S&C Magazine Current Contents Q & A
THE JOYS OF PAPER-TRADING
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- Parent Category: Q & A
- Category: Futures For You
- Written by Carley Garner
How long should novice traders paper-trade before getting involved in the markets?
The benefits of paper-trading significantly diminish beyond a couple of weeks. In fact, those who spend months (or even years) perfecting their skills in a simulated trading account are likely getting more entertainment than education.
UNEQUAL CREATION
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- Parent Category: Q & A
- Category: Aspects Of Trading
- Written by Don Bright
I have been watching various exchange traded funds (ETFs) and exchange traded notes (ETNs) during the day and have found that I need to keep them overnight since I’m still bullish, but they did not go my way. I have read from Direxion that leveraged ETFs are made for daytrading only. What are your feelings about standard ETFs and especially ETNs? —RonJMemphis
Good questions, and I can start out by saying “Stop” — stop keeping any of these products overnight until you understand much better how they work. And by the way, because something goes against you is not a reason to keep it overnight. Traders need to find an actual edge in their trading, even their directional trading, especially when keeping overnight. I asked Rob Friesen, my resident expert on pairs and derivates, to chime in on this question. Friesen is a trader/member and has been a manager for Bright Trading for more than 14 years. He also manages www.pairtrader.com for equity pair traders. His reply:
WHERE'S MY HEDGE?
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- Parent Category: Q & A
- Category: Explore Your Options
- Written by Tom Gentile
If I put on a bull vertical spread, what can I do to hedge the position?
By either purchasing a bull call vertical or selling a bull put spread, you are starting out with a hedged position. Compared to an outright long call using the same strike for the purchased vertical or selling the same strike put, the trader is dramatically cutting down vega (volatility) and theta (time decay) risk. At the same time, desired directional risk is reduced but remains the crux of the spread’s ability to turn a profit.
OPEN AND INTERESTED
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- Parent Category: Q & A
- Category: Explore Your Options
- Written by Tom Gentile
How does open interest as a trading statistic compare in its usefulness versus contract volume of an option?
Option open interest can be useful in a couple of ways as a subordinate tool in reaching a trade decision that may not be gleaned from volume alone. One improvement for traders who pay attention to open interest versus those who do not is having a better read on general liquidity provision in a product.
STAYING COOL
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- Parent Category: Q & A
- Category: Futures For You
- Written by Carley Garner
How can traders improve their ability to manage emotions and stay calm under pressure?
The most influential factor in trader success or failure is the ability to manage emotions. The inability to keep fear and greed in check can lead to financial and psychological devastation. After all, speculation is not a 9-to-5 venture in which traders are paid to show up for work. It is performance based; the capacity to produce income is contingent on the ability to function efficiently and behave logically.
