Month: February 2013

You can look at this “8 million ways to Sunday” – and still sit back at the end of the day wondering…. if you’ve got a freakin clue as to what’s really going on. I feel for you, and to a certain extent share your pain. It’s hard work  no question….as the “risk vs reward”  should have most people running for the hills – not jumping into markets. Yet here we are day in and day out……searching for returns.

I’m up a piddly 3% on the day (and the month for that matter) – as it’s been tough out there. The easy money “trending environment”  has quickly morphed into its evil brother the “meat grinder” – as my afternoon’s sipping high end mezcal, and swimming with sea turtles takes a back seat to “grinding it out” in front of the computer screen.

Well…..not this time.

A valued reader recently asked me why I don’t like “sideways action” – as there are trade opportunities abound,  should one choose to “nickel and dime it” in the trenches of smaller time frames and ranging currency pairs.  Psychologically – I really don’t care for that. I’ve learned to step on the gas in the straight aways……and ride the brakes through the corners.

Most importantly  – we all need to find what works for us. No one is right. No one is “better than the other” as the “trading experience” is unique to every individual.

Finding your “own way” is an important step in becoming successful.

I’m still of the mind set this is setting up for the “blow off top” and likely see a couple weeks holiday in my immediate future as I’ll take it for what it’s worth…and trade sharp as a knife.

Exhausting……yes.

The normalcy bias, or normality bias, refers to a mental state people enter when facing a disaster. It causes people to underestimate both the possibility of a disaster occurring – and its possible effects.

The assumption that is made in the case of the normalcy bias is that since a disaster never has occurred then it never will occur. It also results in the inability of people to cope with a disaster once it occurs. People with a normalcy bias have difficulties reacting to something they have not experienced before.

People also tend to interpret warnings in the most optimistic way possible, seizing on any ambiguities to infer a less serious situation.

I continue to endure the “blind optimism” I am faced with day in day out – as the general masses do their best to bury their heads a bit deeper in the sand.

An aside…..Spain only just squeaked through 2012 by using 90% of its social security fund to buy Spanish debt. The country now has over €200 billion in new debt to issue in 2013. The EU Crisis is still very much in play – just not on your local T.V screen.

If you seriously think this thing is going up “forever” or perhaps just drunk on the “Fed’s Kool-Aid” – Normalcy Bias might be a concern.

I find it fascinating that the U.S media is absorbed with the potential cuts of some 85 billion dollars – while the printing presses currently rattle that off  – every single month. How interesting it is, as the media suggests “country-wide job losses” as a result  – that 85 billion in printing per month can’t produce an increase in jobs!

The graphic in the post below puts things in perspective:

Quantitative Easing For Dummies

The gig is up here soon I imagine – as I seriously can’t understand for the life of me – how American citizens continue to accept/trust that the “powers that be” have their best interests in mind.

You’ve got 85 billion a month going up in flames ( well…..actually just being deposited with the big banks on Wall Street ) while the “media machine” continues to scare the living daylights out of you – with concern of potential “cuts” – and how they will affect your daily lives.

These are not cuts – the “proposed cuts” only mean – LESS GIVEN.

So…..If I told you I was gonna give you ( a defense contractor ) “x” number of dollars MORE next year in INCREASED SPENDING…..then call you back and let you know that I’ve got a couple other bills to pay etc…and the amount of “EXTRA MONEY” will be a touch less – THEY CALL THAT  A CUT?

And the drones fly.

Click and read.

I realize now – that any kind of “day-to-day” documentation of my trade activity will be near impossible…..let alone extremely  time-consuming and more than “just a little tedious”. I imagine I’ll have to pullback here, and continue with the outline of general concepts and background  fundamentals as – the day-to-day stuff is just  too fast n furious to blog in real-time.

For what it’s worth – I’ve held on to my “short USD” trades through today – and will plan to add to them when the turn presents itself. Looking at as many charts as I can  – this looks more like a “cleansing / rinse” if anything else – and I would need to see a lot more  ( as this move has primarily been in the EUR – with the USD barely gaining an inch on most) before considering switching gears and getting long.

HOWEVER – I did pull a complete “stop and reverse” in the short JPY pairs as of last night – to eliminate loss in the trades – and immediately switch to a profitable position. (please Google it.) This is not for the faint of heart, and not commonly practiced – but in this case did the trick. Net result being break even on JPY trades and still in the red ( for now) on the few dollars out there – short USD.

If this is any example of what you have to look forward to over the coming year ( which I feel it most certainly is ) you’ll need to find a way to survive. Holding “old turkey” is for the birds – and trading this is gonna be a task and a half.

The “chop” up here at the highs will do everything it can to empty accounts, as the day to day action will continue to confuse and confound.

Are we going higher? Is this the plunge? Should I get short? Are you buying here? ……………………Welcome to 2013.

Day trading refers to the practice of speculation in securities, specifically buying and selling financial instruments within the same trading day, such that all positions are usually closed before the market close for the trading day. Traders who participate in day trading are called active traders or day traders. (Thanks Wiki!)

Yesterday I took a number of positions  – under the general premise that:

• Risk on will continue.
• Safe haven currencies  will continue to be sold.
• Technical analysis suggested a reasonable place to enter.

A full day later and “good ol Kong” is clearly in the weeds on the trade. The USD has continued its upward move, and the Yen has clearly not “sold off” any further.

Reflecting on this we have much to learn:

• My position size ( my entry position ) is so small that I could really care less.
• If indeed I choose to remain in the trade ( which I do ) I will easily double my position at any given time…and then again double…and then again double if greater opportunity presents itself – If I choose.
• I can easily enter new positions in other currency pairs to “off set” further downside, as I will have learned from this “poor entry” that other “good entries” must be available in the opposite direction.
• I can blow the entire thing out – cry about it for about 10 seconds, and get my ass back at it as I’ve done countless times before.

Hmmmmmm…….decisions decisions……point being – If you swing for the fences and trade too large vs your actual account size / bank roll you don’t allow for this kind of scenario. Anyone who thinks they can pick a “magical entry”  time and time again – will be back working at McDonald’s by weeks end.

You get good at this by checking your emotions at the door – and trading within your means. I’ve got more options than I could imagine in a market that can only go up, down or sideways…..and we all know I hate sideways.

In a general sense I’ll give it another day or two in that…..I fully understand that pushing the upside here is exactly that – pushing. Frankly – I still don’t see a single fundamental change and have a hard time seeing the USD do anything more than this before rolling back over. “Tops” don’t just  flop over in a day – but I am very aware that the process is underway. I still think we see some kind of “euphoric blast” upward before this thing hits the skids as this just looks to easy. Wall Street needs to take things “past extremes” to get the last one of you off the couch and on the phone with your broker in fear you’re gonna miss it. That’s when we see the top.

Hey…..I trade for different reasons than you. I need to eat, I need to buy new shoes and I need to pay my bills –  just like everyone else. The only difference being – this is my job! No trade = no money, and no money is no good.

I am extremely leery of this market as a whole – but need to continue pushing in order to keep money coming in. Regardless of market conditions I need to keep digging, work longer hours, get up earlier, read more, find ways to keep money coming in. Patience in placing trades, is a mastery of human psychology and an absolute “must have” for the successful trader – but times arise when one must rely on other skills, other means to keep that plan moving forward.

With over 25 – 30 currency pairs at my disposal, you’d think I’d be able to find a place to put a buck or two – in order to stick to the plan right? RIGHT. When you win as often as I do, this falls into a simple area / category as what I’d like to call “managed risk”. I made “x” number of dollars last month –  and thus far I am willing to “risk x value of that” now – in order to keep the wheels turning. On a fundamental level I’m at odds with markets ( as we are so far stretched, all time highs, currency wars, etc) but can’t allow it to impede my abilities to extract cash.

THIS IS CALLED TRADING – NOT INVESTING.

I already know exactly  how much money can / will lose – to the penny I’ve already lost it. I know it, I love it, I embrace it. That’s the psychology of it. That’s what keeps you in the game.

Kong gets short USD as well JPY against the Commods. I can ( and just as likely will) lose money.

Big freakin deal.