Bunnies and Money Management

It is essential to understand money management before you enter the market. In fact, learning the essentials is important before you try anything. I learned this lesson years ago while caring for my neighbors animals.

babybunnyLast summer, my neighbors went on their annual camping trip to Beaver, Utah. Every year they ask me to take care of their pets while they’re away. The number of pets they have is always growing, and that year consisted of 12 chickens, 2 fish, 1 cat, and 4 bunnies. I never have, and am doubtful that I ever will, own a pet, but I agreed to help them out. I received 3 pages of typed instruction, and training on how to place the labeled chicken food into the labeled chicken pen using the labeled chicken scoop (I may have accidently mixed up the cat and chicken food the year before). I even practiced feeding the chickens with their daughter two days in advance. They left feeling reassured that not even I could mess up their detailed instructions, and I watched them go feeling confident in my ability to keep their animals alive for five days (one year the cat jumped into the fish tank, resulting in a decrease in the fish population).

The next day: I fed the fish, I fed the cat (not the fish), I fed the chickens, gathered the chicken eggs, and opened the door to the bunny cage. Unfortunately, the bunny in there ran out as soon as the door was opened, and I spent the next hour chasing it around the backyard. Finally, with the bunny safely in my arms, I returned it to the cage with the other bunnies. I replaced the food and water, and left feeling like a champ.

The next five days passed uneventfully, and I was delighted with my success. My neighbors returned, and immediately checked to see if their dear pets were still alive. I happily informed them that they were all alive and well. Their daughter, inspecting the bunnies, turned around and said, “Mom? Why is the boy bunny in with the girl bunnies?” One month later, they had 34 baby bunnies.

Truthfully, I’m uncomfortable with animals. They sound easy to take care of, and I had the instructions and means to take care of them, but I had no experience or any idea on how to actually handle them. Now, relate this to money management. I know it can feel like a stretch comparing caring for animals to your money (though I wish my money could reproduce as fast as those rabbits), but the similarity isn’t between animals and money. It’s between knowing how to handle and care for them.

Proper care and handling of money in the markets is key to successful trading.  In the same way improper handling of the neighbors farm resulted in unintended consequences, improper handling of money can have unintended effects – loss of capital, longer hold periods, lost opportunities.  However, with some basic knowledge, a good set of instructions, close attention to details and discipline you’ll discover that you can manage your results with much greater control…  And who knows, maybe your monies can grow like bunnies.

Happy Trading!

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The Traffic Laws of Trading

 Awww yeah, that would be life. Cruising down the highway in your sleek new ferrari… or maybe not.

ferrari-458_lA few years ago, a driver of a candy red Ferrari Testarossa managed to nail a $290,000 speeding fine while driving 85 mph through a village in Switzerland. In Switzerland, they base their speeding fines off of income, and since this was a repeat offense they were not messing around. After reviewing the case, the court said, “the accused ignored elementary traffic rules with a powerful vehicle out of a pure desire for speed.” That’s a high price to pay because you forgot one of the most basic traffic laws. speed_limit_25_sign

We can all relate to the pit that drops to your stomach when you look in the mirror and see those blue lights flashing. And while most traffic fines aren’t that hefty, just in the United States they generate between $3.8 billion to $5.4 billion a year in revenue.  Now, relate this to your trading. How many times do we let our emotions, or our pure desire to make the trade work, cause us to forget one of the most elementary trading rules-get out of a losing trade. When we get emotionally involved in a losing trade, we get caught-and you’ll end up with a ‘ticket.’ Just like the driver of that candy red Ferrari let his desire to go fast cloud out the danger (and high price) of speeding, we can forget that taking a small loss is better than big one. So just slow down, follow the traffic rules of trading, and have a good day in the market!

Happy Trading!

One way to not get caught in a losing trade is to have  trading plan or a set of rules you follow when you trade. Here’s the link to a couple of our blog posts about having a trading plan.

http://www.apiaryfundblog.com/how-to-form-a-trading-strategy/

http://www.apiaryfundblog.com/take-market-come-top/

http://www.apiaryfundblog.com/our-philosophy-on-success/

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Good “Luck” Trading

If good trading is all about luck, then Apiary has sown the seeds for success…  quite literally!  About a year ago, Shawn had a vision of turning an ordinary fescue lawn into a factory of four leaf clovers!  While most gardeners might balk at the idea of purposefully growing clover, (clover is considered a weed in most places) at the Apiary Fund we find it quite delicious. With thousands of hungry bees working at the office (mostly real bees, and a couple of human bee-ings) nobody balks at a fresh batch of clover honey – or a fresh batch of clover juice – to keep the trading session lively!

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cloverjuice

 

We got a new juicer for the office Monday and tested it out with a frothy glass of  “Luck O’ the Irish”  clover juice – straight from the lawn!  Disclaimer. We don’t actually know if drinking freshly juiced four leaf clovers will give you luck in the market but we figured, hey, it couldn’t hurt!

Obviously, there are other great ways to find success in trading that don’t depend on ‘good luck’ charms.  Trading forex isn’t about magic tricks or superstitious rituals and it’s definitely not based on luck like the slot machines in Vegas.  Instead it’s honest, consistent effort and discipline that will bring home the green in the currency market!

Here’s some links to a couple blog posts about being a successful trader.

http://www.apiaryfundblog.com/our-philosophy-on-success/

www.apiaryfundblog.com/8-expectations/

Happy Trading!

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Trading the Summer Doldrums

I am sitting here remembering how much I loathe trading the summer doldrums.  A few minutes ago I received a text from the Apiary Fund development team asking me to place a few live execution trades through one of our new liquidity providers.  It is about 4:46pm Mountain Time and there is nothing happening.  The chart is so flat it makes the Utah Bonneville Salt Flats look like mountains!  And trading is so slow that I’ve started keeping track of which comes first; a new tic or a new minute.  So far the minutes are in the lead!

Welcome to trading the summer doldrums.  The doldrums are the period of time between close of the US market and the open of the Asian market when even sleep takes a nap and nothing happens in the currency markets.  And if you thought the doldrums were bad, then the summer doldrums take it a notch slower!  Summer is notoriously slow as traders take a break from trading and head out on vacation!

While most internet company’s in the world look at midnight to perform maintenance on servers and so forth, in the currency markets we use the doldrums.  Its a time when many brokers perform some of the mundane tasks such as calculating your carry interest.

When you trade currencies you borrow money in one currency to buy a different currency.   You have to pay interest on the money that you borrow.  Fortunately, you get paid interest on the currency that you buy.

If the interest rate of currency you borrow is greater than the interest rate of the currency you bought, then you’ll end up paying the broker a little bit of interest.  If the opposite is true and the interest rate of the currency you bought is greater than the interest rate of the currency that you borrowed, then instead of paying the broker, the broker will pay you!  Which is good, because sometimes that’s the only money you’ll make during the summer doldrums!

As for me right now, I suppose I’ll just have to wait for Aussie’s to stir things up a bit!

Happy Trading,

-Shawn

 

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What Are The Costs To Trading Forex?

While there are many costs to trading forex, most costs are categorized in three ways:

Explicit Costs, Implicit Costs and Optional Costs

choices opportunity cost decision

Explicit costs: are the fees your broker charges. Examples of explicit costs include commission, spread, margin costs, account and management fees, software fees, and data fees.

Implicit costs: are costs that are not charged by the broker, but by the market. For example, a losing trade could be considered an implicit cost. Other implicit costs include slippage, gaps, opportunity costs, etc.

Optional costs: are just that – they’re optional – they are services that may help you make better trading decisions. Optional trading costs include education, better technology, newsletters, trading systems, or advisory services.

As with anything, trading costs can get expensive. However, it’s not necessary to pay high costs while trading.

For example, to beat the high explicit costs of trading, take time selecting a good broker: be selective and do your homework. Brokers can be tricky at masking fees, so there is no better way to understand the true cost than by opening a small account and testing them out.

Implicit costs are kept in check by improving your knowledge and trading skills. Take time to develop your skills: observe, practice, and learn.  Companies like the Apiary Fund provide excellent education and skill development training to mitigate your risk and costs while you’re developing your skills.

It’s important to know that there will always be costs to trading forex. These costs should not discourage you from trading, but encourage you to be a better trader. The benefits can far out-weigh the expense if you’re willing to be careful, and understand the costs before you dive in!

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Greece Financial Crisis Explained

With all the financial news focused on a looming Greek debt default and the pundit’s myriad forecasts of apocalyptic consequence, it might be easy to forget that Greece is celebrating it’s 6th anniversary of this current debt crisis.Parthenon

In this post, I’d like peel back the layers of hype about the Greece financial crisis, and look at the root of the gridlock problem.

 

The question on everyone’s mind is, will Greece will exit the European Union? I personally feel that a Greek exit is a highly unlikely scenario, since there are no clear advantages to either the EU or Greece to separate.  Let me explain.

For the European Union, a Greek exit would be a political nightmare that opens a floodgate of financial problems.  You might think that Greece is relatively inconsequential in terms of its financial contributions to the EU, and that a Greek exit would not have much of an influence on its overall financial welfare.  So big deal, let Greece leave, write off the debt and focus on things that matter most!

The challenge for the EU is contagion.

Allowing the Greek domino to tip starts a chain of reactions in Spain, Italy, Portugal, Ireland and other debt laden members of the EU.  The fight in Greece is a fight for the European Union itself.  While the demands for some level of austerity from Greece seem unfair, it is the only way to keep the EU in tact.  IF the EU softens debt terms for Greece, then it has to soften debt terms for other economically strained countries – putting an enormous burden on the already weak economic union.  A Greek exit is no better.  The EU could probably absorb Greek default, but defaults don’t happen in a vacuum.  The financial burden is not removed – it’s just transferred to other parties and you have no idea where the burden will manifest itself.  Clearly, the EU is stuck between a rock and a hard spot.

For Greece an exit is equally dire.  To exit the EU would mean austerity for the Greek people of the worst kind.  Some people are arguing that Greece should exit the EU, wipe their debt clean,  and start over printing it’s own currency – the New Greek Drachma.  The problem is that if Greece exits, then foreign investment money will be non-existent.  This puts the strain of finance on the Greek Central Bank to issue bonds, buy the bonds themselves, and print money to pay the bonds.  In short – inflation and taxation.  The inflation will destroy pensions and any semblance of wealth for Greek citizens.  In other words, a Greek exit will guarantee the austerity they are trying to avoid by renegotiating debt structure.  Greece’s argument that the debt demands from the EU are too burdensome for their citizens is a weak argument, because its only other option is worse austerity.  Clearly, Greece is stuck between a rock and a hard spot.

So what is most likely to happen next is exactly what has happened for the past six years.  Rescue funding may be given at the last moment to allow Greece to limp along for a few more months while political posturing continues to play out for the media.  Perhaps Greece will default on a payment – just like it did a couple years ago and just like Cyprus did in 2013.  Other political players such as Russia and the US will try to steer the outcome to their favor – possibly offering assistance in one form or another.  Meanwhile, you’ll have a group of bankers and lawyers working behind closed doors to restructure and renegotiate terms in hopes that time and inflation, or better yet, real economic growth will sweep all their problems away.

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Non-Directional Markets

With all the talk about volatility and the dollar strengthening… it appears the dollar stalled out in January, and has gone nowhere since. On January 27, the dollar was trading at 1.13 against the Euro and it’s there again today – the dollar has essentially gone nowhere in 6 months.

What we’re seeing is an extended period of non-directional movement in the dollar. This is a situation where large dollar gains and losses are typical – with the media focusing more on the strong dollar than the weak giving us the illusion that the dollar is strengthening when it is really just drifting sideways for an extended period.

The root cause of the non-directional market is uncertainty. As traders, we understand that the only guarantee in the markets is uncertainty, but this type of uncertainty is different. For example, it’s easy to frame uncertainty during a rate decision – if the rates increase the dollar goes up.  If the rates drop the dollar weakens.  However, the uncertainty of having one fed meeting after another with conflicting economic data is much more difficult to forecast future movement.

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And there is a lot of this type of uncertainty in our world.  Among them is the uncertainty surrounding the Greek debt defaults and the Grexit from the Eurozone.  An exit could bring contagion to financial markets – the extent to which no one really knows.

Geopolitical tensions (such as ISIS, South China Sea, and Ukraine) also make directional bias difficult.  At any moment tensions could flare resulting in greater uncertainty.

Adding to the uncertain cauldron, is the presidential race in the US, where we have an ever-expanding pool of candidates with no candidate showing any real sign of strength.  There is also the dysfunctional relationship between the Whitehouse and Congress, and their inability to settle on any meaningful fiscal policy.

All these factors make forecasting future trends foggy at best.

What do you do in markets like this?  The easiest solution is to use different models.  Fading the outside of the range is an effective strategy.  Reversals will tend to yield better results than breakouts.  Smaller timeframes will still have directional bias – albeit with smaller returns. And taking small incremental profits is better than hitting home runs.

Traders can survive periods of non-direction if we remember the rules are different and it requires a different book of play.  Don’t forget the rule of volatility – the market oscillate from periods of high volatility to low.  We are in a low volatility period so the next move is to an increase…  Clarity on any of the issues mentioned in this article could be a catalyst for that shift and you need to be prepared!
Happy Trading!

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All About Apiary VPS

June 2015 Apiary launched a new service called VPS.

VPS is designed to help people with Apple Mac, and increase trader mobility.

A fast computer with a fast internet connection is a necessity for a trader. It’s crucial in order to execute trades for the prices you want. However, a fast computer is costly, and not everybody is computer savvy and knows how to maintain their computer. No matter how fast a computer is, without proper maintenance it will slow down eventually. In the last few years, it’s become a trend to use VPS (Virtual Private Server) to increase trading performance.

Virtual Private Server acts like a computer, but in the cloud. A trader installs their trading platform (such as Alveo) and all of their trading activities are executed through the VPS. The trader’s computer or laptop only acts as a ‘keyboard’ to control the VPS.

The benefit of using VPS are :

  1. VPS works faster in transmitting the orders then an ordinary computer or laptop. This may reduce slippage.
  2. Trader can trade from anywhere with different machines (computer,laptop,iPad, tablets, etc). Say a trader’s laptop is broken, the trader doesn’t need to worry about his/her trading because all of the trades are in the VPS. The trader just needs to find/borrow a laptop with an internet connection then login to the VPS to secure his/her trading positions. In the past, traders have needed to reinstall all software and equipment again in order to access the trades.
  3. Save money because trader does not have to buy ‘high end’ computers to get fast trade execution.
  4. In case of power failure event,  VPS will keep the trading position (including Take Profit and Stop Loss), so all strategy and pending orders will proceed as normal until the trader has access to VPS.
  5. A trader will not need to waste time maintaining their computer, since VPS usually already has their own IT team to make sure it runs 24/7 without problem.
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Our Philosophy On Success

I was on facebook the other night, and I ran into an article, “Will Your Child be Rich or Poor? 15 Poverty Habits Parents Teach Their Children.”  I read the article, and was surprised by Habit #4. It stated,

“62% of the wealthy floss their teeth every day vs. 16% of the poor.”
 

Now that may seem like a silly statistic about an unrelated field.  I mean, how does flossing your teeth connect with the size of your bank account?  As I started to think, it hit me as to why it was #4 on the list. Successful people are creatures of habit, but not just any habits: Successful habits.

If you want clean teeth you need to both brush and floss.  I don’t think I am saying anything too ground breaking here.  I mean, we’ve all been taught the benefits of dental hygiene from a very young age.

So how will dental floss help you in your trading?

Habits.  We, by our life experience, create habits on how we act when different things happen to us.  When people see the market falling they are naturally fearful.  When people see the market raising they are naturally greedy.  It is not the emotions that define who we are, it is what we DO with those emotions.  Do you let fear take control of you?  Do you cut your winners short?  What we have found in the Apiary Fund is that the most successful traders are the ones who have a set of rules, and apply those rules consistently every day.  We all have times in trading where the market does not go our way.  The question is what do we do at those times?

Remedy: Know your rules and follow them.

That might seem like a nice trite remark, but what do I mean by know your rules?  Step one is to write your rules down on paper.  I know most of you have your system that you follow in your head, but if you can’t write it down then you can’t measure it.  If you can’t measure it you can’t improve it.  Once you know it, you have to follow it.

Seems like a simple enough recipe for success, but then again so does flossing!

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Fear of Failure

A 2014 study conducted by Babson College revealed how fear of failure stops some people from engaging in activities where failure is a possible outcome – including the activity of learning. The study concluded that the fear of failure negatively influences a person’s motivation to learn and their attitude toward learning.A mature business man giving a presentation to some colleagues.

This study has direct implications on the mission and purpose of the Apiary Fund. At its core, the Apiary Fund teaches a person how to manage an investment portfolio – an activity where risk of failure is very real. We accomplish the goal through a progression of classes, simulation, and the eventual management of a small portfolio in live market conditions.

At every step, Apiary works to mitigate the elements of risk and teach a person how to properly analyze and make decisions that include risk. We strive in every possible way to give a person the greatest chance of success in learning how to manage an investment portfolio.

The irony of this study is that when fear of failure prevents a person from engaging in an activity that will make them better, it almost assures their failure in that activity. And when that activity is learning how to manage our finances and investments, the cost of failure can be high! Imagine living your life and avoiding all investment decisions – it is likely to leave you broke for retirement. Imagine giving all those decisions to someone else – it leaves you vulnerable to fraud, mismanagement, and high costs.

We know that many of you join Apiary Fund for the opportunity of trading our money. It is a wonderful incentive – one I wish I had when I was first starting! However, what you really gain through your Apiary experience is a skill and an ability to make intelligent decisions that involve the risk. That is a skill and an ability that has far a greater reach and value in your life than any amount of money you could trade for Apiary Fund!

Happy Trading,
Shawn

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