Blog Posts

What separates professional traders from amateur traders? What do they know or what traits do they share? Let’s take a look. 1) Risk Management Professionals have a strong understanding of risk management principles and techniques, such as position sizing, cost-effective use of options, and portfolio diversification. They tend to think of having a certain structure […]

Time series forecasting models in trading are statistical techniques used to predict future values of financial assets based on historical data. These models try to identify patterns and trends in time series data to help traders to make informed decisions about entry and exit points, as well as risk management strategies. Accurate forecasting can provide […]

Duration-neutral spread basis (DNSB) refers to a trading strategy or approach that tries to construct a portfolio or set of positions that are uncorrelated or neutral to the broader market movements, specifically to changes in interest rates or duration risk. The goal is to systematically eliminate or minimize exposure to the overall market risk while […]

Convergence trading strategies try to profit from the temporary mispricing of two related financial instruments that have diverged from their long-term equilibrium relationship.  Traders establish positions that will ideally benefit when the identified mispricing corrects itself and the assets converge back toward their expected equilibrium.  A deep understanding of the cause-effect mechanics and drivers of […]

We look at the differences between cointegration and correlations and its application in trading. Imagine a trader observing two assets that seem to move in unison. Do these assets offer a solid basis for a trading strategy (e.g., eventual convergence if they run apart)? Noticing this movement alone isn’t sufficient. It’s important to determine whether […]

Related securities and assets – most stocks, oil and natural gas – often move together in the market over long periods of time. This reflects a financial concept known as cointegration. Cointegration occurs when asset prices move together over the long term, even if they may diverge in the short term. While correlation is by […]

There are very few true monopolies in the stock market these days the classic sense, as antitrust laws and regulations aim to promote competition. Nonetheless, there are some companies that enjoy a dominant market position or quasi-monopolistic advantages in their respective industries.   Key Takeaways – Stocks That Are Monopolies Stocks that are monopolies (examples) […]

Seasonal stocks are those that tend to experience predictable patterns of price movements and trading activity at certain times of the year due to the cyclical or seasonal nature of their business operations. We look at the details of seasonality in the stock market and some examples.   Key Takeaways – Seasonal Stocks Here are […]

When a stock’s price falls to zero, it means the company has gone bankrupt or its shares have become essentially worthless. This situation typically arises from severe financial distress that leads the company to bankruptcy or a similar outcome where the company’s assets are insufficient to pay off its debts and obligations.   Key Takeaways […]

When you sell a stock, the buyer is typically another individual investor, an institutional investor, or a market maker. We look further into the topic below on the mechanics of the buying and selling process.   Key Takeaways – When You Sell a Stock Who Buys It?  Anonymity – You don’t necessarily know who specifically […]