My Trading Mask

The marriage metaphor is getting a little stale for me when it comes to trading. You don't want to get married to your trade, but you are committed to your trading plan (in a married sort of way). When you deviate from your trade plan, your infidelity is a burden for you to bear alone when you go to bed at night. I'm leaving personal relationship analogies behind for now. Instead, I'm introducing a new style of trading: the Janus style. Janus is a euphemism for two-faced and suggests some unscrupulous character flaw, but remember that many famous people have lived double lives and still contributed to the culture in which they lived. Think Superman. Super hero when duty called, but otherwise a news reporter. Or how about Spiderman ( Peter the photographer) and Batman ( Bruce the philanthropist). I can't remember what Catwoman's day job was, but I'm pretty sure it wasn't running around town in a latex outfit.  Maybe Catwoman is not a good example, but you get the idea. Analogy applied to trading? I am continuing my pursuit of black box system trading by day, but I am assuming my own alter-ego and becoming a discretionary trader by night.

An Experiment in Risk Arbitrage

I just started reading Inefficient Markets: An Introduction to Behavior Finance by Andrei Shleifer where he pretty much dispatches the notion that markets are efficient, as envisioned by the great minds who postulated the Efficient Market Hypothesis (EMH). One argument that EMH uses to promote this notion of efficient markets is that arbitrageurs will clean up irrational trading inefficiencies (known as noise trading) through a process of selling an 'over-valued' security while simultaneously buying the same (or nearly the same) 'under-valued' security. Well, I thought Apple's introduction of a new gizmo would be a good time to try my hand at arbitrage, so I quickly funded my paper money account with $100,000 and set up the trade three hours before Steve Jobs took the stage.