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Thursday, 3 January 2013

The Pros and Cons of Financial Market Bloggers plus my Favourite Blogs.


Every trader seems to have a favourite market blog or blogger these days. Over the last few years a number of them have become quite influential in their own right, with some almost becoming essential reading and at times 'de-rigour' during many of the various episodes or crises affecting markets in recent years. 


Market Bloggers provide very valuable services and all at no cost to the reader. However it is important to keep a perspective on Blogs, they are not news websites, nor analytical services or edited journalistic publications. Many traders can benefit from blogs, but knowing how to use blogs and 'blog aggregating' services effectively can help improve one’s own decision-making in trading, and help traders avoid falling into any one of a number of potential 'trader-traps'. 


Below are a list of some of the beneficial aspects of blogs, and a further list of some of the pit-falls which can affect traders when using blogs. I have also provided a short list of some of my own favourite 'Financial Market' blogs and 'blog aggregators'.


The beneficial aspects of blogs.

  • A useful source of news and information on markets, often with some additional perspective or angle added by the contributor, which can help provoke thought and add a new element to the reader’s knowledge of the market and the bigger macro-economic or political picture. 
  • They provide access to or reproduce interesting articles and stories, which readers may have not had access to or been aware of. 
  • They allow the reader access to information, thoughts and sentiments of leading players in the market, which can provide added input to the individual trader who does not have access to these sources of information. 
  • They both inform and educate at the same time, and can at times be entertaining. Not all blogs are about markets; some can be educational or provide information for learning on certain topics or themes.
  • They provide a kind of surrogate community for traders: Trading can be a lonely existence, particularly for the many lone traders working from home. Blogs can create some sort of community feel or forum for debate, even without actually participation of the reader.

Some negative aspects to following bloggers too closely or relying to heavily on them in the decision-making process.

  • Blog commentary, though presented as unbiased and true dissemination of facts, are nonetheless opinions which often heavily reflect the writers own biases and beliefs and have 'usually' not been through any formal editorial process. 
  • People have a tendency to believe what they read, particularly when backed-up with selective facts or statistics; this is how conspiracy theories spread. The financial market biosphere is fertile ground for these, particularly as the reader usually has financial loss or gain wrapped up into the bargain.
  • Anonymous blogs: Anonymity may not be a bad thing in itself; it can help publication of thoughts, perspectives and stories, which identification of the writer or source may have held back publication. However this is a double-edge sword, anonymity can add a veneer of credibility to something or someone who is without credit. - 'Reader Beware!' should always be at the back of your mind, where blogs are anonymous. 
  • Many bloggers do not have 'skin' in the market: Rather like the other point, there is good and bad to this: Someone without 'skin' in the market may be a very good analyst, and not being affected by the emotional baggage that comes with trading may lead them to have a clearer perspective. However, many are presenting themselves as credible individuals and the 'blog-reader'/trader can easily become influenced and identify with people who may not be who they present themselves as. In many cases the blogger is relying on promoting them-self (or their product or service), they may not suffer the pain the trader who takes their advice does.  
  • Sensationalism is common. Creating a sensational headline or claim, is one way to increase readership and ensure the articles are forwarded or picked by aggregating sites. This is often, though not always, the preserve of the anonymous or egotistical blogger. - The dangers here are that their story or headline is open to misinterpretation, could be exaggerated or short of the full facts. The danger to the trader is that the story or headline may raise the blood pressure and create negative feelings in their mind, just at the wrong time. Again - keep 'Reader Beware!' firmly at the back of the mind.
  • Traders can easily become too heavily influenced by blogs to the point that their own decision-making on markets is usurped at times. Use blogs as supplementary information when making decisions, 'Never' as a primary decision-making tool.
  • Confirmation bias; a tendency for people to favour information that confirms or supports their beliefs or theories. The risk form this is actually re-enforcing a negative view or a bias and ignoring crucial information which opposes a beliefs or theory, to the trader’s detriment. Try to ensure you have a balance of blogs opinions and seek out some who have contra or opposing opinions. - Whilst, you do not want to undermine your perspectives on markets you also want to ensure robustness; seeking out opposing views can help you become more aware of other aspects you may have overlooked. 
  •  Blog or analysis overload. - What is happening in front of you on the screen in the markets is paramount. - However too often people can be caught up in the world of blogs. This can cause them to subjugate so much else they should be doing for blog-reading and searching for trade ideas (other peoples ideas). This can also cause them to miss crucial market activity, partly by distracting them, partly by blinding them and also by adding a layer of confusion and obfuscating clarity. - Traders should aim to restrict the amount of time spent reading blogs, restrict he number of blogs one reads, and vary your reading. I always try and request of my clients, 'Do your own homework; be thorough, think first and think independently rather than let other people shape your thinking too much'. 
Having said all that: - I would like to provide a small list of my favourite blogs or blog aggregators. The list includes a wide range of themes, markets, analysis methods, approaches and perspectives. Some relate to markets currents, some are particular to a field of topic. Some are very well know, some lesser, and some to just a few (Currently).

  • RMDfx - Excellent commentary and opinion from a very wise trader (who does have skin in it): http://www.rmdfx.com/
  • The Mercenary Trader - An excellent and thought provoking and sometimes educational blog : http://www.mercenarytrader.com/
  • A Dash of Insight - One of my favourite over the years, consistent not sensational, good rational explanations around markets: http://oldprof.typepad.com/
  • The Trend - The thoughts of a trader on markets, he describes the status of his trading system and what it means for markets, mostly US equity and FX: http://trendythird.blogspot.co.uk/
  • The Big Picture - A staple of the financial market blogosphere for years, Barry Ritholtz is often forthcoming in his opinion, and also carries many other exceptional articles: http://www.ritholtz.com/blog/
  • Pragmatic Capitalism - Good commentary on markets from a macro and micro perspective. I'm not always in agreements with his views, but that does not make him necessarily wrong though: http://pragcap.com/
  • The Psy-Fi blog - One for those with an interest in behavioural finance. A brilliant blog always interesting, IMHO : http://www.psyfitec.com/
  • A Trader Journal - Excellent blog by a trader and member of my linkedin group, whereby he shares his thoughts related to trading and market analysis. : http://www.atraderjournal.com/
  • Seeking Alpha: Seeking Alpha is a blog aggregator, has many excellent articles and blog entries: . http://seekingalpha.com/
  • Mish's Global Economic Trend Analysis: Mike Shedlock provides some well thought out perspectives on markets and investing: http://globaleconomicanalysis.blogspot.co.uk/
  • Matt Trivisonno's Blog: This is a blog I really like, I am not sure how widely read it is, its not a professional blog like some, not is it  always relevant, but it does have some occasional great stuff: http://www.trivisonno.com/
  • Carl Futia: Carl produces daily technical calls on the S&P, nothing fussy, usually a range call. There is no ego attached, not how right or wrong he is, just plain and simple. Having watched his calls for many years, he is 'very' good most the time : http://carlfutia.blogspot.co.uk/


Feel free to add your own favourites in the comments section of this blog, or the on the linkedin group discussion this is attached to. Or to respond to on any aspect of my own thoughts and musing on financial blogs.

Image "Blog Definition Button" by Stuart Miles, image "Blog Post" by Renjith Krishnan, and image "Business Report" by Jeroen van Oostrom  courtesy of FreeDigitalPhotos.Net "http://www.freedigitalphotos.net".

3 comments:

  1. If you think the mercenary traders is a good blog, you are only hurting your reputation. Same goes for pragmatic capitalism and all the garbage posted in seeking alpha.

    ReplyDelete
  2. This is very good trading advice. I’ve been studying this site, too.
    http://zstock7.com/

    ReplyDelete
  3. Hi Steven - Thank you for including my blog and for your kind words. I appreciate it.
    Best Regards,
    Durga

    ReplyDelete