War of Attrition (Part II)

Further examples of a War of Attrition include any historic war ever fought, modern or ancient. The fight for land, territory, independence or any other reason will always issue a cost and expenses will not end (at least) until the war is over and a side has won.
Now a practical example for our purposes is the common mistake most every new trader makes, be it in stocks, in currencies, arbitration or any, is to let his losses ride too long and to keep a losing position. While it cannot always be the right move to sell a losing position, letting losses get detrimental or getting emotionally attached to a position is costly. This is your War of Attrition, you are in a position and you lose 10%, do you dollar cost average?, do you let the position go unchanged?, do you sell and move on to another position? There is no uniform answer, what is the cost of "winning" here? A consideration must be made that a 10% increase is needed just to re-capitalize- is it likely to exceed a ten-percent move?
These are cases that will define your trading techniques, with good objectivity your main reaction to a situation like this will not be uniform and the least one can do is hope to learn from each experience.

War of Attrittion or, How Game Theory Can Make Me More Logical

A War of Attrition is a model in game theory which means to exploit the idea of competing members in a specific type of zero-sum game... let's back up a moment. What is Game Theory, and how can it make me a more logical thinker? this, if you are not familiar with game theory, is probably what is popping in your head right about now. Game Theory (G.T), at it's core, is the study of decision making; as such, it has many applications in the fields of economics (which very much adopted G.T. as a standard component to economic thought) and can be utilized in everyday thinking, especially in finance. Most models in G.T. are mathematical in nature, but that should not prohibit or discourage the novice mathematician from exploring it's fields. Many components in Game Theory can be expressed without mathematical quotients and for the sake of this site- we will rarely if ever be expressing G.T. inside the realm of quotients and variables. One core idea in G.T. is knowing what kind of game you are playing; one example of how important it is to know what game you are playing can be expressed like this: a con-man going to a bank for a loan. The banker meets with the con-man and might see a good portfolio, reassuring documents and a profitable reason to loan a man a sum, he believes he is playing 'game A'. But keep in mind, the con-man is playing a different game all together. While the banker might have thought he was getting a mutually beneficial deal, the con-man is playing his own game and more importantly knows so- that is why he has the advantage, he will take the loan and never repay it.
War of Attrition, which is a zero-sum game- a situation (or game) in which one's benefit or loss is exactly proportional to someone else's benefit or loss (ie where there is only one winner), but what is important in a War of Attrition is that every move taken before reaching your goal is costly. It is also generally the case that the costs issued are necessary to obtain your goal.
In actuality, the real life examples of this can be endless. For example, if one accepts the Peter Siris model for trading stocks, you would be looking at each trade as a small battle (or game) where you buying a stock and someone selling a stock are in direct competition- fighting over who is in the right. Siris' take on the situation is that there is always one loser and one winner. So say, even if "man X" bought acb Company at $5 a share and sells them to you at $25 a share and abc Co goes to $50 a share- man X lost that game. Now, most people looking at this believe that everyone won, "man X" made money and you made money; but Siris' view is that "man X" only sold his position because he believed it was not worth that and therefore would lose value soon. Since that did not happen he lost that battle.
Thanks to ĻiĻ Pië for Photo (Continued in Part II)

What is Forex?

Photo: Forex by market size in billions from 1988- 2007
The Foreign Exchange market, or forex, is a market for currencies. It takes place intra-bank and therefore has no actual trading center (as appose to NYSE, Nasdaq or other equity markets). What makes forex unique is that because of it's nature being OTC (over the counter), electronic, open 24 hours a day/6 days a week and having a simpler fundamentals structure when compared to other markets, forex is actually more truly competitive and liquid. Since forex trades are based on one currency with respect to a second, it is a truly global market and almost immune to market manipulations. It's fundamentals (Federal Reserve, or other Central Banks, cutting/raising rates, etc.) are quickly absorbed by the exchanges and there is no penalties for insider information. If you happen to know the head of Japan's central bank, and he told you he is going to cut interest rates by 50 basis points (.50%) you could make trades without fear of insider-trading prosecutions.
While some consider London to be the center of the forex market, this is unofficial. As the photo represents, forex is currently over a 3 trillion dollar market, making it the largest exchange traded regularly. Further, brokers to the foreign markets do not charge commissions for trades. Instead, they simply keep the spread in between the bid and ask price ( this is whether you are long or short a currency).
In future posts, we hope to explore the foreign exchange markets more in-depth and will surely be using forex models when we get to technical analysis.

Why Is "$" Dollar?

Well, the site has been up a couple of hours and a friend of mine already asked a pretty straight-forward question about YES, "why is the $ ("s") dollar?"
There is an interesting reason as to why we have, essentially, the letter s and a line through it ($) as apposed to a D with a circle- or any other geometric figure that may more accurately convey the word "dollar". The reason we have an s and not a D is because when America was being founded, as the phrase "not worth a continental" suggests, the continental dollars were becoming more and more worthless (the states kept printing money to help fund the revolution, but without much (if any) backing). At around the time the constitution was being implemented, the founders decided to make a new currency. Yet although there is some discrepancy with the details, it is widely held that the new currency was based on the Spanish dollar, that was already under circulation in the Spain-run colonies of the Americas. Therefore, it made perfect sense to the founders to adopt an $ onto the currency. By doing so, they at once distanced themselves from Britain and created a stronger medium of exchange.

Mission Statement

This site was created as a host for the Investment team at CSN in Las Vegas. Our mission is to talk/inform and utilize various strategies regarding different financial systems. Fixed income, commodity, equity, derivative markets, currency trading and the tools needed to succeed in these various fields.
YES is an acronym for Yen, Euro and Dollar.