This Post is Brought to You By The Number 72

I’ve been reading and commenting on a lot of finance blogs lately, and as a group they’re beginning to piss me off.  I’m not talking about the recycle your toilet paper folks.  Those guys are unintentionally hilarious.  And I don’t really care one way or the other about the debt bloggers.  Good luck paying that off – seriously, I really do wish you the best.  But I can’t help you with anything more than platitudes and common sense since I’ve never paid off a debt more interesting than a month worth of credit card purchases.  And you can’t help me since I’ve got no debts to pay off.

No, the blogs that are pissing me off today are the ones giving well meaning but poorly though out investment advice. Continue reading

Futures Scalping Part 1: Introduction

Now that I’m more or less finished with the speculative alternatives to investment series it’s time to start looking at a new trading method.  I’ve chosen scalping in the futures markets because it’s about as different as you can get from what I’ve covered thus far.  Different instrument, different time scale, different philosophy.  I believe scalping is one of the most advantageous methods for small traders because it can provide large returns while requiring limited capital and having fairly well bounded risk.  Unfortunately scalping is also one of the most difficult methods to learn – it took me years to learn to scalp successfully and almost all of my initial trading losses were from failed attempts at scalping.  So I’m going to advise you to be very careful here.  But it is worth your time to learn this. Continue reading

We Have Met The Enemy And He Is… Dumb?

If reading this blog hasn’t convinced you that I’ve got a huge ego, well, let me make another attempt.

Once of the best things that happened to me back when I was just learning to play poker was discovering that many of my opponents were dumb.  I don’t mean tourists uneducated about poker or gambling in general.  I mean dumb.  I’m talking about the sorts of people who regularly lost that ongoing battle of wits with their VCR (yes, those things) to record at the right time on the right channel.  The sort of people who can’t make correct change without counting on fingers and/or toes.  Dumb.  I’d be sitting there at the table, and suddenly out of the blue one of my opponents would say or do something so profoundly stupid that I knew right then and there I was facing a blithering idiot.  I remember one lady very earnestly explaining how she used astrology to figure out what her lucky hands for the day were.

Now, why was this such a big deal?  Because I was new to the game and needed courage.  When you’re a newbie it’s easy to believe that everyone else is better at the game, and at least within those limited confines smarter than you.  So it’s refreshing when someone hangs out their “stupid” sign.  Until that lady opened her mouth, I honestly believed she might be a better player than I was and that I might be in over my head.  Turns out I need not have worried.

Trading is the same way. Continue reading

QE & The Power of Language, 9-14-2012 Edition

Previously I’ve written about the way bond math and in particular bond spreads have the power of language. They tell you things you wouldn’t otherwise know.  And today is an example of them being particularly talkative.  I don’t usually write about current events, but in this case it serves to illustrate an important point.

Unless you live under a rock, you probably know there was a big Federal Reserve announcement yesterday. Continue reading

Sure the Market is Rigged (and a Theorem)

“I am not superstitious, but I avoid situations in which I continually lose.” -Barry Greenstein, Ace on the River

I led an article with this quote before, but I consider it so key to understanding the markets that I’m going to blatantly re-use it.  The topic I want to discuss is the “rigging” of the markets.  As far as I can tell people have been complaining about rigged markets as long as there have been markets to rig.  The complaining seems to go on at a constant background level, but my perception is that the volume has picked up since the crash of 2008.  The nominal target of the whining changes over time.  In the 80s it was brokers, “boiler rooms”, and program trading.  In 2008/9 is was bailouts and the Plunge Protection Team.  Recently everyone’s bitching about quantitative easing and high frequency trading (HFT).  Five years from now it will be something we haven’t heard of yet.  At every turn the market is rigged.

If you want to succeed as a trader, you absolutely must not participate in this sob fest. Continue reading

The Courage of the Right Convictions

One downside of writing a lot is that sometimes you miss the mark.  I think that happened here: Let’s Find Out.  Not that I was wrong per se, but I failed to capture the idea I was trying to get across.  What I should have written about instead was the relationship between courage, conviction, and success.

I learned from gambling in Las Vegas that the smartest gamblers frequently are not the richest. Most of them have comfortable middle class assets, but very few are millionaires.  Now, you might ask how I know these were the smartest guys at the card table.  But it was easy to tell: they were convinced of incredibly smart things and happy to tell you about it. Continue reading