Here are snippets from some of the blogs that I read over the weekend:
Crude Prices. The Big Picture says: Crude is falling because of demand destruction - this implies a recession in the world economy. A decline to 110 is possible.
My Notes: I had suggested earlier that a breakdown from 120 should see crude come down to 108 - it is nice to note that better analysts share the same view. This decline will still be a correction in an ongoing bull market for crude. Remember, crude is a commodity where the supply is dwindling, day after day.
Pension Funds managed by Wall Street. The Aleph Blog is concerned about a proposal that will allow pension funds for employees to be managed by Wall Street. Sounds familiar ? This is similar to a proposal in India to allow a few large fund managers to manage the provident funds money of millions of Indians. Aleph Blog says that the only way Wall Street can assure higher return is by taking higher risk. The Blog writes: "Ask this: how would you feel today if the plan sponsors ...... adopted highly risky investment strategies? You would worry."
My notes: I worry for India, since the Govt seems to think that Dalal Street has all the answers to the problems facing this country.
Momentum Trading: This research paper analyzes different aspects of trading with momentum, then comes to an interesting conclusion: In summary, momentum trading seems to work, offering several paths to excess returns.
My Notes: Thank You! Technical Analysis for short term traders is about going with the momentum. When research confirms this method, I am gratified to get confirmation that what I do for a living really does work.
Psychology in Trading. Brett Steenbarger , an excellent trading coach, agrees to the importance of psychology in trading, but the actual rules for trading are equally important.
He says: "In general, I would say that traders tend to overweight the importance of psychology in their results and underweight trading mechanics: how they execute trade ideas (getting good entry prices, not chasing moves; ensuring that each trade has a favorable reward-to-risk profile) and how they set and follow criteria for exiting trades (price targets as well as stop losses). To be sure, psychological factors can interfere with the implementation of those mechanics, but many traders simply lack sound rules for entering and exiting positions and instead make decisions impulsively, on the fly."
My Notes: Read these lines again and again. You must have a trading plan, to get started in this business.