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$25 Billion Hedge Fund Manager Explains 'How To Be A Great Trader'

  
  Education
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Some perspective on ‘efficient markets’ from Elliott Management’s Paul Singer,

The fact that the vast majority of investors and traders cannot (with rare exceptions) beat the markets over long periods of time is not an argument for efficiency.Rather, the reason is that they are mostly doing the same thing sharing the same set of assumptions, and following the same impulses.

The fact that a basic assumption about the world is widely held does not make it true, nor does it make trading and pricing decisions based on that assumption efficient regardless of how liquid markets pricing in that assumption appear to be!

Certainly there are periods of time when some markets and submarkets appear to be efficient, but those who have vision, creativity and an understanding of the broader context of markets will make greater returns and/or attain a superior risk profile (assuming they do not get run over by standing rigidly against the sometimes-deeply false passions of the day expressed by the consensus).

How do the select few more or less continuously make money when the “efficient” markets are moving all over the place? Why do most investors fail, over long periods of time, to keep up with their desired index? And why do some people blow up? (more…)

UK Trader Fined 60,000 Pounds For Outsmarting Algos

  
Analysis, Education
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Yet another UK trader is being punished by overzealous regulators for an accomplishment that should instead have earned him accolades: Outsmarting the machines.
In a case that echoes some of the circumstances surrounding the scapegoating of former UK-based trader Nav Sarao, former Bank of America Merrill Lynch bond trader Paul Walter has been fined 60,000 pounds by the FCA for a practice that regulators call ‘algo baiting’.
Algorithm baiting is similar to spoofing – a practice that has been banned by stock-market regulators as those markets have embraced high-frequency trading practices that have broken markets and made them more vulnerable to this type of manipulation. But fixed income markets, like the Dutch loan market Walter is accused of manipulating, have been slower to embrace HFT-type trading. Because of this delay, Walter is a pioneer. Using BrokerTec, a popular fixed-income trading platform, Walter would place a bunch of bids for a given bond, triggering trend-following algos to follow suit. Then he would quickly cancel the bids. Here’s a more complete explanation per the Financial Times. 

 Mr Walter entered bids for Dutch state loans that pushed up their price. Then, when other algorithmic trades followed him in response and raised their bids, Mr Walter sold to them and cancelled his quote. This happened 11 times between July and August 2014 while he was working for the bank, the FCA said, while on one occasion he did the opposite. He netted a total of €22,000 profit from this “algo baiting”.

Mark Steward, the head of FCA enforcement, said the FCA would remain “vigilant” in detecting abusive practices like “algo bating”. Of course, programmers could also build better algorithms, stamping out the practice without any help from the government.
(more…)

Roubini sounds alarm on bond market 'vigilantes'

  
Analysis, Economy, Education
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The United States may fall victim to bond “vigilantes” targeting indebted nations from the United Kingdom to Japan in a potential second stage of the financial crisis, New York University professor Nouriel Roubini said.

“Bond market vigilantes have already woken up in Greece, in Spain, in Portugal, in Ireland, in Iceland, and soon enough they could wake up in the UK, in Japan, in the United States, if we keep on running very large fiscal deficits,” Roubini said at an event at the London School of Economics. “The chances are, they are going to wake up in the United States in the next three years and say, ‘this is unsustainable.'”

The euro has touched a four-year low against the dollar on concern nations with the largest budget deficits will struggle to meet the European Union’s austerity requirements. Roubini, speaking in a lecture hall packed with students who then queued to meet him at a book-signing, suggested that the public debt burden incurred after the banking panic of 2008 may now cause the financial crisis to metamorphose.

“There is now a massive re-leveraging of the public sector, with budget deficits on the order of 10 percent” of gross domestic product “in a number of countries,” Roubini said. “History would suggest that maybe this crisis is not really over. We just finished the first stage and there’s a risk of ending up in the second stage of this financial crisis.”

The US posted its largest April budget deficit on record as the excess of spending over revenue rose to $82.7 billion. The federal debt is currently projected to reach 90 percent of the economy by 2020.

Roubini, who predicted in 2006 that a financial crisis was imminent, said that the record US budget deficit may persist amid a stalemate in Congress between Republicans blocking tax increases and Democrats who oppose cuts in spending.

“In many advanced economies, the political will to do the right thing is constrained,” he said.

Roubini reiterated that the euro region faces the threat of a breakup after the Greek budget crisis. The European Union said on Tuesday it transferred the first instalment of emergency loans to Greece, one day before 8.5 billion euros ($10.4 billion) of bonds come due.

“Even today there is a risk of a breakup of the monetary union, the euro zone as well,” Roubini said.

“A double dip recession in the euro zone” is “something that’s not unlikely, given what’s happening.”

Observations on Life and Markets

  
  Education

-Investing is the most difficult of sports: nowhere else does one begin a career by opposing the world’s most accomplished professionals.

-Respect is the first casualty in lost love.

-Four industries dominate the economy: hope, escape, protection, and convenience.

-Success is the point at which talent and skill meet opportunity.

-The aim of all trading education: to encourage trading.

-The printing press democratized the acquisition of knowledge; the computer has democratized its dissemination.

-Date markets before deciding to marry them.

-Anatomy of a bad trade: Hope, then despair.

-Love, once present, never dies. It must be killed.

-Many a trader fears boredom more than loss, thereby experiencing the two in sequence.

-Work without talent is drudgery; talent without work is self-betrayal.

-Good traders master a market; great traders master markets.

-Goodness of character is measured in loyalty to others; greatness of character is measured in loyalty to principle.

-One encounters losing traders as often as one encounters losing golfers–and for much the same reason.

-Show me what a man loathes, and I will show you what he cannot accept in himself.

-Trading is the only sport in which the rules governing the players change constantly—and without notice.

-The essential message of Web 2.0: Knowledge resides in minds, not just mind.

-Two traders: one increases size after a loss; the other gets smaller. Both continue to lose.

-The absence of self-acceptance too often masquerades as the quest for self-improvement.

-Fidelity to purpose: the mark of good investments and great investors.

-Talent is the better part of trading psychology.

-The foolhardy trade is the courageous trade held a few minutes longer.

-In all fields, performance belongs not just to the talented, but to the prepared.

-Self esteem is treating ourselves with justice, not kindness.

-Addiction: when the desire to trade exceeds the desire to make money.

Read & Learn………..and Comment if u have time !

Have the proper mindset

  
  Education
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Trading is not for everyone.  There certainly is a high burnout factor among professional traders due to the stress involved.  Think of the markets as various shark tanks, with a certain number of sharks fighting for those scraps of meat.

Some of the work personality traits that will help you succeed over the long run include:

Having a thick skin, being able to remove emotions, ability to think clearly in the moment when all hell is breaking loose, attention to detail, pattern recognition, analytical mind, aversion to gambling for gambling’s sake, creative and innovative thinking.

These can be developed through experience, although some certainly have these more “ingrained” in themselves from the beginning.  Having a full life outside of your trading is also important – the ability to “switch off” and not take your trading results home with you each day will lead to a longer and happier trading career.

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