Trading Blog

Are Cryptocurrencies Worth Owning in Volatile Markets?

Cryptocurrencies are a fledgling asset class that has produced, and is continuing to produce, mainstream speculative interest. Their widespread run-up in price throughout 2017 brought large-scale public attention. However, whether you’re a day trader, active swing trader, or buy-and-hold investor, trading is a business. In order to trade well, you have to know asset classes […]

Gold: Why It’s a Good Addition to Your Portfolio

Gold is a type of shadow currency with a valuation proportional to currency and financial asset reserves in circulation divided by global gold reserves. Put another way, it can be considered the sum of a weighted average of the yields of all global financial assets relative to their volumes divided by the global gold stock. […]

Trading Lean Hogs

To trade commodities, it is important to break down what you’re studying into its component parts and understand the economics that feed into its price. In order to properly trade individual commodities, you need a deep understanding of the cost structures of each micro commodity market. Let’s use the example of lean hogs as rough […]

Yuan Depreciation a Tail Risk to Markets

The Trump administration recently upped the ante on tariffs with China, putting another 10% rate on $300 billion worth of goods. A general trading principle is that whenever one country imposes tariffs on another country with a floating exchange rate, that’s an adverse shock that will cause that country’s currency to fall. Whenever a new […]

Important WSJ Article on Accounting Fraud in China

Last Friday, the Wall Street Journal published a very important article regarding the rampant accounting fraud, financial reporting improprieties, and securities infractions that occurs in the Chinese capital markets. For many day traders, prop traders, and high-frequency algorithmic trading operations, fundamentals are often of secondary importance. However, fundamentals are part of it and accurate derivations […]

The Importance of Understanding Expected Value

Every decision that you make in the financial markets should be formulated as an expected value calculation. Every trade or every bet can be thought of as a probability. There is a probability and reward for being right and there’s a probability and penalty for being incorrect. In other words: Expected value = P(right) * […]

Making Better Decisions Trading in the Markets

Making better decisions trading involves knowing how markets function and what they value. Markets are information discounting mechanisms. Where markets go is not based on what things are at face value but what transpires relative to expectations that are already built into the price. To better illustrate this concept, let’s first consider an example. On […]

Low Interest Rates: How Do They Create Wealth?

The developed world is awash in low interest rates and is about to get rates that are even lower. Traders look heavily toward the US Federal Reserve and other central banks for clues on where asset markets will go. This has been covered in other posts on the blog, such as “Why Day Traders Need […]

The Covered Call: How to Trade It

zombiThe covered call – sometimes called a “buy-write” – is a common trading strategy used among all types of market participants, from day traders to institutions that often hold securities for years. A trader executes a covered call by taking a long position in a security and short-selling a call option on the underlying security […]

Value Investing: Is It Still a Viable Strategy?

Much has been made of the idea that value investing is badly lagging other trading strategies. That has continued now through most of 2019 to the point where the MSCI world value index just reached the lowest relative valuation to the MSCI world growth index since 1975. Even the most patient managers are questioning the […]

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