Author Archive

• Ready for the Big Game?
  Derek Hernquist, | February 4th, 2010 at 4:34 pm

  

  Most of us will watch the Super Bowl this weekend, and marvel at the offensive machines run by Manning and Brees.  Are they that much more talented than the rest of the population? Compared to that stud on your high school or college team, then yes. Versus the other 30 NFL QBs(plus backups), I think the answer is a definitive NO.  So why does it look so easy for them?  What can we learn as market speculators? read more...

• The Jester Sings?
  Derek Hernquist, | January 28th, 2010 at 3:56 pm

  

  "You don't need a weatherman to know which way the wind blows"  Bob Dylan

  You do, however, need a method for receiving signals from the market.  When the winds shift, we need a plan for adjusting our sails.  Markets don't go from bullish(winds prevailing from the SW) to bearish(from the NW) overnight, but subtle differences in speed and direction need to be addressed. read more...

• Think Local, Act Global?
  Derek Hernquist, | January 21st, 2010 at 4:59 pm

  

  Correlation patterns are as valuable as anything in my toolkit.  My strategy for every time frame is built on the following chain of events: changing correlation precedes relative price, which precedes absolute price, which precedes fundamentals.

  I believe they operate together...relative strength(RS) can't be revealed without some type of split from an asset's recent orbit, but RS means nothing if the price environment works against all assets.  The opportunity AND danger in portfolios revolves around the dynamic backdrop of correlation patterns. read more...

• Trading As I See It
  Derek Hernquist, | January 14th, 2010 at 6:38 pm

  

  Pros know this, but every now and then I remind myself of the truth.  As speculators, we have a crazy goal to enter before anyone sees what we see, hoping the rest of the universe will immediately see our brilliant idea and follow us in.  Absurd when put that way, but not far from the truth.  So how do we gain an edge? read more...

• When the Market Snubs You
  Derek Hernquist, | January 7th, 2010 at 4:42 pm

  

  After I've addressed the "Core" and "Tactical Beta" portions of a typical portfolio, I like to implement a long/short basket of stocks demonstrating the potential for positive and negative alpha over the coming days/weeks/months.  I manage the risk on a daily and even intraday basis, with the goal of pulling the weeds quickly enough that the real bloomers can take a more prominent role in the account. read more...

• Why I’m an Active Portfolio Manager
  Derek Hernquist, | December 23rd, 2009 at 4:31 pm

  

  I get it, I really do. No one can predict the market, so why endure the fees and time associated with trying to "beat" the market?  There's something to be said for keeping costs down, especially when you add in commissions.  The problem is with the assumptions going into the "pot of gold if you buy and hold" equation and Modern Portfolio Theory...brings to mind the old saying "Garbage In, Garbage Out". read more...

• What Would Maslow Say?
  Derek Hernquist, | December 18th, 2009 at 8:15 am

  

  What is it about trends that carries them further than we think possible?  Greed? Fear? Sure, fear of loss and fear of missing out are well-documented drivers of irrational market moves.  But don't we all know that by now? Why does it keep happening despite our awareness?  I think it boils down to needs vs. wants, and is the source of alpha for the perennial stars...before BNI, Warren Buffett's entire history is built on serving the needs of trapped investors. read more...

• A Bird’s-Eye View of Yourself
  Derek Hernquist, | December 11th, 2009 at 7:59 am

  

  When did position management enter my consciousness?  I think it stems from experiences that gave me an appreciation for the psychology behind our behavior.  Sure, I had read the classic from Edwin Lefevre, and believed in William O'Neil stop-loss rules.  The image that still sticks with me comes from a tiny book I read in 1994 that doesn't get the pub it deserves. read more...

• Price Pays…Does Volume?
  Derek Hernquist, | December 4th, 2009 at 6:39 am

  

  The role of volume in analyzing markets is like the US political landscape...outspoken partisans on the fringes, but most falling in the "I wish it was reliable" camp.  I am part of the mushy middle.  Sometimes high volume is bullish, sometimes it's bearish. Sometimes low volume is a warning sign, sometimes it's not.  Rather than drop it because it's not perfect, however, I choose to use it as a clue when it matters and ignore it when it doesn't.  read more...

• Great Finds on Twitter
  Derek Hernquist, | November 30th, 2009 at 8:38 am

  

  While I enjoy sharing the best of my stream, I'm finding so much value on weekends I'm afraid I'd clutter up your stream with RTs.  So, this may be the first of a weekly post highlighting my favorite links. There's probably a better way to deliver this, but I like to give credit to those who finds these nuggets.

  Here goes: read more...

• What I Can’t Know
  Derek Hernquist, | November 27th, 2009 at 9:25 am

  

  In my younger days, I may have been ready to attack a day like today.  Over the years, I've grown content to let others battle for support and resistance, and just choose the winning side as the evidence builds.  I have ZERO edge on Dubai. If rumors about this had caused a few days of weakness already, sure it might be buyable. But this is a curve ball straight from the highs...no way for me to play it other than holding the defensives I've been buying, and stopping out if they fail. read more...

• What Are YOU Looking At?!
  Derek Hernquist, | November 23rd, 2009 at 11:17 am

  

  Traders & investors cannot avoid data.  Some seek more and more, while others limit details to focus on the big picture.  Whether you base your methods on technicals or fundamentals or sentiment, it is crucial to focus only on data that can help you.  Reading articles about bubbles serves no purpose for the daytrader, just as articles about oscillators serve no purpose for a fundie who likes to do channel checks or read balance sheets. read more...

• Listen Up!
  Derek Hernquist, | November 14th, 2009 at 11:43 am

  

  Not to me, to the market.  Seth Godin is an expert in communication, not trading.  But his piece this morning shows his ability to listen to the marketplace, break it into digestible morsels, and game plan accordingly.  How is trading any different?  Our biggest successes come from those times when something speaks to us so clearly that we plunge confidently, and patiently manage the game awaiting the windfall. read more...

• Are You Better Off Than a Month Ago?
  Derek Hernquist, | November 4th, 2009 at 11:50 am

  

  I love snapshots. We are so used to watching market events unfold play-by-play, that we sometimes forget where we started. Noticing the dramatic deterioration of breadth over the past couple of weeks, I thought I'd display a quick snapshot of some numbers from exactly 4 weeks ago. This was the day before AA kicked off that wonderful earnings season we are now completing. How has the market reacted to all that good news?

  read more...

• It’s Not Me, It’s You
  Derek Hernquist, | November 3rd, 2009 at 1:58 pm

  

  At one point in our career, we've all felt we might be better off pulling a "Costanza". But to be successful, a speculator must maintain perspective.  We are not as smart as we think when we're printing money, nor as dumb as we feel when things aren't clicking. Note I use the term think for success, and feel for struggle. The illusion of control causes us to think that our actions drive the outcome, when they are really just one part of the equation.  At some point, we need others to love our idea in order to profit. read more...