Is Trading Gambling?

The gambling known as business looks with austere disfavor upon the business known as gambling. – Ambrose Bierce, The Devil’s Dictionary

If you ever want to troll a trading forum, just ask this simple question: is trading gambling?  Unless the forum moderators are on the ball you’re all but guaranteed an epic mess.  For some reason this question pushes everyone’s buttons, and that’s a shame because it’s a legitimate question and a complete answer sheds light on the nature of both trading and gambling. Continue reading

Understanding IPOs and IPO Scams

You don’t have to spend too much time around the stock market to discover that there’s something fishy about many stocks’ initial public offerings, (IPOs).  The standing joke is that IPO really stands for “It’s Probably Overpriced”.  While that may or may not be true in any given case, there are a large number of pitfalls awaiting the would-be IPO trader or investor.  It’s a case of caveat emptor, and in order to be suitably wary you need to understand how an IPO works and how it can be manipulated to your disadvantage. Continue reading

The Trading System Development Process

You might be wondering what, exactly, it is that a trader does all day.  Or in my case where I have a 9-5 job, what I do with the 3 or so hours a day I spend working on trading.  If you look at the example trades I’ve posted on this blog, they don’t take very long – the Tickle Me Elmo trades were only open for a few minutes each.  This morning I waited an hour and a half to take a single trade that lasted 7 minutes (a slow one by my standards).  Even taking several such trades a day, there’s no way the actual act of trading is going to add up to more than about an hour of time.  And since my trade entry and management is largely computer automated, most of that time when I have a trade on is really spent just sitting there making sure the computer doesn’t crash.  In an average day I only spend about 30 seconds to a minute actively entering or canceling orders.

Point being, actually trading makes up a tiny part of what a trader does. Continue reading

12 Reasons You Should Avoid Financial Speculation

I hope my passion for trading comes through in this blog.  It’s not just something I do to make money – it’s on the short list of things I care deeply about along with family, charity and God.  No joke.  When I’m sitting around and there’s nothing going on and that internal monologue everyone has starts up – well, mine’s about trading.  Maybe that’s a sign of mental disturbance.  I don’t know.  But it’s true.  When I go about convincing other people that trading could be a good job or side gig for them, it’s because I know some of them will find it as fascinating as I do.

But there’s a downside to contagious passions – sometimes the people who catch them aren’t the people you intended. Continue reading

A Multiplicity of Monkeys

An infinite number of monkeys, typing randomly on typewriters, will produce the complete works of Shakespeare – the Infinite Monkey Theorem

Part of speculation, and trading in general, is coming to terms with uncertainty.  Sometimes your trades work.  Sometimes they don’t.  If you think you know ahead of time which way the next trade is going to go, well, you’re wrong.  You don’t know.  You may have some evidence, a probabilistic understanding, but you don’t know.  This uncertainty will never change – it’s true the first trade you take, and it’ll be true when you’re poring over the Bund yield curve in your nursing home and complaining that you can’t taste the pudding anymore.

If you’re going to encounter rampant uncertainty your entire career, it only makes sense to have tools for dealing with it. Continue reading