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Category Archives: Risk Management
This latest article in Yahoo! Finance is an example of how data-mining bias still drives Wall Street decisions.
Backtests are good for systematic trading and under certain conditions. It makes no sense to use backtests in an effort to analyze current market conditions. Yet, this is done all the time and regrettably by educated people who call themselves … Continue reading
Some investors and traders will never be satisfied with the type of strategy they use. If they use a strategy from the public domain, then they complain it does not work. If they use a black box, then they complain … Continue reading
There are two golden rules savvy traders follow during times of uncertainty. Adhering to these two rules minimizes the risk of large losses due to adverse moves or lack of participation when a favorable move starts.
On December 16, 2015, when the Fed raised short-term rates, the 10-Year Note yield was at 2.29%. After about a month, the market has neutralized the Fed action and the 10-Year Note yield has fallen by about 25 basis points.
Even if only one trade out of several bad trades shows a small gain, large losses can be reduced substantially. Here is an example from last week.
These 16 Dow30 stocks and ETFs dropped more than 15% on August 24, 2015 and some have recovered since. In this new era of high frequency trading, even high cap stocks and popular ETFs can be part of speculative plays … Continue reading