Oct 20

IG Markets Presentation 20.10.2012

This morning I attended the IG Markets seminar where Chris Weston presented the IG market update. To my surprise it was quite interesting and insightful.

He showed a chart showing how Gold and the Euro are correlated. Their view is that as soon as the Euro breaches the 1.31 mark Gold will move to a potential target of $2500. Consequently gold mining stocks should soon be back in fashion according. It never occurred to me that gold and euro could be correlated so I found this piece of information interesting. Check out the chart:

 

Their explanation for the AUD to show such strengths despite the concerns about China is that our Bond market is very strong with Australia’s AAA rated banks leading in the world.

And the other interesting insight I never thought of is that Yen and US Treasury yields are correlated.

Well there you go always inspiring to see that there is still some great minds out there…

Oct 15

Regret Aversion Bias

“People exhibiting regret aversion avoid taking decisive actions because they fear that, in hindsight, whatever course they select will prove less than optimal. Basically, this bias seeks to forestall the pain of regret associated with poor decision-making. It is a cognitive phenomenon that often arises in traders, causing them to hold onto losing positions for too long in order to avoid admitting errors and realizing losses.

Regret aversion also makes people unduly apprehensive about taking positions after a string of losses, as they feel instinctively driven to conserve, to retreat, and to lick their wounds. This might cause them to hesitate most at moments that actually merit aggressive behaviour.

This can also affect a person’s response to winning positions. For example, traders might be unwillingly to sell an in-the-money position despite negative signals, choosing to cling on to it because they fear that the stock might continue to soar even higher once they sell it.

People who are regret-averse try to avoid distress arising from two types of mistakes, (i) errors of commission and (ii) errors of omission. The former occurs when we take misguided actions, while the latter arises from misguided inaction, that is, opportunities overlooked or foregone.

The other danger comes from “herding behaviour” where traders simply try to follow the crowd, since following the mass consensus diffuses responsibility and hence the potential for future regret.

The way out of this is to have confidence in your methods and your skill, so that despite a string of losses, you will still be able to trade consistently, because you know that in the long run, you will be able to recoup those losses and turn up a profit when you manage to catch the big moves. The key here is discipline and consistency.”

“I visualized my grief if the stock market went way up and I wasn’t in it – or if it went way down and I was completely in it. My intention was to minimize my future regret, so I split my retirement plan contributions 50/50 between bonds and equities.” – Harry Markowitz, father of Modern Portfolio Theory

 

Sep 15

How Average People Think Differently From The Rich

Hi Guys

I found this brilliant post on Forexfactory: http://www.forexfactory.com/showthread.php?t=384868

Average people think MONEY is the root of all evil. Rich people believe POVERTY is the root of all evil.

Average people think selfishness is a vice. Rich people think selfishness is a virtue.

Average people have a lottery mentality. Rich people have an action mentality.

Average people think the road to riches is paved with formal education. Rich people believe in acquiring specific knowledge.

Average people long for the good old days. Rich people dream of the future.

Average people see money through the eyes of emotion. Rich people think about money logically.

Average people earn money doing things they don’t love. Rich people follow their passion.

Average people set low expectations so they’re never disappointed. Rich people are up for the challenge.

Average people believe you have to DO something to get rich. Rich people believe you have to BE something to get rich.

Average people believe you need money to make money. Rich people use other people’s money.

Average people believe the markets are driven by logic and strategy. Rich people know they’re driven by emotion and greed.

Average people live beyond their means. Rich people live below theirs.

Average people teach their children how to survive. Rich people teach their kids to get rich.

Average people let money stress them out. Rich people find peace of mind in wealth.

Average people would rather be entertained than educated. Rich people would rather be educated than entertained.

Average people think rich people are snobs. Rich people just want to surround themselves with like-minded people.

Average people focus on saving. Rich people focus on earning.

Average people play it safe with money. Rich people know when to take risks.

Average people love to be comfortable. Rich people find comfort in uncertainty.

Average people never make the connection between money and health. Rich people know money can save your life.

Average people believe they must choose between a great family and being rich. Rich people know you can have it all.

Aug 19

A tricky Inverse Head and Shoulders

 

 

 

 

 

 

Aug 09

Richard Farleigh

Last night I went to the FXCM presentation to see Richard Farleigh speak. I was very disappointed that he only had a 1 hour slot as I think he had a lot of real great information to offer.

Anyhow, what I really enjoyed about this presentation is that in my opinion he spoke about how things really are in trading! He emphasized that if you want to be successful as a trader, you need to be professional. The trouble is that most traders have no clue what professional means…

That might be a great topic for my next newsletter, because that whole shift to professional was the thing that made all the difference to my trading results! By the way, that is the topic I will be speaking about during the ATAA Newcastle presentation…

We need more ‘real’ people like that on the speaking circuit. I was sitting next to a lady who has been trading for only 18 months and she was very excited about this guy whose name I will not mention who apparently trades only 1 hour a day and surfs the rest of the day whilst making A$2 Mill profit a year. And of course he is teaching his ‘secrets’ on how he does that and how you can do it too! Wow is all I can say.. How naive can people be?

If he really makes 2 mill, how big is his trading bank? How much is his % return? It all just doesn’t add up.. But I am open minded, just would love to see his trading statements …

I know quite a few extremely successful traders and I can tell you they all work at least 10 to 12 hours a day. But hey, that is not the dream of most people, they want to have ‘quality of life’ etc whilst making millions of dollars of a !0,000 dollar account.. people, wake up!

Anyhow, hope your trading day today will be your best day ever..

Mandi