I'm aiming for 4000 by christmas, then maybe take a break for a week and enjoy the festivites!

I've been spending a lot of time recently on some research relating to the financial markets, it's based on the principle that people are hardwired to look at things in a certain way, and on that basis will miss things that they otherwise might have picked up on.  For example, polar opposites, on/off, black/white, up/down etc. The world is not categorised in this way, only we make it so.  And in doing this I believe we become polarised to the polarised perspective, and therefore we miss things we otherwise might have picked up on.  Actually I prefer not to post too much detail as I've had the rather unfortunate experience of coming up with ideas only to have someone else take them, and gain credit for them.

I managed to quantify an interesting relationship in the markets, it must have taken me several weeks to do this now, since it involved essentially creating a new way of doing something, that certainly isn't in the public domain.  In some ways I view financial markets very much like the planet earth.  Most of the planet has been explored but certainly not all of it, and it is this as yet unexplored aspect that I am interested in.  I'll never forget the day I was reading some leaked "analysis" from Goldman Sachs and I was thinking as I read it, "Is this it! Is this the best they can come up with, surely someone can't be getting paid $70K/$100K pa for this!".  It just seemed so backward to me, what they were doing.  Coming back to my recent research, earlier this evening I've shown that it's possible to gain 1.44% over just under 4 weeks by exploiting a relationship between equity markets, that is perhaps little, or not understood at all.  I'm slightly different to most people, I will just try something, without having an opinion on whether it will work or not, with the bonus being that if it doesn't work, well I don't really care that much, at least I know what the situation is, but then if it does work then perhaps it's something that can be exploited.  Or perhaps not. There's a lot to be said for just trying.  I have this new idea, that I've tried to at least give a very general view of, that I may be able to exploit in the future.  Then I have a new trading strategy that I'm testing too, that hopefully will form the basis of my new general approach to the markets.  It's Friday night, it's quarter to 11, and here I am again, thinking about the markets.  

Sometimes I think I should be working for a hedge fund or something like that... 

A nicely executed spread trade earlier on (SIM).  Long Nasdaq futures, short DJIA futures;

NASDAQ futures
DJIA futures



The NASDAQ leg was slightly down whereas the DJIA leg was down by quite a lot more, a well timed exit.


Gain on 10 points (SIM).  I'll keep trading SIM until I'm at a point where it looks like the sort of propect I want to trade live.

PARALLELS

I remember this time last year very well indeed.  On the 5th November last year I was indoors back-testing a trading strategy, looking out the window I could see one of my neighbours, a law professor, was outside having some beers and a bonfire with some of his students, setting off fireworks etc. 

That strategy was found wanting, it didn't work, I traded it, made a little but not enough to make it worthwhile.  I find myself going through another process now, not dissimilar to last year, where I'm looking at potential new approaches to the market.  It feels like I've come full circle but I'm now on a different parallel.

More recently I've been working on a new way to analyse prices, whether it be stocks, futures, currencies or whatever, it had been at the back of my mind for a long time, and I wasn't sure exactly how to execute it since, to my knowledge, it hadn't been done before and there's some maths involved, not really my strong suit.  And I wasn't really sure whether anything would come of it, the only way to find out was to create it and start using it. Anyway recently I figured out how it could be done and over the last few days I finished the work, and started analysing using the new tool I've made.  What I found was that it can display relationships between prices that may not be well known in the markets, at least outside hedge funds anyway.  There's no way I'm likely to find out if it's already been done or if someone else is doing the same thing or whatever.   That doesn't really matter anyway since unless I can capitalise on it then it is ultimately pointless.  In fact probably a better way to describe it is a method of tracking where the value is actually moving to.  The complex part is that even where I've found a defined relationship there are several different futures/currencies involved, so now I've actually found what appears to be a clear edge, coming up with a trading strategy that captures it, may not be easy.  It was a complex to create this new tool, it may be even more complex to get something out of it.

But then earlier today something very curious happened, I suddenly realised that there is a completely different way I can trade, a totally peripheral idea to the one I've just spent all that time working on, and the first indications look quite positive.  I've always thought that the best way to look at markets is from the side, and that seems to have been whats happened here.  I've spent time creating something completely new, that I need to do more research on to see if I can use it to create trades, and I now have another new direction to go in.

It's an interesting journey, this path that I've taken, maybe today was a signal for me to take it to a new level, a new parallel.

Turns out that Mrs PositiveDeviant is going to be famous across the Middle East and North Africa...........................well at least for a few minutes anyway.  Some of you may recall that she took part in a NASA project called Planethunters.org, and as a result found a new exo-planet.  Due to this she has received some interest from journalists and whatnot, there was a documentary made about her and another scientist who found a planet using gravitational microlensing.  Anyway that was a while ago, today a Saudi Arabian journalist for BBC Arabic, Aneesa Al Qudaihi came round our place, along with his cameraman to interview her for a technology show that apparently goes out to 25 million across the Middle East and North Africa, it called '4Tech'.  It's about the technology behind Planethunters.org and the citizen scientist movement.  I'd never heard about '4tech' until recently, but of course it's broadcast in Arabic.  I would imagine it's probably similar to the BBC's western tech show called 'Click'.  I'm sure many of you will have seen that, I sometimes catch it of a Saturday morning.  

I had another engagement today so came home 30 mins too late to be able to meet him, a shame, he was talking with MrsPD about how he covered the Arab Spring, having travelled widely throughout the Middle East, the internal situation in Iran, Iran's relationship to Russia etc.

Ok well that was my first spread trade, and it worked very well, essentially I went long the NASDAQ, and short the Dow, making the equivalent of 10.25 NASDAQ points out of the spread.  I usually count in points, rather than $ since it allows you to focus on process and results rather how much is made or lost.


NASDAQ / DOW spread trade (SIM)