Tag Archives: trade

What’s the Difference Between an Investor and a Trader?

When I write, I often think that the world of finance is divided into two camps. (Maybe three.)

There are investors and traders. (I also think the latter category can be divided into another camp of “speculators.”)

Are these actually different and distinct groups?

I’ll list some of the key differences between investors and traders. But then I’d like to see if, just like Donnie and Marie were a little bit country and a little bit rock and roll, that we might be a little bit of each group.

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Do You Have Trading or Investing Rituals?

pic by visualpanic @ Flickr

Everyone has rituals.

Wake up. Brush teeth. Take a shower. Read a blog.

Rituals help us frame our day and frame our mind for more uncertain tasks.

What about trading, or investing rituals?

Some traders admit that they have very specific trading rituals. They may check the Dow futures for instance. For others, it’s a half hour watching CNBC or Fox Business. Others read financial sites and newspapers, or check out overseas markets. Investors may read a prospectus from cover to boring cover.

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Trade Everything: How Technology is Opening New Markets

The types of derivatives and exotic derivatives that are traded are pretty amazing. You can take positions on everything from interest rates to weather, from pig futures to soybeans.

You haven’t seen anything yet. The number of items that can be traded is increasing, another sign of advancing technology and the the continual search for new wealth building opportunities.The types of assets you can trade is also becoming more varied.

Just take a look at Intrade.

Intrade is a prediction market that’s drawing a lot of interest. The prediction market allows people to trade typical commodities, like gold, oil, and currencies. Political outcomes, like the 2008 Presidential elections, are among the most popular trades on Intrade.

But, there are markets for a wide and weird range of other assets and scenarios.

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Expert Profiles: Jez Liberty Sees Vast Automated Trading Potential

Expert Profiles gives Automated and Algorithmic trading system developers and theorists a chance to introduce us to their concepts and strategies.

Our expert featured in this edition of Expert Profiles is Jez Liberty.

Jez is extremely passionate about Automated Trading and its technology. We’ve enjoyed Jez’s posts on Automated Trading at his blog, Au.Tra.Sy blog.

Here’s Jez’s interview:

What made you choose to develop Automated Trading systems?

I have a long-held fascination with the trading world and a passion for technology. So automated/mechanical trading system sits at an ideal crossroads for me and represents an exciting topic to work on.

Additionally the prospect of going into a corporate career never appealed to me; whereas automated trading systems can give you independence and more freedom (and hopefully better wealth).

What are the challenges of developing Automated Trading systems?

There are lot of information out there and it can be hard to know what to pick to get started. In my case, I started trying to automate Technical Analysis patterns with “brute force” backtesting/optimization, which did not prove successful (I am skeptical on the long-term profitability of that approach). Further down the line, I stepped back and got more interested in learning about the nature of the markets, statistics and money management. This led me to have a clear vision of how I could succeed in trading automated systems.

But developing and trading an automated trading system is also a long process, far from the get-rich-quick scheme, that many dubious salesmen would have you believe. So you have to put in some hard work. But the reward and payoff are definitely worth it!

Working on your own can also make you feel isolated. However, my blog and other blogs such as Online Investing are a great way to engage and collaborate with like-minded people.

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Are Humans Programmed To Lose: The Greed Factor



Yesterday, we talked about social proof as one program that hinders your success as a trader. Social proof is the tendency to rely on others to validate one’s actions.

But there are other programs that can cause you to lose at trading and investing. One of the most common is greed: an unrelenting desire for more.

I know what you’re thinking: But isn’t everyone in the market seeking more money? When you make a trade, aren’t you trying to make more money?

Isn’t greed good for traders?

Actually, greed is based more on the feeling of lack and limitation. We have to make a distinction between a healthy attitude toward abundance and a blinding greed that becomes fixated on losing positions.

Greed serves as blinders for investors.

Here’s a scenario:

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Are Humans Programmed To Lose Money?



As the maker of Automated Trading financial systems, we offer a few reasons why computer-based trading can help investors. They operate continually. They edit out emotions. And, they can be programmed for success.

When it comes to trading, it seems that most humans are programmed to lose.

This week, we’ll take a look at the ways you and I can be programmed to lose, especially when it comes to trading decisions.

In today’s post, we’ll take a look at social proof, a psychological theory, that may exert a powerful influence on unsuccessful trading strategies. Social proof is nothing more than “follow the leader,” except, in this case, no one knows who the leader is. And no one knows why the leader is the leader.

Here’s how it works.

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Will Automated Trading Turn Me Into A Lazy Slob?


The pictures of the Singularity include some unflattering visions of humanity:

Large gelatinous shapes, reaching for Cheetos with one flipper and resting the other flipper on the remote for the three-dimensional virtual reality environment. Meanwhile, an Automated Trading system will earn money for this creature.

This is silly. Cheetos will cease to function as a snack food during the Technological Singularity.

OK. Seriously.

There are some trader who look at Automated Trading as the lazy way out. They, after all, enjoy trading and don’t think a machine can trade for them.

Fair enough.

If Automated Trading isn’t a servant for a trader, it can be a boon companion.

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If You Want To Save The Planet, Get Rich First

Creative Commons Photo by Stefan: Daikokuten is one of the Seven Gods of Fortune. He is the god of wealth, commerce and trade (hence the bales of rice under his feet).

Creative Commons Photo by Stefan: Daikokuten is one of the Seven Gods of Fortune. He is the god of wealth, commerce and trade (hence the bales of rice under his feet).

Most of the environmental movement is built on the theory, that the richer we get, the dirtier the world gets. At first glance, it seems to be logical. The more money we make, the more things we consume, and the more energy we use.

In fact, ecologist Paul Ehrlich and the physicist John P. Holdren (President Obama’s science adviser) came up with a whole new equation to sum up this “money is the root of all environmental evil” theory. It basically says, environmental impact=Population X Affluence X Technology (I=PAT).

But John Tierney, who wrote a piece for the New York Times, says this is based on flawed logic. He adds that common sense and a steady stream of data from the 1970s (when the I=PAT theory was first formed) reveal this flaw.

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Nothing But Net: Envisioning Your Investment Success

Visualizing your shots--investment and otherwise--can improve your chances of success.

Visualizing your shots--investment and otherwise--can improve your chances of success.

A group of basketball players were separated into three teams.

Team A practiced taking shots on the court and practiced visualization exercises.

Team B just practiced visualization exercises, seeing their well-tossed ball swish through the hoop.

Team C didn’t do a thing. Just hung out in the locker room and ate pizza, probably. (Man, I wish I was picked for team!)

Then researchers made them take shots out on the court, recording the number of baskets they made.

Needless to say, Team C didn’t exactly light up the boards. In fact, they kind of stunk. And, as you probably guessed, Team A made the most shots.

You would probably guess that Team B did about the same as Team C. I mean, they just sat around and day-dreamed, right?

Not so. Team B almost did as good as Team A. This research suggests that visualizing your goals is a real performance enhancer.

What does this mean for your investing and trading?

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Lie: It Takes Too Much Time And Effort To Manage A Portfolio

A good portion of independent investors are drawn to trading and the market, in general, because they enjoy it. It’s a hobby for many.

But, a vast group of potential investors are left on the doorstep of financial freedom because they believe that it takes special skills and a whole lot of time and effort to become a “trader.” They may invest in a few stocks, but rumors that they will be forced to spend hours locked away with a copy of Value Line and research earnings reports keeps them from actively trading and investing.

With a full-time job and family commitments, time is a commodity they can’t trade.

So, they need someone else to mind their money, they decide.

The financial industry reinforces this stereotype, making it clear that only financial analysts with 120-hour work weeks can understand the market.

But is this true?

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