Trading Archive

http://www.cnbc.com/2017/06/13/death-of-the-human-investor-just-10-percent-of-trading-is-regular-stock-picking-jpmorgan-estimates.html

  • “Fundamental discretionary traders” account for only about 10 percent of trading volume in stocks today, JPMorgan estimates.
  • “The majority of equity investors today don’t buy or sell stocks based on stock specific fundamentals,” said JPMorgan’s Marko Kolanovic.
  • JPMorgan believes the recent sell-off in technology stocks may have been related to quantitative and computer trading and not traditional fundamental investors.

by Evelyn Cheng | @chengevelyn
Tuesday, 13 Jun 2017 | 4:49 PM ET

Quantitative investing based on computer formulas and trading by machines directly are leaving the traditional stock picker in the dust and now dominating the equity markets, according to a new report from JPMorgan.

“While fundamental narratives explaining the price action abound, the majority of equity investors today don’t buy or sell stocks based on stock specific fundamentals,” Marko Kolanovic, global head of quantitative and derivatives research at JPMorgan, said in a Tuesday note to clients.

Kolanovic estimates “fundamental discretionary traders” account for only about 10 percent of trading volume in stocks. Passive and quantitative investing accounts for about 60 percent, more than double the share a decade ago, he said.

In fact, Kolanovic’s analysis attributes the sudden drop in big technology stocks between Friday and Monday to changing strategies by the quants, or the traders using computer algorithms.

In the weeks heading into May 17, Kolanovic said funds bought bonds and bond proxies, sending low volatility stocks and large growth stocks higher. Value, high beta and smaller stocks began falling in a rotation labeled “an unwind of the ‘Trump reflation’ trade,” Kolanovic said.

“Upward pressure on Low Vol and Growth, and downward pressure on Value and High Vol peaked in the first days of June (monthly rebalances), and then quickly snapped back, pulling down FANG stocks” — Facebook, Amazon.com, Netflix and Google parent Alphabet, the report said.

Along with Apple, the big tech-related names fell more than 3 percent each last Friday and dropped again Monday, sending the Nasdaq composite lower in its worst two-day decline since December.

However, “the contribution coming from quant rebalances to this snapback is now likely over,” Kolanovic said, noting that S&P derivatives have supported market gains at the beginning of this week.

“$1.3T of S&P 500 options expire on Friday, and this will change dealers’ positioning,” he said. “This can result in a modest increase of market volatility starting on Friday and into next week.”

Tech recovered Tuesday, helping U.S. stocks close higher with the Dow Jones industrial average at a record.

Derivatives, quant fund flows, central bank policy and political developments have contributed to low market volatility, Kolanovic said. Moreover, he said, “big data strategies are increasingly challenging traditional fundamental investing and will be a catalyst for changes in the years to come.”

Figures from market structure research firm Tabb Group point to similar gains in machine-driven trade volume, while the overall number of shares traded has declined.

A subset of quantitative trading known as high-frequency trading accounted for 52 percent of May’s average daily trading volume of about 6.73 billion shares, Tabb said. During the peak levels of high-frequency trading in 2009, about 61 percent of 9.8 billion of average daily shares traded were executed by high-frequency traders.

To be sure, not everyone on Wall Street is giving ground to the machines so easily.

AllianceBernstein analysts made the case in an April 28 note that artificial intelligence is unable to generate significantly different results — by the mere fact that analyzing more and more data results in increasingly similar strategies.

Evelyn Cheng CNBC

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Learn the Benefits of Footprint® Charts

Posted June 12, 2017 By APTA.org.au

 

Click here to view on YouTube.

Trevor Harnett answers the question of why some traders always seem to have a better read on the market.
You will learn:
– What Footprints are
– How Footprints help traders
– Practical methods for using Footprints in various markets

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Rookie Currency Traders Are Causing Trouble

Posted March 23, 2017 By APTA.org.au

It’s been something of a common lament among Wall Street veterans for a while now. And it goes, more or less, like this: All these darn twenty-something-year-olds around here have no idea what they’re doing.

Perhaps it’s just the typical grousing of community elders, but last week, the Bank for International Settlements said there may be something to the notion.

Tucked deep into a report on foreign-exchange market liquidity was a brief paragraph on how rookie traders could be partly to blame — along with falling volumes and the growing prevalence of electronic trading — for the flash crashes that have roiled the $5.1-trillion-a-day currency market over the past two years.

One case the BIS found particularly worrisome was the time last October that the pound plunged 9 percent in a matter of minutes during early trading hours in Asia. The organization concluded that “less experienced” traders handicapped by a limited knowledge of which algorithms to use at that moment “amplified” the rout.

For Keith Underwood, the report just confirmed what he’s known for a long time.

“If there’s a shortage of senior people, there’s a shortage of knowledge,” said Underwood, who runs his own foreign-exchange consulting firm after a 25-year trading career that included stints at Lloyds Banking Group Plc and Standard Chartered Plc. In his trading days, he said he was leery of handing off positions to junior staff in other regions overnight. “I’ve certainly adjusted my orders, and I’ve also adjusted my sleep.”

Younger, lower-paid employees make up a greater percentage of trading desks today than they have in years.

Part of banks’ broader effort to cut staff, boost electronic trading and lower costs following the global crisis, the “juniorization of Wall Street,” as some call it, has been especially acute in the foreign-exchange market. The world’s 12 largest global banks cut front-office staff by about 25 percent in Group-of-10 currency markets over the past four years, according to Coalition Development Ltd.

That’s coincided with a shift to automation, which slashed staffing needs and spawned a new, and small, generation of quantitative traders whose decisions are driven by mathematical models. For every managing director with about 10 years or more on the job, there are as many as seven less-experienced staffers on currency desks, Coalition said. The ratio was one-to-four just five years ago.

“The old hands who have seen crazy things happen, they’re gone,” said Michael Melvin, a professor at the Rady School of Management at the University of California San Diego and a former managing director at BlackRock Inc.

‘World Is Ending’

BIS’s write-up on the effects of juniorization, which stemmed from discussions with market participants, echoed conclusions put forth in an earlier study that BIS staffers did in tandem with the Bank of England.

Franz Gutwenger, a recruiter in New York, estimates that about 75 percent of recent job openings at banks’ currency desks were for candidates with three to five years of experience. The advertised roles are mainly for assistant vice presidents with base salaries of up to $150,000 a year, or vice presidents who earn about $200,000 a year. That kind of pay is a fraction of the salaries that top traders can make.

Having so many inexperienced people manning a trading desk is risky, Gutwenger said, and senior staff should be on hand in critical situations. Melvin said that many young traders can panic and think “the world is ending” when suddenly exposed to a market crisis.

Read Next: Currency Traders Race to Reform ‘Last Look’ After Bank Scandals

“For many of the jobs, day-to-day, it’s all good, there’s no issue,” he said. “But when extraordinary events happen, it really is useful to have some seasoned old hands around.”

How did 2016 treat you? How did your RBT treat 2016?

Posted February 7, 2017 By APTA.org.au

An article by Ivan Krastins

It is that time of year … again … to have a look at the performance of various RBT’s that have been designed by some students of my L.I.V.E.T.M. approach …

Click below to continue reading the article.

Ivan How was 2016 for you

Next APTA Meeting – Tues 4th Oct 2016

Posted September 29, 2016 By APTA.org.au

Tues 4th October 2016

The next meeting of the Australian Professional Technical Analysts (APTA) Incorporated will be held at the City Tattersalls Club, 194 – 204 Pitt St, Sydney, at 6pm on Tuesday 4th October  2016.

* Please note that APTA and MTA members receive 3 Continuing Education (CE) Credits for the CMT and AMT qualifications for attending the meeting.

Speaker:

Gary Burton

gary-burton

Topic:

From the Work of Ivan Krastins

Gary will examine valid price Spike Highs and Spike Lows and the following price movement into pivot point turns. The text book “ price event” observations, outside periods and inside periods can provide a set a usable statistics with a tradeable outcome in all time frames.

Biography:

Member of The Australian Technical Analysts association. (13 years) and is the current President of the Sydney chapter.
Member of the, Australian Professional Technical Analysts Association. (APTA)
PS 146  Compliance with ADA 1 & 2 in securities and derivatives.
Dip TA in 2004  / CFTe
Technical Analyst and Stock Broker with Alpine Asset Management.
Private client advisor with Macquarie Bank Sydney.
Senior client advisor with RBS Morgan’s.
Senior Client advisor with Investor First, transitioned to Wilson HTM  Sydney
Technical Analyst with FP Markets.

Current student of Ivan Krastins.

A contributor to the Marcus Today stock Market letter.
June 2006 – June 2008 Daily Technical section.
(2008, Marcus won stock picker of the year.)

Presented for the Trading and Investing Expo in Sydney Brisbane and Melbourne.
Contributor to “Your trading Edge” publication and Stock and Commodities magazine.
Regular guest on Sky business “your money your call”
Regular guest on sky business “Lunch money”
Sky Business “ Monday Technical analysis” contributor.
Weekly Contributor to Thomson Reuters Technical Analysis. ( NAB Trade ).

Cost:

APTA and MTA Members $FREE

Non-members $30

All non-members must register and pay prior to the event. Late registration will not be accepted.

Members and non-members WILL NOT be admitted without prior registration and payment.

Payment WILL NOT be accepted at the event.

APTA and MTA members are not required to register.

Eventbrite - Australian Professional Technical Analysts (APTA) 4th October 2016 Meeting

MTA Members:

Following a collaborative agreement between the Australian Professional Technical Analysts (APTA) Inc and the Market Technicians Association (MTA), members of the MTA receive honorary APTA membership and are entitled to attend all APTA meetings. The APTA Management Committee extend a warm welcome to our MTA colleagues.

APTA Meeting FAQs:

How can I attend APTA meetings?

APTA and MTA members may attend normal meetings at no charge. APTA and MTA members may attend the Annual APTA Luncheon and Christmas Party at a discounted price. 
Non APTA and MTA members may also attend normal APTA meetings but must register and pay $30 on-line prior to the event. Registration for the Annual APTA Annual Luncheon is more expensive and will be announced in a timely manner by the Committee.

Can I pay APTA at the door to attend a normal meeting?

No. Unfortunately, all guests must register and pay online at least 2 hours prior to the meeting. Payments can not taken at the meeting and any non member who has failed to register and pay will not gain admittance.

Can I pay APTA at the door to attend the Annual APTA Luncheon?

No. Unfortunately, ALL attendees (including APTA and MTA members) must register and pay online at least 2 days prior to the luncheon. Payments can not taken at the luncheon and any person who has failed to register and pay will not gain admittance.

How can I get the details of the event ?

Details are available at the APTA website at www.apta.org.au .

How can I be notified of upcoming meetings ?

Join the APTA Newsletter mailing list at www.apta.org.au .

Could I invite a friend / colleague to come along to an APTA meeting ?

Of course. If you have any friend / colleague that may be interested in attending as well, feel free to invite them, but please remember that they must register and pay prior to the event.

Comments or questions are welcome.

* indicates required field

Train Your Brain for Trading (No, Really!)

Posted September 15, 2016 By APTA.org.au

http://www.bloomberg.com/news/articles/2016-08-19/neuroscience-may-help-train-your-brain-for-trading?cmpid=BBD081916_BIZ

Recent research finds that traders looking at prices use parts of the brain associated with reading other people.

A stock’s price is ticking up and down on a screen in front of you. Do you rationally evaluate the probabilities that the price will rise before you pull the trigger on a trade? Or do you go with your gut?

You may prefer to think superior ability—that mysterious X-factor some traders appear to have—is rooted in the former scenario. But a few years ago, researchers at the California Institute of Technology went to the trouble of taking pictures of people’s brains while they were evaluating trades. Surprise: As rational as you are, you probably opt for that gut feeling a lot.

Using fMRI scans, neuroscientists can identify which brain structures are associated with particular activities. To do so, they might put a subject in a machine and have him solve a math problem so they can watch the fireworks go off. Those math-related structures aren’t what lit up in the Caltech experiment. Instead, the activation occurred in parts of the brain associated with something psychologists call “theory of mind.”

That’s essentially the ability to read other people. “It’s a viewpoint on what another person is thinking and feeling and what they’re likely to do,” says Denise Shull, founder of the ReThink Group, a New York research and consulting firm that coaches financial professionals and athletes. You unconsciously use theory of mind all the time to process experiences in the world, says Shull. It’s what helps you navigate a busy Manhattan sidewalk: You can tell that the guy in front of you is about to veer to the right, so you step to the left. It’s also what enables some traders to look at the tape, she says, and see that “someone’s slamming the bid.”

In the Caltech experiment, detailed in “Exploring the Nature of ‘Trader Intuition,’ ” a paper published in the Journal of Finance in 2010, researchers set up a stylized market. They had participants trade two “stocks” in a series of sessions. The payoff from the two stocks together was fixed at 50¢, but the portion of the payout that would come from each stock was revealed only after the session ended. One might pay 49¢ and the other would pay 1¢, for example.

In some of the sessions, none of the participants had any additional information about the payoffs. In other sessions, some participants were given a hint about what the payoffs would be. Based on that hint, those participants might bid up one of the stocks.

The trading during those sessions took place electronically and was videotaped. Later, a different group of subjects watched replays. After a while, a researcher would stop the video and ask the subjects to predict what the next price would be.

In the sessions where some traders were acting on hints about the payoff, the observers could infer information about how stocks would move just from watching the prices and flow of orders. The explanation: The fMRI scans showed the observers had engaged the theory-of-mind-related parts of their brains. Also, the observers who were better at predicting prices did better on separate tests of theory-of-mind abilities.
An fMRI image from the Caltech study shows the main activation in the paracingulate cortex, an area associated with theory of mind.
An fMRI image from the Caltech study shows the main activation in the paracingulate cortex, an area associated with theory of mind.
Peter Bossaerts

The Caltech study has some interesting implications. Among them: Theory of mind may explain how uninformed traders infer new information and act on it in such a way that prices quickly come to fully reflect it—as is posited by the efficient markets hypothesis, a cornerstone of finance theory.

Peter Bossaerts, an author of the Caltech study who’s now a professor of experimental finance and decision neuroscience at the University of Melbourne, says subsequent research also supports the idea that theory of mind may explain how information flows through markets. “We have more evidence for it,” he said in an e-mail, citing papers that show connections between theory of mind and market bubbles.

 

The Bloomberg Tradebook Trader Exercise lets you exercise your trader brain.
The Bloomberg Tradebook Trader Exercise lets you exercise your trader brain.

So, can you sharpen your skills for that? Yes, says Shull. “It’s trainable.” Although theory of mind is unconscious, Shull says there’s a conscious version of the same type of processing, which she calls cognitive empathy. “Cognitive empathy is thinking about it and trying to do it intentionally, and that’s where you can train yourself,” she says. The new Bloomberg Tradebook Trader Exercise lets you test your abilities and practice to improve them. Developed by Shull’s ReThink Group in conjunction with Tradebook, Bloomberg’s agency brokerage, the activity uses various animated shapes to challenge your gray matter. Keep an eye on that pentagon!

Asmundsson is <GO> editor of Bloomberg Markets.

Cautious Outlook For US Equities

Posted September 8, 2016 By APTA.org.au

What lies ahead in September for US Equities? Bruno Estier, Independent Market Strategist

You can view this video and the full video archive on the Dukascopy TV page: http://www.dukascopy.com/tv/en/#193388

0:00sep tember is wearing me as every September we know that sometimes if we
0:05look for example in 2014 volatility tend to write the morning brunei so we’re in
0:14September now so do you think the US equity market will continue to go higher
0:20well good morning Sally Starr yes we do have good news
0:23let’s see this morning mid cap which is a lot better for the market we see how
0:29your highs and higher lows here on the smoke up and under the cap as well and
0:33the relative strength has been rising during the old summer and it’s now a
0:38little bit poisoning but the momentum is still higher at first sight it looks
0:42good but what’s worrying you
0:44well September is wearing me as a every September we know that sometimes if we
0:50look for example in 2014 volatility tend to rise in September sometimes even
0:56start with audio in August as August has been very quite so far there is some
1:03chance that the ability would be arising if we look at that here we are below the
1:07thirteen percent levels which is a bit complacent that means nobody worrying
1:11about anything and on the other hand if we look in detail what happened in the
1:17last 10 days we had a first initial rise from eleven to fifteen percent and then
1:22the putback but this pullback with current rising momentum could be a
1:27higher lows and that could announce some more trouble later on okay what does
1:33that mean for their SMP 500 well we hope that that means that it would break out
1:38of these very narrowing bollinger bands which has been like a lasting now for
1:45almost all of july and august we see a very narrow training range again just
1:51before labor day we had a kind of a force break up on the downside that’s
1:56relatively corresponding to the seasonal that just before Labor Day doesn’t break
2:01down it’s more after late and we hadn’t even a rebound to what the top of the
2:06training range so here really what we need to to think and and watch is two
2:12levels
2:12two simple levels the first one would be a failure in the coming days to break
2:17above the resistance level which is a 21 92 93 and of course if there is a such a
2:25failure would be watching at the level of 2160 the support of course as this
2:31confirmation that something is going on there are other markets such as the
2:36European equities markets which have been doing quite well it’s been quite
2:39bullish hasn’t it
2:41well yes and he did give a relatively nice bullish signals because it’s
2:46breaking a long-term downtrend line that we see here over more than one year
2:52around the level of thirty 30 and now it’s rising up it comes at the same time
3:00as a relative strength versus the SNP is rising while it was declining so far so
3:05in fact basically if it was declining so far that means that Europe was lagging
3:10the SNP so that could just be a kind of ketchup situation and not lasting very
3:17long and he say the japanese market performing well
3:21japanese is a has been performing as expected in the sense that when it came
3:26close to 100 then there was a worried that too maybe it was too expensive yen
3:34and then the quickly corrected down 296 and at the same time we see that nuclear
3:40rebounded from 17,000 6402 to the 17,000 levels now yesterday was kind of
3:47interesting because it make a new high like a breakout above the previous
3:52resistance 6900 and at the same time the energy balance so it doesn’t go together
3:5911 of coffee is wrong so if there is a rebound because it was kind of a good
4:05move on the inside then probably the yen could be better patient we see here the
4:10oscillator the momentum is also overboard so it’s a situation where a
4:15reversal on this breakup could be with more dramatic the brunei you being a bit
4:22too cautious have how emerging markets going well if
4:26way that’s a good question you know because everything is doing well if we
4:31take some more distance and we go to a weekly chart
4:34what do we see we see indeed since during a very nice rise but this right
4:40now is approaching kosher levels first of all it’s the previous highs of the
4:46area of sep tember year ago
4:49secondly it is also a technical levels of close to this the top of this cloud
4:55and we know they’re usually that could be some resistance of some stalling that
5:00means the market could go from instead of continuing I could go sideways and
5:05put back that’s it for china so that’s why I’m worried and india was your
5:12favorite market is that still doing well
5:14india has been already making a small pose like we mentioned that two weeks
5:20ago and it’s now making a new high as if it wants to continue to go a lot more
5:26higher it is true that it outperformed the S&P that’s the black line which is
5:31rising vs emerging-market here it’s not so clear because it’s flat for now a few
5:37months so that means that’s not the leader anymore it’s just performing as
5:41well as over markets so here again we need to be careful about what would
5:49happen if we go back to below this key resistance level that we have identified
5:54already or four weeks ago and that would come together with some bearish
6:00divergence so that means what could come after is more of a stronger correction
6:06that what I have been so far and during the summer you like Brazil but has it
6:11been overbought now brazen used 22 always like when somebody games happen
6:17it’s usually uh we’re doing any country equity marketing of that country is
6:22doing well and we see that it has been rising on the relative strength is in
6:26peak away nicely vs said the imaging market it’s now also stalling because
6:32it’s also more linked not anymore with a leaping games that more with oil and
6:37here again
6:38we are close to some key resistance that we had not seen since april $DAY of
6:45$MONTH 2015 so with with the momentum starting a little bit too we need to be
6:51careful that it doesn’t go back below 44 and what could be a trigger for bad news
6:56the trigger for venues will be basically in all these market that what’s it is
7:03expected about growth is not realized so how do we measure grove indirectly in
7:09the markets usually when there is more buff expected interest rates are
7:14supposed to rise and that’s why we try to identify already since mid-july
7:19because we noticed these triangles in the interest rates of the 10-year US but
7:24it hasn’t broken up yet
7:27it’s taking its time again it’s stored at the 163 and it’s back down to the
7:33support level of the triangle so much lower yield below 150 would be a kind of
7:39a warning because we notice that when it went down in June the SNP also had a
7:45kind of a sharp correction and here it has been so quiet that it could happen
7:50the same thing and what should the second market be watching out for the
7:55second market is also linked to interest rate we mention oil if there is some
8:02expectation about inflation that means all price good should also go up as well
8:08as the interest rates and here we also have a very nice long term pattern which
8:13core for higher old price but there as well it’s taking its time it still below
8:2051 and the related transversal the SNP is also still below its key resistances
8:27so it’s not yet a good contributor to our bullish SNP so it’s still in the
8:32waiting
8:34well Bruno as always such a pleasure to have you here and we look forward to any
8:38come in next time you’re welcome
8:40that’s all for myself and Brunei if you like this segment please give it a like
8:44and comment on our website dukascopy . TV

Coworking for Share & Derivatives Traders

Posted August 22, 2016 By APTA.org.au

Coworking for Share & Derivatives Traders

Sydney, AU
7 Members

I run a financial services business and have spare office space that I would like to open up for like minded traders & investors. If you are trading / investing pretty much fu…

Next Meetup

Come and check out the coworking space.

Tuesday, Aug 23, 2016, 1:00 PM
4 Attending

Check out this Meetup Group →

I run a financial services business and have spare office space that I would like to open up for like minded traders & investors. If you are trading / investing pretty much full time (from home) and wish to interact with like minded traders in a professional office environment (and get out of the house…), compare ideas and mutually support each other then come and try us out for free for a couple of days. The office is in Crows Nest, 5 minutes walk from St Leonards Station, and near the centre of the Crows Nest Café and Restaurant scene. Fully air conditioned, kitchen, wired, high speed Ethernet internet. Come and check us out or call Claus on 0410 692 943 for further info.

Come and check out the coworking space.
Tue Aug 23 1:00 PM

1st Floor Unit 8
174 Willoughby Road, Crows Nest

Comfortable office environment for traders. Modern, light with ample space and high speed Ethernet internet. Learn more
Hosted by: Claus (Organizer)

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