Archives of “January 3, 2019” day

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The “Greek Issue”-Fascinating flowchart

  
Analysis, Education
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It is wrong to think that contagion stems only from Grexit. An excessive compromise with Greece could result in moral hazard, particularly in relation to structural reforms. This could undermine the medium-term stability of the euro area. The tail risk is that Greek politicians try to leverage too much the fear of Grexit “contagion risk”. We complete our analysis by looking at the vulnerability of other euro peripherals and the ex-post tools to limit contagion.

Helpful Lessons

  
  Education
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Helpful Lessons1. Remain Flexible – do not let your bias (”The Market MUST Go Down”) cloud the reality of what’s happening

2. Seek High Probability, Low Risk Set-ups
(In this case, we had the trend, resistance, and a doji working in our favor, and were risking 2 points to play for 8 points)

3. Take Your Stop-Loss when the Trade Fails
(You would have been in a worse situation if you stubbornly held short into the sudden 10-point rally)
(In fact, some of the largest swings occur AFTER a high-probability set-ups has failed … I call this “Popped Stops”)

4.  “Anything Can Happen” in the Market (Mark Douglas)
Even the best set-ups can … and sometimes do… fail and that’s perfectly fine as long as you control risk.
Don’t blame FII’s ,Global Market  or Mutual Funds – trading is a game of probabilities instead of certainties.

Study each day to learn more concepts and do your own end-of-day analysis of the charts to make yourselves even better traders!

Trade To Win, Not To Lose!

  
  Education
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When athletes are consumed by not losing rather than by winning, the game is over, often before it has even started. The same precept applies to trading. As crazy as it sounds, most traders aren’t making the money they could be — and the reason, I’d argue, is the fear of losing it. Traders are far too worried about giving money back. This paralyzing phobia can transform talented, elite professionals into disappointing underperformers.

How many times have you been up in a trade and started to think about the money? Your head tells you to bank it quickly and then play it safe. After all, you made your mark for the day, or even the week, so your job is complete. That’s not the mark of a trader; that’s the mark of an accountant. 

Trading is an occupation based on fleeting moments of opportunity. They’re here one second, gone the next and entirely out of anyone’s control. The best traders love this, and even crave it. When the action is on, they’re prepared and trained to strike hard, as they have no idea when the next great trade will appear. 

It’s akin to fishing: You can be out on the water all day and not get a bite, but when you hit a school of tuna, you better have your rods ready and baited to maximize the opportunity. All that matters, ultimately, is how many pounds of fish you caught, not how long it took to reel them in. 

The key is to force yourself to step outside your comfort zones.

  1. Develop guidelines that will require you to increase your position size.
  2. Should you fail to follow your rules you must impose severe consequences.

The goal is not to change your personality or eliminate your fear, but rather the purpose is to get you out of the comfort zone of hording money.

Money in itself is useless, unless it is put to use!

Passive Investing Propaganda

  
Education, Video
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My points to consider:

1. If you have an investment that is not working, or one that is beating you with heavy fees, then you have made a choice. If you don’t want that–stop. If you don’t stop you can always watch a video like this, blame someone else, and refuse to take any personal responsibility. Ignorance is no excuse. It’s your life. Take control.

2. Passive investing (i.e. indexes, buy and hold, etc.) might appear as an option, but how would you feel if you have been buying and holding the Japanese Nikkei 225 since 1989? Not very good is my bet.

3. I teach trend following. The trend following traders in my work illustrate trend following success, but my work is not an advertisement for anyone except me. Can trend following funds charge fees? Yes. However, in their defense the trend following performance numbers in all of my books are ‘after fees’.

4. Brokers are bullshit. If you like bullshit then you get what you want out of life by listening to brokers.

5. This video promotes the efficient-market hypothesis (EMH). Academics promote EMH like there is no tomorrow. Two big reasons? Many of these academics have rock solid tenure at the best universities and also make millions selling EMH text books. Everyone has a motivation, but I will hold my books up against this video every day of the week.

Why Does Trend Following Work?

  
  Education
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  • It is a statistically valid concept to have a “bias” in the otherwise random drift or a series of numbers.
  • It is as simple as Newton’s Law of Physics, a body in motion tends to stay in motion, a body at rest tends to stay at rest. A trend is nothing more than a momentum in a series of price movements.’
  • The markets only allow a few people to make money, and the majority of traders, regardless of what they might think, or say, do not know how to do it correctly (trend following). 
  • The markets exhibit maximum perversity. This means that the trends will only come about after most of the people have lost most of their money and have already given up in disgust. Then, when they do come, and nobody believes it anymore, eventually these people have to start chasing the market, and that’s what makes the trend continue.

    • Confidence

      
      Education
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    Confidence can be an important psychological tool for the trader – important enough to make the difference between a winning trade and a losing trade. When you develop your trading plan, it is obviously important that you have confidence in its accuracy and usefulness and in your belief that you can follow your plan closely and execute it successfully. 
    Often, traders fall into a mental “I know it all” trap, where they use their confidence to nurture their ego instead of using it to be appropriately decisive in their trading and investing decisions. Such misplaced confidence can be crippling to trading success, because any potential influence from the environment (media, others’ opinions, etc.) that could sway the trader from sticking to his trading plan will have far more power. When a trader is caught in this type of trap, his ability to question his opinions and ideas diminishes. If his initial reaction to a suggestion is to accept it, he loses the capacity to question his acceptance; and if his initial reaction is to disagree, then he loses the capacity to question his disagreement, which can cause even the slightest suggestions from news, colleagues, and other influential sources to be magnified in the trader’s psyche.  (more…)

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