If you put every dollar you have to work, you don't give yourself any room when Murphy's Law kicks in.
If you keep some dry powder, you'll be able to able to withstand some shocks to the system, as well as have capital to deploy when something falls into your lap.
Michael Martin interviews options trader and portfolio manager Hari Krishnan on the current environment and how traders can position themselves with options to capture greater profits.
Krishnan is the author of The 2nd Leg Down: Strategies for Profiting after a Market Sell-Off.
Crypto investing is missing some key components that an investor's are used to in trading equities, options, and futures.
In this episode, Michael Martin discusses what's missing and why you should measure 8 times and cut once in the crypto space.
With the likelihood of the fed tightening, investors who rely on certain instruments for income are in a tough spot.
They can use options to transfer the risk and hold their current positions.
Key inflection points can happen with the fundamentals as well as the technicals.
I've seen too many traders try to trade something on a hunch because they thought earnings were going to be a blowout.
It's much more complicated than that.
There's the EPS, top-line growth, expenses, one-time charges, and forward-looking statements that get reported.
I've seen companies beat by $0.02 per share, but the forward-looking statements are bearish or cautious and the stock sells off.
Trading on hunches is a gamble: you don't know the probabilities nor the expected values.
If you can't model it, you can't trade it.
If you believe the adage that "good trading is boring," then system trading is boring to the nth degree.
There are days, sometimes weeks, that I don't generate an ORDER, never mind a trade. Then there are times when there are so many orders, you have to write them all out first in a general ledger and number the tickets.
On the flip side, system trading is also very peaceful because I'm able to scan thousands of instruments in less than a minute and not worry that I'm missing out of an opportunity. That is a mental advantage if nothing else.
Focus on your process and stay out of the results - you're powerless over them.
All you can do is control the "controlables" - that is, your behavior.
Seasonal commodity spreads can be very a reliable type of trade for your portfolio.
While commodities are surely not for everyone, commodity spreads are considered "hedged" because the trader is simultaneously long and short the same commodity but in different expiration months.
A great source of information on spreads is at Moore Research Center. You can find them on the internet at www.mrci.com.
Some investors will test you by asking you questions that are deliberately off the mark.
Stick to you message throughout even if they try to knock you off balance.
You might take a meeting as a CTA and someone interviewing you might say something along the lines of "We're looking to allocate $10MM to a crypto-only portfolio in the next 5 days" when they know you're looking for assets.
It's ok to laugh at them and say "good luck - I hope there is a short selling component to the model."
Tell them that it's "not terribly wise to make such an allocation on short notice." Most want some fight in the dog.
Stick to your message and what it is you can do and leave it at that. Otherwise, you'll look amateurish if you're all over the place.
Every once in a while, the market will open below the point where you would have stopped out your long position or above where you would have covered your short position.
The best practice is to offset the position right away. Bad situations become worse.
Your first loss is your best loss.
Aggravating as it might be, this has not happened enough to me to convince me to stop holding positions overnight or over the weekend. In fact, I'll go so far to say that holding my positions are what I attribute the majority of my gains to.
You need a great deal of help when you're getting started. That doesn't mean you have to give away the house in order to get it.
For one, I'll help you as much as I can with what I know that will save you time and money.
Second, pay as you go compensation plans have the most flexibility, as opposed to "you were here at the beginning, there are two of us, so you get 50%." That's a bad deal.
When you align your goals with your overall behavior, you'll have harmony in your life and business.
Coach your clients about what they should expect. It will save you tons of time in work and having to explain things, and in the process make you look like a pro.
It's the differences that sell. Your potential clients are looking for more than just performance from you.
Spend some time taking notes on this episode if you're looking to get new assets from potential clients.
There are a ton of moving parts to your trading business. Pick your partners carefully - sometimes you can't unwind things as fast as you set them up.
Everyone flirts hard to get your business and the best deal you can strike is on the day you walk in the front door - it only gets worse after that - and that's why people change firms.
Measure 8 times and cut once.
If volatility increases while you have an existing position on, you should probably cut the size of the trade down to reflect the new vol.
Market vol is increasing due to higher level of discomfort and uncertainty, but don't go adding new indicators now. They're not as telling as you'd think.
In this episode, Michael Martin discusses the various reasons you might consider to add short selling to your portfolio.
You can short sell for real returns, or you can use it to cut the vol in your long-only strategy.
If you enter a short sale late as can happen with breakouts to the downside, you might have it rally in your face before it becomes meaningfully profitable.
In today's episode, Michael Martin discusses one way that you can enter the market short with a more improved entry - and potentially less risk.
The most valuable information is not necessarily the recent data.
Michael Martin discusses what you can learn from a historical chart. Names mentioned CMGI, Munder Net Net Fund, Vertical Net, Cronos, Bitcoin, and Cisco.
Most rookies are looking to take profits when the have a winning trade. Professionals look to continue riding the trend for all it's worth. As I've said here before, inexperienced traders need the boost to their self-esteem by posting smaller wins to validate their behavior as traders. Small or not, a win is a win and that's what's important to them. We advocate something that takes a little more evolution.
I have found in almost 30 years of teaching that a trader's unwillingness to add to winners is more of an uncomfortable, emotional problem than it is to understand the math involved.
Like any behavior, it takes some getting used to, but if you do it enough times, you can make it a good habit and replace the bad habit of having price targets.