Posts filed under “Trading”
At the risk of overstating the obvious, there are important differences between traders and investors. Their timelines differ, as do their goals, preferred assets and methods. Yet some of what I have been hearing from members of each group suggests they themselves can sometimes become confused about these dissimilarities. Blame the recent market volatility for this.
Because of my background, I understand both perspectives: I began on a trading desk, where I did pretty well, if you ignore the several times I nearly blew up. Not just money-losing months — all traders suffer through those occasionally. I mean total destruction. Those experiences sent me searching for a better understanding of investor psychology, into a decade-plus doing sell-side research, and ultimately, to the buy side as a money manager.
So I’m familiar with both sides of the aisle, whether it is as a short-term trades or a long-term asset manager. That lets me spot the trouble that arises when I see folks dancing back and forth over that line.
It is an old cliche because it’s true: Trader’s should never let a bad trade turn into an investment; investors should never try to trade in and out or time the markets.
A quick review explains why investors should invest, traders should trade . . .
Continues here: Don’t Even Think About Trading Places in Markets
My Sunday Washington Post Business Section column is out. This morning, we follow up a June column that advised taking advantage of markets at all time highs to clean up your portfolios. This time out, we look at the market turmoil as a reminder, and the snapback rally as an opportunity. The print version…Read More
I found this chart, via Torsten Sløk of Deutsche Bank Securities. It is a quite fascinating look at the VVIX index. If you are unfamiliar with the VVIX, it is a measure of the volatility of the VIX, itself a volatility measure of the equity market. More precisely, it represents the expected volatility of the 30-day forward…Read More
One of the themes we like to touch on in this column are heuristics. Myths that become Wall Street rules of thumb have existed for as long as there have been trading desks. They are legion, they pop up regularly and most of the time they are terribly wrong. Woe to the unwary trader who relies…Read More
What do gold prices, a stock-market plunge and a credit crisis have in common? The way investors tend to see them are examples of the “recency effect.“ A brief description first: In human psychology, people who are asked to recall items on a long list tend to have a sharper memory of the items toward…Read More
This was the week Greece inched closest to chaos, as a bank holiday and a technical default caused markets around the world to erupt in turmoil. They recovered somewhat Tuesday, and futures looked stronger Wednesday morning, but on Monday, the NASDAQ Composite Index lost 2.4 percent, the Standard & Poor’s 500 Index lost 2.09 percent and the…Read More
Where has all the stock market volatility gone? U.S. equities have been surprisingly quite the past three years. There hasn’t been a one-day change of 2 percent or more in the Standard & Poor’s 500 Index since December, Bloomberg News reported. Data compiled by Bloomberg and Deutsche Bank AG note that this is the longest such streak…Read More
Great couple of graphics from the WSJ this AM. This is the simple version, a short explanatory overlaid on a graph: Perfect Storm click for ginormous graphic Source: WSJ The interactive version is far richer and more details as tot he minute by minute set up: Flash Crash’ a Perfect Storm for Markets click…Read More