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Swingtrading indices with pair trading

June 7, 2010 Leave a comment

we know intuitively, anecdotally, that the indices of the world market move in and out of favor with SPY

we know definitively that the degree of correlation varies based on market condition, and can change pretty quickly too

this study looks at what happens if you had a pair trade between each of the main indices and SPY (long the index, short SPY) and held it for 10 days

i look back 400 days in order to find: max, min, average, stdev, and calculate a z score of today’s value to provide context

you will notice that:

1. right now anyway,  10 days seems like a natural oscillation cycle as the indices “dance” with SPY
    2. the commodities offer longer and more rewarding trends for the pair trade
    this supports my idea of knowing which index “has the juice” right now compared to SPY, being market neutral overnight, and then adding to the strong index when it is outperforming SPY early in the day, using the leveraged ETFs to get a nice move intraday, and then going mkt neutral overnight once more. Repeat while the index:SPY relationship is in force.
    the 10 day sum of performance seems to smooth it out a little, nothing magic about it
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    Diagnosing and alleviating stress in the workplace: theory and practice

    June 5, 2010 2 comments

    Brain structures involved in dealing with stre...
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    Organizations are becoming more aware of the relationship between employee wellness and proactivity, with one estimate suggesting job stress costs US businesses over 300 billion annually. The response has been a rise of OD interventions such as fitness, wellness and stress management programs whose goals include individual well-being or wellness. Health is an important subcomponent of wellness as well as a cost for organizations.

    Diagnosis of stress in the workplace can be diagnosed as he function of: physical environment, individual factors, group factors and organizational factors. Stress from all four dimensions lead to a variety of negative consequences for individuals as well as the organization. These consequences have personal organizational and monetary costs. The results in typical OD interventions include programs to improve things like: job clarification, supportive relationships, stress inoculation training, health facilities and employee assistance programs as outlined in figure 19.2.

    Preliminary evidence suggests that fitness programs help reduce absenteeism and improve health as well as better mental health and resistance to stress. This remains an area where additional research is needed to pinpoint cause-and-effect relationships between programs and results but it’s clearly an area of great interest and potential.

    Our college is leading the way for the Army when it comes to identifying total soldier fitness programs. The wellness program is the single dominant program which can allow officers to miss class without question. We have mandated physical and mental wellness checks and are looking at pushing this down to the Captains career course so that we get the benefit of establishing baselines and the development of stress management skills earlier in their career.

    The latest topic that is on everyone’s mind is the nature of posttraumatic stress disorder or PTSD where we are having difficulty in convincing the culture that this is a biological fact and an injury every bit as debilitating as a gunshot one. There are lingering superstitions and outdated cultural values related to manliness, courage and soldierly virtues which inhibit people from seeking the help they need and receiving the support from their peer groups.

    This is an issue that is number one on the Vice Chief of Staff of the Army‘s agenda and he made a special trip to our college to lay out the nature of the issue so that our officers can take good information in proper values back to the units after graduation.

    I have personal experience in using biofeedback devices as the Freeze framer  from the Heart Math Institute and the Jewel stone from the Wild Divine group, which I believe offer effective means of bio feedback stress control which can be learned pretty quickly by kids and adults.

    References:

    Cummings, Thomas, G. & Worley, Christopher, G. (2009) Organization Development & Change.  5191 Natorp Blvd. Mason, OH 45050 South-West Cengage Learning

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    Major demographic trends and implications for organizational development/design

    June 5, 2010 3 comments

    Age-standardised disability-adjusted life year...
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    One trend is a growing recognition that diversity means more than simply cultural or racial differences; there’s recognition of this definition is too narrow. Diversity comes about from people with different resources, perspectives, and needs, preferences, expectations and lifestyles in addition to their cultural and racial makeup.

    Another trend is the serious effort organizations are undertaking in order to account for these differences in order to attract and retain productive workforce and maintain competitive advantage.

    Specific enduring trends and the types of interventions that are suggested from OD theory, taken from table 19.1, include:

    Age: median age is increasing and the distribution is broadening which suggests personal or motivational approaches such as: wellness programs, job design, career planning and development, reward systems.

    Gender: an increase in females in the workforce suggesting OD interventions like job design and fringe benefit rewards.

    Disability: an increase in the number of people with disabilities entering the workforce, suggesting interventions like performance management, job design, career planning and development

    Culture and values: a rising proportion of immigrant and minority groups leading to OD interventions such as career planning and development, employee involvement, and reward systems.

    Sexual orientation: an increase in the number of single-sex households and broadening acceptance of sexual orientation, suggesting interventions like equal employment opportunities, fringe benefits, education and training.

    The Army is at a crossroads with respect to sexual orientation and organizational values and traditions. There is a firestorm of political controversy  between the administration and the chiefs of staff concerning the potential repeal of don’t ask don’t tell. When the chairman of the joint Chiefs came and spoke at a college that was the number one question on people’s minds, since he had taken a position in opposition to the traditional military response which was that homosexuality was incompatible with military service, because of the effect on good order and discipline in the organization.

    The administration has been talking about repealing the  “don’t ask don’t tell” policy, but have done little to take the leadership role in this regard and so we see the issue being played out politically in the newspapers which is unseemly, unprofessional and nonmilitary. There is a risk of politics nation of the officer corps on this issue which would be the worst possible outcome regardless of which way the policy is resolved

    Q4. Discuss various methods to diagnose employee stress OD interventions aimed at alleviating it in the work place.

    Organizations are becoming more aware of the relationship between employee wellness and proactivity, with one estimate suggesting job stress costs US businesses over 300 billion annually. The response has been a rise of OD interventions such as fitness, wellness and stress management programs whose goals include individual well-being or wellness. Health is an important subcomponent of wellness as well as a cost for organizations.

    Diagnosis of stress in the workplace can be diagnosed as he function of: physical environment, individual factors, group factors and organizational factors. Stress from all four dimensions lead to a variety of negative consequences for individuals as well as the organization. These consequences have personal organizational and monetary costs. The results in typical OD interventions include programs to improve things like: job clarification, supportive relationships, stress inoculation training, health facilities and employee assistance programs as outlined in figure 19.2.

    Preliminary evidence suggests that fitness programs help reduce absenteeism and improve health as well as better mental health and resistance to stress. This remains an area where additional research is needed to pinpoint cause-and-effect relationships between programs and results but it’s clearly an area of great interest and potential.

    Our college is leading the way for the Army when it comes to identifying total soldier fitness programs. The wellness program is the single dominant program which can allow officers to miss class without question. We have mandated physical and mental wellness checks and are looking at pushing this down to the Captains career course so that we get the benefit of establishing baselines and the development of stress management skills earlier in their career.

    The latest topic that is on everyone’s mind is the nature of posttraumatic stress disorder or PTSD where we are having difficulty in convincing the culture that this is a biological fact and an injury every bit as debilitating as a gunshot one. There are lingering superstitions and outdated cultural values related to manliness, courage and soldierly virtues which inhibit people from seeking the help they need and receiving the support from their peer groups.

    This is an issue that is number one on the Vice Chief of Staff of the Army’s agenda and he made a special trip to our college to lay out the nature of the issue so that our officers can take good information in proper values back to the units after graduation.

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    The motivational approach to work design.

    June 5, 2010 Leave a comment

    Lt. Col. Dave Bair, a native of Washington D.C...
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    Work design is concerned with creating jobs and workgroups to generate high levels of employee fulfillment and productivity. It can be a standalone change program or part of a larger program. Three approaches to work design include: the engineering approach which focuses on efficiency and simplification; sociotechnical approach, which balances the social and the technical dimensions of work and is the most recent form; the motivational approach which seeks to enrich work experiences based on creating jobs with high levels of meaning, discretion and knowledge of results.

    A well-developed model of job attributes has made the motivational approach methodologically sound. Based on motivational theory, the motivational method has goals of providing people with opportunities for autonomy, responsibility, completeness and performance feedback. It’s a an approach that is well known in the US. In the work of Herzburg, Hackman and Oldham, attributes are broken into two categories: motivators and hygiene. Motivators are those that enhance satisfaction while hygiene factors seek to prevent dissatisfaction. Although intuitively appealing, this model is difficult to operationalize it has been superseded by a theory of job enrichment.

    In Hackman and Oldham’s theory of job enrichment there are five core job dimensions: skill variety, task identity, task significance, autonomy and feedback. The first three influence the extent to which work is perceived as meaningful. Autonomy represents independence freedom and discretion while feedback represents information workers receive about their results.

    10 years ago in my experience, the Army was exploring the motivational approach much more than the blended sociotechnical approach. I attribute this to the fact that we were coming out of a decade of ill-defined missions in limited overseas engagements on a grand scale. With the beginning of operation Iraqi freedom, however as more and more of the Army has become committed to the current fight, the emphasis on technical expertise has come to the forefront. I see it now using a balanced approach that looks more like the sociotechnical approach than the motivational theory. Some argue that the motivational approach is a luxury that we can only afford in times of peace, but it’s clear that we continue to emphasize this in a balanced way.

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    Traders Roundtable: the fifth P of successful trading is Performance

    June 5, 2010 1 comment

    A lot of beginning traders are under the mistaken assumption that if they have a back tested system, good preparation, and a relaxed state of mind that they have an almost certainty of being successful.

    If only it were that easy. All the preparation and the world does not guarantee effective performance. We still have to get in the water and start swimming with sharks. Your judgment, self-discipline and stress management techniques will all be tested on a regular basis once you begin trading.

    There won’t always be enough time to double check all your rules, so sometimes you’re going to have to use your best judgment when the unexpected occurs.

    This is the main reason why actual performance of traders varies from the statistics of mechanically back testing systems.

    By measuring the difference between your performance and that of a theoretically mechanical system you can determine what affect your judgment is having upon your performance. You could call this the trader quality number and use it as the basis for judging your skill improvement.

    In order to judge the effectiveness of your performance you must keep good records, and set aside time at the end of the day, week, month and quarter in order to compare your actual performance against your benchmarks.

    These comparisons allow you to determine if you’re making progress in your skill development is a traitor.

    Make sure that you take into account the market condition under which her performance is achieved, so that you can understand the markets influence on your outcomes. You could be a good trader with a good system but using it in the wrong market condition in your performance will suffer. Only your strategic judgment of using an inappropriate system would be bad, while everything else could be right on time. By fixing that one error in judgment, you would make a dramatic performance improvement.

    you must group your performance numbers into Ben’s based on the type of strategy that you’re implying so that you can determine which system works best for you.

    You should be looking at measurable concepts like risk to reward ratios, percent successful trades, size of the average winner and loser, size of the worst loss, size of the biggest gain, standard deviation of your returns. You should be putting your are multiple distributions and with frequency histogram to examine the variation of your data set.

    Analysis of performance is every bit as important as back testing your next strategy, so make sure that you are faithful to your trading Journal and your professional discipline.

    Good trading!

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    Should I have a long or short bias at this moment?

    May 28, 2010 Leave a comment

    Yin and yang stones
    Image via Wikipedia

    There were two duelling hypotheses at work today in the market, looking at symbol:  in SPY, the exchanged traded fund for the US S&P 500 index.

    Price had gone back and forth between buyers and sellers, bulls and bears..

    Was the high of the day seen at 110.8 and /or was the low the day established when price it 109.56?

    Depending on your directional bias for the intraday trade, either one of these hypotheses could be true and is supported by evidence the price actually reach those levels during the morning trade.

    Which bias is correct?

    Now note that you don’t have to have a long bias or a short bias, exclusively. You can have both but to a certain degree; it’s a “fuzzy logic” concept.

    A person that is 5’6″ is short (to a certain degree) and tall (to a certain degree), as is a person that is 6’3″.  They have differing degrees, and differing amounts of evidence;

    Remember,  the context matters too: 6’3″ is tall on the street, but not in the NBA; 5’6″ is tall in Thailand.

    So, the market momentum or price condition, its “state of nature” has elements of both long and short in it; it must, by definition, or it wouldn’t be a market.

    In the same way yin-yang has elements of the other even in the most extreme moment

    The moment it became “all long” the market would cease to exist..

    So, at any moment when you are trying to get a read on which way to be looking, you must actually be simultaneously holding both ideas in your head, and evaluating the evidence of likelihood and opportunity in both directions to make a decision about which way offers you more value .

    The trade MUST be able to be framed by someone in some time frame at some probability of gain, because someone is taking the other side of the trade.

    To me, that is the essence of thinking about the reward to risk ratio of 2:1 all the time, and estimating the Green-Yellow-Red zones to gauge what i think price action and support and resistance levels are telling me.

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    Making learning fun

    May 25, 2010 6 comments

    schematic view of Curriculum in/out of school,...
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    In a lot of educational writing, it’s taken as a given that creating an atmosphere of fun in the classroom must inevitably lead to learning. It’s fair to ask what is the relationship between fun and learning, however from an evidential perspective.

    This analysis leads you to develop a working definition of fun and what it looks like in the classroom so that we can say if we have more or less of it. This definition and quantification allows us to analyze the relationship between fun and learning as measured by quantitative assessments.

    Reread those words and see if you can find any fun in them. Is there anything about that attitude that would make you want to attend the class from someone who thought in that way.

    This is not to discount the importance of an objectivist approach to education and looking critically at the outcomes of your educational efforts.

    I believe we can proceed with the assumption that people are social animals and that the atmosphere in which they find themselves in the classroom, particularly if this was not a matter of choice but one of policy, can go a long way towards improving the quality of their learning.

    Our hypothesis is that of fun atmosphere will improve the probability that they generate the internal desire to learn which most people would agree is the basis for a lifelong love of learning that will sustain them once they leave our classroom area

    Making things fun  requires you to look at curriculum and the educational space through the eyes of your students and their preferred learning styles. We need variety, experiential learning, connection to the important matters of our times, alignment of the class lessons with the interests of our students to more fully engage their attention.

    All of these things lead to fun in the classroom. Perhaps the most important contributor, though, is the personal attitude towards the class as expressed by the teacher and model than his or her behavior. If it’s not fun for the teacher, it it makes it that much harder for it to be fun for the students. If the teacher truly loves the math, then the math class will be fun and we’ll get through it with enjoyment and improve learning.

    So, don’t neglect the outcomes-based evaluations of education, but don’t forget that where people and that we need to be engaged in courage and enthusiastic about our time in the classroom too.

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