Investment Journal 7

• Due to increasingly central bank intervention, long-term FX positions are close to impossible
• FX world has seen many reverse trends, overreaction, and trade on news
• So is equity index, but the trend correlates with news less closely, short-to-medium term or long-term is more realistic
• In terms of trading, I need to distinguish between risk premia positions, medium term positions, and short-term market distortion (trade on news or mean-reversion)
• Put close stop to the short-term trades, close positions if I'm wrong; let the winning ones run
• Have a clear rationale for each trade

Investment Journal 6

Learnt the terrible lesson, lost all today, need to take a step back and do extensive reading: momentum vs mean-reversion

• Jim argued noise/information is way too much, so over short to medium-term, mean reverson must work
• Some interesting comments on trend following: 
• Academic work by Titman, Sarno etc.
• Market Wizards
• Well I don't think anyone has a silver bullet for when/where trend-following vs mean-reverting works. At least if they did they should be sipping margaritas on a yacht in the Riviera. Here though is how I think about it. Auto-correlation whether positive or negative is a function of two things. The first is order flow persistence, i.e. it's a well known fact that if there are more buys than sells in one period, than one would expect all things being equal more buys than sells in the next period. The second is order flow elasticity, i.e. as the price rises there will be fewer buyers and more sellers and vice versa. The former is the logic behind trend-following. The latter is why that logic doesn't always hold, if there was heavy buying action that pushed the price up it might dry up buyers and flood sellers in the next period pushing the price down.
  
  I think this paradigm goes a long way towards explaining why trend-following works in certain markets and mean-reversion works in others. For example take one of the most well-known mean-reverting markets, the idiosyncratic return component of equities (i.e. the returns of single stocks neutralized against the major market factors). This formed the core of many stat-arb strategies for a very long time. And with very good reason, one would expect order flow to be highly elastic for idiosyncratic equity factors. Most equities outside of their core factor exposures are very close substitutes for each other. So investors have very little tolerance if the idiosyncratic returns drive prices away from fair value. E.g. if the idiosyncratic component of one firm in the S&P 500 was higher than the others most investors would substitute to the others very easily.
  
  In contrast one of the best markets for trend-following tends to be commodities. And with good reason, the buyers and sellers are very price inelastic. For example if the price of oil goes up, consumers can't quickly substitute away from using crude oil. There are massive infrastructure changes that need to be made. Similar if say wheat is falling, it's not like farmers can easily switch over to growing corn without making large capital expenditures. So low elasticity leads to momentum, because when there's an imbalance between buyers and sellers it takes longer for prices to readjust to a point to bring markets back to equilibrium.
• LowVol, Down Market: Just punt
  LowVol, Up Market: MOM performs well
  HighVol, Down Market: MR performs well
  HighVol, Up Market: MOM & MR performs okay
• Keep reading and I'll reach my own conclusion

Investment journal 5

• low volatility, inflow to risky assets, equity up, bond down, bad-performing safe heaven assets (CHF, treasury), is it a new era or people just overact the eurozone heal and fiscal cliff?
• Trading is fundamentally different from investing, need to distinguish them two

Investment Journal 4 -- 10/Jan/2013

• The markets priced in the message from ECB that they would lower the rates, the public announcement suggested the other way, so Euro is shooting; nothing was known to me before. Following news is important in short-term, even medium term trading
• Market can be very naughty: FTSE falls below the opening price near the close, and back literally in the last minute.This less than a hour volatility has no good reasons to explan, which implies high-freq trading without technical support is essentially gambling
• Volatility is very very important, needs to understand this more. VIX is a volatility index for S&P

Investment journal 3 -- 09/01/2013

• Opening level is a biased estimator
• Gold falls, yield increases, after fiscal cliff, money is fleeding away from heaven to risky assets, is it the end of a low-yielding era? Fed increases the rates?
• Stocks increase across the board
• Yen weakens, due to new QE
• Inestigate into to Swisse! Sounds like an opportunity.

Investment journal 2 -- 08/01/2012

• Never gamble, never! Very short-term trading is essentially a gamble (5 min binary)
• It often makes sense to look backwards, rather than forwards. For instance, markets followed the upward trend looking backward from the peak point; looking forward, you cannot really know whether it's a bubble or a trend to follow. Choosing trend-following or contrarian thinking is a really tough job.
• Currency value should pick up with the growth figure
• QE, inflation up, purchasing power down, FX depreciates; in this way, if QE stops or inflation down, FX appreciates; USD is argubly a substitute of gold, so if USD is up, gold might be down
• Economic not always works, needs to think about the whole picture

Investment journal 1 -- 07/Jan/2012

• Never be emotional about the market
• Need to be clear about long-term and short-term trades
• There must be clear goals with any trade that you've got
• Extreme pessimism is a great source of profit (Standard Chartered, AAM)
• History often goes in the positive way during the so-called crisis, after you eliminate the tail risk