Is Trading All About Luck? – #AnirudhSethi

Luck of the Draw? There's a Lot More to Trading and I... - Ticker TapeOne of the biggest misconceptions about trading is that it is all just luck. Is trading really just a game of chance? Is there any way to improve your odds? The answer is no, and yes. Trading isn’t all about luck because you can make intelligent decisions on what trades to take, but at the same time not every trade will be successful. You have to accept failure in order to succeed.

##The idea of luck is a misconception:

The idea of luck is a misconception. It’s not about who has the most money, or even who knows what they are doing…it’s all about how your brain handles risk and reward in our complex world.

Do you know that research shows we make more impulsive decisions when stressed out? Stress may be one cause for some people to have an increased vulnerability to gambling addiction. This doesn’t sound like much fun! Some other factors which can increase susceptibility to gambling addiction include poverty, social isolation, prior mental illness, access to addictive substances such as alcohol or drugs, and family history of addictions (including “dipsomania”).

A study published in the Journal of Gambling Studies found that gamblers with a family history of addiction were more likely to have worsened gambling symptoms than those without such a history.

People who are addicted might not be able to control their behaviors and they may experience cravings for the activity – even if it’s harmful or dangerous. This is where trading all about luck comes in! If you can take your emotions out, then this will give you an edge over other traders on Wall Street. Is Trading All About Luck?

It’s possible some people just aren’t wired right when it comes to making decisions under duress which would explain why these people seem “luckier” at times – but luckily doesn’t mean there isn’t skill involved as well!

##Trading is about managing risk and being disciplined: (more…)

The full statement from the July 2021 FOMC meeting

FOMC statement from the July 28, 2021 meeting

Federal Reserve issues FOMC statement

For release at 2:00 p.m. EDT

The Federal Reserve is committed to using its full range of tools to support the U.S. economy in this challenging time, thereby promoting its maximum employment and price stability goals.

With progress on vaccinations and strong policy support, indicators of economic activity and employment have continued to strengthen. The sectors most adversely affected by the pandemic have shown improvement but have not fully recovered. Inflation has risen, largely reflecting transitory factors. Overall financial conditions remain accommodative, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses.

The path of the economy continues to depend on the course of the virus. Progress on vaccinations will likely continue to reduce the effects of the public health crisis on the economy, but risks to the economic outlook remain.

The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. With inflation having run persistently below this longer-run goal, the Committee will aim to achieve inflation moderately above 2 percent for some time so that inflation averages 2 percent over time and longer‑term inflation expectations remain well anchored at 2 percent. The Committee expects to maintain an accommodative stance of monetary policy until these outcomes are achieved. The Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and expects it will be appropriate to maintain this target range until labor market conditions have reached levels consistent with the Committee’s assessments of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time. Last December, the Committee indicated that it would continue to increase its holdings of Treasury securities by at least $80 billion per month and of agency mortgage‑backed securities by at least $40 billion per month until substantial further progress has been made toward its maximum employment and price stability goals. Since then, the economy has made progress toward these goals, and the Committee will continue to assess progress in coming meetings. These asset purchases help foster smooth market functioning and accommodative financial conditions, thereby supporting the flow of credit to households and businesses.

In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals. The Committee’s assessments will take into account a wide range of information, including readings on public health, labor market conditions, inflation pressures and inflation expectations, and financial and international developments.

Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Thomas I. Barkin; Raphael W. Bostic; Michelle W. Bowman; Lael Brainard; Richard H. Clarida; Mary C. Daly; Charles L. Evans; Randal K. Quarles; and Christopher J. Waller.

Implementation Note issued July 28, 2021



To HEAR you have to listen and listen intentionally. You will not HEAR properly if you are focused on other things. This situation is especially true on a webinar or during the trading day when the markets are open. It is essential to set distractions aside and HEAR what is being stated.


To RECEIVE something you have to HEAR it and come into agreement with it.  To RECEIVE is to take it unto yourself and personally grab hold of what you have heard and make it your own.


To be successful you have to believe that what you HEAR and RECEIVE can add value to your current situation. You have to BELIEVE that a specific strategy repeated and correctly  executed, regards of any specific outcome, will provide successful results over time. You will act on what you believe In all areas of life.  Please make sure you really do BELIEVE it and are not allowing any contradictory mindset to compete with your belief because it is possible to hold two opposing beliefs at once. This is being double minded and leads to instability.  Being firm and unswayed in what you BELIEVE can lead to becoming a successful trader.


APPLY Is taking action on what you BELIEVE. You will not fully apply something until you fully believe it. Application requires action. You must be willing to pull the trigger on a trade when all of your rules are meet or when all the T’s have been crossed.  You must also without reservation pull the trigger to exit at your predetermined stop loss. Regardless of what we think or BELIEVE we will also act out of core or dominant belief. To properly apply ourselves we have to revise our core beliefs.  If I APPLY all of my predefined rules for entry and exit even when the trades go against me, my core belief will keep me confident that I did the right thing in making this trade and over time I will accomplish my goals. In addition my loss will not stress me because based on following my predefined rules it was a small loss based on a predetermined, well thought out process.

As we move forward we should focus on hearing , receiving, believing and applying.

Timing vs. Price

Probably one of the biggest hurdles most traders are struggling with is their obsession with entry prices. You will often hear people brag about their entry price and how they picked a bottom. You mostly never hear them talk about their overall performance. Let alone the bad trades they made. Throw a few darts – you’ll be lucky every now and then.


Here is an example to show what I mean. One of the stocks I plan to enter is PCX – Patriot Coal. It is on my public list and I’ve annotated it. What I am looking for is a flag pattern to develop. If we get one – and right now it looks like PCX is indeed starting to build one – I will be watching it very closely. I will watch for clues if my entry rationale is still valid. Is price retreating in orderly fashion? Is volume decreasing during the consolidation?

So what about price? Does it make any difference if I buy at 9.00 or 8.50 or 8.00? You guessed it. I couldn’t care less. If the pressure is there and the stock is acting right I want to buy. If my timing is right I will make money. My entry price won’t matter.

Timing is more important than price!

Risk ahead for the EURO this week

ECB policy review and European summit

German bunds were trading at -0.46% yesterday on the 10 year chart which is 10bps lower than a Bloomberg modelled curve mentioned on the Bloomberg Live Blog yesterday. This is most likely due to positioning ahead of the European Council’s summit.

On Friday and Saturday of this week EU policy makers will meet to discuss the proposed €750 billion recovery plan.The big questions is whether nations like Austria, Denmark, Sweden, Netherland and Finland will block the plan. The  issue is that these countries are opposed to the idea of large handouts on principle.However, despite their reluctance, the present crisis means their reticence may be seen as mean spirited in a time of shared humanitarian crisis. The pressure is for the countries concerned about the ideas of grants rather than loans to approve this proposed fund.On July 10 we had a German official state that Netherlands is unlikely to block the EU recovery fund which is supportive of the fund being accepted.

On Thursday we have the ECB rate meeting with little change expected. With the PEPP program increasing by €600 billion euros last month  it is unlikely that we see any changes to the PEPP program on Thursday.

The risk

If the recovery fund is rejected by the frugal four expect immediate downside for the EUR. However, given that the second day of the meeting is taking place over the weekend this is going to be weekend risk for the EUR.

ECB policy review and European summit

A huge earnings calendar next week. 

A huge earnings calendar next week.

In addition to any escalation of the coronavirus, the stock markets will be tested next week by a plethora of earnings announcements.  The “Who’s Who” of companies will be announcing.  Below is the schedule of the major releases (subject to change):
Monday, January 27
  • DR Horton
  • Whirlpool
Tuesday, January 28
  • 3M
  • Starbucks
  • Apple
  • Pfizer
  • Lockheed Martin
Wednesday, January 29
  • Tesla
  • McDonald’s
  • Microsoft
  • Boeing
  • Facebook
  • AT&T
  • General Electric
  • Paypal
Thursday, January 30
  • UPS
  • Amazon
  • Coca-Cola
  • Electronic Arts
  • Biogen
  • Raytheon
  • Verizon
  • Northrop Grumman

Friday, January 31

  • Chevron
  • Honeywell
  • Caterpillar
  • Exxon Mobil
  • Colgate-Palmolive

Key events and releases next week

Key events and releases for the week starting November 18

Monday, November 18
  • US NAHB housing market index, 10 AM ET. Estimate 71 versus 71 last
  • Fed’s Mester speaks at University of Maryland, 2 PM ET/1700 GMT

Tuesday, November 19

  • RBA monetary policy meeting minutes, 7:30 PM ET (Monday)/0030 GMT
  • Canada manufacturing sales, 8:30 AM ET/1330 GMT.  Estimate -0.5 versus +0.8 last month
  • US building permits and housing starts, 8:30 AM ET/1330 GMT. Building permits estimate 1385K.  Housing starts 1320K
  • FOMC member William’s speaks, 9 AM ET/1400 GMT.  Speaking at Capital Market conference
  • New Zealand global dairy trade price index, tentative
  • BOC member Wilkins speaks, 1 PM ET/1800 GMT
Wednesday, November 20
  • Japan trade balance, 6:50 PM ET/2350 GMT (Tuesday). 301.0 billion versus -124.8 billion
  • Canada CPI, 8:30 AM ET/1330 GMT.  YoY estimate 1.9% versus 1.9%
  • FOMC meeting minutes, 2 PM ET/1900 GMT
Thursday, November 21
  • ECB monitor policy meeting report, 7:30 AM ET/1230 GMT
  • US Philly Fed manufacturing index, 8:30 AM ET/1330 GMT. Estimate 6.6 versus 5.6 last month
  • Initial jobless claims, 8:30 AM ET/1330 GMT. Estimate 219K vs 225K last week
  • US existing home sales, 10 AM ET/1500 GMT.  Estimate 5.5M vs 5.38M last
Friday, November 22
  • Australia flash manufacturing/services PMI, 5 PM ET (Thursday)/2200 GMT (Thursday).  Last month manufacturing 50.0.  Services PMI 50.8 last month
  • Japan CPI data, 6:30 PM ET (Thursday)/2330 GMT (Thursday).  YoY 0.3% versus 0.2% last
  • Japan flash manufacturing PMI, 7:30 PM ET/0030 GMT
  • German final GDP 3Q, 2 AM ET/0700 GMT
  • ECB Pres. Lagarde speaks, 3 AM ET/0800 GMT
  • France PMI data, 3:15 AM ET/0815 GMT
  • German PMI data, 3:30 AM ET/0 830 GMT
  • EU PMI data, 4 AM ET/0900 GMT
  • Canada retail sales, 8:30 AM ET/1330 GMT. Estimate -0.1% versus -0.1% last month
  • US Markit manufacturing/services PMI, 9:45 AM ET/1445 GMT.  Services estimate 51.5 versus 51.0 last month. Manufacturing 51.5 versus 51.3 last month
  • University of Michigan consumer sentiment (final), 10 AM ET/1500 GMT. Estimate 95.7 versus 95.7 preliminary

A Good Trade -One Liner

  • A good trade is based on your trading plan; a bad trade is based on emotions and beliefs.
  • A good trade is based on your own personal edge; a bad trade is based on your opinion.
    • “A trader should have no opinion.  The stronger your opinion, the harder it is to get out of a losing position.”  -Paul Rotter
  • A good trade is made using your own time frame; a bad trade changes timeframe due to a loss.
  • A good trade is made in reaction to current price reality; a bad trade is made based on personal judgment.
    • Your plans can make you money because you’re not trying go predict what will happen; you’re adjusting in real time to what is happening.
    • Always trade in the direction of the longer-term trend of your time frame where the easiest money is located.
  • A good trade is made after identifying and trading with the trend; a bad trade fights the trend.
    • “The answer to the question, ‘What’s the trend?’ is the question, ‘What’s your timeframe?”  -Richard Weissman
  • A good trade is made using the trading vehicles you are an expert in; a bad trade is when you trade unfamiliar markets.
    • In the markets you will see that money flows from those who have not done their homework to those who have”

61 -One Liner on Strategy

1. Always change a losing game; never change a winning game.

2. Always have a plan going into a match, and a backup plan.

3. Always have a surprise to pull out all the stops.

4. Reconnoiter your opponent before the match for his strengths and weaknesses.

5. Have a general strategy against all power players, and another against all control players.

6. Analyze every match – how would you play it differently next time.

7. Keep a log of your strategies, and of the opponents.

8. Always have a customized strategy against each opponent, if possible.

9. Call a timeout whenever you skip two straight shots, or the opponent runs three straight points.

10. Keep a coach in the crowd for a second opinion. (more…)

10 Mistakes -Done By 95% Traders

  1. Not honoring your original stops. Big losses make winning systems losing ones.
  2. Quit trading it during drawdowns. All systems have losing streaks, the key is to manage risk and stick to it until the system has time to play out with profits as the market becomes conducive to your system’s method.
  3. Lack of discipline, drifting from taking defined entries and exit signals to  your own opinions is hazardous.
  4. Trading too big, no system can survive huge positions sizing that makes the first string of losses the last.
  5. Style drift is deadly, slowly changing your trading system during active trades is not good. Research has to happen after hours when the market is closed and backtested before changes are made.
  6. If you can’t mentally and emotionally deal with the equity curve of your trading style then you can’t trade it long term. You can’t quite during losing streaks or get too excited during winning streaks.
  7. You have to believe that your method will work over the long term, confidence comes from research, backtesting, and homework.
  8. Don’t trade someone else’s system, build your own. Custom to fit who you are by using the principles that you believe in and work.
  9. Trading too big during losing streaks ruins the potential of winning, don’t try to get back the blood the market took from you instead try to stop the bleeding by trading smaller and smaller until a new winning streak emerges.
  10. Straying from the trading plan and making one big, bold, can’t miss trade and blow up all your previous profits. Don’t let greed make you do something stupid, stick to the plan.
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