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A Quick-and-Dirty Way to Time an Entry for a Position Trade

  
Analysis, Education

For position trades, you may not want to be too involved in the intraday timing for your entry. Nonetheless, rather than just buying at a random time, e.g. at the open or at the close, your entry price can be improved by taking note of the intraday trend using some quick-and-dirty methods.

A quick-and-dirty way to determine the trend is to say that if price is above the 50-period SMA, and the 50-period SMA is sloping upwards, then it is an uptrend. Reverse those conditions for a downtrend.

Now say you want to take a long position

  • If the intraday chart shows an uptrend based on the method above, then immediately enter your position.
  • If the intraday chart shows a downtrend, wait for the trend to change to up, then enter immediately.

If you want to take a short position, reverse the instructions above. If you want to add some complexity to trend determination, you can also add in an additional condition for higher highs and higher lows for uptrend, and lower highs and lower lows for downtrend.

Ex-JP Morgan traders and their artificial intelligence FX trading fund

  
Analysis, Education

A Bloomberg piece on an artificial intelligence-driven hedge fund run by two former JPMorgan  traders

Some interesting points:
  • fund uses so-called deep-learning algorithms to analyze data and forecast market moves
  • model monitors trading levels across a variety of asset classes as well as economic figures and consensus estimates, and assigns potential return probabilities to various trades
  • “It can say if you’re positioned this way, chances are you’re going to make a lot more money than the other way around
  • So the odds, the probabilities are with you, or there’s an asymmetric payoff in this sense.”
Not much more on detail etc., as you’d expect I guess. Link is here. 
Gotta keep learnin’ more on of this stuff!

HOW TO LOSE MONEY IN THE STOCK MARKET

  
  Education
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There are so many ways to lose money in the stock market but whether it is from blindly trusting what turns out to be a Bernie Madoff ponzi scheme to refusing to take a loss on a “sure thing”, the root cause of losses is our inability to objectively perceive market action without the many and varied biases associated with “money on the line”.

According to Mark Douglas…

In any particular trade you never really know how far prices will travel from any given point. If you never really know where the market may stop, it is very easy to believe there are no limits to how much you can make on any given trade. From a psychological perspective this characteristic will allow you to indulge yourself in the illusion that each trade has the potential of fulfilling your wildest dream of financial independence. Based on the consistency of market participants and their potential to act as a force great enough to move prices in your direction, the possibility of having your dreams fulfilled may not even remotely exist. However, if you believe it does, then you will have the tendency to gather only the kind of market information that will confirm and reinforce your belief, all the while denying vital information that may be telling you the best opportunity may be in the opposite direction.

There are several psychological factors that go into being able to assess accurately the market’s potential for movement in any given direction. One of them is releasing yourself from the notion that each trade has the potential to fulfill all your dreams. At the very least this illusion will be a major obstacle keeping you from learning how to perceive market action from an objective perspective. Otherwise, if you continually filter market information in such a way as to confirm this belief, learning to be objective won’t be a concern because you probably won’t have any money left to trade with (italics mine).

From Chapter Four of THE DISCIPLINED TRADER

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