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CFTC commitments of traders. JPY longs increase vs the USD in the current week

  
  Analysis
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Forex futures positioning data for the week ending May 26, 2020

  • EUR long 75K vs 72K long last week. Longs increased by 3K
  • GBP short 22K vs 19K short last week. Shorts increased by 3K
  • JPY long 35K vs 28K long last week. Longs increased by 7K
  • CHF long 9K vs 9K long last week. Unchanged
  • AUD short 40k vs 39K short last week. Shorts increased by 1K
  • NZD short 15K  vs 16K short last week. Shorts trimmed by 1K
  • CAD short 34k vs 35K short last week. Shorts trimmed by 1K

Highlights for the week:

  • EUR remains the largest speculative position at 75 him K followed by the AUD at 40K. The traders are long EUR (short USDs) and short AUD (long USDs).  The JPY is the next largest position at 35K. The speculative position is long JPY (short USD).
  • There are three currencies that are long vs the USD (EUR, JPY an CHF) and 4 currencies that are short vs the USD (GBP, AUD, NZD and CAD).

CFTC commitments of traders: EUR longs trimmed for the 2nd week in a row.

  
Analysis, Forex
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Forex futures positioning data for the week ending May 5, 2020.

  • EUR long 76K vs 80K long last week. Shorts trimmed by 4K
  • GBP short 12K vs 7K short last week. Shorts increased by 5K
  • JPY long 27K vs 32K long last week. Longs trimmed by 5K
  • CHF long 8K vs 6K long last week. Longs increased by 2K
  • AUD short 33k vs 38K short last week. Shorts trimmed by 5K
  • NZD short 15K  vs 14K short last week. Shorts increased by 1K
  • CAD short 32k vs 29K short last week. Shorts increased by 3K

Highlights:

  • the largest position change was 5K in the GBP, JPY and AUD. The GBP positions were increased by 5K, while the JPY and AUD positions were trimmed by 5K
  • The EUR long remains the largest position, but is lower for the 2nd week in a row. The net long over the last 2 weeks has seen the 87K to 76K this week
  • The AUD and CAD are the next largest positions at 33K and 32K respectively. However, traders are short AUD,and long CAD.
Below is a chart of the deposition in the EUR.  Although lower from the recent peak, it is still near high levels for the year, and high levels going back to June 2018.
Forex futures positioning data for the week ending May 5, 2020.

4 Dirty Words of Trading

  
  Education
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Should– Phrases include: “The market should have” and “I should have”. Those phrases are often used to socialize losses. They are a strong signal something is off. They should be used to aid you in correcting your vision not make you feel better.

Must– Phrases include: “The market must…”, “I must make money”, or “I must trade”. The market does not have to do anything and neither do you. When you use the word “must” it is hardly ever from a position of strength. The market knows when you are desperate and will take full advantage of you. Keeping your expenses as low as possible will make it easier to not make those statements.

Won’t– Phrases include: “The market won’t…” or “I won’t make money”. Notice a theme here? You are part of the market, you are not the market. Not getting what you expect, even if it is positive, confuses the brain. If you expect to lose and don’t it is still a bad outcome. Your brain is going through enough as it is. The market is a one way walkie talkie, you listen, it talks.

Can’t– Phrases include: “The market can’t..” or “I can’t…” or “I can’t lose anymore”. Yes the market can, go look at a chart. Go look at a Fed day or about any chart from 2008. Not only can it happen, it does happen. There are no more once in a lifetime moves in the market. There are and always have been life changing moves. No one ever said trading was easy but at least in the case of futures someone is taking your money. If you think you can’t, you probably wont. The market will take every penny you have. If can take every penny you put at risk. Fix the problem, when you run out of money it is too late.

Cut Losses Short

  
  Education
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Cut losses short is the sister rule to the let profit run, and is usually just as difficult to implement. In the same way that profitability comes from a few large winning trades, capital preservation comes from avoiding the few large losers that the market will toss your way each year. Setting a maximum loss point before you enter the trade so you know before-hand approximately how much you are risking on this particular position is relatively straightforward. You simply need to have a exit price that says to you this trade is a loser and I will exit before it gets any bigger. Due to gaps at the open, or limit moves in futures we can never be 100%
certain that we can get out with our maximum loss, but simply having the rules, and always sticking to it will save us from the nasty trades that just keep on going and going against our position until we have lost more than many winning trades can make back.

If you have a losing position that is at you maximum loss point, just get out. Do not hope that it will turn around. Given that trades are either winners or losers, and this one is shouting Loser at you, the chances that it will turn around and become a large winner is tiny. Why risk any more money on this losing trade, when you could simply close it out (accept the loss) and move on. This will leave you in a much better place financially and mentally, than holding the position and hoping it will go back your way. Even if it did do this, the mental energy and negative feelings from holding the losing position are not worth it. Always stick to your rules and exit a position if it hits your stop point.

Traders -Remember These Two Words-Won't & Can't

  
  Education
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Won’t– Phrases include: “The market won’t…” or “I won’t make money”. Notice a theme here? You are part of the market, you are not the market. Not getting what you expect, even if it is positive, confuses the brain. If you expect to lose and don’t it is still a bad outcome. Your brain is going through enough as it is. The market is a one way walkie talkie, you listen, it talks.

Can’t– Phrases include: “The market can’t..” or “I can’t…” or “I can’t lose anymore”. Yes the market can, go look at a chart. Go look at a Fed day or about any chart from 2008. Not only can it happen, it does happen. There are no more once in a lifetime moves in the market. There are and always have been life changing moves. No one ever said trading was easy but at least in the case of futures someone is taking your money. If you think you can’t, you probably wont. The market will take every penny you have. If can take every penny you put at risk. Fix the problem, when you run out of money it is too late.

Trading is a business

  
  Education
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Trading can be mastered if you concentrate your efforts on how you will react to price rather than desiring to predict it. Reacting is a business decision, predicting is an ego play.

Traders want to make money. Losses in the long run don’t matter. Forecasters (prophets) want to be right (ego). And that’s all that they are concerned about.

Don’t decide anything (ego), let the market do that job for you (business).

Like any other business you have a business plan and the financial portion of that plan is the most important.

In this business your inventory is stocks, bonds, futures or options. Like any other business you define what an acceptable loss is on an item and what is an acceptable profit for the risk undertaken. Like any other business if the item of inventory doesn’t do what you expected it to do, you put it on sale and liquidate it to raise capital to purchase inventory that will do what you want it to do. Your acceptable loss is your stop. Your money management system tells you how much that is. Your mark up is dependent upon your trading system and trading style. It doesn’t make any difference if you are a day trader or an investor. Like any business, some turn their inventory 10 times a day, some 20 times a year and some only twice a year. Your trading style and inventory volatility will tell you what your turnover rate will be.

Trading is a business and if you treat it as anything else you will be a loser.

18 -Wisdom One Liners for Traders

  
  Education
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1. You will be tested mentally and emotionally this is not for the weak minded.

 2. Master Traders are detached emotionally from profit or loss. 

3. Boredom is the enemy of the master opportunist.

4. Haste is the enemy of great entry points.

5. Doubt is often followed by a lost opportunity.

6. The Trend will give you direction on your path.

 7. Having an exit strategy prevents unnecessary pain.

8. The laws of probability give strength to your fingers.

 9. Going against momentum brings forth the fools reward. 

10. Better the bad trade that is unrewarding. 

11. Habit is built on the principles of probability.


12. Know your exit point in the worst case scenario first.
13. The master trader is an escape artist.
14. When one knows the present they master the futures.

15. Set realistic goals and let the good times role.


16. A loss can be turned into a win when one is swift.
17. A master in day trading trades in an egoless state.

 18. Times of great probability are like diamonds falling from the sky.

Mark Cuban’s post mortem on Facebook

  
  Education
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His latest take on the facebook IPO is here. His points are in bold.

1. Say goodbye to the individual investor on Wall Street. Mr. Cuban argues that because the media hyped the FB IPO that Wall Street is to blame. OK, I agree the IPO was hyped. But is that Wall Streets fault? Isn’t it the media’s fault? Isn’t it the buyers fault for not doing their due diligence? Didn’t Morgan Stanley spend millions propping up the stock the first day?

No one has long term success by reading any single piece of media, especially without knowing the writers intentions.

Here is a brief explanation on how the market works. If there are more buyers than sellers it goes up or vice versa. Or more important right now, if they have the means to buy.

2. The Valuation Bubble in Silicon Valley is bursting – but not for the reasons you think. The idea of private investment seems great but the execution is far off. The value of any market is liquidity. That has to be one of the important factors when making an investment. You know why futures are gaining popularity and what will eventually lead to their demise? A central market place and the lack thereof. Their spawns will kill the market and liquidity. The less central a market place the more likely the forces within that market are able to take control.

Mark agrees with me on liquidity but my interpretation is that he makes an argument against his point not for it. Didn’t the public market do a much better job at pricing? Didn’t the private market fail more dramatically than the public is this case? (Some one that knows the details better than I, when they went public did private shares get converted 1 to 1? If it did not get converted 1 to 1 let me know and I will gladly change it)

I believe Shark Tank is a great reason why Wall Street will always exist. I do not feel bad for the euntrepreuners and or the Sharks. Each assume the other person will add value. Wall Street assumes the same thing but to more people But as Mr. Cuban already knows, not everyone can win. But would they do better if there were 10 sharks or 100 sharks? Would more companies get funded?

If you allow people to be stupid, they will continue to be stupid. Howard Lindzon wrote a post as well that I disagreed with on the basis of access. They are both a lot more successful than I so I could be wrong. Also both of those guys should know that you are more likely to get screwed privately than publicly. I think this might be changing but it hasn’t yet. Open is not bad, closed is not bad, bad is bad. Liquidity and cash is always king, deeper markets should lead to better pricing. (more…)

William Eckhardt Quotes

  
  Education
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Partner of perhaps the best-known futures speculator of our time, Richard Dennis.Created the famous trading group known as the Turtles. William has averaged over 62 percent return.  

“I take the point of view that missing an important trade is a much more serious error than making a bad trade”. 
”Buying on retracement is psychologically seductive because you feel you’re getting a bargain versus the price you saw a while ago. However, I feel that approach contains more than a drop of poison.”
”You shouldn’t plan to risk more than 2 percent on a trade. Although, of course, you could still lose more if the market gaps beyond your intended point of exit.”
”I haven’t seen much correlation between good trading and intelligence. Some outstanding traders are quite intelligent, but a few aren’t. Many outstanding intelligent people are horrible traders. Average intelligence is enough. Beyond that, emotional makeup is more important.”
”The answer to the question of whether trading can be taught has to be an unqualified yes. Anyone with average intelligence can learn to trade. This is not rocket science.”
”If you bring normal human habits and tendencies to trading, you’ll gravitate toward the majority and inevitably lose.”
”Watch idly while profit-taking opportunities arise, but in adversity run like a jackrabbit.”
”One adage that is completely wrongheaded is that you can’t go broke taking profits. That’s precisely how many traders do go broke. While amateurs go broke taking large losses, professionals go broke by taking small profits.”
”What feels good is often the wrong thing to do.”
”Human nature does not operate to maximize gain but rather to maximize the chance of a gain. The desire to maximize the number of winning trades (or minimize the number of losing trades) works against the trader. The success rate of trades is the least important performance statistic and may even be inversely related to performance.”
”Two of the cardinal sins of trading – giving losses too much rope and taking profits prematurely – are both attempts to make current positions more likely to succeed, to the severe detriment of long-term performance.”
”Don’t think about what the market’s going to do; you have absolutely no control over that. Think about what you’re going to do if it gets there.”
”It is a common notion that after you have profits from your original equity, you can start taking even greater risks because now you are playing with ‘their money’. We are sure you have heard this. Once you have profit, you’re playing with ‘their money’. It’s a comforting thought. It certainly can’t be as bad to lose ‘their money’ as ‘yours’? Right? Wrong. Why should it matter whom the money used to belong to? What matters is who it belongs to now and what to do about it. And in this case it all belongs to you.”  

10 Trading Quotes

  
  Education
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“Good investing is a peculiar balance between the conviction to follow your ideas and the flexibility to recognize when you have made a mistake.“ –Michael Steinhardt

Do not stay bullish or bearish go with the current flow of the market>

“There is only one side of the market and it is not the bull side or the bear side, but the right side.”-Jesse Livermore

Putting it all together, it is more than just numbers>

“Successful trading depends on the 3M`s – Mind, Method and Money. Beginners focus on analysis, but professionals operate in a three dimensional space. They are aware of trading psychology their own feelings and the mass psychology of the markets. Each trader needs to have a method for choosing specific stocks, options or futures as well as firm rules for pulling the trigger – deciding when to buy and sell. Money refers to how you manage your trading capital.” – Alexander Elder

The money is in the primary market trend, not jumping in and out>

“I think it was a long step forward in my trading education when I realised at last that when old Mr. Partridge kept on telling 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.” – Jesse Livermore

This is one of the best ways i Know to measure short term trends, and be on the right side of the primary moves>

“The 10 day exponential moving average (EMA) is my favourite indicator to determine the major trend. I call this “red light, green light” because it is imperative in trading to remain on the correct side of moving average to give yourself the best probability of sucess. When you are trading above the 10 day, you have the green light, the market is in positive mode and you should be thinking buy. Conversely, trading below the average is a red light. The market is in a negative mode and you should be thinking sell.” – Marty Schwartz

Why it is so important to let your winners run and cut your losers short>

“It’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you‘re wrong.” -George Soros

Eliminating the risk of ruin in one easy step>

By risking 1%, I am indifferent to any individual trade. Keeping your risk small and constant is absolutely critical.” Larry Hite.

Never add to a losing position becasue you are fighting the trend>

“Losers average losers.” this was posted in Paul Tudor Jones’ Office

This is successful stock trading summarized>

“My basic philosophy is: Expose your portfolio to the best stocks that the market has to offer and cut your losses very quickly when you’re wrong. That one sentence essentially describes my strategy.” – Mark Minervini

Trend Trading in a nut shell>

“It is always the best discretion to let the market show us where it is going and just simply follow (this would be prudent), rather than predict where the market is going and place a position (this would be gambling).” -Anne-Marie Baiynd

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