For a demonstration of the unsustainable course that European sovereign funding is on, look no further than Spain, where earlier the government auctioned off €2.468 billion in three year notes for a whopping 3.717%. The bid to cover was 2.27 compared to 2.16 in October, and it was reported that foreign buyers bid above 60% of the auction (which means the ECB funded domestic banks bought about 40%). However, the same issued priced at 2.527% at the last sale on Oct. 7, a 119 bps difference. Still it wasn’t all bad, considering the bond had traded at almost 4% in recent days. As Reuters reports: “Analysts and bond market players had predicted a leap of as much as 2 percentage points in yields, but Madrid’s situation has been helped by mounting expectations the European Central Bank will step up extraordinary measures to contain the crisis.” The problem for Spain is that it has minimized the amount of debt it is issuing during turbulent times: “The Treasury had cut the amount of bonds on offer in order to trim financing costs as it faces down market doubts on whether it can bring down its deficit due to sluggish economic growth and persistent concerns it might need to bailout its debt-laden banks.” And the problem for the ECB is that it most likely, as many analysts are predicting, will not announce anything of substance, as otherwise the ECB will have to monetize up to €1.5 trillion in total debt and interest through the end of 2011. The result for the EUR will inevitably be disastrous in either case, and if in 25 minutes JCT indeed announces nothing, look for all those who bid up the bond auction earlier to be tearing out their hair as the 3 Year promptly passes 4%.
Archives of “measures” tag
rssPsychology and Gaining Confidence
Hi All,
There has been a lot of talk on the psychology of trading and getting rid of fear etc. I think that one way to help is to understand the performance parameters of your trading system and this means extensive
backtesting and changing the way you think when entering a trade.
Now whenever I have placed a trade I have assumed that I was wrong and so if the market did not immediately prove my position correct I would be taking measures to reduce my position and, if necessary,
get out. This kept my losses small and when correct I was able to do nothing and just move my stop up. This is contrary to the way most people trade in that they place a trade assuming they are right and wait
for the market to prove them wrong.
IAlso if you have backtested a system thoroughly you will know what percentage of profitable trades you can expect. From this you can also determine the number of consecutive losing trades that you can
expect for a given number of trades. The formula is quite straight forward and is:
Consecutive losses = LN(N)/-LN(S) where
N = Number of expected trades
S = (100-strike rate %)/100
Now if you place say 30 trades a month and you have a 50% success rate, you can expect to have 5 consecutive losing trades.
But the more trades you place the bigger the chance of consecutive losing runs. So if our trader has 12 x 30 trades a year = 360 they can expect to have nearly 9 consecutive losing trades.
Of course the opposite is also true in that you could expect to get 9 consecutive winning trades as well. The problem is that I have seen many systems that have only a 40% success rate and in the same
example above this would result in 12 consecutive losing trades. Psychologically this is very difficult to handle yet if you had backtested your system thoroughly it is easily seen that this is to be expected and
means that your system is operating within normal parameters.
Food for thought I hope
Psychology and Gaining Confidence
There has been a lot of talk on the psychology of trading and getting rid of fear etc. I think that one way to help is to understand the performance parameters of your trading system and this means extensive backtesting and changing the way you think when entering a trade.
Now whenever I have placed a trade I have assumed that I was wrong and so if the market did not immediately prove my position correct I would be taking measures to reduce my position and, if necessary, get out. This kept my losses small and when correct I was able to do nothing and just move my stop up. This is contrary to the way most people trade in that they place a trade assuming they are right and wait for the market to prove them wrong.
IAlso if you have backtested a system thoroughly you will know what percentage of profitable trades you can expect. From this you can also determine the number of consecutive losing trades that you can expect for a given number of trades. The formula is quite straight forward and is:
Consecutive losses = LN(N)/-LN(S) where
N = Number of expected trades
S = (100-strike rate %)/100 (more…)
Why is Jim Rogers Sceptical of India's Future?
Investor and Adventure Capitalist Jim Rogers remains deeply sceptical of India’s future. In an interview with Forbes India, he argues the country is sitting on a fiscal time bomb.The finance minister has changed the direction of India’s budget deficit by reducing the target for 2010-11 to 5.5 percent.
You really believe it will happen? Go back over the years and see their previous claims.
He has got a lot of praise for that in India. Still you are not impressed. Why?
Even if it happens, it is not being done by sound budgeting. It is from selling off the family jewels if it happens.
Don’t you think a high deficit was justified last year when the government had to spend and help the economy revive?
No. They are just trying to push the problems out into the future rather than solving the underlying problems. Do you really think the solution for a problem of too much debt and too much consumption is more debt and more consumption?
Are we not living in extraordinary times when we have to follow such flexible policies?
We are indeed. They are making the problems worse in extraordinary times which require tough measures to correct decades of abuse.
The finance minister rolled back some of the economic stimulus measures he had announced last year. Would you have preferred to see a complete rollback than a partial one?
Yes. And more.
If you were to set an agenda for the government, what would that be?
Cut spending and subsidies dramatically. Many studies have shown that countries start having serious growth problems when debt is 90 percent of GDP (gross domestic product). India is now [at] 80 percent and will be [at] 90 percent soon under this budget. The subsidies distort the economy in less productive areas.
Self-Beleif – Inspiration Poem. – 'The Man Who Thinks He Can'.
In the constant battle for success in trading, there are many qualities needed to overcome the many hurdles put up by both the market and ourselves. People may possess these qualities in varying measures and differing degrees, however there is one quality which all people need to possess: ‘Self belief’. – Without this, you are almost certainly beaten already, and when you lose this, the perils are many.
‘Self-Belief’ is a quality shared by winners across all fields, from sports, to business, to trading. There is a wonderful poem, written about 100 years ago, which nicely captures and summaries this point. – I advise many of my trading clients to print this poem off and keep it close to hand:
_________________________________________________________________________________
The Man Who Thinks He Can.
By Walter D.Wintle.
If you think you are beaten, you are
If you think you dare not, you don’t,
If you like to win, but you think you can’t
It is almost certain you won’t.
If you think you’ll lose, you’re lost
For out of the world we find,
Success begins with a fellow’s will
It’s all in the state of mind.
If you think you are outclassed, you are
You’ve got to think high to rise,
You’ve got to be sure of yourself before
You can ever win a prize.
Life’s battles don’t always go
To the stronger or faster man,
But soon or late the man who wins
Is the man WHO THINKS HE CAN!
If you think you dare not, you don’t,
If you like to win, but you think you can’t
It is almost certain you won’t.
If you think you’ll lose, you’re lost
For out of the world we find,
Success begins with a fellow’s will
It’s all in the state of mind.
If you think you are outclassed, you are
You’ve got to think high to rise,
You’ve got to be sure of yourself before
You can ever win a prize.
Life’s battles don’t always go
To the stronger or faster man,
But soon or late the man who wins
Is the man WHO THINKS HE CAN!