rss

Flood of Japanese money rushing to USD assets

Bloomberg report on Japanese investors, facing ongoing negative rates domestically, are buying dollars and risk assets

  • “The presence of the Japanese as the main carry trade driver seems to be growing as they must turn to overseas investments”
Demand for higher-yielding American assets growing
  • In April, Japan’s money managers bought the most U.S. corporate debt in eight years and the second-highest amount of equities in five years
  • “Japanese investors use yen to fund purchases of Treasuries or U.S. corporate bonds, for instance, to seek credit spreads and these flows are continuing,” said Koichi Sugisaki, a strategist at Morgan Stanley MUFG Securities Co. in Tokyo.
Check out USD/JPY … its net more or less unchanged, even a little lower, since November last year …. Without all the Japanese money leaving yen into USD it’d have to be lower I guess?
Bloomberg report on Japanese investors, facing ongoing negative rates domestically, are buying dollars and risk assets 

SOME WELL-KNOWN ALGORITHMIC STRATEGIES

On a broad sense most commonly used algorithmic strategies are Momentum strategies, as the names indicate the algorithm start execution based on a given spike or given moment. The algorithm basically detects the moment (e.g spike) and executed by and sell order as to how it has been programmed.

One another popular strategy is Mean-Reversion algorithmic strategy. This algorithm assumes that prices usually deviate back to its average.

A more sophisticated type of algo trading is a market-making strategy, these algorithms are known as liquidity providers. Market Making strategies aim to supply buy and sell orders in order to fill the order book and make a certain instrument in a market more liquid. Market Making strategies are designed to capture the spread between buying and selling price and ultimately decrease the spread.

Another advanced and complex algorithmic strategy is Arbitrage algorithms. These algorithms are designed to detect mispricing and spread inefficiencies among different markets. Basically, Arbitrage algorithms find the different prices among two different markets and buy or sell orders to take advantage of the price difference.

Among big investment banks and hedge funds trading with high frequency is also a popular practice. A great deal of all trades executed globally is done with high-frequency trading. The main aim of high-frequency trading is to perform trades based on market behaviors as fast and as scalable as possible. Though, high-frequency trading requires solid and somewhat expensive infrastructure. Firms that would like to perform trading with high frequency need to collocate their servers that run the algorithm near the market they are executing to minimize the latency as much as possible.

Adaptive Shortfall

Adaptive Implementation Shortfall algorithm designed for reduction of market impact during executing large orders. It allows keeping trading plans with automatic reactions to price liquidity.

Basket Trading

Basket Orders is a strategy designed to automated parallel trading of many assets, balancing their share in the portfolio’s value.

Bollinger Band

Bollinger bands strategy is a trading algorithm that computes three bands – lower, middle and upper. When the middle band crosses one of the other from the proper side then some order is made.

CCI (more…)

Six EU states to scrap bans on short-selling after today

Austria, Belgium, France, Greece, Italy and Spain decide to scrap bans on short-selling stocks that began back in March

Besides Italy, the other five EU states will see the bans expire at 2159 GMT today and they have decided against renewing it. For some context, the bans were introduced back in March due to “excessive market volatility” and were extended back in April here.

As the other market watchdogs choose not to extend the bans, Italy is following to cut short their short-selling ban – supposed to be until 18 June – to align itself with the others.

Sell Buy

Fed Powell press conference highlights

Feds Powell conducts press conference after January 2020 interest rate decision

Fed's Powell
  • Fed wants to avoid misinterpretation with inflation wording
  • Not comfortable with inflation persistently under 2%
  • Want to signal not comfortable with prices below goal
  • We expect Bill purchases to make reserves ample in 2nd quarter
  • Fed will know when adjustments have run course when reserves are durably at a sustainable level
  • At some point the Fed will raise minimum bid rate on repos
  • reserve levels will have to be at a level high enough to remain ample. 1.5 trillion will be the bottom end of the range
  • he expects reserve fluctuation particularly around tax season
  • Fed will provide more details and will keep the process a smooth one
  • Fed’s attention is just to raise the level of reserves. That is our sole intention
  • Asked if Bill buying is QE , he says many things affect financial markets.
  • Most forecasts underestimated labor participation gains
  • Labor market continues to perform well
  • Labor wages have moved from about 2% to 3% currently
  • It is a bit surprising that wages haven’t risen more given such low unemployment

Market reaction:

  • Gold has moved to new session highs at $1575.84
  • US rates have moved lower with the 10 year falling to 1.5942%
  • NASDAQ index up 47 points at 9316.69. S&P index up 11.3 points (was up 13 points)
  • EURUSUD moved to New York session highs at 1.1015.  A trendline on the hourly chart is just ahead at 1.1017 and the falling 100 hour moving average is 1.10232
EURUSD looks to test topside trend line and falling 100 hour moving average

  • USDCHF is moving toward session lows.  Markets trading at 0.9728 from 0.9743. USDJPY moves lower as well (109.10 currently from 109.20).
More from Powell presser:
  • virus is a serious issue, significant human suffering
  • coronavirus likely to disrupt activity in China, maybe world
  • very uncertain about how far virus will spread
  • Fed’s carefully monitoring situation around coronavirus
  • sees grounds for cautious optimism on global economy
  • supportive financial conditions, trade tensions easing and lower odds of hard Brexit all contributed to more positive outlook
  • We will continue to adjust IOER as appropriate to help move the effective rate for the middle of the range
  • there is no current urgency to make decision on standing repo facility
  • over the long term it is possible there is a financial stability risk from climate change
  • in the very early stages of the impact from climate change
On China and USMCA
  • Phase 1 deal with China and USMCA is without question positive and should support the economy over time
  • Trade policies uncertainty remains elevated
  • Still have 2 or 3 active trade discussions going on at the moment
  • There is a wait and see attitude for businesses on trade
  • We need to be patient on trade deals economic impact
  • Does not yet see a decisive recovery for manufacturing
There is some modest moves to the downside in stocks and the USD has tilted to the downside (3:04 PM ET):
  • S&P index up 6.5 points
  • NASDAQ index up 32 points
  • The USD has ticked lower through the presser on a modest basis.
More from the Powell press conference:
  • We don’t think there is imminent risk on Chinese debt
  • Fed sees asset value valuations somewhat elevated, but not extreme
  • household that is in a good place
  • business debt is rising but not threatening stability
  • vulnerabilities to financial stability is moderate overall
Press conference ends at 3:23 PM ET.

quotations and euphemisms from : Reminiscences of a Stock Operator

  • It takes a man a long time to learn all the lessons of his mistakes. They say there are two sides to everything. But there is only one side to the stock market; and it is not the bull side or the bear side, but the right side.
  • I think it was a long step forward in my trading education when I realized at last that when old Mr. Partridge kept on telling the other customers, Well, you know this is a bull market! he really meant to tell them that the big money was not in the individual fluctuations but in the main movements that is, not in reading the tape, but in sizing up the entire market and its trend.
  • The reason is that a man may see straight and clearly and yet become impatient or doubtful when the market takes its time about doing as he figured it must do. That is why so many men in Wall Street, who are not at all in the sucker class, not even in the third grade, nevertheless lose money. The market does not beat them. They beat themselves, because though they have brains they cannot sit tight. Old Turkey was dead right in doing and saying what he did. He had not only the courage of his convictions but the intelligent patience to sit tight.
  • The average man doesn’t wish to be told that it is a bull or bear market. What he desires is to be told specifically which particular stock to buy or sell. He wants to get something for nothing. He does not wish to work. He doesn’t even wish to have to think. It is too much bother to have to count the money that he picks up from the ground. We love volatility and days like the one in which the stock market took a big plunge, for being on the right side of moving markets is what makes us money. A stagnant market in any commodity, such as grain has experienced recently, means there’s no opportunity for us to make money.
  • A man will risk half his fortune in the stock market with less reflection than he devotes to the selection of a medium-priced automobile.

64 points : Traders Reality Wisdom

Knowledge only becomes wisdom if it is transferred and applied. I have compiled 65 of the best
tweets that focus on the psychology of trading. This is beneficial for those who would rather refer
to this document in their spare time, maybe print it off and have it near their trading desk?
Enjoy…
1. It’s so important to understand what is meant by failure? Failure occurs when you lack
knowledge, even if you have the knowledge and still fail…well I guess determination and
perseverance come into play.
2. If you are prepared to study an indicators entry and exit criteria, why would you assume
that is all that is needed to make money. Pay more attention to the function of how the
market works. Then you will realise that indicators alone are not sustainable.
3. You have to build calluses in your mind. The tough conditioning of losses builds a
character that eventually develops a discipline of awareness and embraces uncertainty.
Train your mind to lose, perform to win…
4. The development of a irrational trading mind starts with the traders lack of conviction on
their preferred trading personality. It’s paramount to your progression that you establish
your trading personality.
5. Most new traders are back testing how their method will perform. Most new traders
neglect to train the mind which = emotional imbalances?
6. A Trader that boasts of his victories, tends to be hiding his losses. Entertain the Trader
that talks of losses for he has been humbled.
7. I used to take losses and be angry. Then I accepted one important element in trading. I
HAVE NO CONTROL OF UNCERTAINTY.
8. Believe Me When I Tell You…Unless You Accept Uncertainty, You Will Forever Have
Expectations That Will Lead You To Losses. Learn Acceptance.
9. Some Are Happy To Accept Reality Of Being Correct But Not If Wrong. This Battle In Our
Mind Will Forever Obstruct Our Progression as Traders
10. Losses are Gold to every trader.
11. An Old Saying Can Be Related To This “Observe Your Enemies (Emotions) They
Highlight Your Faults.
12. Many Hide From Losses. Little Do They Know, Losses Are The Key To Changing And
Becoming Aware Of What Needs To Be Done To Improve.
13. Trade for the moment, for the dwelling on expectation of a move is sure to upset and
damage Trading moral.
14. The market will never teach you how to win. It will teach you how to become one with
your mind. The battle is in our minds
15. Never Start Your Trading Week Convincing Yourself How Much Money You Are Going
To Make. Focus On Trading Well. The Money Will Come…
16. Rule Of Sales: Customer Is Always Right Rule Of Trading: Market Is Always Right!
17. Taking Time Away From The Markets Creates Transparency In Your Mind To Correct
Behaviours That Sabotaged Your Trading
18. Your philosophy is the determining factor to your trading success
19. The minute that we change our minds and stop giving power to the past, the with its
mistakes loses power over us.
20. Our brains use biological mechanisms to translate expectations of what we want to
perceive…Manage these mechanisms to trade mindfully.
21. Why Get Mad If Your Indicators Give You A False Signal? There Is No Indicator That
Factors The Unknown.
22. Never be excited to trade…This will set you up to avoid taking losses…More importantly
feeding The Ego.
23. It is through adversity, are you then able to reset your mind and focus on forming new
habits to overcome the self limiting beliefs.
24. There’s no greater wisdom than of those who tell you not to make a mistake.I guess the
smart learns from himself.The wise learns from others.
25. The only factors that MM rely on is Fear and greed of retail traders. Not to forget that they
make the market. So they can see all orders and simply send price in that direction to get
their orders filled
26. Does your imagination as a profitable trader hinder your approach to trading
successfully? Do not be fooled by short term success.
27. A Trader Will Continue To Encounter The Dark Perils Of Trading… It Is Only When He
Accepts That He Is Allowed To Be Wrong, He Is Then Free
28. Trading is about the expression of one’s character to manage their behaviour through the
chaos of the financial markets. Only when he is one with his mind he expresses his true
ability as a mindful trader
29. Let’s Face It…Trading Is Like This…Some Will, Some Won’t, So What!!!! Next Trade. If
you understand this…You free your mind of expectation
30. It’s Really About Taking Your Profits And Accepting Your Losses. Everything Else That
Intervenes Is Bad For The Trading Soul.
31. Trading Safely Is Like The Habit Of Driving Safely, Always Pay Attention, Whether You
Are Angry Or Happy, You Still Have To Drive (Trade) Safely. Habit Will Protect Your Car
(Capital)
32. Results orientated: in poker, you have no control of the outcome of the flop. You only
have the strength of your hand to go by. Acceptance and understanding of variance
sustains longevity. This is no different in trading
33. The beauty of trading is this. The harder you work, the harder it is to surrender.
34. The only way you can really apply yourself when taking a trade is to not care…how do
you do it? Simple. Practise…like driving a car. Are you continuously conscious of
changing gears? No. Subconsciously you do it without hesitation. It’s the only way to
move forward.
35. Anyone that enters into the realm of trading usually has the perspective of “me against
the market”…The true reality is, it’s “ I Against I” before you confront the battle of trading,
confront the battle in your mind.
36. A mistake that traders make, one that took me a while to overcome was once I entered a
position,I turned from a trader into an investor…Biggest mistake you can make. If your
position is losing, get out, don’t “ride it” in hope it will return. Waiting to break even costs
money.
37. Trading same way you would on a roulette table: 1) you bet/trade 2) your number
hits/trade is profitable 3) you take your winnings/close trade. So why would you allow a
winning trade to turn into a loss. Take whatever is given by the market. You never knew it
would be a winner.
38. Admitting that you lose is the first step to transitioning as to why you lose. Many traders,
even myself, have struggled with accepting this. It’s only when enough money is lost that
you then decide, “to survive in this game, I have to accept it’s OK to be wrong”
39. When you decide to not allow your conflicts of the mind deter you from making
systematic and objective decisions, you will be taking the first step to becoming a trade
40. Once you detach from the money. You then become a trader. A trader thrives on the
process not the result. Being results oriented most likely guarantees expectations, which
definitely guarantees upsets and mistakes.
41. Many will learn from their mistakes, but few focus and study their behaviour when they
were right…Learning from mistakes saves you money…Learning from your wins, makes
you money.
42. A Retrace. The idea behind it is “oh it needs a break” or “it’s taking a breath”…that’s what
the MM want you to think. A retrace is a stop hunt for the market makers to suck in as
much liquidity as they can to fill their orders.Don’t be fooled.
43. When you learn to detach from what the market is fooling you to believe, you are then in
a position to take advantage of the market makers momentum. Get in and get out. The
market is no place for heros. You will get slaughtered.
44. The mind is a great thing. Funny how you place a trade and then all of a sudden the entry
you took does not seem to align with your analysis? Hindsight does that to you. But we
can avoid this by simply accepting what is and not focus on what it could be.
45. There were days when I felt compelled to trade. This was because I had FOMO. Fear of
missing out mindset is guaranteed to make you successfully lose each time you enter
into the market with this way of thinking. Cash is a position too.
46. If you really want to succeed in this game, you have to let go my friends. This game takes
no prisoners. It doesn’t care if you have £1m account or £1, to the market, it’s liquidity,
they will take it from you. Unless you learn to play the game.
47. The great thing about trading is, you only need to be right 50% of the time..there are
traders that are right less than 50% of the time and are profitable.???Money
Management and Mind Management
48. Be aware of the FOMC. This is a passport for the market makers to really take out areas
of liquidity for their own gain. If you have profited from today’s movements. Great…Don’t
give it back. Let the Dumb money get swallowed.
49. At some point you will develop the skill set to be able to close a losing position and re
enter. Avoid being results oriented, focus on the process of execution, if done correctly,
the results will always be positive.
50. Your objective as a trader is to survive. If you trade and win, great…Next trade. If you
lose and lose small, great…Next trade. It really is all about the process of entry to exit
and simplifying this behaviour by managing your emotional imbalances.
51. Avoid thinking like the herd. It pays to really focus on the behaviour of the one who
controls the herd. Then you will have you answer.
52. You will only improve your trading if you allow yourself to. The same way stands if you
close a losing position when your rules tell you too and close a winning position when
your rules tell you too. Become me aware of your behaviour, then you can grow.
53. It’s nothing to be afraid of…Losses are indefinite in this game…Just aim to keep them
small
54. Trading is all about gathering the wisdom of those who are prepared to share their
losses, their wins and determination to find the balance with their mind.
55. Who cares if you made a call and said price would hit a certain price area, are you a
genius? Have you developed a flawless consistently profitable indicator? Who cares!
Demonstrate your ability to manage risk effectively before you claim the title of “Trader”
56. If you feel the market is out to get you…your right…but the flip side, the market can be
very rewarding, it’s all down to perspective and mindset.
57. Don’t fool yourself into thinking that the current trade you have is the final one. There will
always be tomorrow.
58. It’s no secret, the market makers will manipulate price.They can also manipulate your
mind. If your thinking is irrationally based, then this is your greatest adversary. Fix your
thinking…Then you will see trading for what it is
59. I guess the greatest tool to a trader is a drawdown….this exposes you, to your faults and
thoughts. Using a drawdown can be advantageous and help you improve your trading.
Drawdowns happen regardless. It’s what you decide to take from each one.
60. If there is one thing I can share with everyone. If your trading. Always Always Always pay
yourself…This game is about longevity
61. So you are left with a zero account after you had received margin call on a position to
only see it be closed out…the irony is, the moment you placed the trade, your mind said
“that’s too much”, but greed stepped in…be systematic, not impulsive
62. I guess the key to trading successfully is to accept that you have no idea how the market
will behave…However, have a very clear vision of how much money you are willing to
risk. Always make money management your priority
63. Always always protect yourself…I guess the #science of boxing and trading are really no
different. The battle you must overcome is the battle of ” I Against I”
64. There is no indicator that will manage your emotions during trading. However, executing
a plan, without hesitation will eliminate you responding emotionally to any circumstance that arises in the market

Avoid the pitfalls of ‘over trading’ and ‘under trading.’

* There are basically two types of over trading. Trading too often and trading too many shares/contracts.

* Remember that there really is no good reason to trade constantly, since extreme over-trading creates stress, produces high commissions and can often lead to more losses.

* Market forces do not last forever and time has shown various examples of the law of gravity in the trading market- that whatever comes up must go down. – and vice versa.

* Instead of grabbing every opportunity that comes along (or thinking that it is an opportunity) make sure each trade setup meets the criteria of your trading plan, don’t be over confident or scared of making trades.

* Utilizing a risk calculator to determine the appropriate position size before you enter a trade can help you determine how many shares/contracts you initially buy. You can start off with a small position and add as the trade continues in your favor. It relieves stress to know that the amount at risk for each position you hold is well proportioned to the size of your entire account and this is great asset management.

* Whenever you feel that you did not stick to your trading plan and made a mistake, quickly learn from that and let it go.

RISK MANAGEMENT

1.Never enter a trade before you know where you will exit if proven wrong.
2.    First find the right stop loss level that will show you that you’re wrong about a trade then set your positions size based on that price level.
3.    Focus like a laser on how much capital can be lost on any trade first before you enter not on how much profit you could make.
4.    Structure your trades through position sizing and stop losses so you never lose more than 1% of your trading capital on one losing trade.
5.    Never expose your trading account to more than 5% total risk at any one time.
6.    Understand the nature of volatility and adjust your position size for the increased risk with volatility spikes.
7.    Never, ever, ever, add to a losing trade. Eventually that will destroy your trading account when you eventually fight the wrong trend.
8.    All your trades should end in one of four ways: a small win, a big win, a small loss, or break even, but never a big loss. If you can get rid of big losses you have a great chance of eventually trading success.
9.    Be incredibly stubborn in your risk management rules don’t give up an inch. Defense wins championships in sports and profits in trading.
10.    Most of the time trailing stops are more profitable than profit targets. We need the big wins to pay for the losing trades. Trends tend to go farther than anyone anticipates.

10 Things Traders Must Quantify

  1. What exactly is your entry signal going to be? What technical indicators will trigger you to enter a trade?
  2. What will the perceived edge for your entries be based on? Will you quantify your entries edge with back testing of through trading principles?
  3. Will you wait for an initial move in the direction of your trade entry or will you enter based on a technical indicator trigger?
  4. How will you trade in different market environments and trends? Will you have better odds of success buying dips in bull markets and shorting strength in down trends?
  5. What is the risk/reward ratio for the trade you want to take? How much are you willing to risk if the trade is a loser? How much could you make if you are right? Is it worth it?
  6. What are the probabilities that this entry will be a winning trade based on past historical price data and charts? With the winning percentage in mind how big do the winners have to be and how small do you have to keep the losers for the trading system to be profitable?
  7. Where should your stop loss be? At what price level will your entry be wrong and signal you to exit the trade with a loss?
  8. How big of a position size should you take based on your stop level and total capital you are willing to risk on this one trade?
  9. Is your position size small enough to enable you to hold the trade without emotions effecting your ability to follow your trading plan?
  10. When you open this trade in addition to your other positions, how much of your total trading capital is now exposed to loss if all trades went against you at the same time?

Risk Management

  1.  Risk of Ruin-Never risk more than 1% of your total account capital on any one trade.
  2. Position Sizing-Use your capital at risk to understand the right amount to trade based on the securities volatility.
  3. Capital at risk: Never put more than 6% of your total capital at risk at any given time on all positions.
  4. Trailing stops- Always have an exit strategy to lock in your winners.