Trading Catalysts [Paperback]
How Events Move Markets and Create Trading Opportunitiesby Robert I. Webb
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Description of Trading CatalystsFirst book to explain in detail how some events can cause large price moves in markets and how traders can profit from these events.
Focuses on the lessons traders can learn from past market reactions to internal and external market catalysts so as to improve their future trading.
Every chapter begins with a detailed example of how a particular trading catalyst impacted market prices.
Examples include comments by policymakers, key economic reports, political events, and factors internal to the market itself.
Understand the Triggers of Market Volatility - and Take Advantage of Them
Actionable lessons from 25 years of major events - and the market's reactions to them
Predicting the market impact of everything from Fed statements to natural disasters
Separating real information from noise, major "market movers” from trivia
In Trading Catalysts, Robert I. Webb examines the various factors that move markets. Webb focuses on the catalysts that spark the biggest price changes - and the greatest potential for substantial profits or losses. Using numerous real market examples, Webb demonstrates the often inconsistent response of prices to similar trading catalysts across markets and over time, the occasional significantly delayed response, and the frequent market overreaction. Whether traders bet directly on a trading catalyst, on the presumed market reaction (or overreaction) to it, or not at all, the potential impact on market prices and volatility means that all traders must pay attention to trading catalysts and the market reactions that they induce. At the very least, the prospect of significant volatility around some event may affect the timing of a trader's entry or exit of positions and may cause a trader to reduce his position size. If you’re a serious trader, this book will help you understand the influence of trading catalysts and identify potential trading opportunities.
Volatile financial markets create both the risk of substantial losses and the opportunity for substantial gains. Sudden jumps or breaks in prices can impart a roller-coaster-ride-like quality to trading or investing in financial markets. Trading Catalysts is the first complete guide to the events that spark large changes in prices. These include: central bank actions; ill-advised comments by policymakers; news of natural disasters; elections; certain economic reports; terrorism; company specific announcements; the unwinding of large positions by key market participants; and simple trading errors among others. The varied origin of trading catalysts means that some traders may have an edge in anticipating the market’s reaction to certain trading catalysts. Numerous real market examples take the reader into the heart of the market to illustrate the direction, magnitude, speed, duration, intensity and breadth of influence of trading catalysts on market prices. Because a minute can be a “lifetime” in the world of trading, many of the detailed examples recount moment-by-moment and tick-by-tick changes in market prices. This book discusses the role that trading theses(or prevailing beliefs about market relationships), market conditions, and sentiment play in determining how prices react and sometimes overreact to various trading catalysts over time. Trading Catalysts will help readers anticipate potential events that could spark rallies or breaks; predict situations with feedback loops that drive markets up or down; and identify situations where substantial overreactions are likely to occur.
Size Matters: When key players unwind positions and move the markets
The Information in Economic Reports: Rout or Rally? Uncertain market reaction to the forecast errors from economic reports
Talk Isn't Cheap: When the comments of politicians and policymakers move markets
Market Interventions: When governments intervene: case studies, from currencies to oil
Geopolitical Risk: From elections to terrorism to wars
Bubbles, Crashes, Corners, and Market Crises: Lessons from the “silver corner,” the 1987 stock market crash, and the Asian Financial Crisis
Quantifying the Market Impact of Natural Disasters: From earthquakes to floods to mad cow disease
Fat Fingers: When trading errors and mistranslations move the market
Of Straws and Camels' Backs: When trivial news sparks huge moves
Press and Industry Reviews"Trading Catalysts takes you into the market and recounts moment-by-moment price action. From an almost 14% rise in the Nasdaq following a surprise Fed rate cut to an incredible (and temporary) 22% decline in the S&P 500 futures price following a single large sell order, Trading Catalysts is loaded with real-life examples of how events move markets. Must reading for traders and investors alike."
- Victor Canto, Pd.D., founder of La Jolla Economics and a columnist for The National Review
"At last...an invaluable investment book that shows in detail how markets actually behaved during extreme events, times when fortunes were won or lost in the blink of an eye. This is the real world of trading and risk, not academic theory. Read, learn and prepare yourself because these types of extraordinary events will happen again."
- Peter Matthews, Managing Partner, Optimation Investment Management LLC
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About Robert I. WebbRobert I. Webb teaches Financial Trading at both the McIntire School of Commerce and the Darden Graduate School of Business Administration at the University of Virginia. His research focuses on derivative securities and markets, trading, and incentive economics. He is the author of Macroeconomic Information and Financial Trading(Oxford, 1994) and has written numerous academic papers. Webb has traded treasury bonds and other fixed income securities for the Investment Department of the World Bank; traded futures as a "local" on the floor of the Chicago Mercantile Exchange; designed new financial futures and option contracts for the Chicago Mercantile Exchange; served in the Executive Office of the President, Office of Management and Budget during President Reagan's first term; and served at the Commodity Futures Trading Commission. He previously taught at the University of Southern California. Webb is editor of The Journal of Futures Markets, a leading academic journal on derivative securities and markets. He earned his Ph.D. in finance from the University of Chicago, and has published widely in both academic journals and the financial press.
Contents of Trading CatalystsPreface
2: Market Conditions and Sentiment
3: Talk Isn't Cheap
4: Geopolitical Events
5: Weather and Natural Disasters
6: Market Interventions
7: Periodic Economic Reports
8: Size Matters
9: Bubbles, Crashes, Corners, and Market Crises
10: The Accidental Catalyst