Category Archives: Risk Management

When to Ignore Extreme Oversold Conditions

Posted on April 17, 2013 by Michael Harris

Gold has plunged to extreme oversold territory but unless one is very sophisticated with timing entries and exits and managing position risk, these technical reversal signals should be ignored. Extreme oversold, and also overbought, conditions can be quite misleading as market participants … Continue reading →

Posted in ETF Analysis, Risk Management, Technical Analysis | Tagged , | Comments Off

Naive Speculators Were Hit Hard

Posted on February 26, 2013 by Michael Harris

Speculators who rely on naive analysis of price action were hit hard yesterday. In the case of the DIA, HFT algorithms got the speculators both sides. In the case of TLT shorts were shaken out. This is how professionals make money … Continue reading →

Posted in ETF Analysis, Risk Management, Technical Analysis | Tagged , , , | Comments Off

Risk of Ruin For Dummies

Posted on November 2, 2012 by Michael Harris

A good percentage of  traders and investors get ruined because they are deceived into believing that they can be profitable in the longer term even if they are wrong more often than they are right provided they win multiples of what they lose, on … Continue reading →

Posted in Risk Management | Tagged , , | Comments Off

The Fallacy of Rare Events and Fat Tails

Posted on October 21, 2012 by Michael Harris

Rare events such as the 1987 stock market crash or the Google stock drop of last Friday are unpredictable. Those who try to convince investors and traders to constantly plan for such events essentially attempt to neutralize them and turn them into spectators … Continue reading →

Posted in Economic Analysis, Market Statistics, Risk Management | Tagged , , , , , | Comments Off

Confidence Is The Sure Way to Ruin

Posted on October 1, 2012 by Michael Harris

If you are confident about your market analysis then this is the sure way to ruin. Unlike other disciplines that demand confidence due to the existence of concrete rules and procedures, trading and investing are on the opposite side. Nothing … Continue reading →

Posted in Risk Management | Tagged , | Comments Off

A New Paradigm for Equity Investment Risk

Posted on August 23, 2012 by Michael Harris

Equity investment risk is proportional to the inverse of price. This is the new paradigm for risk in the equity markets. As prices increase, risk decreases. As prices fall, risk increases. This is happening mainly because of momentum trading and … Continue reading →

Posted in Economic Analysis, Risk Management | Tagged , | Comments Off

The Most Valuable Chart of All Time

Posted on August 23, 2012 by Michael Harris

This is what I could come up with today. Understanding this chart is half the battle.

Posted in Risk Management | Tagged | Comments Off