Writing a trading blog - a really good idea

I haven't been writing this blog for quite a while. In the mean-time I started working in the investment bank and I was finishing my PhD - I should be done very soon...

I looked at the blog today and I see that I really wrote about great ideas at the proper time - I think I should restart writing this, so I have a cronice of my proprietary trading.

I am starting as soon as I finish my PhD (one or two weeks)

Ideas for 2009...

He he... Probably you noted that I had a short position on VW stocks... It was a good thing that I set a stop-loss. Otherwise I would lose a lot of money.

I haven't been trading recently, because I had really busy period in academia. However it a Christmas break and I have some time to think about some new good position to take.

I will soon post a message with what I think would be the greatest opportunities of the 2009. In the meantime I am waiting for your comments. If you have good ideas please let me know them!!!

Stud.

Morgan Stanley, but what else?

Ok. So it seems that shorting MS was a good decision. Now the price is 37,01, so I made almost 5% on this company so far. However my target is at least 20%, so it seems there is some way to go...

Today's news are pretty gloomy... Economic revival will not come too quickly. As you remember I was thinking about shorting car makers last week. Today some more news appeared that convinced me to such a move.

The question is what would be the car maker that could suffer most? I think that would be German Volkswagen. They had really very good years, but they will also suffer from high oil prices and economics slowdown. Below you can see the graph of the recent price movements of Volkswagen (daily interval from the beginning of march).

I decided to short 100 shares of Volkswagen. :) I hope they will not let me down! ;)

Second day of trading

Cool. It seems the banking industry is weaker than I thought. That should be good for my short position in 513 Morgan Stanley stocks (at this stage I am losing -1,36% on this position, but that is basically the spread I had to pay).

Today, the breaking news was that China is going to increase the price of oil domestically. Unfortunately, this led only to a very minor fall in the global price of the oil. It seems that the demand pressure is so strong that that we are far away from the demand/supply equilibrium in the financial markets. I am not a specialist in the Oil industry, so I am far from placing bets on this, but number of entities predict the rise of the oil price to the level of 200 USD per barrel. That's a lot! However in real terms it would not be such an unimaginable level. The inflation, which is about to take off soon, will decrease the relative pain.

The only tradable information today, was about very poor performance of Chrystler and Auto industry in general. I think about this on the weekend. Maybe I short some auto companies on Monday.

First step - analysis of macroeconomics

So here I am with my 100.000 EUR to start trading. Now this money is on bank account and is waiting for me to start trading.

In order not to go straight into red (loosing) I need to better understand current macroeconomic climat. In order to do that I bought the Financial Times (I think it is much better then WSJ) and I will be buying it everyday to get insight into economics.

Today's headline is "King and Darling issue bleak forecast". It seems that inflation is a major concern right now. It seems that guys want to react to the rising price pressure and want to kill rising inflation expectations. Ok - That would be good for long term for the economy to have stable inflation, but in the short term this means:

1. Negative pressure on the equity markets - at this stage noone should expect any happy rally in the equity markets. It seems all we can hope for is to avoid major fall in the prices of equities.
2. Positive pressure on GBP exchange rate. The depreciation of GBP (against EUR for example) should at least slow down in the near feature.
3. Higher pressure on MBS market. Ok. Maybe the mortgage market already showed all it's dark sides any nothing more will be exposed.
4. General slowdown in Economics => bad for retailers.
5. Some additional pressure on investment banks.

As you see at this stage it is hard to put any trades. We need some more details.

And here come first. On the first side of Financial Times we have: "MStanley in rogue trade probe" - it seems that this particular investment bank has real internal problems. (I applied there for an internship, but they didn't want me - another argument). So that would be my first trade!

I am selling short MStanley! I start with small amount of 20000 USD - I have to think it over again tommorow. But I think that would be a good trade.

After a break!

Dear all!

Now, I am back to trading! I had to finish my last PhD exams and now I am starting to trade again, so you will see the posts online more often.
Since the begining of the February, when I had last time my position opened, a lot has happened in the financial markets.

It seems that we are going to experience years of higher volatility in the world. The inflation seems to be running out of control, so the central banks will have to start their counter-inflationary policy. On how they implement this policy depends the future volatility of the markets. Interest rates will be higher for sure, but higher rates mean higher volatility and higher expected returns, so it's good guys. We will soon see number of global macro opportunities!

What to trade during the global recession?

It is hard time now for everyone who wants to trade equities now. The capital market is predicted to be stagnant for at least one or two years. Probably you will not see many opportunities on equities market soon.

So what should you do if you want to trade for living. The answer is: foreign exchange. During the crisis or recession FX markets offer great and aboundant opportunities.
Basic strategy is to buy currencies of the countries which would suffer most severly and to invest into currencies of the countries that are more immune to global slowdown.

The most obvious example of this strategy is taking EURGBP long. Great Britan is the country is suffering a lot because of the credit crunch. Too high real estate prices and rising inflation in GB compared to relatively stable economic environment in EU suggest that taking EURGBP is no-brainer medium term trade for now.

Other potentially interesting trades are long EURJPY or short EURPLN