Bathe in it? Sounds good....
I'm super excited everyone...We have new products on our simulator to trade. We now have miNY crude, miNY nat gas, fed funds futures, and I have perfectly set up all possilble treasury spreads. I'm in heaven :-)
Anyways, I've been fooling around with the energy products and I'm shocked how volatile and powerful they are. Here's how it breaks down. In the miNY crude, each contract is for 500 barrels of oil. The minimum tick size is 2.5 cents. A $1 move in crude (which is extremely common) is equivalent to a 100 point move in the dow! The natural gas is just as volatile. At 2,500 million btus per contract, minimum tick size of .5 cents, the same dow equivalent is only a 20 cent move! Natural gas goes up and down 20 cents all the time.
WOW. I'm humbled and inspired.
Switching now to some fixed income. I'm trading the TUT (Tens under Twos) and the FOB (Five over Bond) and thus trying to predict the shape of the yield curve. My prediction based on just random chatter is that the yield curve would steapen. Thus I went long the TUT and the FOB. The TUT lost money but the FOB made money indicating a sinking of the middle of the yield curve. The 5 has been the hump in the curve for a while and it must now be correcting.
Now that I got all of that out of the way a think a little martial arts strategy is in order.
Obviously I am excited to have more products (opponents) and am excited by their different styles and abilities. I once talked with a master of kung fu. He was telling me how he was trained to fight many people at once. I was impressed. I asked him what was the main strategy when fighting so many people. He said it was fairly simple. You had to move very quickly and make so it was impossible for more than 1 opponent to attack you at a time. By quickly moving and analyzing your environment you can take on as many people as you want, just one at a time.
Translation to trading:
By trading more than one product at the same time, especially products from completely different backgrounds (i.e. indices, fixed income, commodities) you end up stretching yourself thin. Ideally you should stick to one opponent at a time.
How I will apply this rule:
When I enter each trading day I will analyze all the products available to me. From this analysis I will determine which product would be the best to trade. I will make a trade in that product and then after completion of placing stop losses, I can then move onto a new product. But never over stretch myself. If I try and fight too many opponents I am more likely to get creamed by one of them than if I just go one at a time.
I love this martial arts analogy it never stops making sense.
Anyways, I've been fooling around with the energy products and I'm shocked how volatile and powerful they are. Here's how it breaks down. In the miNY crude, each contract is for 500 barrels of oil. The minimum tick size is 2.5 cents. A $1 move in crude (which is extremely common) is equivalent to a 100 point move in the dow! The natural gas is just as volatile. At 2,500 million btus per contract, minimum tick size of .5 cents, the same dow equivalent is only a 20 cent move! Natural gas goes up and down 20 cents all the time.
WOW. I'm humbled and inspired.
Switching now to some fixed income. I'm trading the TUT (Tens under Twos) and the FOB (Five over Bond) and thus trying to predict the shape of the yield curve. My prediction based on just random chatter is that the yield curve would steapen. Thus I went long the TUT and the FOB. The TUT lost money but the FOB made money indicating a sinking of the middle of the yield curve. The 5 has been the hump in the curve for a while and it must now be correcting.
Now that I got all of that out of the way a think a little martial arts strategy is in order.
Obviously I am excited to have more products (opponents) and am excited by their different styles and abilities. I once talked with a master of kung fu. He was telling me how he was trained to fight many people at once. I was impressed. I asked him what was the main strategy when fighting so many people. He said it was fairly simple. You had to move very quickly and make so it was impossible for more than 1 opponent to attack you at a time. By quickly moving and analyzing your environment you can take on as many people as you want, just one at a time.
Translation to trading:
By trading more than one product at the same time, especially products from completely different backgrounds (i.e. indices, fixed income, commodities) you end up stretching yourself thin. Ideally you should stick to one opponent at a time.
How I will apply this rule:
When I enter each trading day I will analyze all the products available to me. From this analysis I will determine which product would be the best to trade. I will make a trade in that product and then after completion of placing stop losses, I can then move onto a new product. But never over stretch myself. If I try and fight too many opponents I am more likely to get creamed by one of them than if I just go one at a time.
I love this martial arts analogy it never stops making sense.
posted by Shiptastic at 12:36 PM
0 comments
