Had a good week, but it should have been a great week. I like trades where I feel I’ve maximized my returns, and while I know I can’t be perfect, if I exit a trade too early based on continued market movement, I feel like I should have done better.

The main issues this week, or I would say, any week depends on the quality of the trade map. The map is my analyzed chart where I figure out the market’s potential movement for the week ahead. Now the fact that the market movement is variable is what makes it a challenge.

You’d like to be able to organize it to make a map orderly and precise, like this:

 

This would be great!

 

Unfortunately, the market has no fixed landmarks other than past movement, so I have to essentially create maps from scratch based on market stats and support/resistance areas. So oftentimes the map winds up looking like this based on a “best guess”:

 

 

Meh, not as impressive, and plenty of assumptions that prove to be false….kind of like the “New World” maps of yesteryear. But, you have to start somewhere. The more accurate the map, the better my trade entries and exits will be.

How accurate was I this week? The video sums it up nicely:

 

 

I missed a few “key turns” which caused me to enter too early in some trades and too late in others, resulting in reduced profits. I wind up confusing myself with my maps if I draw too many update lines and start losing the bigger picture.

Since I’m working a hedge by trading both sides, the errors get doubled as well.

On the positive side, my plan of putting in my hedge trades in advance is working well. Even though my “directional” side is still a bit uncomfortable, I’m getting used to trading ranges now instead of only at the perceived maximum lows and highs. The new methods should clean house over my older direction centered methods once I’m fully adept.

I also made some good improvements to my mapping to help in making and keeping it accurate, so I can avoid those “off road” ventures.

The market had great volatility and movement this week. It tanked big time of the weak jobs report on Friday, but recovered nicely. Hopefully market movement will continue to be robust next week. I have some catching up to do to make up for a sub par quarter.

 

 

I was going to post my trading update, but I’ll do that later….

Blogging rules to live/attack by:

1. If someone leaves a comment that isn’t intentionally “trollish” that you may not agree with, you can either

A) Call out the points in the comment that you disagree with and address your counter point. (adult method)

B) Ignore it. (adult method)

C) Be condescendingly dismissive. (immature method)

D) Attempt to squash a person dead by showing vast superiority in knowledge with the intention of trying to embarrass/humiliate them in the process. (aggressive/arrogant immaturity)

 

Now I’ve seen lead off replies with the A, B , and C variety of responses, but it’s a rare occurrence for someone to go straight to a “Defcon 1″ D level attack, but I’ve experienced one this week.

 

I’m not typically in “battle mode” so at first I didn’t even recognize the initial response as such an attack. After all you don’t expect responses like that when one thinks they are engaged in friendly conversation. So my reply was based on a face value question rather than regarding it as an assault on my abilities or intelligence.

However, internally a flag was raised that something didn’t feel “right”, but I had no reason to expect such an attack so it wasn’t registering.

 

Anyways, I wasn’t sure so I moved on to other things, and then later on this person posts another entry with the sole purpose of discussing highlighting the attack made that supposedly “put me in my place”, and giving themselves a pat on the back in the process.

 

Of course I see this because I’m subscribed to this person.

 

So that cleared things up right away and removed all uncertainties about what happened. Now I’m doubly irritated since I find the original attack unwarranted, childish, hella rude, and now to top it off, a “high five” post is created celebrating my supposed “squishing”- with a double shot of arrogance knowing that I’m going to see it as well.
 

Now if this “mental giant” had taken the time to visit my blog, they would know I’m not a shrinking violet when it comes to internet disagreements/arguments. Which brings us to the next rule:

 

2) If you post a gloat over your attempt to trash someone and they are a subscriber, it should be obvious that the “trashee” will see it so you should probably EXPECT some type of response.

If that’s not asking “Bring it!”, I don’t know what is.

 

And that’s exactly what I did- leaving a comment on that “high five” post calling out the rude behavior, expressing disappointment at such a low level response and surprise that it’s being “celebrated” as if their actions were something to be proud of.

Okay so this “tough” person who has been talking a good game now has me right where they presumably want me, so they can now let me have it with both barrels….

Instead, this would be “people squisher” turns tail and de-subcribes me rather than attempt to mow me down with their “vaunted” intellect.

Big talk, no action.  Which brings us the following Rules:

 

3) If you’re attempting to step on someone,  be sure it’s with your OWN shoes, not those you’re trying to borrow from others who have accomplished more (as if cred and skills transfer by osmosis).

 

4) If called out on your rude actions and “gloats” by the target of your amusement you can either

A) Walk your talk and “Bring it!”

B) Admit your error – hey, we all make mistakes.

C) Avoid confrontation when you realize the “target” isn’t intimidated and now you’ll have to prove just how “superior” you are.

 

Seems to me that those who chose option “C” would be better off not trying to show off by making waves in the first place.

 

 

 

I really have little patience for arrogant folks, especially those who can’t back up their bravado. People like that are better off on “friends lock” so they can control and protect their environment from the harsh world of REALITY.

 

 

An alternate title for this post would be why you should suspect anyone who offers to teach you “easy trading secrets” for big bucks.

Someone in the twitter stream this week was commenting on the need for traders to get professional help (ie paid training) if they wish to have any success in trading. Of course, you know I had to correct this misinformed individual on the error of his ways by telling him I achieved success with no paid help so he needs to rethink his statements.

During the ensuing conversation, he asked if I’d be willing to show him my methods and that he’d be willing to pay me if it improves his trading.

What was my response? It’s the common sense response you would expect from someone who actually knows how to trade – I told him I have no desire to share my methods since I can make my own money with trading, so why would I weaken my edge by making it public?

You see, trading is an open loop system, where the market reaction is based on the inputs of others for a collective result. This means there are no “fixed” methods that are guaranteed to work independent of market participants knowledge.

Here’s an example of what I mean – let’s say there a bakery that lowers the price of their goods based on the amount of traffic in their store. Now if someone were to carefully observe store traffic throughout the day, they could arrive at the best time to go there to get the best discounts.  Now, that “answer” isn’t fixed in that it depends on the other shoppers to continue their habits. If the person were to announce to all what the best time of day to shop there was, more people would go at that time and the price would go up, cancelling out that time advantage.

The same thing applies in trading. In order for the market to make dramatic moves up and down, you need people to drive that market behavior, and make mistakes in the process to help that movement along. Revealing a working method to the masses would mean it would be compromised by overuse.

So if you do have a method that works in making money, why would you put it at risk by selling it when you could use it yourself to make money instead? That means you have to be suspicious of anyone offering to teach you “sure fire” techniques to make money. After all, if it is that “sure fire” and simple, why isn’t the seller using it themselves instead of trying to sell it?

So if someone is selling training, you can be sure that if they are legit, there will be no “simple” or “magic” solutions to easy wealth and will require much work/practice for any hope of success. There is a reason why the trading success rate is low, it requires work and effort like any other worthwhile venture. You can also be sure that the trading experts are keeping any “simple solutions” that work to themselves.

 

 

 

My whole shebang weekly/monthly quarterly update….

As the week went, so went the month. As the month went , so went the quarter. One word to describe all three- meh.

This week my mind was sent on a direction trade that never hit its target point although I felt near certain it would. Instead, it would move towards it, then move away as the market slowly edged against my position. The end result was my target was never hit and I gave my profits back to the market..again.  It’s a good summary for the month’s performance.

 

March Performance

Definitely a retrograde performance month for me. Apparently I entered the “Bizarro Universe” where you start out with high gains and then seek to give it all back….doh!

Was this a result of my new methods of hedging? Nope, it’s due to me NOT hedging when I should have. This is basically a pure directional trade that I’m “patiently” waiting to hit the intended target price range. This also highlights a critical fact that I need to remember:

My directional methods typically accurately determines the markets destination, but not the path it takes to get there.

What that means is if I make plans for the market to make a bee line to my target price level, there’s a good chance the market will have other ideas and tell me to think again. You’ve seen this in my past performance charts on several occasions (ie “roller coaster” charts).

Hedging is supposed to solve this issue by taking advantage of the path taken while I wait for the target to get hit……that’s IF I use it, but I wind up standing in my own way.

This is what happens: I get to a hedging point but I feel so certain that it’s going straight to my target that I don’t initiate the hedge, thinking I’ll be reducing my profits needlessly. Then when the market proves my feelings wrong, I miss out on the hedge move. This happened so many time these last two weeks, it’s a bit embarrassing.  If I had properly hedged, this month’s performance  would have easily been 15% – 20% if not higher.

Another key mistake is I should never let a 25% gain turn into a nominal return – at a certain point you have to lock in gains to prevent the reversal I experienced. At a minimum, I should have retained at least 10% for the month.

One thing I didn’t take into account (again) is that the market was nearing all time highs- and when that happens signals that typically pan out don’t work, even my home brew ones. Certain forces were intent on getting to an all time high so any market weakness was quickly countered with more buying. Indicators that typically moved in the opposite direction of the market were overpowered by the market’s singular intent to break records, and lo and behold, we hit all times highs in the S&P 500 this week. Still, it wouldn’t have mattered had I been taking the appropriate hedges.

 

March Performance vs Indices

This lackluster month also seals my fate for the the quarter as well.

 

1st Quarter Performance

 

1st Quarter vs Indices

 

Clearly this isn’t performance to be proud of. A big bunch of meh.

That said, despite the bad quarter, surprisingly, I feel pretty upbeat going forward. That’s because I know exactly what caused my problems this month and I have solid solutions for them. In addition, I gained some new insights that will significantly improve my precision in entries/exits.

Here’s one big solution that I’ll share: I’ve reached the stage where I can make my trades semi automated by putting in my calculated entries and exit targets in advance. Yet, silly me was intent on hedging via trading live. Since I know now I can’t be trusted to follow through on hedging live, I’ll just put in my hedge price entry/exit levels in advance as well. I don’t know why I didn’t think about doing this earlier. This leaves me to focus more on the accuracy of my analysis rather than keeping an eye on trades throughout the day or night, which also solves the problem of having to stay up for late night monitoring as well. Life just got simpler.

Lots of lessons learned this month and quarter- now to see if I can put them to proper use going forward.

 

 

I know a few people who have mentioned they are experiencing some difficult times so that is the inspiration of this post.

I don’t share much of my personal life on this blog but suffice to say, I’m no exception from having to deal with issues that generate negative emotions. Some of these issues have greater significance and as a result can be harder to resolve or get past.

I only bring it up now because last night while on the net I rediscovered a song I heard a few years back while I was driving, and haven’t heard it since then.

As I was listening to it, the song had an unintended and amazing effect on me. It was as if it was awakening or reminding me of what my normal state of feeling was without any negative feelings getting in the way. It wasn’t like I forgot the negative issues, but they lost the priority they once had and were down shifted in significance.

This made me realize how we all go though life and whether we realize it or not, we are changed on an ongoing basis by the experiences we encounter- sometime the changes are subtle, but are there nonetheless. In time and over the years in adapting to dealing with all the negativity the world can dish out, we also change and likely become darker versions of our former selves.

The change can be so slow that’s it’s imperceptible that it’s happening until something breaks through the armor plating/insulation that reminds us of what we were like and how we felt before getting bogged down by life’s issues/concerns.  When that happens it puts everything back in perspective and resets the internal stress clock.

I don’t remember any song ever having this kind of immediate and lasting effect on me before so I wanted to share it in hope that it may benefit others as well.

 

 

 

Extended Non video version:

 

 

 

 

 I don’t know if this song just affected my with my specific wiring or if there’s a more mass effect. If not, then may you find your awakening song soon! 

 

 Happy Friday!

 

 Man rescues baby girl who stopped breathing at Australian grocery store.

 

 

 

 

 

I’ve read numerous books on trading from the beginners series to those intermediate and higher on improving one’s trading skills.

Some focus on mastering certain techniques, others on risk management or some other “improvement based” factors to move to higher levels.

 

I’m here to say there is one critical thing that every would be trader needs in order to move forward.

 

Just send me $99.95 and I’ll tell you what it is.

 

Kidding.

 

The truth is the following – it may sound stupidly simple, but it’s guaranteed to be overlooked by 99% of traders including myself when I was on the beginners curve.

The key is before one can improve their trading skills, they FIRST have to be a satisfactory trader, and what I mean by “satisfactory” is being able to consistently make a profit over time trading regularly.

Taken at first glance, what I said sounds very tautological- some will think improving trading is the same thing as learning to be a satisfactory trader. It isn’t. These are two distinct animals with two different goals/mindsets.

Improving trading generally means a whole host of things – making more and more money, being able to trade for a living, becoming wealthy, living a life only dreamed about, and so on. This compares to being a satisfactory trader, with the ONLY goal of being able to generate consistent profits over time.

What does it mean to generate consistent profits? Over many trades, one can satisfy the following:

1) Net positive days.

2) Net positive weeks.

3) Net positive months.

 

Having a net loss day is normal, but positive days should be the norm versus the exception. Same thing goes with weeks and especially months. If one has an abundance of negative days/weeks, and winds up with a positive month, that looks like more of a lucky “big” trade saving the day instead of consistent good trading. Relying on good luck is fine for Vegas trips, not so much if the goal is to be consistent or stable.

What I’m saying is the first thing a trader must do is develop a technique/method that allows them to generate consistent profit before thinking/planning anything else.

How much profit? Doesn’t matter, as long as it’s consistent. It can be just a few dollars a week. The key is being able to repeat that again and again over time and numerous trades.

Once you’ve mastered generating a profit consistently, then one can move on to working on the host of improvements like building wealth, trading for a living, etc,…

Knowing this can save one a ton of “tuition” in mastering the learning curve since it sets the focus on just staying positive versus getting “rich”. Everyone wants wealth to come ASAP which is why the key basic element is overlooked. Trying to be a satisfactory trader AND generate wealth just makes the learning curve many times more difficult – that I know from experience!

When I think back to the difficulties I had and boatloads of money lost when I was still learning how to trade to how fast I can now understand and pick up new things when “improving” on my core skills, the better path to success becomes obvious.

 

 

A very tumultuous week packed with strong moves both up and down, but interestingly the week ended almost exactly where it ended the prior week (for ES). Despite the sum total “non action” of the week, each day had a strong move which provided good trading opportunities.

As for my trading week – two words – mixed bag- I had my share of high and low points.

 

Sunday: As I suspected, the attempt to levy a fee on Cyprus insured “guaranteed” deposit holders spooked the market and futures went lower. The was of course, great for me since I had a nice size short position that I had rolled over from the prior week. It feels good to have a position established at the starting point of a move since that means there’s the good chance of getting big returns. The market basically moved in just one direction, down all through Sunday and into the night. My intraday account had a nice big fat surplus of profit. With my planned targets, I though I might even have a shot at a record breaking five figure day. I didn’t want to miss getting the max gains if my targets were exceeded, so I decided to stay up all night monitoring the action.

Monday: Early Monday morning I was expecting one more leg down move to reach my target area, but prices starting drifting higher instead. I didn’t think anything of it as I felt certain my targets would be hit. But slowly but surely, prices continued drifting higher. There was a time when prices were zig zagging back and forth and I thought, ah, this is where it drops back down and continues. Instead, prices decided to surge upward as if it consumed an energy drink. I looked on incredulously and the market ramped higher and my mighty profits kept shrinking. The day ended down, but well off the overnight lows, and I had to live with the fact that 2/3 of my profits went bye bye. The remaining profit was still decent, but compared to what it was at the market lows, felt empty. It’s like being on a game show where you have $500K in potential prizes, but you goof and wind up with a $70K prize. You don’t think about the $70K gained as much as you do the $430K lost.

Analysis: Losing potential profit has to be taken in stride when you’re looking for a bigger profit target. If I cashed out whenever the market made me feel any doubt, I’d never the big win days. This is why most traders lose over time – they cash out too soon for fear of losing their profits but when in a bad trade, they stay in until the loss is bad enough to force them out. What they are doing is minimizing their gains and maximizing their losses, and results in traders losing weeks worth of gains with just one bad trade.

Looking at my chart analysis, I was chagrined to figure out that I made an error and the market did indeed move to my target area – I just had the target level wrong, doh! After that realization, then I truly felt bad since it was a definite screw up on my part. To get handed such a nice gift and let it slip away feels “almost” as bad as losing money outright instead of just profit.

So I reanalyzed my price charts to make sure everything looked good and prepared for Tuesday. I didn’t get much sleep as I compared price movement to my new analysis to make sure everything synched up. It was then in my sleep deprived state that I started getting additional insights in predicting price movement in the short term, which was great.

 

Tuesday: The market is moving as expected, and I expect some energy up from the counter trend before the market heads lower. I decide to “rest” my eyes for a while, and that is exactly the time the market chooses to do what I “thought” it would do the prior day and move straight down like a meteor towards my target. And because life is like that, this time I didn’t have my preset auto trade targets set. So when I woke up I went back to see my target area was hit and now the market was on its way back up again. Give me a double shot of doh!   No one to blame but myself which adds to my frustration. Actually I blame the market too since it seems personally out to thwart my plans.

The interesting thing was the target hit was just the 1st one, and it should have gone lower to hit additional targets, but it didn’t and bounced instead.

I’m left wondering why it didn’t break lower, looked over my analysis , and don’t see any errors this time, so I’m thinking my target is right, but the path taken there won’t be direct due to all the market gyrations.

Wednesday: Market heads all the way up and reclaims all area lost the prior day, except this time I’m expecting it to do that via my analysis.

Thursday: Market is very choppy and does numerous zig zags, but ultimately heads lower, which is what I also expected. I still have my main position that is rising and falling profits like the tides. I’m also making some actual profits on my hedges throughout the week.

Friday: Today I expect the market to finally drop lower to my secondary target, but it again decides to slowly ramp up and make up the losses from the prior day. I’m still confident in my analysis that the market should be heading lower, but again, it’s taking it’s sweet time to get there.

 

I did make some modest gains this week with my hedge trades, but they could have been much greater. Still figuring out the best way to apply them. My main trades are still on hold as the market plays out going into next week.

Cyprus is still in negotiations on a bailout deal since they rejected the 1st one requiring those deposit fees. The two market dangers here are the following:

1) Reinstating charges on insured deposits that could trigger a bank run across Europe. It sets the precedent that banks are not safe – even with so called “insured” deposits.

2) No bailout for Cyprus, their banks fail and they are forced out of the Euro. The first country being allowed to fail would trigger bond prices surge and make it more difficult for the banks of other troubled countries to borrow funds. It sets the precedent that not all countries will be bailed out which raises the risks for all other problem child countries.

Both scenarios are bearish in the short term.

 

 

As it was meant to be…..

 

 

 

 

As usual, this isn’t making headline news today in most areas, so you’ve likely missed this potential bombshell.

Apparently, the island of Cyprus needs to be bailed out financially as one of the many countries faring badly in the wake of the financial meltdown/recession that’s affecting so many countries. The fact they need help isn’t surprising news.

The EU has agreed to pump money into the Cyprus banks to help stabilize them – standard policy and again, nothing too surprising here.

However, the terms being applied this time marks a critical first, and a very dark one in my opinion.

Under the terms of the bail out, ALL bank depositors will be charged a levy based on their bank balance:

9.9% on balances over $100K euros

 

6.7% on balances under that amount.

 

The bombshell to this is that amounts under $100K euros were supposed to be government insured. It’s the equivalent to FDIC insurance for the US banks.

In other words, bank amounts that were insured as being “safe” to keep in the bank backed by the security of the Cyprus government is going to turn out to be one big fat lie. Cyprus has already acted in curtailing depositors fighting this by stopping all electronic transfers, and the policy will be put into effect on Monday, which is a bank holiday over there so no one will be able to access their accounts before the policy goes into effect and the money is extracted.

So, rather than just make the banks, ultra wealthy or corporations pay the price for the policies they backed that were largely responsible for their economic downturn, they are seeking to transfer the pain to even to lowliest depositor who had nothing to do with the financial crisis except being a victim to it. It also punishes folks of low income who are responsible enough to have an account with savings rather than be spendthrift.

Alright, so why is this BIG news? It’s huge because it undermines the integrity and confidence consumers have in banks. How can people trust their money in banks when so-called “government insurance” is nothing more than empty words that fail to deliver? This is liable to trigger bank runs all across Europe as people rush to take out their money before a similar fate happens to them. This will only make the other banks weaker and trigger more bank failures and a greater need for bailouts.

This new policy is backed by the EU, so the folks in change don’t seem to care about the banks  or government honoring their obligations to their citizens. Of course I have no doubt that the uber wealthy got wind of this in advance and off shored their accounts leaving the less informed and less fortunate to carry the burden.

Will the Cyprus citizens accept this or will there be riots?

 

That also begs the question, could that type of policy eventually happen here?

 

Info: Link1

Info: Link2

 

They may not be announcing this news with big fanfare in the US this weekend, but it’s sure to make big headlines worldwide next week. This can’t be good news for economic stability going forward if people start losing faith in their banks. It moves the situation further from recession and closer to Depression.