Archives of “substantial profits” tag

rss

Trading Wisdom

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #

Markets are highly random and are very, very close to being efficient.

If you are a new trader, trading is probably harder than you think it can be. If you’ve been trading a while, you know this. Financial markets are one of the most competitive environments in the modern world. New information is quickly processed and incorporated into prices. This means that you cannot outsmart the market consistently. You cannot invest based on what you think makes sense or should happen because you are up against investors with superior access to information, knowledge, experience, capital and other resources. Most of the time, markets move in a more or less random fashion; you can’t make money if market movements are random. (“Efficient”, in this context, is an academic term that basically means that all available information is reflected in prices.)

It is impossible to make money trading without an edge.

There are many ways to create an edge in the markets, but one this is true—it is very, very hard to do so. Most things that people say work in the market do not actually work. Treat claims of success and performance with healthy skepticism. I can tell you, based on my experience of nearly twenty years as a trader, most people who say they are making substantial profits are not. This is a very hard business.

Every edge we have is driven by an imbalance of buying and selling pressure.

The world divides into two large groups of traders and investors: fundamental traders who base decisions off of financial analysis, understanding of the industry and a company’s competitive position, growth rates, assessment of management, etc. Technical traders base decisions off of patterns in prices, volume or related data. From a technical perspective, every edge we have is generated by a disagreement between buyers and sellers. When they are in balance (equilibrium), market movements are random.

How Leeson broke the bank -Must read

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #

It was the 1980s. Traders were young and greed was good. Nick Leeson, a working class lad from Watford, the son of a plasterer, was chuffed to land a job in the purportedly-glamorous world of the City of London in 1982.It was a relatively low-grade job, but he quickly made a name for himself. He worked his way up, becoming a whiz-kid in the hardworking atmosphere of the far eastern currency markets.
Soon, he was Barings Bank’s star Singapore trader, bringing substantial profits from the Singapore International Monetary Exchange. By 1993, a year after his arrival in Asia, Leeson had made more than £10m – about 10% of Barings’s total profit for that year.In his autobiography Rogue Trader, Leeson said the ethos at Barings was simple: “We were all driven to make profits, profits, and more profits … I was the rising star.”He and his wife Lisa enjoyed a life of luxury that the money brought.
He earned a bonus of £130,000 on his salary of £50,000
Nickleeson
Nicholas Leesson ,the trader who brought down the Barings Bankbarings_bank_logo in Februrary ,1995 ,is a made to order example of the business of not facing up to a loss ad getting out.He’s also a perfect example of the dangers of adding to a losing postioin in hopes of digging your way out.The Barings Bank was the bank that lent the United States the money to make the Louisiana Purchase.When Nicholas Lesson finished his trading for the bank ,Barings was sold for the equivalent of $ 1.40. (more…)

Go to top