Since the 1960s cognitive psychology has demonstrated many apparently unrelated ‘heuristics’ that lead to cognitive errors. Behavioural Finance, which is the study of how these errors affect financial decisions, has developed rapidly since its start in the early 1990s, but it remains an unstructured area of research and the effects of some of the heuristics seem to contradict each other.

Dr Anderson surveys the most important heuristics with some surprising examples and relates them to how investors think. He will also cover in detail why we might expect these heuristics to weigh particularly heavily on the decisions of financial analysts and fund managers.

• We don’t think how we think we think – examples
• Information processing problems: Forecasting errors, Overconfidence, Conservatism, Sample size neglect, Representativeness, Availability
• Biased decision making: Framing, Mental Accounting, Regret Avoidance, Prospect Theory
• Experts’ decisions: Historical examples, Configural processing, Economic forecasts
• Analysts’ forecasts: Over-optimism, Herding, Career concerns
• Fund managers: Groupthink, Short-termism, Benchmarks, Career concerns

Gerry’s talk will cover the use of chart analysis in modelling long term trends in a multi-asset world, whilst working down to useful short term trading ideas.

Julien Camberlin will present new ideas about how markets behave according to Elliott Waves, Chaos Theory and Fractals. These ideas have been developed in his MFTA.

His studies explain how Fibonacci ratios are formed by strange attractors that are part of the chaos theory and that prices are not stopped by Fibonacci ratios but are rather attracted by them and vibrate in their direction, according to fractal model.

The idea that markets movements are vibrating in the direction of objectives is a real revolution in the understanding of market formation.

On his talk, Yann says “Most long-only asset managers use a fundamental approach in their process – especially in the equity world. However, that does not mean portfolio construction and market timing are not part of their plan. The way such managers use technical analysis is generally twofold: (i) upstream, to target the size of their cash pocket, leverage, or beta; and (ii) downstream, as a timing tool to enter a new position, trade around it and eventually exit.

We think a third dimension is worth emphasizing, too: sector momentum analysis based on the relative strength concept. The information such charts can bring to the portfolio manager are particularly useful if you use several methods and a multi-timeframe analysis. After showing the additional information given by relative charts, we shall compare different methods and try to determine the most relevant combination of technical indicators to carry out sector analysis. Finally, we will analyse the current shape of DJ Stoxx 600 subsectors in order to build a European equity portfolio based on a top-down approach.

In his talk, Clive will discuss the evolution of the Market Profile and particularly recent advancements that are gaining traction on the other side of the pond, specifically “Auction Market Theory”; looking at “Volume at Price” data over longer time periods to establish where “Value” is for a market, and levels of acceptance for said value.

During his talk Saeed will focus on what the ancient world can teach us about modern money markets. How can we use examples from the ancient world, philosophers and writers to better understand the markets? Just as historians such as Herodotus living in ancient Greece examined the past, can traders look to their past to learn something new? Based on the rationale that if your primary objective is purely to make money from trading quickly, you can make decisions that perversely increase the likelihood of losing; Saeed will examine how successful trading can actually be achieved as a by-product of good trading. Relating concepts from the ancient world, such as water and risk, diversified knowledge, Herodotus and historical bias to the modern world money markets, Saeed demonstrates that by focusing on goals that go beyond making money, lateral thinking, targeting risk adjusted returns, and keeping drawdowns in check, investors will indirectly make more money in the long run.

Lee believes in keeping it simple. His best trading strategies are easy to follow but can provide some fantastic trading profits.
During his presentation Goals to Gold, he’ll be talking about the similarities between professional sportsmen and professional traders and the skills set that both require.

Factor models are well-known among long-term investors who favour stock selection models. But there are some exotic factors from which shorter term traders can also benefit. This presentation will discuss the various factor modelling techniques and the more exotic factors that researchers have recently discovered.

When the Efficient Market Theory (EMT) emerged in the 1970s it horrified the fundamental fund managers, and disturbed the chartists. But the chartists should have been much more positive in their immediate reaction, since they had been saying since the nineteenth century that all the views of investors were in the share price – just what, at first glance, the EMT people were now claiming – with scientific back-up. But there was a difference. The proponents of the EMT held that the result was PERFECT pricing – 100% efficiency, for shares in large informed markets. The chartists claimed rather that the markets also reflected the emotions and foolishness of investors which could from time to time over-ride reality. David will discuss the middle ground in the EMT debate and why charting is important in the investment process.

Zaheer’s talk will focus on long-term trading, bringing an understanding of The Turtle Trading system and how it can be still applied today. He will focus on such issues as how to use only the weekly and daily charts to identify trends, managing risk, how to identify target levels once in a trade and compounding to accelerate returns.

Diploma certificates were presented to newly qualified MSTA by STA chairman Axel Rudolph at a very well attended Summer Party held at Bloombergs offices in London. We are most grateful to Bloomberg for their generous hospitality and the very well received trading game that followed.

Four candidates gained a distinction: Craig Erlam, Joshua Mahony, Marcin Narloch and Arjan Shah.

Congratulations to them, and to all our new MSTAs.

In his talk Ghassan will focus on the fact that most hedge funds are run by “Quants” with the largest bets placed using options. The fact that market neutral strategies remain the most predominant strategies in hedge funds highlights the strong belief of “Random Walk”. Using Technical Analysis it is possible to highlight pricing anomalies especially in low delta options. Delta trading and dynamic hedging is most suited to technical analysts, yet very little is done by them. Moving price pattern recognition to a quantitative system may be the first step in the right direction, as it allows the “Quant” to relate better and understand more the technical analyst’s point of view.” In Ghassan’s opinion something needs to change dramatically in the TA approach to allow non-TA (Quants) to understand what technical analysts do.

In the talk Steve Griffiths outlined his unique “Isolation Approach” to Elliott wave analysis and showed how this resolves the problems and shortfalls of more traditional forms of Elliott wave analysis. Combined with Risk Control and Position Sizing this strategy can be applied to any liquid market, including Stocks, Forex and Futures. Steve also touched on his favourite trade that he has nicknamed the “Holy Grail” because it allows the trader to take advantage of the strongest and longest of all the Elliott Wave swings, the Wave (3).

Oliver will be discussing the properties of different measures of volatility and how these can be exploited and modified to produce innovative technical indicators and combined to form powerful strategies. One example that he will demonstrate is his own Volstall indicator, designed to anticipate reversals by identifying trend deceleration.

Technicians have a long-held advantage of being able to look beyond just one asset class with more ease than fundamental analysts do. Indeed, over the past several years, it has been essential that analysts are able to have a view on not just their own area of responsibility but on the core drivers from a range of different markets, all of which can sometimes have a direct impact on seemingly unrelated trades and recommendations. David highlights how Credit Suisse Research pulls all the different asset markets together, the approach and methodology it uses, as well as its current views.