Tuesday, June 29, 2010


Mr. Victor Niederhoffer and Mr. Nassim Nicholas Taleb are two traders whom I admire for a variety of reasons. This article is a great story and synopsis of how different and opposite they both are in their respective trading strategies.

I have read that traders who write options generally tend to make more consistent money than those who buy options; but when an unexpected event comes along they blow it all away. Mr. Niederhoffer writes them, and Mr. Taleb buys them. Mr. Niederhoffer makes money up until the unexpected event. Mr. Taleb loses money until the rare, unexpected, black swan event occurs.

Friday, June 25, 2010

Mr. George Soros Speech - Germany is the Key

Here is the text of a recent speech given by Mr. Soros...no one knows what will happen in the future, and although I usually am optimistic, I do worry that this overleveraged world of our has to structurally reform itself. I think I hear the sound of a piper in the distance...

Wednesday, June 23, 2010

High Frequency Trading Creates an Uneven Playing Field

Here is a link to a video about high frequency trading. High frequency trading (HFT) has become an issue lately. According to the Tabb Group, HFT accounts for 61% of the volume in U.S. equity markets. I am not against it or for it. But I believe the SEC has the obligation to step in and make the playing field level for all traders. Having the opportunity to see bid and ask orders split seconds ahead of others, which is called flash trading, is similar to having inside information. Under exchange rules, stock orders are supposed to be routed to the exchange that offers the best price. This means that exchanges can lose the fee that they charge if the order is executed on a different exchange. By flashing that order for a few milliseconds, they can try to keep the order and gain the fees. This is not a level playing field for investors and traders.

Firms that use high frequency trading claim they are providing liquidity to the market. This is simply not true. High frequency trading may be providing liquidity, but not when the markets need it. Markets need liquidity when an event or crises occurs. High frequency programs are stopped if data feeds and prices are becoming abnormal. This is what happened on May 6, 2010. It reminds me of the stories of the specialists on the Street who simply stopped picking up their phones during the crash of 1987.

The firms who are using HFT are probably doing well with it and will continue to fight anyone who threatens to change the rules. In my opinion, however, HFT needs to be better regulated and the rules need to be changed to make the playing field more level for all traders.

Tuesday, June 15, 2010


Bloomberg posted a video of a speech given by George Soros. It is worth watching. Soros believes that we are now in Act Two of the financial crisis. The sovereign debt problem has not gone away, has not been dealt with, and will come back to haunt us. It makes me shiver thinking about the amount of leverage in this world. America is swimming in debt and has pushed its problems under the rug by borrowing even more in order to solve its problems. The European sovereign debt problem has also not been adequately addressed. Although I have not been involved with credit markets in my life, I still wonder why anyone would buy the debt of countries that will not be able to pay back their debts.

That being said, here's the link to the video...

Wednesday, June 9, 2010

Creativity and Uncertainty, Synchronicities and Trading

We should pay attention to synchronicities that occur in our lives. They may be happening for reasons that we may not currently understand. A synchronicity is what we sometimes call a coincidence, or when two chance events occur at the same time.

Last week I was flipping through the TV channels and caught a few moments of an interview with Mr. Deepak Chopra. All I briefly heard was that creativity tends to occur within uncertainty. I wish I had seen the whole broadcast. Nonetheless, this fragment of information was something I thought about all through the week. As traders, we deal with uncertainty in a variety of ways, so naturally, uncertainty linked with creativity peaked my interest.

Last night, I was looking for a book to read, and began to look at some old books on our shelves. I came across the book, “The Act of Creation,” by Mr. Arthur Koestler. I do not know if you believe that the universe sends messages to us, but I sometimes think it does. This book is about creation and creativity, and how all creative activities have the same basic pattern. I have just begun to read it and I will post my thoughts as I go along over the next period of time.

Wednesday, June 2, 2010

Pictures of Traders on Down Days

I always enjoy the silly pictures that newspapers tend to print of traders on the floor whenever the market has had a huge down day. This has always been the case since I started to trade as teenager. The market has a huge down move, the next morning there is a picture of a trader, or traders, all looking at horror at the screens, or praying, or holding their hands over their mouths in astonishment. I find it humorous.

May gave us some nice pictures...

Tuesday, June 1, 2010

May SP500 Emini Futures Trading Performance

May was a wild month in the SP500 futures market. Although we continue to be in a drawdown, we posted a positive 3.25 points for the month. In addition, the number of trades taken during the first five months of 2010 is below average.

Although this drawdown has been long, it is still similar to any historical drawdown observed historically. It may last a while longer, or things could turn better in the near future. Nonetheless, as systematic traders, we continue to trade our models as signals occur. Trading always involves uncertainty about the future, but if you think about it, so does life.