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The Wall Street Journal on China’s financial bubble in high-end sneakers.

  
  Analysis
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The Journal with a report “Chinese sneaker mania has gone into hyperdrive”

  • Speculators are flooding trading platforms and treating sneakers much like financial derivatives, including buying and selling shoe fractions
  • It’s all getting a bit much for the People’s Bank of China, whose Shanghai branch recently warned financial agencies in the city of sneaker-frenzy risk, including “mass disturbances,”
  • On trading platform Nice, a pair of Travis Scott Nike Air Force 1s is set to go on sale on Nov. 4 for around $170. Two buyers have already bought rights, similar to a call option, to buy the shoes for $1,553 and $2,667, respectively, and more than 2,000 users have said they are generally interested. More than 800 buyers are offering between $295 and $700 for a pair of Air Jordans set for release on Nov. 5 at $183.
Outstanding!

Risk:Reward

  
  Education
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The typical trader is not profitable, and I suggest that one must learn to operate differently than the typical trader.  One example is how the typical trader looks at risk versus reward. I’m not talking about probabilities or risk:reward ratios, I’m referring to something entirely different.  One of the things I do in my work with traders is teach them to look at it the following way: The trader determines the risk, but any potential reward is determined by the market. Thinking about risk versus reward in this fashion has a number of benefits.

It helps operationalize what I mean when I talk about focusing on what we can control and letting go of the rest.  It is also a good example of one of my rules in action, that we must be rigid with risk but flexible with expectations. This is part of the bigger picture of focusing on doing the right thing versus focusing on being right. And as I talked about in my recent webinar, a specific technique is for a trader to continually ask the following question at each point during the trading process when a decision or action is about to made: “Am I acting in my own best interest right now”.

Trading well over time requires that we control the risk and must be flexible with expectations by accepting the fact that we must adapt to what the market is doing regardless of our wishes.  It also serves as a reminder that upon entry, a trader is essentially assuming that if they go long/short they believe (and need)  other buyers/sellers are going to step in afterword and move the market even further by paying worse prices.

More on this extremely important idea of accepting risk and managing expectations in future posts.

Advice from Bob Knight

  
Education, Uncategorized
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bobbykI don’t know much about basketball, but I do know that if you’re confronted with a chair-wielding maniac like Coach Bob Knight, that you should listen to him. Surprisingly, he was most interesting speaker I have heard in years. Rather than relay his career/professional tips, I’ll instead regurgitate three stories he told to prove his points….
An old man and his grandson are walking a donkey along the road when a car stops and the driver says, “hey old man, you should let your grandson ride on the mule”. So the kid jumps on and they carry on.
Soon enough, another car stops and the occupant says, “hey kid, get off that donkey, you should let the old man ride”. They swap places and continue on their way. (more…)

Take the knocks

  
  Education
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I’ve identified recently that one of the most important internal abilities a trader needs is a seemingly endless supply of resilience to take daily knocks in the market and get back up. For me this shows up as a “not happening day”…

Some days its happening, but some days its not. As soon as I realize I’m in a not happening day the most important thing to do is quit right now and start again tomorrow completely fresh. Just forget it, start over tomorrow.

Each day in the market has no connection for the trader to the one before, its a clean slate. You need to just bounce back like a ball, fresh as a daisy. The sins of yesterday are completely forgiven, but you will be judged on how you act today.

Strangely I notice that these days also often line up to some degree with market behavior. My not happening days can sometimes be accompanied by a daily print that whipsawed in an ugly confused fashion.

This is not always the case, sometimes the market trends cleanly but I just didn’t get what was going on, I was in the wrong state to be doing this. Other days my head is clear but the market is a nervous wreck.

It is a strength though to be able to realize quickly that today its just not happening for what ever reason and to leave it for another day. If I’m in a position and i feel like this, I’ll just cut it, start flat tommorow. Usually these are positions that are going nowhere or else going bad anyway.

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