An Early Exit Strategy

It’s February, and that means it’s about the time you’re wishing winter would finally end! We just got a fresh new heap of snow on our lawn, and walking outside I couldn’t resist one teensy tiny snowball at my sister. Big mistake. You should not start a snowball fight, one that you intended to win at least, without first either

  1. building a snow fort
  2. planning an escape strategy

-or-

    3. making sure the most direct path indoors is clear*

It’s snowball prep 101 to have an exit strategy, especially if you’re going to be outnumbered. Even Buddy the Elf, with his north pole experience and skill, only engaged in a snowball fight without adequate protection after being ambushed by a set of amateurs.**

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With that being said, you wouldn’t enter any situation without a good exit strategy (can you sense where I’m going here?). Coerced into lunch with your mom’s book club? Set your dentist appointment for a half hour later. Blind date later tonight? Your best friend is scheduled to call at 9:00. We may make light of these situations, but when you find yourself in them you’ll have wished you made a plan.

On a more serious note, the consequences of not having an exit strategy can be more severe when you’re trading. It always pays off to take the time to know your exit strategy; Benjamin Franklin knew his stuff when he said, “an ounce of prevention is worth a pound of cure.” Set up your exit strategy early, and then enjoy the snowball fight…or, er…trade 😉

Happy Trading!

*I feel like I have the responsibility to mention that this is the coward’s path, and is not recommended if you wish you escape, albeit with a few battle scars, with dignity.

**Honestly, why would you throw a snowball at somebody who is clearly skilled in all aspects of winter.

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Shifting Spreads and Such

Spreads keep changing and keeping you guessing?

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Here at the Apiary Fund, the ECN style market structure shows constantly changing spreads throughout the day. Spreads are either set naturally (by pending orders in the market) or, if the market is not liquid, set by the liquidity provider.

Since spreads will widen or shrink often, it is common to see spreads fluctuate during the open or close of trading sessions. Spreads will also adjust for

-Uncertainty in the direction of prices

-News events

-Volatility shifts

-Changes in liquidity

A liquidity provider uses spreads to help manage risk by either encouraging or discouraging the trading of the liquidity provider’s currency inventory. For example, if a liquidity provider wants to move inventory, they might narrow the spreads to encourage trading; similarly, if they want to retain inventory, they might increase spreads to discourage trading in that currency. The magnitude of the spread indicates the degree to which a liquidity provider wants to encourage or discourage trading. Obviously, during uncertain times of high volatility and news events, it’s common to see spreads widen–sometimes significantly!

While spreads will always vary, by knowing why they’re changing you’re showing that you understand what’s moving the market. Now see if you can predict where the next shift will be!

Happy Trading!

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Trading and Misquotes

While viewing a chart, you are actually looking at two different prices: a historical price and a current price.

When you first open a chart, Alveo doesn’t have a history of current prices so it must backfill the chart with data from our “Historic Data” server; this is called historical data.

Once a chart is open, Alveo starts receiving “Current Price” data from our “Quote Server.” Apiary Fund has multiple liquidity providers who send their current price quote to our Quote Server which collects and organizes the different quotes, finds the best price, and broadcasts it to your computer.

The challenge with current price data is that occasionally we get an incorrect quote from one of our liquidity providers – called a misquote.  Since Alveo doesn’t know whether a quote is correct or not, it will “print” that quote on the chart.

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As you can imagine, misquotes are problematic for many reasons.  First, misquotes are not a true reflection of price and any analysis using a misquote will be inaccurate.  Second, the misquote may trigger pending orders. If the price limit of the pending order is between the current quote and the misquote, then it will trigger the pending order and give you a fill that is outside the current price.

No data or quote providers guarantee perfect data.  However, Alveo takes extra steps to make sure it has an impeccable record of clean data.  We have sophisticated systems in place to catch misquotes sent to us by our liquidity partners.  These systems catch the vast majority of misquotes, but again, no data is perfect and occasionally a misquote will slip past our watchful eyes – about one in about 100,000 misquotes to be precise.

Most of these misquotes are so close to the current price that you’ll never notice, but occasionally a misquote may pop up that is more apparent. If you suspect there is a misquote on your chart, you can find out by refreshing your data.  This will cause Alveo to pull historical price data.  If the spike on your chart goes away, then you’ll know it was a misquote.  If the spike on your chart remains, then you’ll know it was a good quote.

Happy Trading!

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Apiary Fund Resolutions

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It’s the beginning of a new year, and this means overflowing rec center parking lots as gym memberships increase along with work hours, dieting, and library cards as everybody desperately tries to hold onto their New Year Resolutions. It’s also a nice high volatile time for the stock market (even though this year had sort of a rough start, thanks Janet). Did your New Year resolutions include anything about helping you improve your trading? If so, we want to hear them!

Here’s what some of us around the office are working on:

Shawn Lucas– Lose weight and grow out my beard!

Dakota Andrews– Pass beeline to funding

Jacob Johnson– Develop a consistent trading strategy I have confidence in, get married and treat my wife like a queen, be profitable every month, and earn enough money to build a shipping container in the woods

Vilas Yang– Trade better by improving trading set ups (working with others), once I get this down the rest is going to be good!

Brian Lloyd– Double my trading account and profitability, and help others achieve their goals

Ron Evans– Become better at long term trading

Allisa Daybell– Spend as much time with my family as possible, and get three consecutive months of profit

Paul Allen– Become funded with Apiary by June 1st

As you can see, there’s so many goals we’re working together here at the hive! I hoped you noticed that most of the goals about trading were pretty specific–that’s one of the first steps to effective goal setting. Please share with us what resolutions you’ll be working on this year, and if there’s anything we can do to help!

Happy Trading!

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What An Old Fisherman Taught Me About The Markets

One of the greatest investors of all time had to be Noah…  They say Noah was able to float his stock while the rest of the world was in liquidation.  Impressive, eh!  While he may have been a good investor, he couldn’t have been much of a fisherman.  Why?  He only had two worms.

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If you’ve spent much time with a rod and reel, you might be quick to recognize the many lessons the sport teaches us about money in the market

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Here’s a short story about what an old fisherman – not Noah — taught me about the markets!

Link to Short Story:

http://issuu.com/apiaryfund/docs/apiary-fund-old-fisherman

Enjoy, and Happy Trading!

-Shawn

 

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Warning: This Post May Cause…

Disneyland Prop 65 WarningCAUTION

We all know everything in California is known to cause cancer, right? How could you miss it when there are warning signs posted on your grocery bags, in your hotel room, a restaurant, and even as you enter the Disneyland Resort. If simply entering the state is known to ‘cause cancer and birth defects,’ then why do 38.8 million people live there?

And we all know trading forex is dangerous. The warning that a bunch of power hungry wall street suits are scrambling around just to steal your money. You might as well be gambling, right? Then why are millions of trading transactions taking place every day?

Trading Forex is about as dangerous as going to California for vacation. Sure,  California has the potential to be harmful…if you go around licking signposts, eating wrappers, and sunbathing without sunscreen. Trading Forex might not be as relaxing as a nice trip to California, but it’s not a dangerous slot machine either. As long as you follow some common trading sense rules, you’ll avoid the substantial losses that instill hefty doses of fear in each of us.

Take time to learn how to trade safely, and you don’t need to fear the market. The Apiary Fund teaches and funds traders in the currency market, so you’re covered as you start the learning curve that comes with a new skill. Learn more at apiaryfund.com

Happy Trading!

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Delusions Every Trader Faces

Usually when we think of delusions we imagine mental disorders: someone struggling with schizophrenia or hypochondria. We may even imagine somebody we know–somebody who is high-strung with anxiety and convinced the world is out to get them. There are some pretty bizarre delusions out there:

  • Ever feel like you’re life is a movie? For people suffering from the Truman Show Delusion, they’re literally convinced that their life is a reality show they can’t escape from. This article on Buzzfeed reports that a man actually sued HBO for putting him on a secret reality show.
  • As if living your life in a reality tv show wasn’t bad enough, imagine your life was a video game! Want to score points to win? Steal cars, avoid police, and receive your instructions through your gaming headphones. Even if you’re arrested, it’s just another level to the game. (Source)
  • Do you know someone who lives their life in denial–to the point that they don’t even think they exist? A rare condition known as ‘Walking Corpse Syndrome’ is a delusion where the individual is convinced that they’re already dead or don’t exist. Some even claim to be able to smell their own rotting flesh.

I think most of us suffer from multiple delusions (hopefully not that serious, though). A delusion is a belief or impression that is firmly maintained despite being contradicted by what is generally accepted as reality or rational. I’d like to think that I’m connected with reality and don’t belong in an asylum (my family might tell you differently, especially when I’m even remotely lacking sleep), but as I’ve grown older I’ve been able to look back and recognize the delusions I used to live by. Most traders experience delusions as well.

Traders, both new and old, often experience delusions in the currency market. Some common ones we might face:

  • “If I just keep trading, I can make a little more money.” That’s a scary delusion. You can be following the charts all day making trades, but it’s not about how many it’s about how well. The quality of your trades is much more important than the quantity.
  • “I can make some quick, easy cash in Forex.” The economy is not a magic box where you put a little money in and get a lot of money out. Trading requires discipline and strategy–not luck.
  • “It’s going to come back soon…”  This delusion can bring you down. Fast. When you hit your stop loss, it’s time to get out. Trying to hang on to a losing trade is like trying to hang onto a hangnail–it’s a lot less painful to just cut it off.

We’re all at least a little guilty of these delusions, but a diagnostic is the first step to a cure. Review some of your past trades, and identify any delusions that affected the outcome. Then, find a way to overcome them; you can share it with a friend or mentor, keep a reminder next to your computer, or even watch a cheesy motivational trading video. Whatever you need to do, don’t let yourself be the reason you don’t succeed.
Happy Trading!

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Why The Little Guys Can Still Win In The Currency Market

Bigger is better, right? Well, traditionally, yes. However, sometimes a new way or an original idea is just downright better than conventional methods. Take, for example, a fight between the big guy and the little guy. What advantages does each one have, and who will win?

Big Guy Little Guy
Muscle Mass Not muscle bound
Powerful hits Fast, successive strikes
More damage per connection Better angle for body striking
Better long range Better short range

 

Take a look at this epic fight from Sherlock Holmes 2:

Even though he’s up against a larger opponent, Sherlock effectively uses his speed and strategy to make quick work of that guy! I wouldn’t want to be on the wrong side of team Sherlock. Ever.

Now parallel this to The Apiary Fund. We’re definitely a smaller company made up of the little guys. Most of our traders don’t have years of schooling and finance degrees under our belts; however, we aren’t hung up in corporations, worried about whether or not the new kid in the next cubicle is out trading us, or whether or not we’ll still have our jobs at the end of the month. We don’t have to move massive amount of money bulk: our smaller individual portfolio’s can quickly jump into the perfect set up for a quick jab at the market. You’re free from corporate stress while still enjoying the benefits of having a company back you up! You guys bring us the ‘Little Guy’ advantages, and together we create the ‘Big Guy’ perks (for example, everyone coming together and shorting the euro at the Manhattan Beach Summit).

Also, please note Sherlock’s line, “This mustn’t register on an emotional level,” and then how he mapped out his strategy and followed throuh. Remind you of something you’ve been told a hundred times?? 😉

Happy Trading!

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Apiary Manhattan Beach Summit

On October 26th, 9:00 pm West Pacific Time, a crowd gathered on the Manhattan Beach pier.

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A passerby stopped to see what the excitement was about, and imagine their surprise when they found Nate, Todd, and myself sitting comfortable on our UCLA camp chairs and using a Verizon hotspot to trade the Asian session, which was making its own waves—3 ticks up 2 ticks down.

 

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It’s not that we expected to make much money during the doldrums of the Asian session, but we wanted the experience of trading on the beach!  And we had a blast!  We were 30 bees on a beach–with a whole lot of curious bystanders!  It wasn’t the fastest trading of the day, but it was profitable with some 54 pips of combined profit by sessions end.

That was just one highlight from the Manhattan Beach summit, some others were:

On Monday morning, Melinda predicted the close of the Wednesday 10:59am candle would be 1.1064  – The actual close:  1.1065.  She came within 1 pip of calling the actual close!  Impressive analysis, Melinda!

We split the summit attendees into 6 teams, and each team created their own trading strategy–presenting the strategy to a shark tank of Nate, Todd and Shawn. Our jobs were to choose a strategy, and trade it in a competition on Wednesday morning. The winning system: Bollinger bands made 2 winning trades for a total of 11 pips!

4 of the 6 trading of the participants’ strategies were profitable!

Todd pulled out 233 pips of profit in the Tuesday morning trading session.  He was kind of quiet most of the morning…  When confronted, he admitted he was trading.  We told him there was a program for that!

In the spirit of crowd intelligence, we set up an experiment and polled the room to see how the USD would respond to Wednesday’s Fed Announcement.  37 of the participants said the USD would strengthen, while only 12 said it would weaken. We shorted the EURO, and made some quick money on Wednesday!

But the best part was watching our outstanding Apiary traders develop confidence in their own trading strategies! We’d like to send a HUGE shout out to all the traders who attended the LA Summit; we learn just as much from spending time with you, and it was a real privilege to trade with everyone who attended.

Thanks again, and Happy Trading!

-Shawn

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How Running Has Helped Me Become a Better Trader

Ever been stuck in the slumps? Yeah, me too.

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For the past couple of months I’ve felt like the man in this picture. When I ran, I was just going through the motions-just trying to finish my work out. Sure, there were some good days here and there, but I knew that I wasn’t reaching my potential as a runner. I also wasn’t feeling the happiness and energy I usually felt after a good run. I approached my coach, and he gave me some steps to help me out of this rut I’d gotten myself into. However, I realized that these steps wouldn’t just help me in my running; they could help me with my profession, my social life, and (of course) my trading.

  1. Set my sights higher than just the next race

I know you’ve all probably heard more than your fair share of motivational speeches centered on goal setting, but honestly there is something about a goal that just helps you focus on improvement. When I stopped and focused on what I was going to accomplish the racing season, I saw each race as a step to reaching my personal record. When trading, you have to look further down the road than your next trade.   What do you want to accomplish today?  This week?  This month? You have to set your sights higher than a single trade and discover what you can do to accomplish your personal best.

  1. Stop running so much

What? To improve running you need to stop running? To a degree, yes. Running daily is very important, but I always reserve one day of the week to resting and recovery. Without this break, I would end up running less during the week because my legs would become overworked. Sometimes, you need a little break from trading. Don’t spend all day with your eyes glued to the candles on your screen-go for a run or something 😉

  1. Track your mileage

I always track my mileage – along with how much sleep I get, and the food I eat. This not only helps me feel good throughout the season, but I can look back and see when I was struggling or doing good. By tracking my progress this way I can see what made me sick or tired and what made me feel good and energized. Track your trades. Notice what setups work for you, and what triggers an unwanted emotional response. Besides, whether your profitable or not, it always feels good to look back and see the progress you’re making.

  1. Mix it up

Contrary to what some may imagine of a typical cross country runner, I actually lift a lot weights. My core and upper body strength is just as important as having strong legs when I run. Sometimes, at the end of a race, if your legs feel like they don’t have the energy you can pump your arms, and ,crazily enough, your legs will follow! When you’re trading you need to be prepared for different market events. Learn to trade in long summer doldrums, as well as high votility markets.

  1. Change your attitude

One of my pet peeves is when I go to a race, and hear runners complain that they have to run. Don’t you run because you like it? If you don’t like it, then why are you here running?! I like feeling strong, the runner’s high, and swelling accomplishment that fills you up and makes you feel like floating. What do you like about trading? If you can’t answer this question, then you need to find out why you’re trading. Identifying why you’re trading will help get you through the slumps.

I hope if you’re feeling a little bit stuck in a rut in your trading, that you can try these out. Make trading enjoyable again, and go make some pips.

Happy Trading!

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