This section is called Trading and contains subcategories Market psychology and Rules. Below you will see the total of all articles in both categories. To filter for either one of them, click the appropriate category in the menu on the left-hand side.
The model portfolio that we used to run on this blog has now been replaced. The new version is called: Greed and Fear algorithmic trading. But since we're still in the phase of building a decent track record, everyone can now follow this new way of trading for free! All trades are reported in real-time in a Telegram group and channel.
Once you have joined, you can read back all messages to the very first start. At the end of the day or week, I will update the trading sheet, which you can find here with all the details: Greed and Fear Algorithmic trading - trading journal
Interactive Brokers (IB) is a popular broker, operating in several counties around the world, usually under local national names. Their trading platform is the same everywhere, it's the Trader Workstation or TWS. For novice users, it may be somewhat intimidating at first glance, but once you get a good understanding, you'll see it has a lot of powerful features to offer.
We have learned that disciplined trading is the only way to survive in this business. The best way to adhere to your own strict trading rules is to automate things. Let your orders take care of your trading, not your brain because the human brain usually fails in (short-term) trading. In order to achieve this, we need an extensive set of order types. TWS has just that, so let's get into it.
In our previous post about gaps, we looked at market behavior around opening-gaps and would generally happen during that same trading session. But nothing spectacular came out, an opening-gap basically meant nothing for further price action that day. Also, the average size of an opening-gap turned out to be a few factors smaller than average daily volatility, so those margins were easily absorbed regardless of whether there was an opening gap or not.
Now suppose the opening-gap does not get closed during the same trading day. How does affect the market in the next couple of days? Does price gravitate back towards such a gap, as if it wants to pull in price or doesn't it have any significant meaning as we saw in the opening-gaps analysis? Let's dive in.
There's a lot of talk about so-called gaps. General wisdom says they will be closed. But is that true? Is there a statistical edge about gaps that we can use in our trading? Let's find out.
The easiest way to replicate the Greed and Fear model portfolio is by using the autotrading facility. There's a section that explains how that all works. But there can also be good reasons not to use autotrading.
If you use any search engine and type in the phrase "How to become a successful short-term trader" or anything similar, you will find roughly 70 million(!) websites that will help you in achieving that goal, or so it seems. While in reality, there's only one right and honest answer which is more like this: "There is an extremely low probability you will ever be successful in short-term trading, and you will most likely lose all funds in your account".
If you're a software developer like me, then the phenomenon of a so-called bug is a well-known thing. The other day, I ran some tests and discovered one in my neural network which has significantly degraded the performance in the last 6 months.
The first part of 'Market gurus and their predictions' has really caught some attention. Let's now move on to the next part about this subject.
Again, as mentioned in part 1, these pages are mostly meant as an eye-opener that almost all of the 'mainstream' analysts have no added value in trading or investing. In fact, flipping a coin has a higher probability of making a correct call about the expected market direction than those analysts.
First, autotrading is a great development for the trading community, both for investors as well as traders. It gets rid of all the fluff and ambiguous analysis that float around the internet, that whole crazy circus feeding the modern gold-rush.
Actual and verified trading results of the Greed and Fear model portfolio are now available provided by trusted third parties. They are keeping track of the actual trading activity and record each and every trade made, based on the Greed and Fear indicator.
Early visitors of this blog have seen my daily posts for years now with the so-called Greed and Fear indicator and to which direction it was pointing. This was my initial attempt to expose the indicator to the public. Along the way, the performance was measured of course, to see if it was any good and useful in trading. The most honest way to measure this performance was by counting index points 'it called right' subtracted by 'index points it called wrong', as I've explained here in more detail.
But during all those years, I never explained in some more detail what the Greed and Fear indicator really was, while this is probably one of the most fascinating subjects today: a neural network! The more widely known terminology would be machine learning, artificial intelligence, etc. There are subtle differences, but it all comes down to 'intelligent software'.
This section will explain how autotrading works and what the benefits are for investors in the Greed and Fear portfolio. Autotrading also offers the possibility to have the trading results verified by a trusted third party, the autotrading platform. Potential investors can easily see each and every transaction and how those results build up to the current state of the portfolio.
This section is about how trading signals work for the Greed and Fear model portfolio. It's a very good alternative to autotrading, and sometimes even preferable.
As a trader you need rules. One could also say that a trader needs a plan. The trading rules/plan will protect a trader from making decisions that he would otherwise not have made. Sometimes the stressful moments of the markets may disrupt the thought process. It is at those times that rules will tell a trader what to do.
The articles in this section are mostly about market psychology. As a trader, you have to be aware of market psychology, what it does to you, but also what it does to other market participants. Every trader at some point realizes that everything is not what it always seemed to be. There is a somewhat hidden reality behind the obvious one. Getting to know this hidden reality, this different view on the markets and human behavior, will likely make you a better a trader in the end.
The field of machine learning is a very fascinating one. And because the Greed and Fear indicator is a neural network, there's a lot to discuss about ways to apply neural networks and machine learning in trading.
This section has blog posts with a more educational character. For instance, how to place advanced orders, or how to use statistics to your advantage.