Moving averages are primarily used as trend indicators and trend filters. They are quantified technical trading indicators that can be used for backtesting and signal creation. Using moving averages to capture profitable trends are only one side of their usefulness. What enables moving averages to work as profitable technical trading tools is their ability to […]
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Why did the Coronavirus drop the stock market so fast? The stock market is a forward looking investment mechanism and is always pricing in the future earnings expectations today. The Coronavirus is a highly contagious and dangerous illness that has already caused the quarantine of Chinese cities, Italian towns, cruise ships, and travellers returning home
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A stop loss is a risk management tool that keeps your losing trades small. The point of a stop loss is defensive and to eliminate big losses from your trading. Here are ten tips for thinking about when placing a stop loss on a trade: Your stop loss should be a part of your trading
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There are two different types of stop orders you can place with your broker to exit a trade when a specific price level is reached that triggers your stop loss on a position. Both of these types of orders are risk management tools that try to limit the losses if a stock or market moves
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A margin call is when a broker requires that an account holder deposit more capital into their account or sell an open position to maintain it at the required minimum security value for margin requirements. A margin call happens when the value of a trader’s margin account of borrowed money drops below the broker’s requirement
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The definition of financial hedging is to buy insurance to limit the risk of the downside if an asset falls in value. Hedging is a multi-position strategy that purchases insurance for an investment or trade position that is being held as a way to limit the downside losses if it trends against the investor. It
The Calmar Ratio was created by Terry W. Young in 1991, it is short for California Managed Account Reports. The Calmar ratio is usually based on recent and short term data. The Calmar ratio gives investors insight into the risk parameters of different investments and money managers. The Calmar Ratio contrasts the risk of maximum drawdown and the annual
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CAGR stands for ‘compound annual growth rate’ and is used in business, investing, and trading as a term for the measurement as a geometric progression ratio providing a constant rate of return over a specific time period. While CAGR is not an accounting term it is still used to describe the return in segments of
The term Antifragile was coined by author Nassim Nicholas Taleb who was also a professional option trader and former hedge fund manager. Taleb created the word ‘anti-fragility’ because the existing words used to describe the opposite of fragility, such as unbreakable and robustness, were not accurate in what he was trying to describe. Antifragile goes beyond these
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The Sharpe Ratio was developed it in 1966 by William F. Sharpe as a way to quantify potential risk in an individual investment or an investing method or trading strategy. The Sharpe Ratio is the defined difference of the returns between an investment and the potential risk free return that is then divided by the standard deviation/volatility of the
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Margin trading is when your broker adds buying power to your account to increase the size you can trade and the quantity of trades you can make. Margin can be used to add leverage to your trades or faster turnover on your trades without having to wait for them to clear after entering and exiting.
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When you enter a trade a stop loss is the exit tool you use to know when it is time to get out of the trade because you are losing money. A stop loss is the tool you use to prevent a small loss from becoming a big loss. This is one of the most
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Here are ten reasons a stop loss is so important in trading: A stop loss defines your price risk by quantifying what price level you will exit a trade at. A stop loss helps define your trade size. By knowing what price you are going to exit a losing trade you can set your position
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“Successful trading depends on the 3M`s – Mind, Method and Money. Beginners focus on analysis, but professionals operate in a three dimensional space. They are aware of trading psychology their own feelings and the mass psychology of the markets. Each trader needs to have a method for choosing specific stocks, options or futures as well
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In trading as in life there are both risks and rewards to consider before you start any journey. You have to ask yourself are the risks of loss worth the possibility of the gains from the rewards. In trading your risk is created on entry by a combination of your position sizing and stop loss if
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On trade entry the risk/reward ratio measures a trades potential for loss versus the magnitude of possible profits. In backtesting the average of all the losses in a system compared to all the average gains gives you the system’s risk/reward ratio based on historical price action. Looking at your stop loss versus your profit
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In trading defense is under rated and offense is over rated.Too many new traders want to make money so bad they don’t even consider the risk of loss when the market becomes very volatile and plunges. Here are ten ways to manage risk and limit your losses during market plunges. Your maximum position size on
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This is a Guest Post by Niclas Hummel, creator of the Risk Simulator and a trader living in Bangkok. “Trading is managing risk and being a trader is being a risk manager.” This simple statement implies two realities: There is always risk The only thing you can do is manage it So what can you do to be a
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This is a Guest Post by Niclas Hummel, creator of the Risk Simulator and a trader living in Bangkok. A Monte Carlo simulation projects your trading system’s equity curve into the future. You only have to know the average loss, average win and hit rate of your system. Because I could not find a good Monte
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This is a Guest Post by AK of Fallible. Bruve Kovner: How To Trade Stocks Like A Market Wizard Bruce Kovner retired in 2011 from Caxton Associates, the hedge fund he founded and ran for 28 years. Over that time the fund returned an average of 21 percent a year since its inception. In comparison,
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