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.

Comments { 0 }

Yoda Quote #8 “Excitement…Jedi Crave Not These Things”

This is a continuation of the Trading Words of Wisdom By Yoda, for Quote #9 click here.

8. “Adventure. Excitement. A Jedi craves not these things.” The Empire Strikes Back

star-wars-character-yoda-handout-651712929Some might say that the word Investor replaces the word Jedi quite well in this sentence; for some reason, the glamorous life of investing just doesn’t pull to some people. However, being a boring investor can equal some exciting returns when it’s time to retire.

Consider the life of a Jedi: flying through space, fighting bounty hunters, saving a planet. It sounds like the life of adventure dreamed of by little boys, so why would Yoda say that a Jedi ‘craves not these things?’ It is because a Jedi’s role is to serve and protect, not seek the adrenaline rush of fighting for your life. It also takes many years of dedicated training to be master the force. Given the choice between fighting enemy droids or establishing peace in the galaxy, my bet is that Yoda would choose peace.

It’s a common question, ‘What would you do with a million dollars?’ The exciting answers are skydiving, buying a mansion, or an African safari. Yet, most millionaires follow ‘boring’ investment strategies. We want a balanced portfolio that will maximize our returns–without a lot of active participation and stress. Our role is to grow and protect our portfolio, not to enjoy the temporary power rush of a shopping spree. Just like training to be a Jedi (ok, maybe not just like), it takes years of discipline and repetition (boring) to achieve the status of successful investor (cha-ching!). As we’re completing our ‘training’ it’s important not to be sidetracked by ‘hot’ or ‘exotic’ trades–stick to your trading strategy that you’ve developed, trust, and know.

Happy Trading, and May The Force Be With You!

For Quote #7 click here.

Comments { 0 }

Yoda Quote #9 “Use Your Feelings”

This is a continuation of the Trading Words of Wisdom By Yoda, for Quote #10 click here.

9. “Use your feelings, Obi-Wan, and find him you will.” Revenge Of The Sith

image_update_dbd162580cda702b_1360229793_9j-4aaqsk

I know what you might be thinking, “but Master Yoda, we were told never to let our emotions control our trading!” And it’s true, you shouldn’t. We are told over and over again, DO NOT let your emotions control your trading; however, there’s an important difference between emotions and feelings.

*There is a lot of scientific controversy around this topic. If you would like to learn more, you can look up the science behind neuroplasticity and emotions/feelings. For this article, we are stating that there is a difference between emotion and feeling.

Emotions are universal feelings like happy, sad, anger, or frustration, and happen on the physical level (your heart rate increases or fist tightens). Feelings are a reaction or association in your brain to your emotions, and you can learn to master them. Think about the moment when your emotions are triggered. There’s a small gap of time before they translate into actions, within that gap you have the opportunity to discipline your feelings–in turn, directing your actions. Practice training your brain to recognize certain emotional triggers so you have command over what you’re feeling (Master Yoda wasn’t so crazy after all!). Now, when you find yourself in emotional or high-risk situations you can trust what you are feeling, consequently acting instead of reacting.

Happy Trading, and May The Force Be With You!

For Quote #8 click here

Comments { 0 }

Trading Words of Wisdom By Yoda

Over the next couple of weeks, we’ll be sharing some quotes by one of the wisest creatures of all-time: Master Yoda. Yoda_SWSB

His words might have been intended to restore peace to the galaxy, but if you follow his council you will also find the force in your trading. So keep an eye out for the top ten trading words of wisdom from the Emperor’s ‘little green friend.’

Trading Words of Wisdom #10: “That is why you fail.” The Empire Strikes Back

No matter the situation, Yoda will tell it to you straight…in his backwards speech sort of way. Anyways, when Luke utters the words, ‘I don’t believe it,’ after Master Yoda raises his X-wing from the swamp, Yoda replies with these poignant words of wisdom: “That is why you fail.”

We are often told that the sky’s the limit, but really it should be your mind that is the limit. When you decide for yourself that you’re going to do something, you’ve overcome the hardest part. Believing, or trusting, in yourself is the first step to learning how to trade successfully. We’re confident in all of our traders ability to overcome any challenges they’re currently facing, and we’re here to help you! You can do hard things!

Happy Trading, and May The Force Be With You!

For Quote #9 click here

Comments { 0 }

Orlando, Florida Summit Highlights

The Apiary Fund would like to thank everybody for making the Orlando, Florida Summit a success last week! As always, we really enjoy the opportunity we have to meet our traders in person and watch them develop throughout the week. Besides enjoying the sunny Florida weather, here are a couple of highlights from the week.

The Shark Tank

DCIM100MEDIADJI_0009.JPG

Our own little version of the popular TV show, Shark Tank, is quickly becoming one of our favorite events at the summit. First, we have all of the traders break off into groups of four. Then, they work together in their groups to form a trading strategy which they will use for the next couple of hours. Finally, the top four teams will then go on to present their trading plan to the ‘sharks:’ Shawn, Nate, Todd, and Jeff. Each shark will choose a strategy to trade over the next hour, revealing which shark, or trading strategy, will rise victorious. It was close, but Shawn squeaked by with a win by a couple pips.

The $1,000 Accounts

Traders knew heading into the summit that they would be given $1,000 (of real money) to trade with during week; we were pleased to see most traders turning out a profit. However, we were all in for a surprise when Shawn let them keep the account until the end of the month! Everybody seemed excited to be able to go home and continue strengthening the skills they learned the past week.

DCIM100MEDIADJI_0017.JPG

The Apiary Orlando, Florida Summit Traders

We really appreciate everybody who was able to make it to this summit. These events help teach us just as much as they teach you, and most of the time it’s because we are lucky to have such great traders. If you weren’t able to make it to the Orlando, Florida Summit, we hope that we’ll be able to meet, and trade, with you at the next one!

Happy Trading!

Comments { 0 }

Positions, Risk, and Buffets

You don’t want to have too many active positions open; it’s like eating too much food at your favorite buffet. Buffets can be good. Buffets can be very good. However, you almost always–or at least I do–walk (if you still can) away from a buffet in pain–sometimes in a great deal of pain. I like the illusion that I have control over myself around food, but that disappears as soon as I see a soft serve ice cream machine paired with caramel and hot fudge pumps. There’s this mode that I enter when I’m in a buffet. I become this mindless food eating machine that inhales plate after plate of mediocre greasy food just because I can. Forget the fact that I’ve been working on not eating carbs for the past three weeks, I’m have four or five rolls with honey butter.

Catering_at_the_University_of_Exeter_(10137691074)

Did you know that Apiary limits the number of open or pending trades you can have? This isn’t an all-you-can-position buffet, and for good reason! Apiary limits the number of open trades or pending orders in an account for risk management purposes. Mainly because during extreme market conditions, slippage is of serious concern; a lack of liquidity on either the buy or sell side means orders may not be filled before slipping far beyond any stops. By limiting the number of pending or open positions, Apiary can better manage risk across the entire portfolio. Mitigating risk is beneficial for us as a company, and for you as a client.

In addition to Apiary’s risk management model, limiting the number of open positions is a good practice at the personal level. One argument for multiple positions is the benefit of diversification.  However, after about 8-12 open positions, the benefit can become incrementally smaller and can actually turn negative.  For example, a trader actively managing 100 open positions is far less effective than a person managing 10. In fact, this is one of the ideas that helped found Apiary! It’s far better to have a group of ten traders individually managing ten positions than to have one person managing 100. In the end, the same number of active positions are being managed, but with far less risk.

Happy Trading!

Comments { 0 }

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:

16820153696_285c65bcef_o

  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!

Comments { 0 }

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.**

buddy-the-elf-snowballs-1024x555

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.

Comments { 0 }

Shifting Spreads and Such

Shifting spreads keeping you guessing?

Indian_Chameleon_(Chamaeleo_zeylanicus)_Photograph_By_Shantanu_Kuveskar

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

Comments { 0 }

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.

6a00d83451586c69e201a511cf5adc970c-320wi

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!

Comments { 0 }