Long/Short Market Dynamics is designed to show the individual trader or investor how to successfully analyze the morphology of modern markets and how to implement long/short strategies that enable the management of risk in a world and market that contain many new uncertainties.
Introduction:
The growing importance of derivatives, the heightened focus on proprietary trading by the major investment banks and the proliferation of alternative asset management strategies have all been reshaping the investment landscape. To cite just one example, the hedge fund sector alone is now estimated to be responsible for more than 50% of current stock market volume.
New transaction technologies have reduced the costs of trading, disintermediation has all but eliminated certain tiers of the market, and a low interest rate environment has forced a rethinking of many previously accepted canons of asset allocation theory. The growing role of long/short strategies and derivatives means that many traditional market indicators simply don’t work anymore.
Increasingly stocks are being traded like commodities and many of the traditional decision support tools for analyzing stock market behavior have become obsolete. Paradoxically just as the markets have become more oriented towards purely technical trading, many of the legacy elements from technical analysis can actually be misleading and hinder the active trader who wants to profit in today’s markets.
If you are an active trader or investor it is vital that you come to terms with the new modes of market behavior. You need new pattern templates and analytical techniques that will enable you to identify the chart formations that reveal these new dynamics at work.
Contents:
- Coming to Terms with New Market Dynamics
- Range Expansion and Liquidity
- Comparative Quantiles
- Volume as a Leading Indicator
- Alignments and Divergences
- Volatility
- The Morphology of Gaps
- Correlation and Convergence
- Random Walks and Power Laws
- Regime Shifts and Stationarity
- Money Management Techniques
- Portfolio Theory
- Alpha
- Markets as Networks