Tuesday, April 22, 2008

Perspectives and Themes for Tuesday Morning

* Banks Continue to Struggle - While we recently hit multi-month highs in the number of stocks trading at fresh 65-day highs, banking stocks ($BKX) remain solidly lodged within their February-March trading range. As I noted in recent Twitter posts, both the Bank of England and the ECB have expressed continued concerns over banks and the credit crisis. I'm not sure the banks need to lead any market rally, but their failure to participate is concerning.

* The Virtues of System Trading - Bill Rempel offers some valuable elaborations to my recent trading psychology post by pointing to the strengths of developing and trading systems. Readers know that I am a discretionary trader, but I can vouch for the successes of those who develop and tweak systems that adapt to changing market conditions. Bill's point regarding the value of trading multiple systems that perform under varying regimes is excellent.

* It's Not Just Markets That Follow Seasonal Patterns - Thanks also to a reader for pointing me to the research of Dr. Richard Wiseman and this very interesting study of how personality patterns--including the perception of being lucky!--are related to the seasons of one's birth. Given the relationship between seasonality and mood, including the phenomenon of seasonal affective disorder, the findings aren't so far-fetched.

* Scenario Planning as a Guide to Action - Ray Barros continues to offer excellent guidance for traders, including this perspective on scenario planning. See also his scenario creation for discretionary traders.

* Valuable Perspectives - Trader Mike's recent links highlight discussions of stop-losses and algorithmic trading. From Abnormal Returns, we get some very interesting views, including a look at commodities and bond yields and how seasons affect the VIX.

* Can Positive Thinking Be Irresponsible? - Thanks to a reader for bringing this research report to my attention, highlighting how people edit their memories of past outcomes to justify continued gambling. It's much harder to engage in such distortion when you're tracking your trades and P/L in a journal (which may be one reason traders don't maintain journals).

* Comprehensive Psychiatry Textbook - Just received my copy of the mammoth fifth edition of the Textbook of Psychiatry from American Psychiatric Publishing, the publishing arm of the American Psychiatric Association. With over 1700 pages, the volume features chapters from recognized experts on topics ranging from psychiatric disorders to treatments and the needs of special populations. My chapter deals with brief therapies, including the approaches to short-term work that I utilize with traders.