When folks talk about trading they may think of a couple of things – charts, company earnings, fundamentals and research, technical indicators, etc.… however, one aspect of trading that is chronically under-appreciated is the psychology of trading.
In our previous blog we looked at some of the inflationary forces beginning to show up in the market, however, inflation is a lot like the slow erosion of wind, the results are drastic given a long enough timeline.
Stocks are at an all-time high fueled by an accommodative Fed, improving trade war sentiment, and a steepening yield curve. What do all three of these things have in common? They are all major contributors to the resurgence of the “Reflation Trade.” The Reflation Trade refers to the idea that all the easy money from … Read more
Let’s talk about the yield curve. What is it? Yield curve is a visual representation of the “spread” or difference between government bonds of different maturities. For example, if the 10yr bond has a rate of 2% and the 2yr bond has a rate of 1% that would mean the 10y/2y spread is 1%, or … Read more
The U.S. Dollar has been very much in focus over the past couple of months. Traders believe that the Fed’s easing policies may have a negative effect on the Dollar moving forward. It won’t, and here is why. All currencies are traded as relative value, meaning that in order for the Dollar to fall another … Read more
Let’s review the big news of the week, specifically, the Fed and the ECB both trying to out-dive the other. On Tuesday, we had Mario Draghi essentially front-run the Fed on Wednesday by stating that the ECB was very open to lowering rates and additional asset purchases. What does this mean? Well, it means that … Read more
Let’s go back to December 2018. The market was rapidly falling, the fear was palpable, there was blood in the streets … and then what happened? The Fed capitulated on their rate hike schedule. The market cheered and rallied from a V-shaped bottom back to the previous all-time high. Everyone likes a rally, but let’s … Read more
Let’s talk stock trends. What are a couple of things we want to see when a stock is trending? Higher highs and higher lows combined with momentum. But how do we know when the momentum in a trend is cooling off and it’s time to GTFO (Get the Funds Out)? That’s where the 10X Bars … Read more
2019 began just as everyone predicted, the Fed capitulating on rate hikes for the year and even hinting that a reduction in rates was possible. Of course, we’re only kidding as many traders were caught wrong-footed by the quick change in sentiment.
As we change the calendars to 2019, it is important to look forward to the next year to see what opportunities and challenges face the markets. We see 2019 as a year fraught with landmines of volatility; however, volatility is the lifeblood of trading so we want to be prepared for what may come. We … Read more