Archives of “few minutes” tag

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List of Things I Do When I Plan a Trade

  
  Education
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planfirst1. My better trades come when I have found a place to quietly think about the trade idea, before I take the trade. I lay down for a few minutes and let my mind roam. This settles me down at an otherwise tense moment. It also allows me to clearly consider what I like or don’t like about the trade.

2. It’s important to me to ignore outside influences when I am planning a trade. I’d rather pay attention to my own reasons for the trade, instead of someone else’s views of the currency pair that have nothing to do with the indicators and other things that I look at when wanting to buy or sell. (more…)

The strategy of one of the best-performing hedge fund

  
Analysis, Education
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Norway is not what you would call a hotbed for hedge funds. Due to restrictive regulatory requirements and an almost uniformly long-only focused investor-community, there are only a handful of hedge funds managed out of Norway.

Despite this, Norwegian Warren Short Term Trading (WST) is one of the best performing hedge funds in the world. Since the fund’s inception in November 2011, its return has been 46.7% with a net 2012-return of 29.1% after fees (pdf).

WST hedge fund manager Peter Chester Warren explains how this works:

Our hypothesis is that most of what happens in the markets during a single day is noise created by orders, rumors and other temporary influences and that there is no informational value in this. Unlike our other funds, we do not try to separate the signal from the noise in WST but accept it for being just noise. … Time is instead spent on creating mathematical and statistical models meant to uncover short-term human behavior.

This is a significantly different strategy than that of most other hedge funds, which typically own assets over a period of time. WST rarely owns assets longer than a few minutes or sometimes even a few seconds.

And every day when the asset manager goes to sleep, he holds zero assets. Then, when he gets back in to the office the next day, he starts from scratch again, looking for tiny opportunities in the markets using a combination of correlations, math and experience. (more…)

Ed Seykota: The Jademaster

  
  Education
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Lots of people go into trading as a way to get rich quick. The fact is that rarely if ever will happen. Trading is a career and a life-long study.  The markets are always changing, and they are always the same. I have invested so much time, money, and study into trading. To excel in trading requires extremely hard work and discipline. The same combination required for excellence in any field.

If you knew that is not way to fail in trading, how hard would you like to work on it? Would you ever quit?

Seykota is considered to be one of the best traders to ever live. The following story helped me immensely and I think of it often, very often.

The Jademaster

One cold winter morning a young man walks five miles through the snow. He knocks on the Jademaster’s door. The Jademaster answers with a broom in his hand.

“Yes?”

“I want to learn about Jade.”

“Very well then, come in out of the cold.”

They sit by the fire sipping hot green tea. The Jademaster presses a green stone deeply into the young man’s hand and begins to talk about tree frogs. After a few minutes, the young man interrupts.

“Excuse me, I am here to learn about Jade, not tree frogs.”

The Jademaster takes the stone and tells the young man to go home and return in a week. The following week the young man returns. The Jademaster presses another green stone into the young man’s hand and continues the story. Again, the young man interrupts. Again, the Jademaster sends him home. Weeks pass. The young man interrupts less and less. The young man also learns to brew the hot green tea, clean up the kitchen and sweep the floors. Spring comes.

One day, the young man observes, “The stone I hold is not genuine Jade.”

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