Short till bullish trend?-OILBreak of 15min bullish trend. Now is testing support level at 52.70, if prices breaks it, we can project price till the next support level(52.10-52.20)
Leverage
Leveraged ETF pairs: Time decayThis is more of an educational post, but it also serves as a trading idea.
Costs of derivatives and manager fees make leveraged ETFs have a dangerous time decay. If trading for periods longer than a day, these kick in. How badly they impair performance depends on the volatility of the underlyings, so be careful when trading these. A more clearly trending underlying makes for a safer leveraged play, so, instruments like QLD/QID aren't as affected by this.
You can observe how being short both sides of the coin, can produce a downtrend in the chart, and thus, a safe long term short.
Be careful when trading these for longer than a day, and if trading QLD, or QID, be careful with trades held for longer than a month, or a quarter (I estimate that is for how long they can outperform QQQ).
Cheers,
Ivan Labrie.
Leveraged Decay: how to calculate itBrexit and currency hedging has thrown up the need for products such as SUP3 however there is danger in holding such leveraged products as SUP3 (3X Long GBP Short EUR). As path dependency of the currency picks up in volatility the arithmetic mean drifts below the geometrical mean.
This is most easily realised in the following example of an up and down fluctuation of 10%:
100 +10% = 110
110 - 10% = 99
We have lost 1% due to the path dependency having only moved up and down 10%
We can approximate the volatility drag using the following:
Volatility Drag = 0.5 * (Leverage) * (Standard Deviation) ^2
This comes from the formula for the geom mean:
Geom Mean = Arith Mean - 0.5 * SD^2
It is not precise but allows a proxy to be formed!
Why Most Forex Traders Fail... LEVERAGEWay too many traders trade with very little capital and they do this because their brokers allow them to by offering them insane amounts of leverage. We really don't understand it because you would think that these brokers would want their clients to succeed in order to continue placing trades which yields the broker revenue from commissions and spreads. It is inevitable that with such little capital ($50-$100) these traders will go bust and blow their accounts, especially if they are allowed to take position sizes of upwards of 500 times their account value. These retail traders have been conditioned to believe that this is the way Forex trading is and quite frankly it isn't. The most successful Forex traders in the game use little to NO leverage at all and they only return a small consistent return of 1-3% per month. It seems impossible to make money with such small returns but if you actually take the time to break out a calculator and calculate how much such a return yields over extended periods of time like 5 years or 10 years you will see it is immense. Take $10,000... in 8 years with a consistent 5% a month return... that $10,000 will become $1,000,000.
So please guys read through the information on the chart. It is long but it is very valuable!
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Using Leveraged USDEUR QE Pair to Supercharge Outlook on BitcoinIt seems as if the USDEUR still has room to move as central banks (they are the largest forex traders worldwide) have not stopped selling EUR (www.bloomberg.com) and are still apparently accumulating dollars with abandon (www.wsj.com). IMF data to be released Tuesday may confirm many trader’s thoughts that CBs are still accumulating greenbacks. This can supercharge a BTC trader’s long/short strategy, since the relationship between the pair components will likely move with more volatility than the individual currencies themselves. This also (shameless plug) shows why you should be trading P2P in addition to (if not instead of) using centralized legacy exchanges). If you want to go into Monday long BTC buy it with the EURUSD pair, leveraged 60x (receive BTCUSD=x and pay EURUSD=x). Despite recent reversals in the USD, the medium term “force” is still higher. Conversely, if you want to go in Monday short BTC, create the contract as receive USDEUR=x (long) and pay BTCUSD=x, again at 60x leverage. Each contract should contain no collateral (if just for the day’s trading session) with the expectation of at least 50% chance of capital exhaustion (being unwound due to hitting max P/L). To extend past Monday’s trading, add collateral as needed (at contract’s creation). I would expect a ~91% net return, net of fees, on this by EOD Monday (if you picked the right side of the trade). Download the P2P trading wallet, quick start guide and spreadsheet to model the trades here veritaseum.com
LEVERAGE: The Legitimate UsageImagine you have a strategy and you found that the optimal risk you should take is 4%.
In other words with this strategy you should put 4% of your capital at risk in every trade to grow your account the fastest.
If you enter a trade with 100% of your capital, the SL % is the % you put at risk. NOT the whole position size. So by entering a trade with all of your money and setting a 4% SL you only put 4% of your money at risk at all times !
Now let's examine the following situation keeping our strategy in mind.
Imagine a perfectly oscillating market (for demonstration only). We are at the point where the red line ends and we expect the price to go the dashed path with a very high certainty. Our optimal & desired risk is 4%. However in this trade that we want to enter rightnow we can set a stop loss tighter than 4% because we are very certain that it wont be hit. So we can use a 2% stop instead. If you now put 100% of your capital in this trade you only put 2% of our money at risk at all times. However we want to put 4% of our money at risk for the best returns possible taking optimal risk (4%). That's where leverage comes into play as a LEGITIMATE tool and not a gambling tool. You already have 100% of your money in this trade, you can't put in more (without leverage) although your risk management tells you to do so. You want to increase your risk from currently 2% to 4% = double it. This means you have to take a 2x leverage. Now you are 200% invested in the trade and if your stop loss of 2% (in price action) gets hit you will lose 2 x 2% = 4% which is the optimal risk we wanted.
More in-depth information about optimal risk for fast growth:
en.wikipedia.org
www.youtube.com
