Category: Financial Risk Management
The Weatherstone Approach
Dennis Weatherstone, the former CEO and Chairman of JP Morgan had a special approach for deciding on the riskiness of new products. He would give the developers three 15 minute slots (45 minutes) to explain the product. His rule for approval would be simple. If the product could not be explained in the allotted time, […]
TED Spread Warning – Not What You Think
The TED spread has been used as financial market warning signal for decades although it has moved in and out of favor over time. Market participants have turned to other measure of financial risk, but when this old measure jumps, it is worth taking a closer peek.
The Clearinghouse, FCM’s, and the New DFP’s
The clearinghouse is the truly special feature of any futures exchange because it allows buyers and sellers to comfortably come together to trade with only limited credit risk. Traders know that they do not have to worry about the specific risk of their trade counter-party because their risk is with the clearinghouse. We know that the actual structures in place are more complex than this simple story. The mechanics make all the difference so changes should be looked at closely.
Overcoming Mental Biases in Trading and Investing
Average CTA’s, investors, and people generally have an overwhelming desire to be “right.” Who likes to be wrong? You read and hear daily from friends, and fellow traders (spouses – J), how important it is to be correct, especially when they make a market prediction or, even worse when they put real money into a […]
Still Neutral Sugar
Sugar #11- May15 Futures – In yesterday’s trading session Sugar future values were strongly influenced by the exchange rate movement in Brazil. This is the first time since March of 2004 that the dollar quote fell below $3, closing at R$2.967 (-1.3%).
Crude Oil: Potential Target in Focus
Crude oil bulls had a brilliant day on Thursday, with the oil complex posting strong gains. Brent crude finished at $64.83while WTI closed at $57.66. With the market sailing above the 100-day MA last week, a review of the continuation chart gives a perspective on what the bulls might be targeting in the longer term. […]
Energies: DOE Preview for Wednesday, 22 April 2015
Oil futures closed lower on Tuesday. June WTI finished the day down $1.26 at $56.62 a barrel while June Brent settled at $62.08 down $1.37 on the day. After being up each day last week and making new highs for the year, oil has been consolidating these gains early this week due to a lack […]
The Importance of Losing in Trading and Investing
I think this article on trading and the markets will slightly differ from anything you have read in that the main focus is “Losing.” So, why an article on losing? First, I believe that people learn the most from their mistakes or through adversity if they are willing to open their eyes and confront what’s […]
How to Measure the Edge of Your Trading Entry Signals
When a CTA or Money Manager is testing or back-testing their entry signals, one of the most important aspects they look at is if the techniques they are using have a distinct “edge” for the time frame they are trading (short-term, swing, long-term, etc.). Understanding MAE and MFE Positive price movement is when the market […]
Navigating Investment Choices in a Volatile Market
The stock market just hit an all time high and real estate values continue rising rapidly. Investors could not be happier. The day I refer to, of course, is October 9, 2007 when the S&P closed at its new record of 1565.15. What followed was a bull run in commodities culminating on July 11, 2008 when oil hit its high of $147.27 on dollar weakness and insatiable raw material demand from China. By January of 2009, oil dropped to almost $30 a barrel, the dollar was much stronger as seemingly everyone flocked to its perceived safety, and the worldwide economy would begin digging out slowly from the depths of the credit crisis. The S&P would drop below 700 points.