About Shawn Lucas

Shawn Lucas is the founder and fund manager at Apiary Fund. He began his career as a broker for Fidelity and Charles Schwab where he worked the trading desk and processed orders for high net worth investors. An expert in the field of technical and economic analysis of the financial markets, Lucas has since established his reputation as a thought leader and guest speaker for several financial companies including Reuters and TD Ameritrade. He has traveled extensively throughout the world providing lectures, training, consulting, and expert testimony to companies and individuals on the art and science of financial analysis. Lucas has authored sixteen books and studies on the use of technical and economic analysis in stock, option, and futures trading. His simple and methodical approach to the markets has helped thousands of investors better understand and improve their performance and profitability in the financial markets.

Author Archive | Shawn Lucas

Traders See Success at Apiary Summit

Apiary Summits offer something unique.  Attendee’s of the Orlando Apiary Summit received a $1000 funded account to manage during the 3-days event.  Moreover, they were able to keep 60% of any profits.  Summits are an important part of the Trader Development process because it gives people a sense of reality.  What’s possible and what’s not – you get to see real folks, making real money, in real life.  It’s a tremendous boost to your motivation.

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And in terms of success, this Apiary Summit was a huge hit.  82 traders with laptops en toe, converged on a simple conference room in Orlando, Florida where they managed a collective portfolio of $82,000.  These traders represent all walks of life from an ice cream maker in Chicago to a young entrepreneur from Mexico to a NASA engineer from Florida.  It is truly a unique gathering of traders!

But as impressive as the group is, it’s even more impressive to see what they were able to accomplish.  You may think from reading the annual report of your favorite mutual fund that numbers like 12-15% annual return is acceptable performance.  Which to most of the world it is.  Nobody walks away from numbers like that.

However, by the end of trading on the third day of the conference the portfolio had grown to $84, 788 – a 3.28% return.  You read that correct – in just 3-days this rag-tag team of traders yielded a 3.28% return!  Take that Fidelity.

The feedback we get from the Summit is overwhelmingly great.  It’s educational, it’s experiential, it motivational – and by the numbers – it’s successful!  The next Apiary Summit is scheduled for September 19-21 in Salt Lake City.  We hope to trade with you then!

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Yoda Quote #7 “Size Matters Not”

This is a continuation of the Trading Words of Wisdom By Yoda, for Quote #8 click here.

7. “Judge me by my size, do you?” The Empire Strikes Back

Yoda may not look like a formidable foe, but that’s a little green guy you do not want to mess with! This quote is from when Yoda explains to Luke Skywalker that while he might be small, he is an ally to the Force-which is strong and flows through everything. The Force is power, and when a Jedi can feel the Force surrounding them and connecting them to something as trivial as the trees in the forest or the rocks resting in the swamp, then they become powerful as well.

We shouldn’t disregard size, but we definitely shouldn’t judge or be intimidated by it. We should be aware of how things are connected and influence each other. There might be some who throw large amounts of money into the market, gambling that they’ll strike it big. Some might boast of large position sizes, but judge not by their size! The market is bigger than a small pond, and a couple of “big fish” aren’t going to rule it. The importance is understanding the market: how it moves, its trends, or how it is affected by events. We don’t control the market–we work with it. It can be good to trade small, because you are testing and developing your trading strategy. With a small position size, if a trade goes badly you can control damage and regain your ground. So if you’re still in training, young Jedis, judge not by your size!

Happy Trading, and May The Force Be With You!

For Quote #6 click here.

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Trading During Scheduled News Events

Last week, The U.S. Department of Labor presented the monthly update on nonfarm payrolls. This would be an example of a scheduled news event. This may come as a surprise to some of you, but did you know that Apiary usually discourages trading during scheduled news events? It’s not necessarily bad to trade during these events, but here is a couple of reasons behind our thinking:

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  1.     Spreads widen:  The cost of trading in the form of spreads increase during scheduled news events due to the expectation of volatility and risk; liquidity providers will widen the spread to mitigate risk.
  2.     Slippage increases:  It takes time for a quote to be sent from the liquidity provider, received by Alveo, and then have a trade sent back to the liquidity provider. The chances of slippage increase even more with the volatility of a news event.
  3.     Frequent whipsaws:  The initial reaction to a news announcement is not always right–we’ve all been warned about the consequences of first impressions– and markets can change direction many times before the full meaning of the news is digested.
  4.     Lack of liquidity:  Sometimes trades may not trigger due to a lack of liquidity during scheduled news events.
  5.     Hardware issues:  The volatility, along with the pace of data, during news events can put extra strain on your hardware–leading to a slowdown in performance or even malfunctions during a news event.

If you choose to trade during scheduled news events, it’s important for you to recognize the challenges associated with this type of trading and be willing to adjust for the probability of increased risk. Keep these points in mind, and as always…
Happy Trading!

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Shifting Spreads and Such

Shifting spreads keeping you guessing?

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Just as a chameleon will change to match a variety of backgrounds, in the currency market spread will invariably change to match market events. 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 them fluctuate during the open or close of trading sessions. This makes sense because the open and close of each trading session are usually the most volatile. Spreads will also adjust for

-Uncertainty in the direction of prices

-News events

-Volatility shifts

-Changes in liquidity

Liquidity providers use spread 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 spread to encourage trading; similarly, if they want to retain inventory, they might increase the spread 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. If you can understand spread changes, you’re one step closer to really knowing how to trade. You will be acting instead of reacting. Now see if you can predict where the next shift will be!

Happy Trading!

Shawn Lucas

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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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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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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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Breaking the Trading Psychology Barrier: Fight or Flight

The Apiary Fund is helping people break the trading psychology barriers that are holding them back from success in the financial markets.  Each week we’re focusing on a different psychological barrier to help you better see it and beat it!

Today’s obstacle is the psychological phenomenon called fight or flight!

When faced with adversity, we all have an instinctive response:  some confront the challenge head-on while others run for hills. In psychology, it’s called fight or flight, and sometimes our instinctive response comes at odds with rational decision making in the financial markets.

Emotional traders will often allow their pre-programmed response to make the tough decisions.  Do you close the position?  Do you keep it open?  Do you double down?  Do you quit trading altogether?

The problem with emotional triggers is timing – the emotion does not always manifest itself at the right time.  So the instinctual response to the emotion of adversity is often ill-timed.

It would be nice if the emotional trigger and the right time to make a decision always correlated…  But they don’t, so the trick is to make buy and sell decisions when it’s a rational time to make the decision – not when the emotion is tugging you into a response.

One approach traders use to overcome the instinctive response of fight or flight is to identify when the emotions start tugging on the instincts.  You must learn to recognize it by documenting or making note of every situation where the emotion starts to express itself.

Once you recognize the emotion, then you can start looking for patterns.  At first you may only recognize the pattern as a losing trade, but you need to dig deeper if you can.  Is it a pattern to the size of the loss?  Or the duration of the loss?  Is it the opinion of another trader?  Is it CNBC?  Understanding the patterns that trigger the emotion will allow you to plan your trade better.

The final step is to make pre-defined decision points before you enter a trade.  In this way, you’ll know when to make a decision and when not to, irrespective of how you feel.  You’ll begin to develop confidence that these points work within boundaries of your natural instincts. It will save you from making a decision based on emotions and it will help you be more rational in your trading.

Stay tuned for the next trading psychology barrier:  Pleasure or Pain.

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Apiary Fund – Breaking the Trading Psychology Barriers

There are three obstacles Apiary Fund traders must overcome in order to get funded: trading knowledge, trading skill, and trading psychology. The toughest of these is trading psychology.

The next few Apiary Fund blog posts will focus on a different barrier we have in our trading psychology and present ways to break the barrier!

Trading Psychology Barrier:  Getting Something for Nothing

Most people like the idea of trading currencies because of the vast fortunes you can make with very little effort. Sadly, it’s not that easy. Trading currencies requires work – a lot it.  You must spend time learning and developing your skill. Like anything that requires skill, such as sports, music, or professional occupation, you should not expect to just walk in and experience instant success. The desire to make something from nothing leads to speculative behavior.  Speculative behavior leads to financial ruin.

Breaking the Trading Psychology Barrier:  Commitment.

Breaking the trading psychology barrier of getting something for nothing is as simple as making a commitment.

The usual excuse for the uncommitted is that:

–       “There’s something ‘better’ around the corner” – or –

–       “There’s no clear evidence of a win with what I’m doing.”

Modern psychology will tell you that ‘WHAT’ you commit to is secondary to ‘HOW’ you commit to it.  It is ‘how’ you commit to trading that will make you successful. Only the smallest part of committing is a passive process that evaluates whether or not something will work.  The #1 factor that will make the choice to trade currencies successful or not is what work you put into it.

Stay tuned for tips on the next trading psychology barrier:  Fight or Flight.

Happy Trading!

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Apiary Fund Traders Manage Risk on the Markets Darkest Day

August 24th will go down as a dark day in market history as the Dow Jones Industrials dropped over 1000 points in early trading.  Days like this bring an ominous air to the hive.

The first profit and loss report was run early Monday morning.  The Dow was just recovering from a 1000-point opening plunge and tensions were tighter than the e-string on a violin.   The seconds seemed like hours while the server churned out the calculation that would give the bottom line for the fund – how many losses, how many gains, and is the fund up or down…

The first number to show up was profits: $33,638.

Next, the losses:  $5,196.

Winners were beating losers by a 5:1 ratio; the early read on profits was nearly 3%.   Tension turned to pure exhilaration as we started going through the detailed report.

The traders here at Apiary Fund are amazing.

I always tell people that the risk management system is for safety and learning.  Yes, it’s true, Apiary Funds money is kept safe by the program that constantly monitors accounts and makes the call many of us are too timid to make – cut the losing trade.   But performance on days like this cannot be attributed to the fail stop of the risk management system, but to the skill our traders have developed as they work toward funding.

The Apiary Fund risk management system keeps the fund safe, but it’s more than that. It’s teaching traders how to manage risk in the tsunami of market disasters.

As good as the numbers were in that first report of the day, what was an even greater accomplishment was the fact that not a single funded trader had been stopped out by the risk management system.

Again, I repeat.  The Apiary Fund Traders are amazing!

Keep up the good work, and happy trading!

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