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Using technology for Arbitrage
Technology has had significant impact on human race in almost every sphere of life. So why not use the impact of same on trading. I discussed in brief about using technology for trading purposes in my last article on Algorithmic trading. Continuing on the same lines, I now want to tell you in very simple words how algorithms can be used in arbitrage which is the bread and butter of almost all traders across the world.
What do I mean by Arbitrage
It is a kind of trading where traders earn profits by exploiting price difference of similar or identical financial products on different market or in different forms and this Arbitrage exists because of market inefficiencies.
Example: – A program can buy or sell the future stock of a commodity like gold depending upon the spread level of same product of different expiry month contract in the Indian commodity market (MCX). More >
All about algorithmic trading
The new buzz word among the securities market enthusiasts is ALGORITHMS. Traders across the globe have been affected by the use of algorithms. Positively, if they are doing and obviously, on the negative side if they are not into it. Algo, or system trading (as is known by many in the market place) has been in vogue since quite some time in developed financial markets while developing ones (yes, I use this classification for capital markets as well) are awakening to this concept gradually. Not many participants still know what it is and how does it impact. I will try and answer some of the basic questions through this post. More >
Should Age Determine Your Investments in Equity?
Go to google and search for “asset allocation by age”. You will get plethora of asset allocation calculators and heaps of advice on asset allocation based on your age. You will find a traditional rule of thumb repeated quite often - subtract your age from 100 and invest that percent of your assets in stocks, with rest in fixed deposits or bonds or cash. (A 29-year-old would put 71% of her money in equity shares or mutual funds and a 79-year-old would put only 21% there.) To me, it seems there is something grossly wrong here.
Why should age determine how much risk you can take?
An 89-year-old investor with Rs. 50 lakhs and a huge well to do family would be foolish to move most of her money into bonds. He already has lot of money and his grandchildren (who will eventually inherit his stocks) have decades of investing ahead of them. On the other hand a 25-year-old who is saving for his wedding and a house down payment would be out of his minds to put all or majority of his money into stocks. More >
US Debt ceiling – What is it all about?
One of the most talked about news doing rounds in the world economy in the last month has been the US debt ceiling. US is the biggest economy of the world with $ 14.6 trillion of GDP. Nearest competitor China is at $ 5.8 trillion i.e less than half of that of USA. Still credit rating agencies gave a deadline of August 2 to decide on the debt ceiling issue failing which credit rating on select US Government bond would have been lowered. Amid a lot of discussions and debates, Obama Government could pass on the bill for raising the debt ceiling. Amid all this, I thought, what is this issue of debt ceiling, and why is it important?
Open Interest – Essential Trading Tool
Many a times you would have come across statements like “Open interest in XYZ increased 20 percent”, but not many of us are comfortable with the idea of Open interest and many others confuse the same with volume. I will try to clarify this concept through this article.
First let me explain you, what is the open interest and why is it important?
The word ‘open’ in open interest itself says that the contract is open. Open interest means unsettled derivative contract for a specific underlying security like Future and Option. Simply it can be also summarized as contracts outstanding on a particular day.
Interesting Forex Slangs
Every morning while browsing through the forex market commentaries I usually come across a range of terms used in currency market which either do not exist in real world or exist in a totally different context. Its quite interesting to know these terms and find out why they have been named as such.
Cable
Refers to the Great Britain Pound i.e. GBP/USD currency rate (read our note on currency basics to understand the pair). It refers to the Atlantic Cable, a steel cable laid under the Atlantic Ocean in 1850, telegraphically linking the UK with the USA, enabling messages with currency prices to be transmitted between the London and New York Exchanges. GBPUSD pair is also known as Pound Sterling
The Importance of a Financial Education to Young Minds
It doesn’t come naturally for children, teens and young adults to make smart long-term decisions with their money. After all, when you’re young, instant gratification is the key to candy, video games, fast food and trendy clothing.
Because young people aren’t likely to get a thorough financial education in school while they’re busy learning math, science, literature and languages, it’s important that you instill in them valuable financial life lessons while they’re still living in your home. The practical knowledge you provide your children will definitely be worth your while, unless of course you want your children to be borrowing money from you well into adulthood to make up for their money blunders.
10 Commandments of Successful Investing
Let me unveil the 10 commandments of successful investing today. These commandments strictly followed can make you a successful investor; make you richer. The successful legendary investors like Benjamin graham, warren buffet have followed these principles. So why not you…?
Decide your investment strategy and stick to it:
An investor may invest in SIP and when the market continues to fall he will discontinue his SIP. But market crash is the right time to continue your SIP. Because, during the market crash you will get more number of units and the averaging works out in your favour.
Another investor may decide 50:50 as his debt:equity asset allocation ratio. When the market goes up he may want to invest more in equity and hence he may change his asset allocation to 30:70. Actually when the market goes up one need to reduce his equity exposure to bring the portfolio back to his predetermined asset allocation ratio. More >
