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Simplify Your Trading Using Occam’s Razor

Simplify Your Trading Using Occam’s Razor

Occam’s Razor, also known as the law of parsimony, is a philosophical principle that is attributed to William of Ockham, an English Franciscan friar, philosopher and theologian. The principle states that among competing hypotheses that predict equally well, the one with the fewest assumptions should be selected. Said another way, the simplest solution is always the best. Like all mental models you can apply it across many disciplines but we like to explore how we can use Occam’s Razor to…

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Month End Trading

Month End Trading

Month end trading is different to other trading days. All the big players are active on the last day of the month. Pension funds, commodity funds, hedge funds, mutual funds, you name it the big players are all there. They enter the market and buy and sell en masse. There are so many big players present at month end that their aggregated behaviour can distort the price of a market more than normal. Their trading size is so large that…

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Opportunity Cost

Opportunity Cost

All trading decisions should be viewed through the lens of opportunity cost. You want to maximise the amount of money you make by spending your time in the most useful manner. The concept of opportunity cost comes from the field of microeconomics so some of you may be familiar with it already. Opportunity cost is just a fancy word for trade-off. When we do one thing we won’t be able to do something else. It is the cost of missing…

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How Blue Light From Screens Impacts Our Health

How Blue Light From Screens Impacts Our Health

Traders spend a disproportionate amount of time in front of their digital devices. Unfortunately it’s part and parcel of the job. However staring at the screens all day long can have some serious implications for your overall health. The majority of the problems arise from the blue light emitted from our digital devices. Too much exposure to the blue light from your screens can affect your eyes, your sleep and your mood. We all know how it goes, you wake…

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Recommended Reading List

Recommended Reading List

Every trader should read widely, it is one of the best ways to improve your trading. The best traders are inquisitive by nature and constantly question what they believe to be true. No matter how much you know about trading there will always more to learn. It is one of the reasons we recommend traders become students of the markets. While we contribute a significant amount to the trading community we acknowledge that we are by no means the authority…

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How Spoofing and Layering Impact the Markets

How Spoofing and Layering Impact the Markets

Every trader should understand the games played in the markets they trade. Spoofing and layering are one of those games. If you understand the impact spoofing and layering have on the market you can use it to your advantage. Spoofing and Layering is the act of placing a large order or multiple large orders on one side of the market and cancelling those orders soon after. This creates an artificial supply or demand. The reason for placing a large order…

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Paul Tudor Jones on the Importance of Technical Analysis

Paul Tudor Jones on the Importance of Technical Analysis

Paul Tudor Jones highlighting the importance of trusting the price action despite having incomplete information: I see the younger generation hampered by the need to understand and rationalize why something should go up or down. Usually by the time that becomes self-evident, the move is already over. When I got into the business, there was so little information on fundamentals, and what little information one could get was largely imperfect. We learned just to go with the chart. Why work…

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Margin of Safety

Margin of Safety

The principle of margin of safety comes from the discipline of engineering but was adopted by those in the finance industry as a way to minimise risk. The concept was made famous by Ben Graham most notably in his book the Intelligent Investor and subsequently by his followers, namely Warren Buffett. It is also mentioned by Jesse Livermore in his book Reminiscences of a Stock Operator. It is a very simple concept that helps you absorb errors and bad luck…

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System 1 vs System 2 Thinking for Traders

System 1 vs System 2 Thinking for Traders

Nobel laureate Danial Kahneman is one the worlds eminent experts when it comes to decision making. In his book “Thinking Fast and Slow” he describes how the brain is divided into two agents which he calls System 1 and System 2. System 1 and System 2 produce fast and slow thinking respectively. System 1 thinking refers to our intuitive thinking system, which is fast, automatic and effortless. We make most of our decisions in life through system 1 thinking. By…

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Circle of Competence: Avoid What You Think You Know

Circle of Competence: Avoid What You Think You Know

The concept of circle of competence has been used by the best professional traders for years as a way to focus on only trading in areas they know best. Most people will be familiar with this concept if they’ve ever read any of the shareholder letters of the famed investor Warren Buffett. But the concept applies just as much to trading as it does investing. As traders we all build up our own unique skill sets in the markets. Through…

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