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Interesting. From your statements I infer that you trade comparatively illiquid products. I have had similar experiences. Small cap equities are way more inefficiently priced than big cap equities. Just a small example: often small cap stocks (marketcap < 500 M$) which have predictable...

There is no golden rule that says if VIX > 30 than VIX will rise. Have a look at April-May 2010, September-October 2008, etc. Sometimes it takes years until the VIX falls to it's long-term average.

The price of an option is calculated in terms of its implied volatility (IV). Yes, you can use a call for a leverage long position iff a) you want to trade the underlying longer term (say 1 week minimum) b) you know whether it is not to pricey in terms of IV In fact if you have a...

Hi, I am new to options, not to the market though. I am looking at MOT October calls, which look pretty cheap to me. The 7 Calls go for 38%, the 8 for 34%. Given the last earnings surprise in Q1 and heavy revisions for the year I think there is good chance that the October 8 Call will expire...

It's actually fairly simple. Those who have an edge should trade, those who don't shouldn't. Now, where is your edge? Having a big edge means there is a very high risk reward ratio and there are no hidden risks. Random prop trading with "setups" usually means there is no edge and there is no...

http://www.berkshirehathaway.com/donate/bmgfltr.pdf

The problem with most technical approaches is that it lacks precision and misses the central concept of randomness. It's like playing poker without knowing the concept of odds (i.e. probabilities). Markets are not deterministic, therefore "analytical geometry" doesn't apply.

Actually I developed a trend-indicator today which correlates quite well with CTA-trendfollowing funds. It is calculated over a universe of 20 or so liquid futures. I think if I would tweak a bit it would replicate a CTA index.

I think what is usually meant by trend is that prices go higher and 'decidely' so. That is most of the time of the trending period prices go steadily higher. In fact to say that markets always trend is a paradox, because that would mean they are predictable. Markets can't be predictable all the...

Maximizing mu-sigma is more or less what the "modern" portfolio theory says. As you absolutely correctly pointed out, the weakness is that mu and sigma are supposed to be static. As bad as the Brownian Motion is, it is a good start to think about trends.

People who are not knowledgeable in mathematics like to think that a definition of trend is as straightforward as it gets. For example I skimmed through one of the major popular books on trendfollowing and it is full of babble about trends. The problem is that trends are a very perplexing...