All you want to know but never asked about the stocks and options markets.

martes, 4 de octubre de 2016

Investment Strategies: Spread Trading

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Investing in pairs or spread trading is relatively common in the world of institutional investors, but rare among minor investors, mainly because one of the two legs of the strategy involves a short position. This fact can limit access to retail investors, because they tend to have more difficulty finding a broker that allows them to open a short position on an asset.

In general terms, spread trading is to bet that an asset will perform better than another, regardless of whether the market rises or falls. That is, it is considered a market neutral strategy, because if our forecast is met, it does not matter what the market do.

martes, 21 de junio de 2016

Binary options, investment or bet?

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binary options, bet or investment

The options, in general, are financial products that are part of the group of derivatives.
Theoretical definition: An option is a contract between two parties whereby one acquires on the other the right, but not the obligation, to buy or sell a specific amount of an asset at a certain price at a future time.
Previously we saw the overall functioning of the most frequent options known as call and put options options.

viernes, 10 de junio de 2016

Investment Strategies: Permanent portfolio

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Investment Strategies - Permanent portfolio


In the last months of 2015 there has been a marked deterioration in the S&P 500, the benchmark of the US stock market, a situation that persists in the beginning of 2016. Among the reasons for this decline, as well as for the high volatility experienced from the summer of 2015, can be mentioned, among others, doubts about the Chinese economy, the drop in commodities (especially in oil), the political and economic uncertainty in many countries (including United States) and the South American stagnation.

How to make a lifestyle with intraday trading?

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First of all, start with a demo account. Trade in your demo account for 3 months. Try to negotiate five days a week. Establish a daily profit and loss goal for yourself.

Discipline

Check the big news every morning before the market opening. Trade with capital you can afford to lose. Do not put all your buying power in one trade (money management). Stick to your trading plan at all times. Work with a small list of 3-5 stocks that you dominate. And do not overtrade.

viernes, 3 de junio de 2016

Sprint looking to buy T-Mobile USA

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Sprint, which previously played a merger between AT&T and T-Mobile  is now interested in buying T-Mobile USA based in Seattle for $40 per share. Earlier this year, Sprint was acquired by the  largest mobile communications company in Japan, Softbank. Softbank executives have more than 85% of the shares of Sprint and want to expand their investments to keep up with the competition and become one of the three largest companies in the sector of mobile comunications.

lunes, 2 de mayo de 2016

Make Money with Insider Information

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The use of privileged information only appears in the news when someone ends up in jail. Thus, it may seem strange to suggest the possibility to try to make money through insider trading.

However, here it is a shocking truth - the insider is not illegal. It is perfectly fine for a key executive to make trades based on what he knows about what is happening in their company - whether good or bad. What is illegal is not reporting the trade made - the Securities and Exchange Commission (SEC) requires that privileged traders with non-public information report any transaction in shares of the company within a period of two days after the trade.

domingo, 24 de abril de 2016

What is slippage in stocks day trading?

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slippage in trading

In an ideal world, when a daytrader place an order, the trade is executed at exactly the price specified. However, under certain conditions, the trade or operation can be executed at a different price. For example, if an intraday trader places a stop loss after having taken a long position - in other words, a trade in which he or she bought stocks instead of selling them - it is possible that the share price could fall below the price specified in the stop loss order before it can be executed. In this case, the stop order will be executed at a lower price - although the broker will try to get the best price available.

jueves, 21 de abril de 2016

Spreads in stock trading

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If you look at the price quoted for any given stock, you can see that there are actually two prices. The first is the buying price (bid) -how much traders are offering to buy such stock - and the second is the selling price (ask), which is the amount that traders are offering to sell that stock. In most cases, particularly in high-volume stocks in the United States, the difference between these prices - the price differential - or the difference between supply and demand (called spread) is usually only a cent.

However, in some cases, the differential or spread may become wider, and this is something that traders have to pay attention. Especially when they are trading in the short term.

martes, 5 de abril de 2016

Do You Have to Use Indicators in Trading?

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Many traders feel compelled to use indicators to anticipate the movements of the stock market, but often, this can backfire. While some traders find that indicators fit their trading style, many more are confused and upset. In fact, many successful traders have abandoned the use of indicators completely, and now choose to focus only on the price and volume information.

lunes, 21 de marzo de 2016

Five Rules for Selecting Stocks

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There is a huge amount of stocks to choose from, so picking the right can be a challenge for most investors. The stocks you choose to some extent depend on your own personal investment strategy, but there are a number of simple rules that apply to almost any market sector or investment approach.

sábado, 20 de febrero de 2016

The FTSE 100 Index

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The FTSE 100 index, popularly pronounced as Footsie 100, is a stock market index published by the Financial Times. It is composed of the top 100 equities in the LSE (London Stock Exchange). FTSE is an acronym for Financial Times Stock Exchange. The main indicator of the FTSE 100 is the FTSE 100 Index. The index was developed with a base price level of 1000 on January 3, 1984.

viernes, 19 de febrero de 2016

Phillips curve, the relationship between unemployment and inflation

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In this article we moved virtually to a class of macroeconomics at the University. But, unlike those tedious explanations where the slate is filled with graphics and symbols, we will understand easily and briefly this important economic theory.

William Phillips was first engineer and then economist, influenced by Keynesian theories. In 1958, the New Zealand put on a graph the inflation rate and the unemployment rate of the last hundred years (1861-1957), and observed a downward sloping curve reflecting that at higher unemployment, lower inflation and vice versa. In other words, "there is a negative relationship between inflation and unemployment". We see it in the red curves.

miércoles, 17 de febrero de 2016

Dow Theory

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Charles Henry Dow (1851-1902), the precursor of technical analysis, during the late nineteenth century, wrote in the business newspaper Wall Street Journal 255 editorial explaining his studies of the market graphics, based mainly on price movements and trends formed by these movements. His work was compiled based on these editorial and is currently known as Dow Theory.

Basic principles of the Dow Theory

Dow Theory is based on these six main points, and lays the foundation for much of what is now known as technical analysis.

martes, 16 de febrero de 2016

Investment Strategies: Global Macro

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One of the most attractive investment strategies for professional managers in the financial markets is called Global Macro strategy.

This investment strategy is characterized by carrying out a comprehensive strategy, that is, an approach that takes into account assets and markets around the world with the aim to create an investment portfolio that allows the inverstor to beat the market average.

sábado, 13 de febrero de 2016

S&P 500: We could be looking at a simple 'abc' corrective pattern?

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The index has fallen back to price levels of two years ago.
As is happening in all European indices and across the Atlantic still we have no trend change patterns that somehow anticipate the possibility that we have seen a market floor in the S&P 500. For the moment anything can happen.

Coeuré (ECB) considers necessary to keep rates low in the euro area

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The French member of the executive committee of the European Central Bank (ECB), Benoît Coeuré, said today that the aim of the institution is not that the current phase of low interest rates become normal, but stressed the need to keep the interest rates at low level to raise inflation and protect recovery.

New York Stock Exchange (NYSE)

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The New York Stock Exchange (NYSE) is the largest stock market in the world in terms of money supply and also the first in terms of affiliated companies. Its volume in shares was exceeded by the volume of NASDAQ during the 90s, but the capital of companies listed on the NYSE is five times higher than in the NASDAQ. The NYSE has an annual transaction volume of 21 billion dollars, including 7.1 billion of non-US companies.

NYSE was created in 1817, when a group of stockbrokers was organized forming a committee called the "New York Stock and Exchange Board" (NYS & EB) in order to be able to control the flow of stocks which, in those days, was freely negotiated and foremost across the street of Wall Street.

In 1918, after World War I, it becomes the main broker in the world, overtaking the London Stock Exchange.

On thursday October 24, 1929, thereafter called Black Thursday, there was one of the biggest falls in this stock market, which would produce the biggest economic recession in the United States in the twentieth century, the "Great Depression".



miércoles, 10 de febrero de 2016

Investment strategies: Long Short Equity

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When making our investments we have multiple options to put our money to work depending on our investment style and the risk we are willing to assume.

For those investors who are willing to tolerate some exposure there are a number of alternative investment strategies to more traditional investment approaches that seek to achieve positive returns regardless of market developments. Among these strategies we have one called Long Short Equity strategy, widely used in the world of hedge funds.

The implementation of this strategy is simple, and consists of creating an investment portfolio with long and short positions.

Correlation among stocks: Do you consider it in your trading?

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One of the fundamental concepts in which are based the stock market managers when they manage the portfolios under their responsibility is the correlation between the different stocks making up those portfolios. However, this concept can also be very useful for the retail investor.
Correlation is a statistical concept that indicates the relationship between two or more variables

So, if we have two variables, A and B, there will be a positive correlation between the two if the increase of value of A increases the value of B and vice versa. Conversely, there is a negative correlation when the behavior is reversed.  That is, when A increases then B decreases and vice versa.

martes, 9 de febrero de 2016

The role of fear in investment

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Sure we've all read a book or article on sectors, markets or companies with potential, deep fundamental analysis, or interesting investment systems.

But investors and traders less often discuss a subjet that ultimately has as much or more influence on investment: psychology in general and in particular the fear that an investor feels at some point.

When the market falls hard and savings that has cost so much effort to get lost value per minute, is inevitably to feel fear.

What is fear?

From a physiological point of view, as we notice a potential threat our brain secretes a substance that causes a biochemical change in the flow of dopamine, creating an imbalance in serotonin levels and initiating the perception of an unpleasant sensation. A simple bad smell can trigger this process by inducing a small stress reaction.

A clear threat feeling can significantly alter biochemical balance, so that further increase stress levels. This part of our brain has a highly autonomous response and comes from the remains of the reptilian brain.

It can cause a extreme survival reaction which is known as fight-flight reaction. The body prepares to face the situation as the danger lies ahead. We are ready to fight or flee. That's what has kept up with the evolution of humans. Thus, the most capable individuals to face the danger and fight/escape were those who survived and perpetuate the species.

That jerk reaction of fear stems from the oldest prehistoric times, when our ancestors were walking across the savannah and appeared a hungry lion that directly threatened their safety and that of their fellow people. This reaction have the same sense in our times? The short answer is no. Nobody is going to eat us as a snack in a city in the XXI century; However evolutionary adaptation remains, and we must face other dangers that cause exactly the same reaction we had thousands of years ago. Now is not a lion, but it can be a car, or it may be the fear of losing money which provide us with necessary goods.

Fear on investment

In 2008, during the subprime crisis, we had many media reports and analysts that gave us reasons to fear, a feeling that grips financial markets:
  • Advanced economies will not return to remarkable growth rates over many years.
  • Unemployment rates will remain high at least until 2020.
  • The risk premium of the economies of southern Europe will continue into the air and sovereign debt will be rampant..
  • Europe and the United States are on the wane, their role will be replaced by emerging economies, especially China, but also Russia and Brazil.
  • Oil could continue to rise above $150/barrel with a catastrophic impact on inflation and the productive economy.

In hindsight, we see that none of this has been accomplished, and we simply attended the cyclical downturn that periodically occurs.


Now, after several years of global growth, especially in the United States we have new threats:
  • Employment is recovering too slowly.
  • GDP grows in Europe and the US irregularly.
  • The risk premium has been reduced by the intervention of the central banks, but the debt is too high.
  • Emerging countries are a time bomb, especially their debt.
  • Oil breaks down below $40/barrel, which remains a threat to global stability.
We see that many of the messages are contradictory. In 2008, the high price of oil was a problem, in 2016 the problem is just the opposite. Therefore, we will always find potential threats to our investments.

Some tips to avoid being seized with fear

  • Distraction: In times of stress is advisable not to trade. Likewise it is recommended not to shop in that situation, let alone to manage our investments.
  • Value and price: An investment is neither better nor worse trading at $10 or trading at $15, is the same. Always focus on value, not price.
  • Be aware of your own limitations: If we are very anxious then perhaps it is better not to trade with the open market and use pending orders without looking at the market.
  • Consistency: If we are long-term investors (years), why look at how is evolving our portfolio every day?

Conclusion

Says one of the best investors in history, Warren Buffett, "The most important quality for an investor is temperament, not his intellect."

We all know that to invest in the stock markets with some success is not necesary to be an expert in finance, but it is important to have a defined strategy and follow it with conviction. In this context, the psychology in general and fear in particular have a very important role, so it is important to know our weaknesses and learn to manage them.




Quadruple witching

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Unlike what happens with the stocks that have an indefinite life (except in exceptional cases of bankruptcy, liquidation, merger ...), other financial instruments have a predetermined maturity period. This applies, for example, for derivatives (futures and options).

Every three months, coinciding with the third Friday of each end of the quarter (March 20, June 19, September 18 and December 18 of 2016), occurs the expiration of index futures, index options, stock futures and stock options. These four days have a peculiar name, the "quadruple witching".