Friday, October 02, 2015

Futures winners and losers: VIX jumped, crude oil sank in 2015

Futures, 1-year performance highlights: 

The VIX volatility index zoomed higher as stocks declined in August and September. Japan's Nikkei 225 topped the Finviz futures list of leading stock indexes. The S&P 500 has managed to eke out a gain of 1% over the past year.

As noted on Twitter, I believe Finviz' data on ethanol futures is incorrect (they show a 1-year gain of 70%). Here's a continuous weekly chart on ethanol that shows a picture of flat returns over last year's prices.  

Metals and energy prices suffered over the past year, as copper and platinum fell over 20%. Natural gas sank 41%, but the biggest hits came to WTI and Brent crude oil. 

Focusing in on oil, this year's worst performer, we see WTI crude oil down 50% for the year.

Oil is now trading near $45, down well off its highs near $100 - $110 of the last several years. Of course, that's taken the entire oil and gas complex down with it. The crash in oil and energy stocks is a trend we've covered on Twitter and StockTwits since late 2014. More on that to come in a future post.

Wednesday, September 30, 2015

Tesla Model X opens its Falcon Wing Doors (GIF)

Tesla Model X Falcon Wing open doors launch GIF

Tesla Model X opening its Falcon Wing doors. Having made this GIF, I think it's safe to say I've gone full Elon Musk/Tesla fanboy. Well, it's pretty darn cool.

Check out the full presentation at the Tesla Model X launch (watch).

You can check out some of our previous Tesla and Elon Musk posts in the links below.

Related posts:

1. Tesla vs. GM stock performance (it's not even close).

2. Tesla hits new all-time high + Elon Musk interviews.

Sunday, August 02, 2015

Video: Paul Tudor Jones and Peter Borish on trading

Hello, gang. Long time, no update (here on the blog). Today we have some great weekend videos for you that bridge the trading past with the present. I think you'll enjoy them.

Longtime readers and followers of Finance Trends may recall our posting the Paul Tudor Jones Trader documentary way back in the early days of this bull market. 

We're bringing it back today with a new video link and adding some new commentary on hedge funds and trading from Jones' old partner, Peter Borish, who was recently interviewed on Bloomberg TV. So without further ado, let's jump right in.

Watch: Paul Tudor Jones Trader (1987). 

Paul Tudor Jones PTJ Trading Losers

Yes, this video now serves as a time capsule of 1980s Wall Street, its trading floors, lingo, fashions, and pre-web technology. However, it's also a wonderful snapshot of the nascent hedge fund industry and the breakout year for one its biggest stars, Paul Tudor Jones.

One of the best quotes from the film, Paul Tudor Jones on risk management in trading:

"Where you want to be is always in control, never wishing, always trading. And always, first and foremost, protecting your ass.

...That's why most people lose money as traders or as individual investors because they're not focused on the money they have at risk. If everyone spent 90% of their time on that instead of on how much money they're going to make, they'd be incredibly successful as investors."

If you, or someone you know, is having a hard time in the markets (wild swings, big losses, etc.), come back and read this quote again and again. It will help you stay in the game, if you let it sink in.

Next we've got PTJ's old right-hand man, Peter Borish (you'll recognize him from Trader) talking with Bloomberg about hedge fund performance today and his search for new talent among smaller hedge funds. 

Quoth Borish on trading talent and the need for coaching:

"It's a combination of both. If you don't have talent, you can't succeed. But talent alone is not sufficient to succeed. If you look at any profession, those who work the hardest are the best.".  

And tying it back to my favorite quote from the Paul Tudor Jones clip (above), Borish reminds us of what he learned from PTJ back in the day: that the market is always right.

"It's all about making money and not being right. Too often, people get stubborn. The point is to be flexible. The market is always right. That's one of the main things I learned from Paul... you've got to be around to play for another day. That's capital preservation."

If you'd like to hear more, you can check out Peter Borish's recent chat with Michael Covel on charity, the Robin Hood foundation, politics, and markets.

Enjoy, and stay tuned for more new posts next week. You can also follow Finance Trends in real-time on Twitter.


Monday, March 02, 2015

What I Learned Losing a Million Dollars: Interview with Brendan Moynihan

What I Learned Losing a Million Dollars book coverNext on my to-read list is Jim Paul and Brendan Moynihan's book, What I Learned Losing a Million Dollars. It is the story of one trader's (Jim Paul) disastrous losing streak and how he (barely) survived it, learning a few key lessons on ego and risk in the process.

As you'll note from the book's rather unusual title, What I Learned Losing a Million Dollars is not your typical "trading system-in-a-book", promising a golden pathway to riches. It deals squarely with losses and how overconfidence and success can lead us to complacency and ruin. So what lessons can we take from another trader's experience losing large sums of money? 

Tim Ferris recently interviewed the book's co-author, Brendan Moynihan. Here are some highlights from their discussion:

• While introducing Brendan Moynihan, Tim mentions that he was won over by Nassim Taleb's recommendation of the book, which he praised for its "non-charlatanic" real-life wisdom. Moynihan says that the interest generated from Taleb's endorsement spurred them to reprint the book. 

• Moynihan met globetrotting investor, Jim Rogers in Alabama. He learned a bit about finance from Rogers and decided he wanted to get involved with the markets. While working in Chicago, Moynihan met futures trader, Jim Paul and heard the story of his near-washout. He later flew to his home in Chicago to record Paul and transcribe his story into a book. Some amusing stories about Paul and self-publishing in the pre-internet age are included.

• When we lose money, we tend to internalize what should be an external loss. People often equate net worth with self-worth, a fatal mistake.

• There are (according to Moynihan) 5 types of market participants: investors, speculators, traders, bettors, and gamblers. How you behave in the market environment defines you in terms of each class of participant. "You don't have to be in a casino to gamble. You can gamble in the markets." Bettors, gamblers, and investors all have different motivations, methods, and decision making processes.

When emotions become involved in your decision making, you have personalized the issue. Emotions are inherent to our makeup, but emotional decision making in markets can be disastrous. As Gustave Le Bon wrote in The Crowd, a crowd is the single entity that best exhibits the phenomenon of emotional decision making. 

There are many ways to make money in the markets. There are a few reliable ways (emotional pitfalls) to lose your money. 

Come up with a trading plan and a written checklist that will guide your buy and sell decisions in the market. Tim Ferris cites another book, The Checklist Manifesto, that outlines the profound changes we see in hospitals when performance and safety guidelines are enforced with written procedural checklists. 

• The best thing you can do as a trader or investor is learn to recognize and cut your losses. Due to our schooling system, we equate being wrong with losing points and esteem (for more on this, see Michael Martin's book, The Inner Voice of Trading.). In the markets, losing or making money is not about being right or wrong. We need to manage risk and stick with our process.

Check out the full interview with Brendan Moynihan here. 


You can learn more about the habits of successful traders vs. losing traders in our related links below. Check them out!

Related posts

1. Marty Schwartz speaks at Amherst College.

2. Why traders fail: Mark Minervini interivew

3. What makes a great trader? Managing risk.

Tuesday, February 24, 2015

The Dot-Com Bubble in 1 Chart: InfoSpace

With all the recent talk of a new bubble in the making, thanks in part to the Yellen Fed's continued easy money stance, I thought it'd be instructive to revisit our previous stock market bubble - in one quick chart.

So here's what a real stock market bubble looks like. 

For those of you who are a little too young to recall it, this is a chart of InfoSpace at the height of the Nasdaq dot-com bubble in 1999-2001. This fallen angel soared to fantastic heights only to plummet back down to earth as the bubble, and InfoSpace's shady business plan, turned to rubble.

As detailed in our post, "Round trip stocks: Momentum booms and busts", InfoSpace rocketed from under $100 a share to over $1,300 a share in less than six months. 

In a pattern common to many parabolic shooting stars, the stock soon peaked and began a "stage four" decline back to its pre-bubble base. In fact, it sank to levels far below that base. Today, Infospace, having re-branded itself as Blucora (BCOR), trades at a 99% discount to its dot-com bubble peak.   

Are there other boom-and-bust candidates that might claim the title of "quintessential Nasdaq bubble stock"? Sure, and if we pool our heads together and think about it for a few moments, I'm sure we can think of a couple. We'll examine some tech survivors, and tech wrecks, in a follow-up post as we hone in on Nasdaq 5,000 for the first time in 15 years. 

Monday, February 16, 2015

How to "Pull the Trigger" on Your Trading Ideas

In our last post, I quoted hedge fund manager, Jim Leitner on the importance of following up on your investment ideas. 

Today I'd like to follow up and share some thoughts on how you can learn to consistently "pull the trigger" on your best trading setups and investing ideas.

In order to help you do that, we'll take from the best and offer up key insights from interviews with top traders and trading psychologists like Alan Farley, Brett Steenbarger, and Doug Hirschhorn

Now before we get to their key insights on overcoming trading anxiety and pulling the trigger on your trading ideas, let's remember what Jim Leitner said in his interview:

"Learn to love to listen to people and when you hear something interesting, follow up on it. Don't just think, "Well that's an interesting idea" only to find out a year later that the company you could've bought shares in is now up 500-fold. You never want to say woulda, coulda, shoulda.".

The method Leitner stressed to aid us in following up on our investment ideas was taking a small initial position. As I wrote in that post, a small "feeler" position can help us get a toe in the water while keeping our capital risk defined. As the trade goes your way and you begin to see a profit, you can always add to the position (or cut back) in a responsible way. 

Poster via Keep Calm-O-Matic.

What if you're not sure how to enter a trade ("do I buy a breakout to new highs or buy on a pullback?"). Or what if you're not exactly able to clearly articulate your reasons for taking a trade? Or maybe you just don't know if this particular trade will work out in your favor.

Alan Farley addresses these questions in his "Pulling the Trigger Q+A": 

"You're really asking the ultimate Zen trading question: How do I know I'm right? 

Zen answer: There is no right and no wrong. You manage risk. Do that well, and you're right.

Breakouts and breakdowns either go or they don't go. Most of the time you can't tell the difference. Some patterns are easier than others to interpret, and certain kinds of setups have a gut feel that tells you the coast is clear. Just control risk the rest of the time and take the trade to its logical conclusion.

Remember the input you have on the position's outcome. First, you can choose a small position instead of a large one. This keeps your risk small if you're wrong, but you can still make money if you're right. Second, you can take your best shot and keep a tight stop-loss. You take the loss and move on if you're wrong. You add to your position if you're right."

Olivier Tischendorf has written about the importance of trading meaningful position sizes

However, there are times (in choppy market conditions, or after a tough losing streak) when you may want to enter trades with a position size that is smaller than usual. This will help you to focus on your overall process and prevent you from assigning too much importance to the outcome of a single trade. 

As Olivier summarized it in a recent conversation:  

"Small position sizes allow you to approach the market in a disciplined and non-emotional way. It helps to overcome the paralysis of analysis. 

If you struggle emotionally with trading, you should trade smaller position sizes. You'll be more process oriented instead of focusing on the outcome of a single trade. This will allow you to "Just Do It" vs. second-guessing yourself on trades."  

Many times, it seems, the failure to follow up on our investing or trade ideas can be traced back to simple fear. Fear of failure, fear of being wrong, a lack of confidence in our skills, or a poorly vetted trading process may be holding us back in our trading development. 

Tim Bourquin interviewed 3 top trading coaches, Dr. Brett Steenbarger, Dr. Doug Hirschhorn, and Dr. Gary Dayton, about these fears and the performance anxieties we often face as traders. 

They offered up some helpful ideas and exercises in, "Overcoming Your Fear of "Pulling the Trigger"":  

"A lot of traders haven't gone through that kind of developmental process where they first practice their setups then they trade them small, and then they trade them larger.

They're too eager to get right in there and jump right in and trade. And as a result, they don't have the battle test experience. They don't have the confidence in their setups and it can show up as hesitancy and problems in pulling the trigger." - Brett Steenbarger

"Trade in smaller sizes. That's how you practice the skill. Get yourself comfortable with actually putting the risk on and putting the trade on. Because once you can do it with small size and the only differential is changing the default on the size." - Doug Hirschhorn

"What matters to a trader? Well, identifying trades, taking trades, managing sound trades setups and managing them to completion. And if it's only 10 shares, then it's only 10 shares, but that's still taking a step in the direction of what's most important. 

And then be mindful about it as you're doing it. Note what thoughts and feelings you're having. And just pull back from them and accept them as thoughts and feeling that pass that come and go" - Gary Dayton

So whether you're an experienced trader or a newbie investor, I hope you'll come back and reference this post whenever you need encouragement to pull the trigger and act on your research and investing ideas. I hope some of this material helps you as much as it has helped me (even as I researched and wrote this entry).

Thanks for reading and sharing. Keep up with us on Twitter for more trading ideas and real-time updates.  

Saturday, January 31, 2015

Jim Leitner quote: Follow up on your investment ideas

Global macro investor, Jim Leitner of Falcon Management was interviewed for Steven Drobny's book, Inside the House of Money. I've included one of my favorite quotes, on the importance of following up on investing ideas, below.

"Learn to love to listen to people and when you hear something interesting, follow up on it. Don't just think, "Well that's an interesting idea" only to find out a year later that the company you could've bought shares in is now up 500-fold. You never want to say woulda, coulda, shoulda." 

Jim Leitner Falcon hedge fund manager quote investing

This is an especially relevant quote, as I've struggled with regrets over missed opportunities after I failed to pull the trigger on some of my best investing ideas (click through for more on this trading phenomenon). 

During the course of this bull market, I've also made errors of omission when it came to following up on unique investing and trading ideas gleaned from other smart traders. Maybe you've faced the same issues in your trading and investing journey. So what steps can we take to change and seize the opportunities that we uncover?

The important thing to take away from Leitner's quote is the importance of following up on ideas, even if it's just by taking a small starter position ("a tiny amount of money"). 

If you reduce the size of your initial commitment (say, 20 shares vs. your usual 200 or 1000 shares) it will allow you to have a small "feeler" position that can be increased as the investment works out or goes your way. That way, you can step up your position size as you begin to see a profit. Conversely, you will limit your initial losses to a small portion of your overall capital if the trade should go against you.