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Posts Tagged ‘trading’

Crowdsourcing The Personal Hedge Fund

February 2nd, 2014
BOTR

BOTR

Many people have problems with hedge funds and big investment conglomerates. They rake in billions of dollars and live like rock stars.

People hate them so much they protest constantly, occupying this and occupying that.

But, I don’t have a problem with them. In fact, the chants of sympathy for the poor and working class and hand-wringing over income inequality are typically a cover for the protesters who are simply jealous of the big financiers. Had they stumbled onto these opportunities, they would be in the same penthouse, driving the same Porsche.

Read more…

Accelerating Technology, Automated Trading, Investing, Online Investing AI , , , , , , ,

Can Investing Be a Spiritual Exercise?

April 1st, 2013

tradingbeyondI’m reading Van Tharp’s latest book, Trading Beyond the Matrix. I just started it so this will not be a complete review — expect that in the future, though.

But I am already intrigued.

Tharp believes that you don’t trade or invest in the market; you trade or invest in the beliefs of the market. Those beliefs are yours to control, or to allow them to control you. Hence, trading for Tharp is almost a yoga, a mental connection between brain and spirit. Indeed, there are yogic paths that stress mental exercises and meditation exercises.

But we don’t think of trading as a spiritual act. In fact, it’s treated almost as an act of defilement. Our society has twisted views on wealth and earning wealth. We praise and hate the practice. The structure of our tax system treats earning money as a sin by punishing — not rewarding — you for earning more money. It’s the ultimate sin and deserves the ultimate sin tax. Notice: there’s no progressive sales tax on cigarettes or alcohol based on use or over-use.

Tharp though approaches it almost as a Zen philosopher, who sees the extraordinary in the ordinary and the ordinary in the extraordinary. By consciously watching your thoughts and beliefs, the trader is learning about himself. As he learns about his mind, he is learning about the universe.

I sort of saw this coming from Tharp. The last book of his that I read — Super Trader — contained the prerequisite number of charts and graphs, along with trading tips, but did not shy away from spiritual matters. Tharp believes they are closely connected.

Once I’m finished I’ll try to post a review, or summary, of Trading Beyond the Matrix.

 

Resources:

Tharp Institute

Trade Your Way to Freedom

Super Trader

 

 

 

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Why Traders and Investors Rarely Attain Mastery

January 14th, 2013

For many of us, mastery is a journey, not a destination.

Mastery is not just about doing something well, it’s doing something effortlessly well and doing something so well that you add to that field or profession. Think Mozart or Picasso.

There’s something more about mastery  though. It’s more than a gift because there are those who are gifted with skills and knowledge, but never truly develop those skills.

Maybe it’s just too easy.

Mastery is something more than a gift or innate ability, something intangible.

To become a master, you must know yourself and you must know how to let your gift use you. Hidden under your psyche lies the motivations that drive you to mastery.

It’s that last step that causes most trouble. People who have certain abilities are channeled into careers, then realize they are not satisfied in those professions. We call it burnout.

Robert Greene in his new book, Mastery, says:

“Your strategy must be twofold: first, to realize as soon as possible that you have chosen your career for the wrong reasons, before your confidence takes a hit. And second, to actively rebel against those forces that have pushed you away from your true path.”

I think this is the key to why many investors or traders burn out so quickly. For every Warren Buffett, there are a few million former investors who dropped out of the field early, or slugged their way toward retirement.

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Adaptability–Can Machines Master the Market?

October 22nd, 2012

Each day, machines, not humans, are plowing through statistics and crunching numbers trying to devise trading algorithms to make money in stock markets, futures markets, commodities markets, and any other place that traders can turn a dime.

They’ve been successful.

But not totally successful. And not successful for long stretches.

The stories of trading strategies failing are just as common as stories of amazing machine-learning success in the market.

Why is that?

I’ll take a stab. I believe that most machine learning and artificial intelligence programs are essentially created short-sighted. To build an automated trading system, you “train” the program to understand data. This data can be technical or fundamental, or a range of other data sets. The program learns the relationships between the data and the market. When factor x goes up, the market reacts with a y, let’s say.

But, this data is not an object, per se, but is really a shadow of currents in a broader economy. So, the program ends up not be predictive at all. It is reacting to a reactive set of data.

Read more…

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How to Never, Ever Lose a Trade

August 5th, 2012

Most people will tell you that there’s no way to guarantee a winning trade.

Heck, most people can’t guarantee that you’ll win 50 percent of your trade.

I can

There are at least three ways to insure that every trade or investment you make is a winning one.

Treat Each Trade as a Lesson

Even if you lose money on a trade, that doesn’t mean that you lost. You can learn from each trade–even losing ones.

Each trade that loses you money may be teaching you a vital clue about your investment theories, or systems. If that’s true, that s0-called, “losing,” trade is invaluable. You may lose a little now… but reap great rewards later.

In a game of chess, this is like sacrificing a piece to move your opponent into check.

Losing Some Beats Losing It All

People hate to lose more than they love to win, but that doesn’t stop them from making stupid decisions. One decision is not to set a stop-loss — either mechanically, or mentally — for their trades. The result is they follow some really bad investments right into the gutter.

If you lose 3 percent, that’s actually a win compared to losing 10 percent, or 50 percent, or 100 percent.

Trading Discipline 

Despite losing financially, a losing trade may end up as a victory if you follow your trading discipline.

This discipline will pay off later with lower losses and higher gains.

Timing

There is no end point in trading. (Well, maybe when you die, I guess.) As long as you save some money, you have a chance to recover your losses and seize gains. Ultimately, learning how to correct your attitude about losing is the greatest win a trader can have.

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Can Positive Thinking Help Your Trading?

June 9th, 2012

Creative Commons--Flickr

Traders are an odd lot.

No pun intended.

Most who I have met are an odd combination of…

Cynic and dreamer.

Thrill seeker and number nerds.

Cocky and self-deprecating.

They can be all of those things at the same time. Mostly, though, they’re realists. Philosophies, like positive thinking, are, quite frankly, namby-pamby chicken shit thinking. But, according to lots of studies on meditation and positive thinking, this may not be a healthy–or a wealthy–attitude.

Reduce Stress
Trading is stressful. Is that the greatest understatement of the decade? According to the Mayo Clinic, reducing negative self-talk can lower stress. Self-talk is that stream of messages — negative and positive — that swirl around in your conscious brain. One of the steps of positive thinking is to eliminate the negative messages — or cut down on them — and insert positive self-talk.

Rebound Quicker
Positive people take punches, just like everyone else. But, they can pick themselves up quicker and get back into the game. It’s called resilience. For traders, sitting around feeling bad while there are opportunities to be had is a sure way to lose money.

Less Sick Time
You shouldn’t spend a lot of time away from the market. Changes happen quickly in the nanosecond world of trading. Optimistic people build better immune systems and that can mean less sick time.

Investing, Money, Success , , , , , ,

Good Looking Waitress Indicator and 49 Other Indicators to Save Your Portfolio

August 13th, 2011

Good looking waitresses could be bad for your assets. (Creative Commons.)

Can the number of good looking waitresses in a restaurant tell you something about the state of the economy?

Could Big Mac sales help you trade currencies?

They just might. You can check out The WSJ Guide to 50 Indicators by Simon Constable and Robert E. Wright for these–and a lot more financial forecasting devices.

Not all the indicators are as fun to research as waitresses and Big Macs. In a serious, but highly readable style, the authors introduce you to a wide-range of the most important portents of coming economic conditions.

The book does a good job of introducing a range of indicators–from macro-economic to micro-economic and from established to esoteric. There is the well-known Libor indicator, but there’s also, for instance, the aforementioned “good looking waitress”–or Vixen–indicator. Here’s how the latter works: Count the number of good looking waitresses–the more there are the worse the economy is.

Although, the authors also tell you that’s a risky trade and, depending on your marital status, a risky practice.

Read more…

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Human Traders Meet Their Computer Overlords

August 3rd, 2011

Photo Courtesy Creative Commons

Humans can do a lot of things better than computers–but that list is shrinking.

Once, investing and trading solely belonged to humans. Computers were number-crunching machines that helped investors and traders make decisions.

Then, algorithmic trading came along. Trading strategies designed and maintained by computers saw more and more action in the market. Although,there were always people nearby monitoring those trades.

Now, computers have taken another step toward mastering the market.

At a recent conference in Barcelona, Spain researchers released their findings that showed computer model trading agents beat human traders and other computer trading systems.

Read more…

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Trading Strategies of the Rich and Famous: Christian Baha

July 30th, 2011

Algorithmic Trader Christian Baha

The following is part of a series that I’ll be creating on trading strategies of well-known traders and investors. Today, we’ll look at the keys to the the investment and trading strategies of Christian Baha.

Trend following trading strategies are often referred to as “systems.” Systems are specific, disciplined actions that lead to specific results, in this case, making money.

It sounds like a machine, doesn’t it?

If so, you might think that you could design a software program or robot that could take these specific steps and generate an effective trading strategy. That was probably the same logical train of thought that led Christian Baha to design his algorithmic trading system.

Baha, a co-founder of Superfund, has made billions through his technical analysis-based trading systems. Initially, the group just provided software initially, but soon started their own fund. The fund has grown to $1.5 billion and has more than 55,000 retail and institutional investors.

In 2011, which wasn’t exactly a banner year for investors so far, the funds are general in the double-digit gain area.

So, what’s the secret sauce that makes these strategies tick?

Read more…

Automated Trading, Investing, Money, Online Investing AI , , , , , , , ,

Trend Commandments: A Book Review on Michael Covel’s Latest Book

July 12th, 2011

Trend Commandments--a new book by Michael Covel

Let me start off by saying that I am a big fan of Michael Covel. I read his blog. I am a Facebook fan. And I’ve read a few of his books. I constantly reference his book on the Turtle Traders.

I was pretty excited to see that he wrote a new book called, “Trend Commandments.”

If you know anything about Covel, you know he’s going to make things interesting. And he doesn’t disappoint.

However, if you thought this was a book that would offer some actionable insights into trend following–which I did–you might find Trend Commandments a little flat.

We’ll start with the good.

Trend Commandments does a good job at providing general reasons why investing in trends makes so much sense.

Covel also shows why trends occur in every market, all the time. If you’ve studied trend investing, this isn’t really a surprise, but for beginners this will be an eye-opening revelation. Most investors have been trained–maybe even brainwashed–into believing that you avoid bear markets. Not so. There are instruments and tactics–like shorting–that can produce profits even in the worst market, especially the worst market. You might counter: isn’t that risky? My answer: if you’re smart, it’s not as risky as letting your dollars die an inflationary death sitting in a bank account.

So, that’s all good, right?

Read more…

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