Synthetic Long Stock

The strategy combines two option positions: long a call option and short a put option with the same strike and expiration. The net result simulates a comparable long stock position's risk and reward. The principal differences are the smaller capital outlay, the time limitation imposed by the term of the options, and the absence of a stock owner's rights: voting and dividends.

If assigned, the investor who doesn't take further steps to resell, ends up with an actual long stock position. It's another reason to be wary if the long-term outlook is bearish.
Outlook

Looking for an appreciation in the stock's price during the life of the options; the sharper, the better. Since the term of the strategy is limited, the stock's longer-term outlook isn't as critical. However, if the investor is bearish on the stock's longer-term future, it would require a careful pinpointing of the trends; when the stock will head up, and when it will go down. The difficulty of making such a precise forecast suggests that this would not be an optimal strategy for a bearish investor.





Net Position (at expiration)
EXAMPLE

Long 1 XYZ 60 call
Short 1 XYZ 60 put


MAXIMUM GAIN
Unlimited


MAXIMUM LOSS
Strike price - debit paid (substantial)


Summary
This strategy is essentially a long futures position on the underlying stock. The long call and the short put combined simulate a long stock position. The net result entails the same risk/reward profile, though only for the term of the option: unlimited potential for appreciation, and large (though limited) risk should the underlying stock fall in value.


Motivation
Establish a long stock position without actually buying stock.


Variations
If the strike prices of the two options are the same, this strategy is a synthetic long stock. If the call has a higher strike, it is sometimes known as a collar or risk reversal. The term collar can be confusing, because it applies to up to three strategies. Depending on which option is long and which is short, collars can mimic either a long stock or a short stock position; the term applies to both. And because the synthetic short stock version is used is so commonly as a hedge on a stock position, the three-part strategy sometimes known as protective collar is also called 'collar'.


Max Loss
The maximum loss is limited but potentially substantial. The worst that can happen is for the stock to become worthless. In that case, the investor would be assigned on the put and would have to buy the stock at the strike price. The loss would be higher (lower) by the amount of the debit (credit). In this worst case scenario, the call would of course simultaneously expire worthless.


Max Gain
The maximum gain is unlimited, just as with a long stock position. The best that can happen is for the stock to rise to infinity, in which case the theoretical gain would also be infinite. The investor would exercise the call to buy the stock at the strike price and then sell the resulting stock at the new, high price. The gain would be higher (lower) by the amount of the credit (debit) when the strategy was implemented.


Profit/Loss
As with a long stock position, the potential profit is unlimited, and the potential losses are substantial. An investor can do the research on the underlying and monitor the developments, but there is no guarantee of being able to get out of the short put position if a sharp move lower occurs.


Breakeven
This strategy breaks even if, at expiration, the stock is above (below) the strike price by the amount of the debit (credit) that the investor paid (received) when the strategy was implemented.


Breakeven = strike + net debit

(Breakeven = strike - net credit)


Volatility
Volatility is usually not a major consideration when implementing this strategy, all other things being equal. Since the strategy involves being both long and short an option with the same term and strike, any change in implied volatility should roughly be offset.


Time Decay
Since the strategy involves being both long and short an option with the same strike and term, the effects of time decay will roughly offset each other.


Assignment Risk
Early assignment of the short put, while possible at any time, generally occurs if it goes deep into-the-money.


And be aware, a situation where a stock is involved in a restructuring or capitalization event, such as a merger, takeover, spin-off or special dividend, could completely upset typical expectations regarding early exercise of options on the stock.


Expiration Risk
The investor cannot know for sure whether or not assignment occurred, until the Monday after expiration.

How to Stimulate Natural Growth Hormones With Nutrition

Human growth hormone, or HGH, is naturaly formed in the pituitary gland and plays an important role in growth and development throughout childhood and adolescence. During adulthood, HGH continues to play a significant, though lesser role, helping to build and maintain lean muscle. As with any hormone in the body, good nutrition can help to promote and sustain healthy levels of HGH, provided other mechanisms are also in place.

Step 1

Salmon Photo Credit Brent Hofacker/iStock/Getty Images

Eat adequate amounts of protein. According to Colorado State University, HGH is a protein-based hormone that regulates growth and metabolism. HGH is made up of amino acids, the primary structural units of all proteins. An important function of HGH is regulating muscle tissue anabolism, or growth. But a protein-poor diet does not provide the building blocks necessary for muscle anabolism. Animal sources of protein, in particular, supply all the amino acids necessary for muscle development. Lean meat, fish, eggs and dairy are good animal protein sources.

Step 2

Raisins Photo Credit Jupiterimages/Photos.com/Getty Images

Eat a variety of arginine-rich foods. L-arginine is an amino acid that has been shown to heighten HGH secretion in athletes in response to strength training workouts. Foods that are rich in arginine, include walnuts, hazelnuts, pecans, Brazil nuts, sunflower seeds, brown rice, raisins, almonds, cashews, chicken, chocolate, dairy products, meats and peanuts.

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Step 3

White rice Photo Credit Yelena Yemchuk/iStock/Getty Images

Avoid high glycemic carbohydrates that rapidly raise blood sugar, especially after your workout. Sugar, flour, rice and other processed carbohydrates are quickly broken down to glucose, causing a spike in circulating glucose. According to Peak Performance, hyperglycemia, or high blood sugar, tends to switch off HGH secretion. High-fat foods also switch off HGH when eaten before your workout.

Step 4

Drink water Photo Credit Jupiterimages/Creatas/Getty Images

Drink plenty of water before, during and after your workout. Dehydration significantly reduces exercise-induced HGH secretion.

Tips

• While good nutritional support is essential to HGH production, nutrition alone will not increase HGH secretion in adults. Peak Performance notes that high-intensity anaerobic exercise like weight training is the best way to naturally stimulate HGH. Adequate regular sleep patterns are also important. HGH secretion occurs in circadian cycles of six to 12 small surges per day, with the greatest surge taking place about an hour after the onset of night-time sleep. Sleep deprivation or irregular sleep patterns can interfere with circadian cycles, and limit HGH secretion.

Things You'll Need

• Arganine-righ foods
• Protein-rich foods

Foods That Promote HGH

Secreted by the pituitary gland at the base of your brain, human growth hormone, or HGH, fuels growth during your childhood years and helps to maintain optimal function of tissues and organs throughout your life. The body's production of HGH tends to slow as you age and can also decrease because of medical disorders and dietary deficiencies. No foods contain HGH, but including certain foods in your diet can stimulate your body to produce more of the hormone.

Low-Glycemic Foods

Elevated blood glucose levels suppress your body's natural production of HGH, so sticking to foods that are low on the glycemic index promotes the secretion of HGH, according to Ben Greenfield, author of "100 Ways to Boost Your Metabolism." The index gauges the effect of various foods on blood glucose levels. Foods that cause a spike in blood sugar levels rank high on the index, while those that cause a more gradual rise and fall in blood sugar are lower on the index. Greenfield, a sports nutritionist and personal trainer, says that sticking to foods with a glycemic index of 50 or less can help to ensure that HGH production remains at optimal levels. Foods in this category include apples, bananas, carrots, corn, honey, mangoes, milk, oranges, pancakes, pasta, peaches, pears and strawberries.

High-Protein Foods

The late Robert C. Atkins, the New York cardiologist who formulated the weight-loss diet that bears his name, pointed out in "Dr. Atkins' Age-Defying Diet" that a diet high in protein and low in carbohydrates stimulates HGH production in your body. Obesity, like advancing age, slows the output of HGH, so maintaining a healthy weight is also central to the maintenance of optimal body levels of HGH. The high levels of amino acids in protein-rich foods play a key role in triggering the natural production of HGH. Because some high-protein foods also contain significant levels of fat, choose only lean proteins to avoid the HGH-lowering effects of heavy fat consumption. Healthy protein food sources include lean beef, organic chicken, almonds, organic eggs, quinoa, tempeh, tuna, wild salmon, tuna, and plain yogurt, preferably Greek-style.

GABA-Rich Foods

Eating foods with high levels of gamma-aminobutyric acid, or GABA, stimulates the pituitary gland to produce more HGH, according to Gregory L. Jantz, Ph.D., author of "Thin Over 40." Adding more foods high in GABA to your diet as you age can significantly counteract the HGH-lowering effects of advancing age. The added benefits of GABA-rich foods are many, according to Jantz, who is a certified eating disorders counselor. The amino acid, which also acts as a neurotransmitter, has a relaxing and calming effect and tends to inhibit pain and fear. GABA-rich foods include brewer's yeast, eggs, nuts, seafood, seeds, soybeans and whole grains.

L-Arginine Rich Foods

In "Prevention of the Disease of Aging," author Katherine Blanchette, M.D., recommends eating foods high in L-arginine, an amino acid that stimulates production of HGH. She points out that L-arginine's promotion of increased HGH secretion helps to decrease total body fat. Foods high in L-arginine include animal products such as milk, beef, chicken, pork and turkey; seafood; cereals; chocolate; legumes, including chickpeas and soybeans; and nuts, including Brazil nuts, peanuts and walnuts.

The Best Natural Source of HGH

HGH, or human growth hormone, is produced in your pituitary gland within your brain. HGH is responsible for growth during childhood and for the repair and regeneration of tissue throughout your life. By the age of about 30, your HGH levels are only about 20 percent of their peak levels during childhood and its production slowly declines with age. Falling HGH levels are linked to premature aging, loss of lean body mass and reduced energy levels. Injecting synthetic HGH is an effective way of raising your HGH levels, although you can also try natural methods.

Human Growth Hormone

The best natural source of HGH is produced within your own pituitary gland. The ability of your pituitary to produce HGH declines very little with aging, although substances that control HGH secretion change concentrations in your body with age, as cited in the "Professional Guide to Diseases." Three substances control your HGH secretion: growth hormone releasing hormone and growth hormone releasing peptide, which both stimulate your pituitary to release HGH and decline with age, and somatostatin hormone that blocks the release of HGH and increases with age. Pharmaceutical companies have developed synthetic injectable forms of both HGH and HGH-releasing hormone, although there are many natural ways to increase your HGH levels also.

Natural Supplements

HGH is a big molecule that cannot be absorbed via mouth or skin and is easily destroyed if swallowed. The only way in can be administered is via injection, according to the "Compendium of Pharmaceuticals and Specialties." In the early years of HGH treatment, the hormone was either extracted from the glands of human cadavers or some animals, but synthetic versions of HGH are available nowadays. As an alternative method, certain amino acids can be taken orally that stimulate the production of HGH-releasing hormone, which increases the release of HGH from your pituitary. According to "Biochemical, Physiological and Molecular Aspects of Human Nutrition," if you are between the ages of 30 and 50, an effective and economical way of stimulating HGH release is to take about 2 g of glutamine in the morning and between 10 and 30 g of arginine before bedtime on an empty stomach. Other amino acids used for this purpose include lysine and ornthine and are referred to as secretagogues. Amino acid supplementation to increase HGH production is usually not very effective if you are older than 50, so consider some natural activities.

Natural Activities

There are many ways to convince your body that it needs to produce more HGH and a very effective one is intensive weight training, according to "Natural Hormone Therapy for Men, Women and Children." Exerting force on your muscles over prolonged periods can increase levels of HGH in your body. Other HGH promoting activities include getting plenty of quality sleep, reducing stress in your life, regularly laughter and cutting down on alcohol consumption.

Benefits of Increased HGH Levels

Higher levels of HGH contribute to losing body fat, increasing muscle mass, reducing the effects of aging on skin, increasing bone density, strengthening immunity, reversing cognitive decline, stimulating red blood cell production and reducing the risks of cardiovascular disease, according to "Human Biochemistry and Disease." HGH cannot eliminate the effects of oxidation damage and completely reverse the effects of aging, nor can it increase maximum lifespan. Consult with your doctor before you attempt to naturally increase your HGH levels.

How to Produce More Natural HGH

The acronym HGH stands for human growth hormone. This is a pivotal hormone that is produced in the pituitary gland; a pea-sized gland located in the lower front part of the brain. During youth, growth hormone is released to promote the growth of the body. In adulthood, human growth hormone is important for bone strength, metabolism and muscle preservation. People who have low HGH levels often resort to synthetic forms to help boost their levels. But those synthetics can cause harmful side effects, and human growth hormone can also be boosted by taking a natural approach.

Step 1

Get plenty of sleep. Sleep is essential for daily functioning. If you are deprived of sleep, you are going to have low energy levels, compromised brain function and low HGH levels. In the first hour that you are asleep, your body experiences a high HGH release. According to the Centers for Disease Control, adults should get 7 to 9 hours of sleep a night.

Step 2

Watch your intake of simple carbs. Carbohydrates are used for immediate energy or they are stored in the liver and muscles for energy at a later date. Simple carbs spike your blood sugar quickly which can raise your insulin levels. This can have a negative impact on HGH levels. Avoid carbs that are processed and high in sugar like white flour products, candy, cookies, cakes and soft drinks.

Step 3

Do compound exercises. Compound exercises involve more than one muscle group and more than one joint movement. These exercises cause a high amount of muscle recruitment and they can help increase your HGH levels. Examples of exercises are push-ups, pull-ups, shoulder presses, back rows, squats and lunges.

Step 4

Work out at a high intensity. The more intense you work out, the more growth hormone release you can produce. Take short rest periods between your sets and do high sets with heavy weights and low reps. An example of this would be 6 to 10 sets of 3 to 6 reps with 30- to 45-second rest periods.

Step 5

Do not eat fat before you work out. Eating high amounts of fat in the hour prior to your workout can cause your HGH levels to drop. Have a pre-workout meal with a balance of protein and complex carbs. An example would be a cup of yogurt with some fruit.

Step 6

Become more relaxed. Stress and anxiety can cause a disruption in your daily life and it can also reduce your HGH levels. Participate in relaxation activities to become more calm like yoga, meditative breathing, tai-chi, muscle relaxation and listening to music.

Exercises That Release Human Growth Hormones

Overview

The pituitary gland is about the size of a pea and it sits at the base of the brain behind the nose. Even though it is small, this does not take away from its importance to the body. It produces human growth hormone (HGH), which is quintessential for growth when you are an adolescent. Once you are fully grown, HGH is responsible for the proper functioning of organs and tissues. If you are looking to boost your levels, you can get this done by performing exercise; but not just any exercises. They should be compound. Compound exercises involve more than one joint and they recruit more than one muscle group.

Pushups

Pushups are a popular body weight exercise that can be performed just about anywhere. They recruit your chest muscles, triceps, shoulders and abs all at the same time, which qualifies them as compound exercises. To perform these, lie on your stomach with your hands directly under your shoulders. Push yourself up in the air until your arms are straight, then lower yourself back down until you are about the width of your fist off the ground. Repeat for a series of reps. When you do these, keep your back completely straight and your abs contracted. To make these more intense, place your feet on a chair or bench.

Pullups      Pullups are another body weight compound exercise that works your back, shoulders, chest and biceps all at once. To do these, grab the bar with an overhand grip with your hands just past shoulder-width apart. Keep your body straight and pull yourself up until your chest is the height of the bar. Lower yourself back down and repeat. You can also do these with a wide grip, close grip and reverse grip.

Bench Presses

Bench presses are often done as a mass builder. To do these, lie on the bench and grab the bar in a wide grip. Push it off the safety pins and hold it straight above you with your arms straight. Slowly lower it down until it is right above your chest, then push it back up. Take a big inhale when you lower it and exhale when you lift it.

Deadlifts

Deadlifts are a compound exercise that works your back, legs and glutes. To do these, load a barbell with heavy weights. Come into a wide stance behind the bar. Bend your knees, squat down and grab the bar with a shoulder-width grip. Keeping your back straight and gaze fixed forward, lift the bar off the ground and come to a standing position. Lower it back to the ground and repeat. When you do these, you can use an overhand grip or an alternating grip. They can also be done with dumbells.

Clean and Press

Clean and presses work every major muscle in the body. To do them, load a barbell and stand behind it. Squat down and grab it in a slightly wider than shoulder-width grip. Lift the bar, swing it around to the level of your chest, then forcefully push it straight above your head. Slowly lower it back to your chest then back to the ground and repeat. These can also be done with dumbells.

Lunges

Lunges are a compound exercise that work the butt, quads, hamstrings and calves. To do these, take a long step forward and bend your front knee so it is 90 degrees. Your back knee should be just above the ground. Stand back up and step forward with your other foot. Plant your foot and do the same thing. Continue lunging across the room for a series of steps. If you want to make it more intense, hold onto dumbells while you lunge.

Varying Levels

When exercising on a regular basis, your body increases growth hormone after each session, and it continues over a 24-hour period. The amount of growth hormone your body produces during exercise is dependent on your age, the work-rest interval, the load and the frequency of the resistance exercise you're doing. Younger adults, especially women, tend to produce more growth hormone with exercise even after aerobic activities, according to a research study published in Sports Medicine.

It Is Not the Strongest of the Species that Survives But the Most Adaptable

销售之神——原一平

“人与人之间，像这样相对而坐的时候，一定要具备一种强烈吸引对方的魅力，如果你做不到这一点，将来就没什么前途可言了。”

Top 7 Technical Analysts of All Time Share Their Secrets

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My first brush with Technical Analysis was not a good one and I was left asking the question “Does Technical Analysis work?”.  There was plenty of evidence to suggest Fundamental Analysis worked (Warren Buffett has Billions of evidence).  But Fundamental Analysis really doesn’t suit my personality so what were the other options?

Everywhere you go online there is another guru selling the latest TA system accompanied with confusing looking charts.  I decided that if there wasn’t a long list of very rich Technical Analysts out there then I had lost enough money using TA and was ready to quit.  To my delight I discovered many successful traders and investors who had the track record to prove that Technical Analysis does work.  Here is a list of the traders I found particularly noteworthy:

The Worlds Best TA Traders:

Marty Schwartz

Originally a stock analyst but got sick of having to write bullish investment advice on overpriced companies.  He developed and combined several technical indicators in an effort to determine lower risk entry points for his trades.  Schwartz found success when he shifted to technical analysis and focused on mathematical probabilities.

He ran his account up from $40,000 to $20 Million and also won the U.S. Investing Championship in 1984.  When asked if Technical Analysis works he replied “I used fundamentals for nine years and got rich as a technician”.  A big advocate of moving averages, Schwartz identifies healthy stocks by looking for positive divergences in price action over the broad market.

They (traders) would rather lose money than admit they’re wrong…  I became a winning trader when I was able to say, “To hell with my ego, making money is more important” - Marty Schwartz

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Mark D. Cook

Lost all his capital several times while learning to trade including one occasion when he lost more than his entire net worth.  In 1982 he sold naked calls on Cities Service that expired deep in the money.  His account dropped from $165,000 to a deficit of $350,000 in a matter of days; a total loss of $815,000 when taking into account for the money that he lost in his family’s accounts.

Not one to give up, after five years Mark had totally recovered from the losses but vowed never to sell another naked option.  He attributes his turn around in success to the development of what he calls the ‘Cumulative Tick Indicator’.

There is a widely used indicator called the ‘Tick’ that measures the number of NYSE stocks whose last trade was an uptick minus the number whose last trade was a downtick.  When the ‘tick’ indicator is above or below a neutral band the ‘cumulative tick indicator’ starts to add or subtract the ticks from a cumulative total.  This works as an over brought and over sold indicator.  When it reaches extremes of bullish or bearish readings the market tends to reverse direction.

In 1989 Cook finished second in the US Investing Championship trading stocks and in 1992 after shifting to options he won the championship with a return of 563%.  Now he trades options holding them 3-30 days and day trades S&P 500 and NASDAQ futures.

To succeed as a trader, one needs complete commitment… Those seeking shortcuts are doomed to failure.  And even if you do everything right, you should still expect to, lose money during the first five years…  These are cold, hard facts that many would-be traders prefer not to hear or believe, but ignoring them doesn’t change the reality. - Mark D. Cook

Victor Sperandeo

An options trader and technical analyst who had a string of 18 profitable years clocking an average return of 72%.  His first loss was in 1990 with a 35% drawdown.

He described his style as only taking risks when the odds are in his favor.  After an extensive two year study he identified ‘life expectancy’ profiles for market moves.  For example he noticed that an intermediate swing on the Dow during a bull market is typically 20%.  After that 20% has been realized the odds of further advances are diminished significantly.

Understanding this makes a big difference he says, like when a life insurance policy is written the risk profile of an 80 year old is very different from that of a 20 year old.  Sperandeo believes that the most common reason for failure with technical analysts is that they apply their strategies to the market with no allowance for the life expectancy of the bullish or bearish move.

Theses days Victor is the President and CEO of Alpha Financial Technologies which is widely known for its trend-following, futures-based indices: The Diversified Trends Indicator, The Commodity Trends Indicator, and The Financial Trends Indicator.

The key to trading success is emotional discipline.  Making money has nothing to do with intelligence.  To be a successful trader, you have to be able to admit mistakes.  People who are very bright don’t make very many mistakes.  Besides trading, there is probably no other profession where you have to admit when you’re wrong.  In trading, you can’t hide your failures. - Victor Sperandeo

Ed Seykota

THE pioneer when it comes to computerized trading systems.  Inspired by the work of Richard Donchian he began developing futures trading systems in the 1970s.  Seykota tested and implemented his ideas using an IBM 360.  This was well before the days of online stock trading, back then such computers were the size of a large room and were programmed using punch cards.

Originally he wrote trend following systems with some pattern recognition and money management rules.  By 1988 one of his clients’ accounts was up 250,000% on a cash-on-cash basis.  Today it is reported that his daily trading efforts consist of the few minutes it takes him to run his computer programs and generate the new signals.

Ed attributes his success to good money management, his ability to cut losses and the technical analysis based systems he created.  He refers to fundamentals as “funny-mentals” explaining that the market discounts all publicly available information making it of little use.

There are old traders and there are bold traders, but there are very few old, bold traders. - Ed Seykota

Worlds Richest TA Traders:

I was very happy to discover that the Forbes Rich List was scattered with investors and hedge fund managers who have profited handsomely despite giving fundamentals a back seat.  Here are my favourites from the 2012 list:

2012 Forbes – #82 James Simons – 11.0 Billion

Sometimes referred to as the “Quant King” he is also a maths guru and a very smart cookie who studied maths at MIT and got a Ph.D. from UC, Berkeley.  Simons deciphered codes for U.S. department of defence during Vietnam and went on to found Renaissance Technologies in 1982 and at the start of 2013 was managing over 15 billion.

He Co-authored Cherns-Simons theory in 1974; a geometry based formula now used by mathematicians to distinguish between distortions of ordinary space that exist according to Einstein’s theory of relativity.  In addition to this it had been used to help explain parts of the string theory.

Renaissance Technologies is a quantitative hedge fund that uses complex computer models to analyze and trade securities.  A $10,000 investment with them in 1990 would have been worth over $4 million by 2007.

We are a research organization… We hire people to make mathematical models of the markets in which we invest… We look for people capable of doing good science, on the research side, or they are excellent computer scientists in architecting good programs. - James Simons

The flag ship Medallion Fund trades everything from Pork Bellies to Russian Bonds.  In 2008 the fund forged ahead another 80% even after the 5% management and 44% performance fee.  More recently 9.9% returns were seen net of fees through the end of July 2012.  Unfortunately the Medallion fund is now only open to employees, family and friends.

The key to the success of Renaissance Technologies has much to do with the people they hire; PhDs and not MBAs. About a third of their 275 employees have PhDs.  Those on the payroll include code breakers and engineers, people who have worked in computer programming, astrophysics and language recognition.

They also look for people with creativity.  Simons says that creativity is about discovering something new and you don’t do that by reading books or looking in the library, you need ideas.

Everything’s tested in historical markets.  The past is a pretty good predictor of the future.  It’s not perfect.  But human beings drive markets, and human beings don’t change their stripes overnight.  So to the extent that one can understand the past, there’s a good likelihood you’ll have some insight into the future. - James Simons

Forbes 2012 #88 – Ray Dalio – 10 Billion

Placed his first trade at the age of just 12, studied finance at Long Island University and got and MBA from Harvard in 1973.  Dalio traded futures early in his career and founded Bridgewater Associates in 1975 when he was just 25.  From the moment he started managing money Dalio kept notes in a trading diary with the hope that his ideas could later be back tested.

Now king of the rich hedge fund industry, Dalio controls the world’s biggest hedge fund Bridgewater Associates which has about $130 billion in assets.  His flag ship fund ‘Pure Alpha’ has had an average annual return of 15% from 1992 – 2010 and has never suffered a loss over 2%.  Big bets on U.S. and German government bonds saw his funds surge about 20% in 2011; a year where most hedge funds struggled.

Dalio focuses heavily on understanding the processes that govern the way the financial markets work.  By studying and dissecting the fundamental reasons and outcomes from historical financial events he has been able to translate this insight into computer algorithms that scan the world in search of opportunities.  He says by doing this research it provides “a virtual experience of what it would be like to trade through each scenario”.

Ray is particularly interesting because he does not believe in an approach devoid of understanding fundamental cause-effect relationships.  He has however been able to use technical analysis to identify mispriced assets based on fundamental information.  So to say that Ray gives fundamentals analysis the back seat to technical analysis would not be entirely accurate.

Well defined systems, processes and principles are his key when is comes to making investing decisions.  All strategies are back tested and stress tested across different time periods and different market around the world to ensure that they are timeless and universal.  The strategies are all about looking at the probabilities and extreme caution is exercised; for a hedge fund Bridgewater uses relatively low leverage of 4 to 1.

While the hedge fund industry as a whole has an average correlation to the S&P 500 of 75% Dalio claims to have discovered 15 uncorrelated investment vehicles.  Bridgewater focuses mostly in the currency and fixed income markets but uses powerful computers to identify mispriced assets on dozens of markets all over the world.  To find so many different uncorrelated investments requires stepping well beyond the realm of the stock exchange.

I learned to be especially wary about data mining – to not go looking for what would have worked in the past, which will lead me to have an incorrect perspective.  Having a sound fundamental basis for making a trade, and an excellent perspective concerning what to expect from that trade, are the building blocks that have to be combined into a strategy. - Ray Dalio

2012 Forbes – #106 Steven Cohen – $8.8 Billion

Now a well know force on Wall Street due to his world class performance and high volume of trading which accounts for about 2% of the daily volume on the New York Stock Exchange.  Steven started trading options in 1978 and made $8,000 on his first day.

He founded hedge fund SAC Capital in 1992 with $25 million in assets.  By the end of 2012 SAC had about $13 billion under management across 9 funds and had averaged 36% net return annually.  It is reported however that SAC suffered a loss of approximately 15% in 2008.  Its flagship fund was up 8% in 2011, a year in which the average hedge fund was down 5% and up again in 2012 8% through to August.

Steven keeps his activities very secretive but his style is understood to be high volume hair-trigger stock and options trading.

The old guard wasn’t crazy about me, I used to hear it all the time… Most of the old-school had no belief in anything that wasn’t based on fundamental analysis… We were trading more than investing, and people frowned on it, they looked at it and didn’t want to partake.  Finally, they said, ‘Shoot.  He’s making money.’ And they started copying me. - Steven Cohen

He believes that 40% of a stocks price fluctuations are due to the market, 30% to the sector and 30% to the stock itself.

Despite the great performance of SAC Capital their best trader makes a profit on 63% of their trades while most of the traders are profitable 50-55% of the time.  Interestingly 5% of their trades account for virtually all their profits.  Something to keep in mind the next time you get a spam email claiming that your can buy a 95% accurate ‘Stock Trading Robot’.

Steven attributes the success of SAC to the breath of experience and skills found in the people working for the firm.  They look for traders who have the confidence to take risks, those who wait for someone to tell them what to do never succeed.

You have to know what you are, and not try to be what you’re not.  If you are a day trader, day trade.  If you are an investor, then be an investor.  It’s like a comedian who gets up onstage and starts singing.  What’s he singing for?  He’s a comedian. - Steven Cohen

Forbes 2012 #330 – Paul Tudor Jones II – 3.6 Billion

Both a discretionary and systems trader who had his early success trading cotton futures.  Jones majored in economics at the University of Virginia in 1976 and got a job working for the cotton speculator Eli Tullis not long after graduating.  The greatest lesson that he learnt from Eli was emotional control but was later fired for falling asleep on the job after a big night out on the town with his friends.

In 1983 Jones began the hedge fund Tudor Investment Corp with $300,000 under management.  At the end of 1012 the fund was estimated to be managing $12 billion and had achieved an average annual return of 24%.  His firm’s flagship fund, BVI Global saw a gain of 2% in 2011 and 3.8% net of fees through to August 2012.

Much of his fame came from predicting the 1987 stock market crash from which he pulled a 200% return or roughly $100 million.  Jones claims that predicting the crash was possible because he understood how derivatives were being used at the time to insure positions and how selling pressure on an over priced market would set off a chain reaction.  He says that you need a core competency and understanding of the asset class you are trading.

He attributes his success to a deep thirst for knowledge and strong risk management.  Jones is a swing trader, trend follower and contrarian investor who also uses Elliot Wave principles.  Most of his profits have been made picking the tops and bottoms of the market while often missing the ‘meat in the middle’.  Jones believes that prices move first and fundamentals come second.

A self professed conservative investor who hates losing money.  He tries to identify opportunities where the risk/reward ratio is strongly skewed in his favor and does not use a lot of leverage.  In his eyes a good trader is someone who can deliver an annual return of 2-3 times their largest draw down.

Don’t be a hero.  Don’t have an ego.  Always question yourself and your ability.  Don’t ever feel that you are very good.  The second you do, you are dead… my guiding philosophy is playing great defense.  If you make a good trade, don’t think it is because you have some uncanny foresight.  Always maintain your sense of confidence, but keep it in check. - Paul Tudor Jones II

Top Traders Secrets

It is clear that Technical Analysis has worked in the past and continues to work for many successful traders and investors today.  But what are the common aspects that are being were used by these successful market technicians?

Unfortunately due to the extreme secrecy surrounding nearly all of these traders, the specific methods that they use are not known.  However I did uncover the following:

Common Themes

• Mechanical trading models were used my many of the most successful.
• They all used clearly defined systems and stuck to their rules.
• Many of them back tested their ideas before implementing them in the real market.
• Most of them surrounded themselves with exceptional people who had the expertise they needed.
• Many of them lost money for the first few years before hitting their stride.
• Each trading system suited their personality.

Common Personality Traits

• Low Emotional Reactivity – Staying calm; experiencing neither major highs nor lows.
• Detached – Understanding the market does what it does that they have no control over it.
• Humble – With little ego they have no challenge taking losses or letting profits run.
• Decisive – They reach decisions quickly and take action without second guessing.
• Conscientious – Self-controlled, disciplined, consistent, and plan-driven, they persevere.
• Confident – They have faith in their system and their ability to implement it.

It is undeniable that Technical Analysis does work so ignore all those who try and tell you otherwise.  The next step is to make Technical Analysis work for you and that first requires identifying or creating a system that suits your personality.

- See more at: http://etfhq.com/blog/2013/03/02/top-technical-analysts/#sthash.gNkffHi3.dpuf