particular kind of orderly illusion. It is based on the age-old but entirely unwarranted belief that history repeats itself. People who hold this belief - which is to say perhaps ninety-nine out of every hundred people on earth - believe as a corollary proposition that the orderly repetition of history allows for accurate forecasting in certain situations.... Don't fall into this trap. It is true that history repeats itself sometimes, but most often it doesn't, and in any case it never does so in a reliable enough way that you can prudently bet money on it.

Minor Axiom VI
Beware the Chartist's illusion.

Minor Axiom VII
Beware the correlation and causality delusions.

Minor Axiom VIII
Beware the Gambler's Fallacy. (This is my lucky day.)

Major Axiom 6: On Mobility
Avoid putting down roots. They impede motion.

Be ready to jump away from trouble or seize opportunity. You do not have to bounce from one speculation to another like a ping-pong ball. All your moves should be made only after a careful assessment of the odds for and against, and no move should be made for trivial reasons. But when a venture is clearly souring, or when something clearly more promising comes into view, then you must sever those roots and go. Don't let the roots get too thick to cut.

Minor Axiom IX
Do not become trapped in a souring venture because of sentiments like loyalty and nostalgia.

Minor Axiom X
Never hesitate to abandon a venture of something more attractive comes into view.

Major Axiom 7: On Intuition
A hunch can be trusted if it can be explained.

Though intuition is not infallible, it can be a useful speculative tool, if handled with care and skepticism.

If you are hit by strong hunch - put it to the test. Trust it only if you can explained it. That is only if you can identify within your mind a stored body of information out of which that hunch must reasonably be supposed to have arisen.

Be wary of any intuition that seems to promise some outcome you want badly.

Minor Axiom XI
Never confuse a hunch with a hope.

Major Axiom 8: On Religion and the Occult
It is unlikely that god's plan for the universe includes making you rich.

Assume you are on your own. Rely on nothing but your own wits.

Minor Axiom XII
If astrology worked, all astrologers would be rich.

Minor Axiom XIII
A superstition need not be exorcised. It can be enjoyed, provided it is kept in its place.

Major Axiom 9: On Optimism & Pessimism
Optimism means expecting the best, but confidence means knowing how you will handle the worst. Never make a move if you are merely optimistic.

Optimism can be a speculator's enemy. It feels good and is dangerous for that reason. It produces a clouding of judgment. It can lead you into a venture with no exits. Even when there is an exit, optimism can persuade you not to use it.
You should never make a move if you are merely optimistic. Before committing your money to a venture, ask how you will save yourself if things go wrong. Once you have that worked out, you've got something better than optimism. You've got confidence.

Major Axiom 10: On Consensus
Disregard the majority opinion. It is probably wrong.

Probably wrong. Figure everything out for yourself.

Minor Axiom XIV
Never follow speculative fads. Often, the best time to buy something is when no-one else wants it.

Major Axiom 11: On Stubbornness
If it doesn't pay off the first time forget it.

Perseverance is a good idea for spiders and kings, but not always for speculators. Don't fall into the trap of trying to squeeze a gain out of any single speculative entity.

Don't chase any investment in a spirit of stubbornness. Reject any thought that an investment "owes you" something. And don't buy the alluring, but fallacious idea that you can improve a bad situation by averaging down.

Minor Axiom XV
Never try to save a bad investment by averaging down.

Major Axiom 12: On Planning
Long-range plans engender the dangerous belief that the future is under control. It is important never to take your own long-range plans, or other people's, too seriously.

React to events as they occur in the present. Put your money into ventures as they present themselves and withdraw it from hazards as they loom up. Value the freedom that will allow you to do this. Don't ever sign that freedom away.
There is only one long-range financial plan you need: the intention to grow rich. The how is not knowable or plan-able. All you need to know is that you will do it somehow.

Minor Axiom XVI
Shun long-term investments.

[amstocks82]

There are a few problems with the Zurich Axioms.

1) Imagine those investors who have been building wealth for 10 or 15 years who has built up his or her capital. Should such an investor risk years of building wealth on one roll of the dice?

I believe that new investors should be invested in one or two things because concentration is the key to building wealth.

2) The Zurich Axioms appear to pre-suppose that long term investment do not pay off. I would say that many 1 to 3 year investments have the best risk/return. This applies if a person is good at researching and evaluating stocks.

3) Investors like Warren Buffet are long term value investors and seem to have the best results as measured over long time frames.

Imagine an investor who uses the Zurich Axioms and who builds a portfolio worth $10 million. A couple of bad investments in a row and this investor is back under a million.

An investor who builds his skills could take the $10 million and continue to build the portfolio using low risk strategies.

I would say that some investors are not well suited to long term value investors. Others are not well suited to being short term investers. In the stock market, there is room for many philosophies including the Zurich Axioms -- I just would not recommend them to someone who has built a large portfolio.

[rickjust]

hi ,
thanks for your reply.
the zurich axioms are not perfect and may not be suited to everyone, but , like everything here they are only about you and your way of investing or speculating.
you are in the the human condition and all you are really doing is deciding on one illusion for another.  do only what works for you , and only that. don't compare yourself with anyone.
evryone always brings up buffet . is he the only good long term speculator?
there must be others and there must be plenty of others who have made their fortunes on speculation i.e. the swiss bankers who developed the axioms.
so , again , do only what works for you . take only the risks you are willing to take.
in the end it will not matter given that we all end up the same .
you brought the world with you when you came , you take it with you when you go.
thanks
maxi

[nexta]

Hi rickjust,
thanks for Zurich Axioms. My system is similar like this one and I didn´t know it before.
I agree with most of that rules. I am quite new in stockmarket. I hade lost  money with CZ brokers and their recommendations,  I believed them as I thought they are profesionals in stocks - my mistake of course. 
Now I am investing in my own way and as I told, this looks like ZA. I need to be better and to learn a lot in finding new opportunities and tips... I  will buy that book.
  Thank you for it once again :-))
nexta