News & Updates

Most Popular Essentials of Trading Pages in 2012

Every year I like to look back and see which blog posts got the most readership. Here is the overall list, which includes a number of oldie-but-goodie entries.

  1. An Introduction to the Fixed Income Market
  2. Most Traded Currency Pairs
  3. Forex is a Scam!
  4. Most Active Currency Pairs
  5. My Top 5 Trading Books
  6. Should I Become a Chartered Market Technician?
  7. Misunderstanding the Bid/Ask Spread in Stock Trading
  8. Using Unusual Options Activity to Predict Stock Moves
  9. Is Trading for a Living Worthwhile?
  10. No More “Hedging” for Forex Traders

As for just among the posts written in 2012, here are the top reads:

  1. One Broker is so Nervous it’s Shutting Down
  2. Ten of the Leading Trader Mistakes
  3. What Trading Books do the Pros Read?
  4. Help to Avoid Setting Your Stops to Tight
  5. Has Trading Ever Made You Physically Ill?
  6. Technical Analysis in Manipulated Markets
  7. How to Tell if You’re Over-trading
  8. Trader Looking for Angel Investors
  9. If a System Works, Why Share it With the World
  10. New Book Out from Market Wizards Author Jack Schwager

For those wondering why none of those on the 2012 list are on the overall list, it comes down to search engine traffic to a large degree. The older posts are well established in Google, etc. and so bring in visitors who have done searches on specific subjects. The newer posts tend to just get immediate readership at the time of their posting, and beyond to the degree that they get shared around via Facebook, Twitter, etc.

News & Updates

The starting research plan

I had my initial formal meeting with my PhD supervisor over the course of Friday and Monday to set the path for my research and development, at least initially. Basically, that means working out where I need to enhance my research skills (read econometrics in this particular case) and defining at least the basic framework for my research. And naturally the result of that is coursework to do (I need to audit two course this year) and a list of recommended readings. Good thing I like to read because I fully expect to have constantly be working from a list of recommended books, papers, and journal articles. 🙂

As for where I’m to direct my initial research, since my focus will mainly be on Behavioral Finance, it will come as no surprise that I will be starting off by looking at two of the primary Behavioral subject areas. One of them is Prospect Theory and the disposition effect. It is a bit more complex than this, but from a trading perspective it basically boils down to taking profits too early and holding on to losers. This is a psychological bias we have related to the imbalance we perceive between losing and winning. We view the pain of losing as worse than the joy of winning.

The other key research concept I’ll be looking at is the view that overconfidence drives over-trading, and how the latter can lead to under-performance. This idea was most notably put forward in a paper titled “Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors”. The conclusion of the authors is that overconfidence in one’s ability to trade the markets leads traders/investors to be more active in the markets than they should be, leading them to perform worse than had they traded less frequently, or not at all.

The main research to-date in these subject areas has been focused on the stock market. I will be using forex traders, which by all accounts are a much more active bunch, to see if the theorized patterns hold. Some of the initial research I’ve done supports the disposition effect, but asks some questions about the linkage between trading activity and performance, but we’ll see how things fall out when I really get into proper analysis.

This may not exactly be mind-blowing stuff, but it’s a foundation and there’s no telling what I see in the data through the research process.

News & Updates

Transitioned to England

Well, here I am in England.

Between moving out of my apartment near Boston, getting over here, and getting the admin stuff sorted out on this end it’s been an intense couple of weeks. Things are starting to settle out, though. By the end of this week I should have an idea of what my schedule is going to look like. I’m very much looking forward to getting back into some kind of rhythm.

On the negative side, I don’t have access to the same sort of information I had working as an analyst – particularly on a real-time basis. In fact, I don’t even have a TV in my new place, so I can’t just flip on CNBC as I normally would have done. There are ways to overcome those obstacles, though.

On the plus side, I no longer have the constraints of working for a firm in the business of producing market analysis and under the constraints of being a Registered Investment Adviser with the SEC. That means I now have considerably more freedom in my endeavors to educate and discuss the markets.

And of course my ongoing research in the area of Behavioral Finance, and specifically trader performance, will allow me to go deeper in my trader development efforts and provide answers where perhaps previously there were only hints and conjecture.

In short, I’m quite looking forward to what’s coming.

News & Updates

The Best of the Essentials of Trading in 2011

The year 2011 is just about over. This will be my last post to the blog, so I figured it would be a good time to look back and see what posts from the year gone by have garnered the most interest and attention. Based on readership, comments, and related factors, here are the top 10:

  1. The Most Traded Currency Pairs
  2. One trading forum post, numerous trader mistakes
  3. Movie Review: Margin Call
  4. Not being a bored trader
  5. Moderating a QE2 panel on Thursday
  6. Drawbacks to packaged trading systems
  7. Forex positioning analytics available
  8. Maintaining a Position Mindset in a Portfolio
  9. Rogue trading isn’t just an institutional issue
  10. Facebook/Twitter Updates for 2011-11-11 Week

This is a really interesting list. Definitely some surprises.

In terms of all existing blog posts on the site (going back to 2006), here are the ones that were most read:

  1. An Introduction to the Fixed Income Market
  2. Most Active Forex Currency Pairs
  3. Misunderstanding the Bid/Ask Spread in Stock Trading
  4. My Top 5 Trading Books
  5. Should I Become a Chartered Market Technician?
  6. Forex is a scam!
  7. Using Unusual Options Activity to Predict Large Stock Moves
  8. Trader: The Paul Tudor Jones Documentary Video
  9. The Most Traded Currency Pairs
  10. What leverage is really all about

Again, some interesting ones on the list. Search traffic certainly has a major impact on this top 10 list, but I know from looking at the numbers that several of these entries would be here if just looking at direct and referral traffic.

And here’s what readers most frequently clicked from the blog:

  1. [easyazon-link asin=”0071440992″]The Handbook of Fixed Income Securities[/easyazon-link]
  2. [easyazon-link asin=”0470850639″]Fixed Income Strategy: A Practitioner’s Guide to Riding the Curve[/easyazon-link]
  3. [easyazon-link asin=”047179063X”]The Essentials of Trading : From the Basics to Building a Winning Strategy[/easyazon-link]
  4. [easyazon-link asin=”0750660783″]Bond and Money Markets: Strategy, Trading, Analysis[/easyazon-link]
  5. Unusual Activity – Options Insider
  6. [easyazon-link asin=”0132699060″]George Lindsay and the Art of Technical Analysis: Trading Systems of a Market Master[/easyazon-link]
  7. [easyazon-link asin=”007147871X”]Trade Your Way to Financial Freedom[/easyazon-link]
  8. [easyazon-link asin=”0470932201″]Interest Rate Markets: A Practical Approach to Fixed Income[/easyazon-link]
  9. [easyazon-link asin=”1556232896″]The Bond Market: Trading and Risk Management[/easyazon-link]
  10. Option’s Hawk

I’m looking forward to a great 2012, and I hope you are too – well at least until the world comes to an end in December if the Mayan calendar is right. 🙂

News & Updates

Sometimes it helps to circle back around

A post on the Rogue Traderette blog came to my attention recently. In it she talks about the Mark Douglas book [easyazon-link asin=”0735201447″]Trading in the Zone[/easyazon-link]. I do not count myself among those who think it’s the best book ever written on trading, as many seem to believe, but I certainly acknowledge it has some good stuff.

RT brings up Douglas’ Five Fundamental Truths:

1.  Anything can happen.

2.  You don’t need to know what’s going to happen next in order to make money.

3.  Wins and losses are random

4.  Your edge is nothing more than a higher probability of one thing happening over another.

5.  Every moment in the market is unique.

I think #1 and #3 are closely related, and even #5 can be said to be along the same line of thinking. The second point is one a great many traders need to take to heart. The fourth one encourages taking a longer-term view, or at least thinking over large numbers of trades.

Perhaps the biggest takeaway from the post is the fact that we evolve as traders over time, and it can be very worthwhile to go back and revisit things we’ve read in the past for new insights. I’ve certainly done that with the [easyazon-link asin=”1592802974″]Market Wizards[/easyazon-link] books over the years, and it’s one reason I continue reading new books on a regular basis even though I’ve been in the markets for over 20 years now.

News & Updates

On demo trading and trading contests

There’s a post on one of the BabyPips blogs today about how you can take demo trading more seriously so it’s a better developmental experience. There are three suggestions included:

  1. Feel the pain
  2. Treat it like an exam
  3. Join a forex trading contest

I have no idea how the exam thing is supposed to work since successful trading is a continuous process, not a discreet experience. Grading yourself in the different aspects of your trading (risk management, sticking to your plan, etc.) is certainly something you should be doing periodically, but the exam metaphor doesn’t work for me in this case.

As for the first and third alternative, they both have the same issue. How do you feel the pain when you have nothing at risk. As I noted following my academic conference trip a couple weeks back, you need the experience to be salient. Demo trading is good for learning mechanics and testing things, but cannot properly provide the same emotional/intellectual experience as live trading. That’s why I’ve so often said you need to trade real money, not paper money and totally agree with the Abnormal Returns sentiment on the subject.

As for trading contests, I’ve never been a big fan. They focus on the wrong things. On a related note, CNBC was forced to temporarily shut down its annual competition because of manipulation (see this and this).

News & Updates

Improving site speed and performance

For a while now I haven’t been happy with the performance of this blog, particularly in terms of page load times. I experienced it for myself, heard it from visitors at times, and could see it in the metrics I track. My web host kept telling me that nothing was amiss, but clearly the database-driven content, which is the bulk of this blog, was not being served as quickly as could be. I did a few technical things to try to improve performance, but without a lot of success. As a result, I’ve been pondering a change of hosts for a while.

Then came a hack. Readers probably didn’t notice anything, but someone inserted code into some of the files. My host went through and cleaned out the code, but that created other problems on the back-end. That really sealed the deal.

Over the weekend I shifted the site over to a different host. I’ve already seen a very noticeable improvement in page load speed, especially on the back-end. Hopefully you’ll notice better performance on the front-end as well. Feel free to leave a comment as to whether that’s the case or not.

I’ve still got a couple of things I want to try out to see if I can speed things up even more. One of them is to employ cloud technology to speed up the serving of things like image files. That’s something I’ll be looking to get up and running in the next couple of weeks.

In the meantime, if you notice any issues, definitely let me know.