by, 8th-March-2009 at 07:21 PM (3257 Views)
I haven't been a buyer for a while now, mainly because I can't afford it, but also due to the massive volatility!
But I have been watching and attending some education (mainly free - maybe you get what you pay for?).
Anyway, two I did pay for (2x$5) were by Gary Norden of Marketwise traders over here in WA.
He's not a natural salesman, but makes a lot of sense to me. Now, I know most spruikers do sound logical. And I know markets don't follow sense, logic or reason. So I won't be following him or any other guru, just testing out and investigating their advice.
So here's the gist of his presentation - we all know predicting markets is a game of chance, so if you are an active trader (I'm not BTW) you need an edge - a little bit more information or a better insight than others.
That's not easy when the big boys and professionals spend so much on their education, computer models and trading systems.
But as we all know, every system will eventually fail and every chart pattern will make a different shape when you add the next weeks trading to it. So what are we left with?
Fundamentals? Well, these are a good starting point, but markets are driven by fear and greed. External factors can ruin the most solid fundamentals. And management can go bad, change or just get if wrong like the rest of us mortals. People like Lincoln sell products that support this approach. I have no argument with using it, a system, or even charts, to whittle down the bewildering number of choices the markets present. But buyer beware when paying for advice as per anything else.
Urm. There's nothing else. Sorry, but that's it. Just the market. Ah, and markets tell you what is happening now, so why not use those? It requires time, experience and education (and I'm not there yet). But, borowing from Gary's presentation, if you know the RIO CDS cost is currently 7%, you know (if the insurer is sound) that that market thinks there is a 7% chance of it defaulting on it's credit this year.
So get on the web, (bloomberg and markit were
Gary's suggestions) and try to find out about the other markets. Corporate bonds, CDS, FX, VIX etc. Then we might at least know what other markets peg risk at, or where they price credit.
So we now know the CDS market thinks the risk of Rio failing is 7%. I have no idea how to balance reward against that though... anyone out there know? Nobody said it was going to be easy!