Archives of “January 2019” month

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The Foundation of Technical Analysis

  
  Education
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First Principles

  • Markets are highly random and are very, very close to being efficient.
  • It is impossible to make money trading without an edge.
  • Every edge we have is driven by an imbalance of buying and selling pressure.
  • The job of traders is to identify those points of imbalance and to restrict their activities in the markets to those times.
  • There are two competing forces at work in the market: mean reversion and range expansion.
  • These two forces express themselves in the market through the alternation of trends and trading ranges.

The Four Trades

  • Traders usually view market action through charts, which are useful tools, but are only tools.
  • Trades broadly fall into with-trend and countertrend trades. These two categories require significantly different mind-sets and approaches to trade management.
  • There are only four technical trades. Some trades are blends of more than one trade, or an application of one trade to a structure in another time frame, but these are just refinements. At their root, all technical trades fall into one of these categories:
  • Trend continuation.
  • Trend termination.
  • Support and resistance holding.
  • Support and resistance failing.
  • Each of these trades is more appropriate at one phase of the market cycle than another. If you apply the wrong trade to current market conditions, you will lose.

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Sex Is Spiking With The Markets

  
Analysis, Education
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Must Read ..ffffThe odds are you’ve been having a lot more sex this summer than you did last winter.Research suggests that testosterone is closely linked to market performance as well as sexual drive and performance. Basically, all three…ahem…rise and fall together.  (more…)

Accept you will make many mistakes

  
  Education
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Those who learn how to minimize the damage when they are wrong and who readily own up to the mistakes they make will do far better over the long haul. Making mistakes is a part of this game, but knowing how to handle them is everything. Likewise, if you attach your ego to your portfolio’s performance you are destined for failure. The market absolutely loves to kill those with big giant egos and who look for the markets as a place to prove how smart they are. Markets chew and spit out these folks routinely for good reason and they will continue to do so at every available opportunity.

Trading Wisdoms

  
  Education
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  • Being wrong is acceptable, but staying wrong is totally unacceptable. Being wrong isn’t a choice, but staying wrong is.
  • Understand that you will always make mistakes. The only way to prevent mistakes from turning into disasters is to accept losses while they are small and then move on
  • Concentrate on mastering one style that suits your personality. Most people just cannot weather the learning curve. As soon as it gets difficult, and their approach isn’t working up to their expectations, they begin to look for something else. As a result, they become slightly efficient in many areas without ever becoming very good in any single methodology.

Hedge Fund Job Titles Defined

  
  Education
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Hedge Fund AnalystA person who spends their day tracking the activities of people whose job they would have liked.
Quantitative ResearcherA person who can attach probabilities to future events by looking backwards.
Portfolio ManagerA person who has an enormous breadth of knowledge across a range of industries and is an expert in none of them.
StrategistA person who spends their day looking down at global events from 25,000ft but never has to land to take an active decision themselves (see “ Journalist” and “Consultant”).
Head of Quantitative SolutionsA person qualified to Ph.D level who used to earn an annual bonus at a CTA.
Head of RiskThe person who stops portfolio managers earning a bonus.
In-House MarketerA person who can ascribe someone else’s success in the firm to their own activities.
Chief Operating OfficerThe person who is thought to keep hedge funds running as businesses.
Deputy Chief Operating OfficerThe person who actually keeps hedge funds running as businesses.
Chief Investment OfficerThe guy whose name is on everyone’s business card.
Head TraderChief Algo Selector
Compliance OfficerFulfills the statutory requirement to have a fifth column in every firm in the financial sector.
Head of ComplianceChief Snitch
Head of TechnologyThe only person in the firm authorised to have self-defined mission-critical costs no-one else understands.
Head of Investor RelationsThe person that works with the most important existing clients to tidy up the s*** created by the CIO.
Chief Executive OfficerThe person individually chosen by the founder and Chief Investment Officer to buy the paperclips and liaise with the auditors.

MRI’s of Succesful Traders

  
  Education
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I’ve seen this study making the rounds on several websites now as a type of neuroeconomic confirmation of Buffetological principles…

Perhaps procedure might be slightly useful as a means of seeing physical brain improvement by training– such as that found through meditative practices.

“Traders who buy more aggressively based on NAcc signals earn less. High-earning traders have early warning signals in the anterior insular cortex before prices reach a peak, and sell coincidently with that signal, precipitating the crash. These experiments could help understand other cases in which human groups badly miscompute the value of actions or events.”

“Neuroeconomists Confirm Warren Buffet’s Wisdom”: (more…)

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