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January 26, 2017

The Futility Of Predictions

Back in late 2013 I wrote a piece on human nature which was in part inspired by the bullish exuberance exhibited by a MarketWatch article predicting the DJIA at 20,000 in the near term future. A bit over three years later that prediction actually became reality yesterday afternoon and I’m sure the author of that article as well as many other like minded traders popped some champagne in celebration of their awesome ability to predict the future. Now don’t get me wrong, I’m happy for those guys and for the Dow Jones. Assuming of course that everyone involved actually put their money where their mouth had been back then. Which few do and that rarely. And that in [...]

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January 12, 2017

Class In Session

I’m going to cover two important topics today which both relate to realized volatility (RV) and in particular how to trade your way around it. If you’ve been a trader for a while then you probably have noticed that volatility profiles differ substantially on the short term when compared with the long term. In essence volatility has a tendency to decrease toward the long term. Nevertheless many traders treat those charts the same when designing their systems, e.g. how and where they enter, where they place their stop loss, and how they handle campaign management. 

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December 27, 2016

Blast From The Past: Statistical Musings

While I am taking some time off I thought I may as well repost some of popular educational posts which many of you may not have seen or completely forgotten about. The first one is from early 2012 and covers volatility and kurtosis:

If you run the math you will find that on a daily basis – annually – the skew is close to normal, and but  KURT (i.e. kurtosis) is  large. That is due to compounding error of the VIX distribution and overlapping seasonality data. But nothing is black and white – I believe in conditional statistics and offsetting tail distribution. Common sense tells us that when the VIX is > 25 the market will exhibit a different distribution [...]

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September 26, 2016

Ten Trading Rules For Avoiding Extinction

Over the weekend I had a bit of time to reflect on the past year or two, and in particular how increasing randomness and intra-day volatility has affected market sentiment as well as participation right here on the blog. Quite obviously the comment section has become noticeably quieter with less active participants and more sporadic discourse, especially compared with just a few years ago. Which in my mind is a clear sign that more and more retail traders have been relegated to the sidelines; either by their own choice or by being forced out.

A Market In Flux

As a financial blogger I have the dubious pleasure of talking to quite a few traders across the gamut on a daily basis [...]

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Cognitive Bias Carousel
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    The tendency to treat money that has already been committed or spent as more valuable than money that may be spent or acquired. Imagine two … more
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