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The SEC Unanimously Votes to Ban “Flash Trading”

  
Education, US Market
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In a breaking news, it would appear that one of the greatest cause for irritation among retail traders, notably that some big institutions used “flash” computer systems to front-run their client’s orders will be ended shortly, as the Securities and Exchange Commission voted unanimously to ban the practice, accused of allowing among others GS to pocket its enormous trading gains. More also here.

FLASHTRADING

Between Theory And Fear

  
Analysis, Education
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Hell tortures you to stop learning.

 George Soros is setting up institutions to study the failure of economic thinking. They have succeed in demonstrating failure, he said this afternoon at the CEU in Budapest, but not in discovering what to do about it. 
The source of the problem, he explained, is relying too much on theory, on knowledge, and not on how our not knowing what to do makes us act in ways that change the world, which world we don’t see because we expect it to conform to our theories. We need to be able to discard our theories when they are proven wrong, and we need to understand that no general theory is enough, because our actions are constantly changing the world we need to respond to and understand.
 
So I said to him after his talk:
 
– You have divided human activity in two parts, theory, and manipulation. Theory doesn’t work, and manipulation of markets is based on crowd behavior, that is, fear. But since ancient Greece, the parts to human activity have been divided into not two, but three: you have left out practical action.
 
Practical action differs from manipulation, fearfully following and leading each other, in that its end is making learning easier. It’s purpose is outside of itself, in the part of life where we learn, where we find beauty, what makes life good.
 
Why not establish institutions that study how economic relations are practical: what forms of cooperation lead to a life of learning and freedom from manipulation, and which don’t. And study how to make the transition from the present institutions based entirely on greed and fear to the kind we need to have. Do you understand?
 
– I have studied maximization of happiness.
 
– No that’s not what I mean. Counting results of fear based behaviors: doing that is living still in the world of the theoretical and the manipulative. We need to study how to cooperate, study what forms of cooperation help us learn to make our lives better.
 
Let’s go, says George Soros assistant, urging him as she has been doing for the last few minutes as we talked. OK, I say, I tried. You remember me, right?
 
– Yes, he nods his head.
 
I’d asked him for a job the day before when I saw him walking down the street from the University to his hotel.
 
Practical necessity. I need to get out of this hell of Budapest, this place putting pressure on me not to learn.
 
People say it is difficult to diagnose the political problems of our times, but I don’t see the difficulty. We’re together in this hell trapped between theory and fear.

The 10 Bad Habits of Unprofitable Traders

  
  Education
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The 10 Bad Habits of Unprofitable Traders

  1. They  trade too much. A major edge small traders have over institutions is that we can pick our trades carefully and only trade the best trends and entries. The less I trade the more money I make because being picky is an edge, over trading is a sure path to losses.
  2. Unprofitable traders tend to be trend fighters always wanting to try to call tops and bottoms, while they eventually will be right there account will likely be too small by then to really profit from the actual reversal. The money is made swimming with the flow of the river not paddling up stream the whole time.
  3. Taking small profits quickly and letting losing trades run in the hopes of a bounce back is a sure path to failure. The whole thing that makes traders profitable is their risk/reward ratio, big wins and small losses. Being quick to take profits but allowing losses to grow is a sure way to eventually blow up your trading account.
  4. Wanting to be right more than wanting to make money will be VERY expensive because  the trader won’t  want to take losses and he definitely will not want to reverse his position and get on the right side of the market because in his mind that is a failure, in a profitable trader’s mind that is a success if they start making money.
  5. Unprofitable traders trade too big and risk too much to make too little. The biggest key to profitability is to not to have BIG LOSSES. Your wins can be as big as you like but the downside has to be limited.
  6. Unprofitable traders watch BLUE CHANNELS for trading ideas. Just stop it. (more…)

21 Things a Trader Should Know About Trading

  
  Education
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1. Never try to make money the same way twice in a row.lip25

2. Don’t trade inactive markets.

3. Don’t assume that the relation between your two favorite markets will stay the same from year to year.

4. Be alert to big minimums on Monday as they tend to reverse.

5. Try not to sell markets that have big drifts upwards like stocks.

6. Try to go with with the central banks.

7. Be one with the idea that has the world in its grip and be on the side of the market that will further that grip.

8. Never go for small profits as the vig is too great relative to your gain as a %.

9. Don’t trade when a loved one is very sick. (more…)

The Anatomy of a Trend: 10 Guidelines

  
  Education
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  1. A trend begins with capital flowing into an asset based on a perceived increase in the future value of the asset.
  2. Trends are identified by higher highs and higher lows for several days in a row or the reverse lower highs and lower lows.
  3. Moving averages can also identify trends based on a moving average sloping up or sloping down visibly.
  4. A moving average can also act as support or resistance for a stock as it trends in one direction and bounces off a key moving average.
  5. Trends tend to persist because the owners of the asset have no reason to sell and tend to just let their position ride causing the trend to continue.
  6. Supply and demand causes trends when you have a lot of dollars chasing a limited asset.
  7. In stocks, up trends are caused by mutual fund managers building large positions in their favorite stocks.
  8. Down trends in stocks are caused when institutions start to unload a stock or investors cash in their mutual fund shares during bear markets and managers have to raise cash by selling their holdings.
  9. Capital is always looking for great returns so they chase stocks with the biggest earnings expectations planning on the stock price following.
  10. Trends tend to persist until acted on by an opposing force. Sometimes this is as simple as running out of buyers or sellers of the asset.

The money is in the big trends, look for them, find them, and ride them until they end.

“The trend is your friend until the end when it bends” -Ed Seykota

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