Thursday, June 09, 2016

Finance Trends Newsletter #1 Published! Email Signup

Thank you to everyone who signed up to receive the free Finance Trends Newsletter

The first issue of our email letter was sent out this week. If you missed it, or haven't joined our subscriber list yet, please sign up now. For those of you who would like to read issue #1, I've archived it for you here. 

Corona typewriter, via Wikipedia.

As you'll see, I used the introductory letter to let you know what you can expect from these email updates. The newsletters will contain my thoughts on the markets and new trading setups and themes, as well as some of the most insightful writing and audio/video content that I gather in the course of my research. 

Much of this content will be unique to the newsletter, and either won't be found on our social media pages, or will appear in the letters first. You'll also find key materials you might have missed on Twitter or on the Finance Trends website, so do subscribe to our email list for these important, time-saving updates

Of course, I'd like to add that your email and contact info will be respected and kept private. I won't share personal subscriber list info with "affiliates" or sell your email info to marketers. Only my email service provider stores this contact info, by necessity.

So read on for more details, and if you're keeping up with Finance Trends posts via email or RSS updates, be sure to join our email newsletter. You'll get all the best insights and you won't miss a thing! 

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Saturday, May 21, 2016

Know When to Trade, and When to Go Fishing

"There is a time to go long. There is a time to go short. And there is a time to go fishing." - Jesse Livermore

If there is one thing that I have in common with the late, great speculator, Jesse Livermore, it is that we are both "daffy about fishing". Like most great traders, Livermore knew the importance of taking a break from the markets. 

Livermore's preferred method of relaxation was to head South for the coastal waters of Florida and do some saltwater fishing from his yacht. I'm a humble trader/writer, so I usually prefer to head out for an afternoon of fly fishing for warmwater species (crappie, bass, bluegill) in the local waters near my home. There's a nice hybrid bluegill (below) that took my fly on a recent outing. 


Lately, I've seen evidence to suggest that a lot of investors and traders are struggling to make money in this market. Experienced traders may be better at managing their losses and avoiding marginal trades in times like these, but even star traders and hedge fund managers can get the blues.

Whether you're a short-term trader or a long-term investor, there's bound to be a rough period when the market is not offering the opportunities your method requires. Maybe you're out of sync with the market and struggling (it happens to the best of us). Or maybe you've had a big winning streak and decided to take a well-deserved break before success goes to your head.  

Either way, there is no bad time to take a much needed break from the markets and clear your head. Maybe it's time to head out for that week-long fishing trip you've been planning (or putting off) for some time.

After all, when you have no move to make, the best thing to do... is nothing.

Related posts:

1. Your Job as a Trader: Manage Your Equity Curve.

2. Paul Tudor Jones and Peter Borish on Trading.

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Thursday, March 31, 2016

Abnormal Returns "Blogger Wisdom" Series: Investing Roundtable

Tadas Viskanta at Abnormal Returns is running his annual "Blogger Wisdom" post series, and a select group of finance bloggers have come to the table to discuss the hot topics and trends in finance and investing. 

I'm pleased to say that Finance Trends is included in AR's investing roundtable, so this week you'll find me addressing a variety of themes that are a bit out of my comfort zone. Check out this recent finance blogger wisdom post on the rise of index investing or today's update on (the lack of) women in finance and trading for some prime examples. 

Update: Highlighting some under the radar trading websites and books in the final part of AR's "Blogger Wisdom" series.

Abnormal Returns blog logo icon
Special thanks to Tadas and Abnormal Returns for their long-standing support of Finance Trends and the wider financial blogosphere over the past 11 years. Check out the latest Blogger Wisdom series and bookmark AR, if you haven't done so already.

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Tuesday, March 22, 2016

Your Job As a Trader: Manage Your Equity Curve

You can't bet if you lose all your chips, as the saying goes. 

Since our goal as traders and investors is to grow our capital over time (more chips in the pile), I'd like to share a great quote with you that really captures the essence of trading. 

As star hedge fund manager, Steve Clark said in Hedge Fund Market Wizards:

"Your job as a trader is to make the line of your equity curve go from bottom left to top right. That's it. Don't get hung up on other supposed "mandates". Protect your capital and the direction of that equity line."

Market Wizards author, Jack Schwager wrote that he highlighted Steve Clark for his "remarkable performance consistency". Reading those lines again today, I've come to a deeper understanding of how Clark achieved that level of consistency. He was focused on his one true mandate: protecting his capital so that he could continue growing it over time.

Your Job as a Trader Equity Curve Steve Clark, Market Wizards quote

If you allow losses to grow, if you suffer huge drawdowns in individual trades, or add to losing positions in a desperate attempt to prove you are "right" and the market is wrong, you will surely suffer at some point. It is increasingly difficult to get back to your starting point after enduring large losses (simple mathematics), never mind growing your wealth.

This is a subject I've discussed many times with my friend and fellow trader, Olivier Tischendorf, who often speaks to the value of charting his equity curve. Here's what he recently told me: 

"When my equity curve is in sync with market action and meets my expectations, I increase my exposure. I press my bets. When my equity curve does not move higher 'as it should', I heed the warning signals and decrease my exposure."

In other words, "when in doubt, stay out." When you are in sync with the market, you have the best opportunity to grow your capital. When you are out of sync with the markets, or conditions are simply too dangerous or unfavorable for your style, it's imperative to cut back your trading and tightly limit your losses. This is how we keep the line of our equity curve moving up and to the right. After all, isn't that the main thing we are trying to achieve?

Related posts:

1. Lessons from Hedge Fund Market Wizards: Steve Clark.

2. How to Pull the Trigger on Your Trading Ideas.

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Thursday, March 17, 2016

Valeant (VRX) Update: Stunning Losses for Stubborn Investors

Valeant Pharmaceuticals (VRX) is now big headline news, as the stock's downward slide continues to punish investors, big and small. 

Hedge fund manager, Bill Ackman of Pershing Square was reported to have lost $1 billion in a single day due to VRX's latest plunge. Institutional ownership of Valeant's stock was very widespread. As mentioned in our last post, a huge number of hedge funds and mutual funds owned big positions in VRX. Smaller investors may also be feeling the hit in their personal investment accounts or in their pension funds' returns.   

Let's not focus too much on the investors who were unfortunate enough to get burned in this stock crash. The media and the investing world are already having a field day with this debacle. Instead, let's take a fresh look at the chart to better understand why so many savvy investors were hurt in this decline.

As you can see in this updated daily chart (click to enlarge), VRX had been showing signs of distribution (professional selling) for weeks heading into the fall of 2015. 

Valeant VRX stock chart decline crash


After breaking down through its 200 day moving average (the red line), the stock moved sideways for a time before plunging through the $150 level. Here's where the decline really accelerated and volume ramped up. 

Towards the end of 2015, we saw a nice rebound in VRX and a bit of chatter about how "everything would be fine" and "here is a smart place for big investors to average down and buy more", etc. Well, as recent events have shown us, that is not exactly how things played out for the investors who stubbornly held on to their bullish "thesis" for VRX.

At the start of this week, VRX was trading near $68. By Tuesday, the stock had plunged by over 50% to close at $33.49. As of today's close, VRX is trading at $29.65, 60% lower from our previous Valeant (VRX) update at the end of February. 

If you didn't read my last post on VRX, go back and check out the closing section, "How to avoid disastrous stock declines". If you know someone who is stubbornly holding on to major losses in their portfolio or trading account, share the article with them. While nothing is foolproof in investing, these simple ideas may help you pare or avoid the disastrous losses that can ruin any investor, big or small.  

“The most important rule of trading is to play great defense, not great offense. Every day I assume every position I have is wrong. I know where my stop risk points are going to be. If they are going against me, then I have a game plan for getting out." - Paul Tudor Jones, via Darvas Trader.

Related posts:

1. What I Learned Losing a Million Dollars.

2. Marty Schwartz Shares Trading, Life Wisdom.

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