So I was recently listening to some additional presentations from an audio series about investment. This particular installment was called “Technical Traders and Commodity Speculators.” I found out that it was actually two presentations: one about “The Technical Traders,” and one about “The Commodity Speculators.” Both were as interesting as I expected them to be, and brought back fond memories of my days as a business major.
The Technical Traders
The presentation about “The Technical Traders” was about the technical style of trading. Those using this style are often referred to as “technicians.” Like other investors, they have to do their homework. Many will look at the history of stock prices over the last week, the last year, or even the last several decades. When listening to this presentation, I sometimes wished that I could see some of these things depicted on a chalkboard. For example, they made references to “triangles” in the graph of a stock price. As I understand it, this involves a line with an upward trend, followed by a line with a downward trend. Each of those two lines would form one of the three sides of the “triangle,” with the baseline of the graph forming the third side. I could visualize this somewhat when I tried to, but I still would have benefited from seeing some visuals on this subject. This style is called “technical” for a reason. Nonetheless, I gained some respect for the technician style of trading. They have some mathematical tools that enable them to make smarter investments. This is not without some risk, but technicians are reasonably good at managing this risk. I found this a good introduction to their style of investing.
Charles Dow, an investor in this tradition
The Commodity Speculators
The other presentation is called “The Commodity Speculators.” It focuses on investments in the commodities market, which works somewhat differently from investments in stocks and bonds. Frequently, both parties to a transaction will agree upon a “futures” price. This is usually based on expectations that the current price will stay more or less the same. But to a large degree, it involves risk for both parties. If the price increases, the buyer will have to pay more. If the price decreases, the seller will have to receive less in payment. Sometimes the buyer and the seller will transfer their risk to a “speculator,” who will thus receive more of the profits if the price changes. But speculating is often a risky business. Indeed, the word “speculation” itself often has a risky connotation that connotes something like gambling. Speculators can actually manage their risk reasonably well if they do their homework. Nonetheless, it is still much riskier than other kinds of investment. It is indeed a little like betting. If a particular investment does well, they hold on to the investment for a while, in the hopes that its value will continue to rise. If a particular investment does poorly, they hock it at whatever price they can get for it. There will inevitably be losses on speculative investments. Thus, the style can be psychologically taxing for many people, because they feel the pain of constant losses. I don’t think that I could handle using this style. Nonetheless, I found it to be quite enlightening to learn about it in this presentation. Like the other presentations, it is a good introduction to the style being covered here.
Chicago Board of Trade Corn Futures market, 1993
As I said in a previous post, I don't know that I'd actually want to go out there and “invest my own money” (particularly in this way). But I wanted to round out my knowledge of business (and particularly finance). Thus, I found these presentations useful – not to mention interesting.
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Part of an audiobook series
Secrets of the Great Investors
Technical Traders and Commodity Speculators
Others to be covered later
See also the audiobook series
Great Economic Thinkers
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