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
środa, 2 stycznia 2008
What to trade during the global recession?
niedziela, 9 września 2007
czwartek, 6 września 2007
Automated Trading Systems - My comments
A reader of my second blog: http://phdmbacfa.blogspot.com/ send me a link to the free book about the famous Turtle Trading System (http://freeforexebooks.com/Other/turtlerules.pdf). From his personal experience is seems however, (he implemented trading rules in C#) that these strategies do not perform very well in the market. The sharp ratio is not superior.
How that can happen that famous trading rules, which are rumored to have brought millions in profits are useless nowadays?
Possible explanations are:
1. Strategies are quite old. Nowadays, market behaves differently than when Turtles were on the market.
2. Modern quantitative strategies of investment banks exploit mispricing so effectively that any old-style strategy will be beaten by IBank computers.
3. Revealed strategy is not complete/accurate.
(If you find another reason just put it in comments)
I think that most probable is the first explanation. Today market works differently than when Turtles traded. Their strategies and tricks are not as efficient as they were 15 years ago.
The role of the trader is to look constantly for superior strategy. It's like the work of the inventor. You need to check hundreds of solutions and ideas to find these that lead to superior returns. That is very nice in this job. You cannot learn it from books, because the facts in books are outdated. What worked years or weeks ago, may be completely useless today. Your task is to look for new ideas and maybe by accident you'll find a rule that will lead you to the Mont Everest of trading.
How that can happen that famous trading rules, which are rumored to have brought millions in profits are useless nowadays?
Possible explanations are:
1. Strategies are quite old. Nowadays, market behaves differently than when Turtles were on the market.
2. Modern quantitative strategies of investment banks exploit mispricing so effectively that any old-style strategy will be beaten by IBank computers.
3. Revealed strategy is not complete/accurate.
(If you find another reason just put it in comments)
I think that most probable is the first explanation. Today market works differently than when Turtles traded. Their strategies and tricks are not as efficient as they were 15 years ago.
The role of the trader is to look constantly for superior strategy. It's like the work of the inventor. You need to check hundreds of solutions and ideas to find these that lead to superior returns. That is very nice in this job. You cannot learn it from books, because the facts in books are outdated. What worked years or weeks ago, may be completely useless today. Your task is to look for new ideas and maybe by accident you'll find a rule that will lead you to the Mont Everest of trading.
niedziela, 26 sierpnia 2007
EURUSD technical analysis for the new week
Technically, it seems that EURUSD will be testing levels 1.3736-1,3813 which were seen in the first week of August. If that happens we should expect FX rate to test these levels on Wendsday or on Thursday. However, due to short term reasons (global flight to quality) I am expecting that USD will NOT depreciate above these levels. In the middle of the week EURUSD will probably stabilize.czwartek, 23 sierpnia 2007
What should you trade?
This is an important question that every trader has to answer - which instrument suits her/his trading style best... Where she or he can profit markets most?
Fortunately there are not so many possible options: currencies, bonds, derivatives, equities etc.
Normally, derivatives (like options, swaptions etc) are quite advance instruments when it comes to pricing and trading - beginers and intermediate traders shall not base their strategies on derivatives.
Bonds require very detailed knowledge of monetary economics. If you want to trade bonds (or other FI products) successfully, you need to track FEDs or ECBs policy very carefully. This is not as simple as it may seem. Additionally, not so many trading platforms offer good products for those who want to trade bonds.
After excluding complex derivatives and bonds you are left with stocks and currencies. The decision which instrument to chose should depend on your attitude to trading. If you like tracking hundreds of companies at the same time, and you want to base your investment strategies on fundamentals - stocks should be your prime choice. On the other hand if you prefer technical analysis and you rather want to focus on the price dynamics currency trading is what you should chose.
Fortunately there are not so many possible options: currencies, bonds, derivatives, equities etc.
Normally, derivatives (like options, swaptions etc) are quite advance instruments when it comes to pricing and trading - beginers and intermediate traders shall not base their strategies on derivatives.
Bonds require very detailed knowledge of monetary economics. If you want to trade bonds (or other FI products) successfully, you need to track FEDs or ECBs policy very carefully. This is not as simple as it may seem. Additionally, not so many trading platforms offer good products for those who want to trade bonds.
After excluding complex derivatives and bonds you are left with stocks and currencies. The decision which instrument to chose should depend on your attitude to trading. If you like tracking hundreds of companies at the same time, and you want to base your investment strategies on fundamentals - stocks should be your prime choice. On the other hand if you prefer technical analysis and you rather want to focus on the price dynamics currency trading is what you should chose.
środa, 22 sierpnia 2007
DJIA Longterm trend still sustained
Although short term dynamics of the stock market is very unfavorable and we should expect further fall in the equity indices, long term prospects don't look so bad. Simple technical analysis shows that DJIA was able to move back into the long term growth channel (indicated by parallel lines on the chart) after large falls touched the market in last weeks.One of the rules of technical analysis says that when indices move back quickly to support lines this support lines are extremely strong and should be considered to be support in the future. This suggest that in long term we should expect rise in equity indices
EURUSD in a narrow range
For last four days EURUSD is trading in a narrow range. On the one hand this is a good proof of the claim from my previous post (currency market stable when equities turbulent) but on the other hand it seems that the market is awaiting some news that will input a momentum on the market. The currency market is now consolidating and we should expect increased volatility in the days to come. Fundamentaly EURUSD should go up, but in the short term we would rather see further appreciation of the dolar, just because there is a constant flow of investor's money to safe instruments and US T-Bonds are considered to be the safest in the world.
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