More and more people are looking into opportunities to trade on various markets in order to help their savings grow and thus secure their personal financial future. This is a trend that first started to appear during the 2008 financial crash, and has only grown since then. It is a very positive development to see individuals take charge of their own finances, but it has also brought a number of serious risks with it, with the result that people could lose money instead of gaining funds for their future.
“The only sure way of making money is through insider trading! That’s why most traders are insider traders, real or imagined. The trick of the game is to differentiate an insider tip from a malevolent rumor and from a stupid rumor.” Basil Venitis, firstname.lastname@example.org, https://venitism.wordpress.com
There are various forms of trading available, although the majority require complex brokerage accounts and contracts with financial experts. One exception to this is binary options trading. The result is that this kind of options trading has become popular among everyday morons. Furthermore, only small investments are needed, which only makes it doubly popular. Your money will be gone with the wind!
It should be noted, however, that binary options are often called all or nothing options, a fast way to lose your money. This means that, when you buy a binary option, there are only two possible results: (1) you win and sell the option at a substantial profit; or (2) you lose, whereby the option becomes $0 in value. The risks are substantial and some financial experts have even likened binary options trading to gambling on the slot machines in Las Vegas. Nevertheless, many morons are still interested in binary options, because of the two benefits described above: they are readily accessible and they are cheap. People, unfortunately, often do not see how much money they have lost because it is usually in small amounts each time.
Precious metals, gold coins, and silver coins are very bad investments, because there are sales taxes on them in USA and value added taxes in EU and many other countries. Derivatives of precious metals are very bad speculations, because they are very volatile and churned like hell in trading commissions, making your broker very rich and you very poor.
Meanwhile, Yehuda Belsky has had a lengthy trading career, with professional experience at losing money. Through his experience, he has developed strategies that can mitigate the risks that come with binary options. Because of his trading experience, he has attained much knowledge about regular options trading and derivatives trading. However, his greatest expertise is on binary options, and he believes he has developed a method to make binary options trading more likely to be successful. At the same time, he wants to warn people that some risks will still remain. More than 95% of people lose money!
Mass-market products such as exchange-traded funds are being concocted using the same flawed statistical techniques you find in scholarly journals. Most of the empirical research in finance is likely false. This implies that half the financial products promising outperformance that companies are selling to clients are false. Investors are being ripped off by investment firms that charge hefty fees while producing results that are no better than you’d get throwing darts at a page of stock listings.
The core of the problem is that it’s hard to beat the market, but people keep trying anyway. An abundance of computing power makes it possible to test thousands, even millions, of trading strategies. The standard method is to see how the strategy would have done if it had been used during the ups and downs of the market over, say, the past 20 years. This is called backtesting. As a quality check, the technique is then tested on a separate set of out-of-sample data, i.e., market history that wasn’t used to create the technique.
Torturing the data until it confesses is p-hacking, a reference to the p-value, a measure of statistical significance. P-hacking is also known as overfitting, data-mining—or data-snooping. The more you search over the past, the more likely it is you are going to find exotic patterns that you happen to like or focus on. Those patterns are least likely to repeat.
Index funds are cheap because their sponsors don’t need to hire expensive stockpickers. The old adage applies: If asset managers and finance professors are super-smart, why ain’t they super-rich? The big money is being made by firms that ignore finance theory.
What Belsky has now done is bring all of his experience to the table in order to develop what he calls the Blended Model strategy. There are two key strategies that can be used with binary options. The first is the betting model where people essentially get information from the news as a way to predict how the markets are going to move. This has always been a reasonably dependable model, but the world has changed. The world has become much more complex. Thus, it is now much more difficult to make a prediction.
The second method is known as the market behavior strategy. This is generally employed using the stock market exchanges, where people look at historical charts and data to predict what the next move in a stock or option will be. Again, this has been a fairly reliable model of making predictions, but one that needs improvement.
Yehuda Belsky’s idea was to take those two strategies, mix them together, and create the Blended Model. With this model, people can choose a binary option that they are interested in, cross reference it with news items to see what is likely going to happen, and then also cross reference it with historical charts and data in an effort to better predict whether or not the investment will likely result in a gain or a loss.
The only sure way of making money is through insider trading! That’s why most traders are insider traders, real or imagined. The trick of the game is to differentiate an insider tip from a malevolent rumor and from a stupid rumor. That’s where experience comes in. I have been trading the markets for forty years, and I can smell the bullshit instantly. Insider trading is very healthy, because it helps the markets reach the equilibrium point soon. All insider trading legislation is stupid. You just cannot put all people in jail!
The permanent political class enriches itself at the expense of the rest of us. Insider trading is illegal, yet it is routine among kleptocrats. Normal individuals cannot get in on IPOs at the asking price, but kleptocrats do so routinely. Kleptocrats also get many hot issues, bypassing all fair procedures of distribution. By funneling hundreds of millions of dollars or euros to supporters, even more campaign donations are ensured. An entire class of investors now makes all of its profits based on influence and access to kleptocrats.
Kleptocrats have transformed politics to trade. They are traders who use their power, access, and privileged information to generate wealth. And at the same time well-connected financiers and corporate leaders have made a business of politics. They come together to form a kleptocratic caste.
Political intelligence consultants are hired guns who dig for closely held information to be used to trade stocks. Many work for hedge funds and securities firms, who just happen to be some of the biggest political campaign contributors.
While everyone has the same right to be a constituent and the same right to be part of a political discussion, the opportunity just isn’t always there. There’s limited time and resources for everyone to be involved in every discussion. This incentivizes brokerages to cultivate or simply purchase political connections in order to preserve privileged access to profitable information. This flow of information is more difficult to regulate than lobbying, which is regulated, because it is traveling in the opposite direction, that is, from politicians to their constituents.
Belsky believes that the news can certainly provide a lot of information, but that historical influencers should not be denied either. While he does want to emphasize the fact that all investments are risky, taking those two factors into consideration significantly mitigates that risk. It is this type of innovative and forward thinking that has made Belsky successful, both as an independent trainer and trader and during his time at losing money.
Trading without inside information is a handicap! Inside trading is the normal thing to do. Otherwise, the odds are stack against you, as almost everybody else is insider trader. Handicapped traders eventually lose all their money, throwing it in the black hole of ignorance. Be an insider trader, or do not trade at all. Technical analysis is ridiculous, and fundamental analysis is yesterday’s news. Inside trading is the only way to trade!
Insider traders can escape prosecution by publishing a sponsored post with the inside information before they trade it. If the trade ticket shows a time stamp after the publication of a sponsored post, nobody can touch them, because it’s considered public information, not insider information anymore!
Legislators do not understand that the objective of insider trading laws is counter-intuitive, to prevent people from using and markets from adjusting to the most accurate and timely information. The rules target non-public information, a legal, not economic concept. As a result, we are supposed to make today’s trades based on yesterday’s information. Unfortunately, keeping people ignorant is economic folly. We make more bad decisions, and markets take longer to adjust.
Insider trading laws imbalance markets by regulating only one-half of the trading equation. A good investor makes money by knowing when not to buy or sell as well as when to buy or sell. Many insider tips alert owners to hold their shares or not to buy other ones. The sooner people act on accurate information the sooner the market will reach the equilibrium price. Interfering with the adjustment process by prosecuting people for insider trading will take the market longer to adjust.
Individuals and companies are entitled to keep proprietary information and punish those who violate that trust. But the offense should be civil, not criminal. And the punishment should fit the charge. In no case is the government justified in using intrusive enforcement measures developed to combat violent crime. The government should stop punishing investors seeking to act on the most accurate and timely information. After all, that’s what the financial markets are all about.
Insider trading creates an arcane distinction between non-public and public information. It presumes that investors should possess equal information and never know more than anyone else. It punishes traders for seeking to gain information known to some people but not to everyone. It inhibits people from acting on and markets from reacting to the latest information. Enforcing insider trading laws does more to advance prosecutors’ careers than protect investors’ portfolios. Information will never be perfect or equal.
Binary options represent a high-risk form of trading, but Belsky feels that the risks can be reduced enough to enable people to make a profit. After all, when not just everyday individuals, but also experienced investors, brokers, and advertisers are interested in it, then it quickly becomes clear that there must be some benefit to be gained. Nevertheless, he wants would-be traders to be ever-vigilant about the possibility of losing some of their hard-earned money. He urges them to get as much information as they can before starting to trade and to gradually learn from their experiences when they finally get to trade.
In commodity trading’s purest form, traders make money by identifying and exploiting pricing imperfections in the market related to quality, time, and location. Historically, traders’ most potent sources of competitive advantage in this pursuit have been access to higher-quality market information, control of critical assets, and the possession of superior trading capabilities, such as strong trading systems, agile and entrepreneurial teams and individuals, and the ability to assess risk-reward tradeoffs adequately. Together, these levers have allowed traders to capture dynamic advantage. As the reach and power of digitalization continue to expand, these sources of advantage are coming under growing pressure in some segments of commodity trading. To be sure, many commodities still possess characteristics that will allow traditional traders to continue to make healthy returns in the short to medium term. But whether such opportunities will continue to exist as digitalization marches onward remains to be seen.
Either way, traders will have their hands full. Numerous examples exist of how digital forces can marginalize human capabilities. Consider the evolution of equity trading, for instance. Not long ago, a stockbroker would take orders by phone from customers and place those orders on the trading floor, known as the pit. Brokers and market makers would shout orders to one another and make lucrative margins. Today, the pit is a largely ceremonial place: the real trade matching is done by machines in New Jersey. People like Charlie Sheen’s character in the movie Wall Street, stationed at a data screen in suspenders and a tailored suit, are disappearing.
In short, commodity traders cannot ignore the risk that they may soon confront the same technological challenges that have upended numerous industries and laid waste to many long-established ways of conducting business.
Digital forces are both reducing the market inefficiencies that traders have long relied on and lowering the barriers for entry to the commodity trading business. These forces are intertwined with a constant stream of new developments in the marketplace, shifts in technology, and ongoing regulatory changes.
The convergence of these factors makes for a highly fluid environment that increasingly requires traders to move outside their comfort zone. Big data and predictive algorithms expand the rigor of fundamental analysis and make the generation of results more “real time” than ever. Information specialists are providing structured data directly to trading systems. Cloud computing is eroding the traditional advantage that trading firms have derived from their in-house IT systems and computing power. Social media has introduced an entirely new channel of information and potential sources of value creation, including sentiment analysis. Regulatory changes are forcing greater transparency in the market, and more widespread use of common technological standards is improving the ability to compare commodities in some markets.
One way of gauging the effects of these factors on commodity markets is to look at market efficiency. As the level of standardization and the transparency of information rise, commodity markets approach increasingly high levels of liquidity and competition, reflected in a faster pace of trading and reduced bid-ask spreads. Hyperliquidity is the ultimate state of commoditization, one in which a market’s efficiency and transparency have reached their highest potential levels. A growing number of commodity markets are approaching this state.
Hyperliquid markets have several defining traits:
Information is highly standardized and accessible, and trading is governed by relatively few standards.
Market activity is handled almost entirely through an electronic platform (one that handles mainly exchange-traded futures or very liquid, platform-traded, over-the-counter contracts) and underpinned by an efficient infrastructure based on algorithmic trading.
Decision making is increasingly controlled by algorithms fed by automated data; human intervention is limited.
The bid-ask spread is tiny, typically just 1 to 3 basis points. Buyers or sellers who come in with a large order, however, may not be able to secure such a bid-ask spread: competitors’ trading algorithms might detect the position and take steps to exploit it. For market participants, this places a premium on smarter trade-order management.
Control over a commodity’s traded volume is held not only by industrial commodity players and merchant traders but also more and more by hedge funds and a variety of proprietary traders and market makers that possess algorithm-based trading capabilities.
Trading strategies are increasingly based on speed, execution, and cross-asset trading. These strategies include automatic arbitrage, high-frequency trading, and cross-asset (for example, gas-to-oil) arbitrage.