Trading is not Hard

I love getting up in the middle of the night to find that the market is at an extreme for the week and it's been pausing for an hour or two; then continues on its way.  A low risk entry and potentially unlimited upside. 

In the last 2 weeks of December I cease my trading. Since markets are a "human behavior" phenomena, just about all the stupidity for the year has already been expended by mid-December, and everyone [rational] who trades has either booked their year's profits or accepted that they aren't going to recoup their losses until 2016.

The few irrational confirmed losers that feel the need to trade past the 15th are welcome to whatever profits I might miss from their passing my way. Trading statistics have proven it too, so feel free to avoid the anemic volatility and waste of time playing a lowered-edge environment.

And have an extra single malt or two over the two weeks. Preferably an 18 year old Macallan, recommended it to me by Barry Eisler- known for his John Rain series. Thanks Barry.

Trading is Not Hard

How you think about yourself, the markets and its other participants really helps you maintain an overwhelming edge.

In an interview Paul Tudor Jones was asked about his overall trading philosophy.

His reply:

I have very strong views of the long-run direction of all markets. I also have a very short-term horizon for pain. As a result, frequently, I may try repeated trades from the long side over a period of weeks in a market which continues to move lower.

When it was suggested that it sounded like he was performing a series of "probing trades" before he hit gold... 

He replied:

I consider myself a premier market opportunist. That means I develop an idea on the market and pursue it from a very-low-risk standpoint until I have repeatedly been proven wrong, or until I change my viewpoint.

The reason I mention this is due to his comment about pursuing the market from a very-low-risk-standpoint. Whether you do this from a trending standpoint (my preference) or a counter-trend point of view; the fact that you are doing it completely cognizant of the risk and make that part of your series of actions - is why your odds of success rise significantly over competitors who H-O-P-E that the market will go their way every time they put on a trade.

There are a lot of them - thankfully. Even governments get wrong minded. As large and as wrong as they can get; they represent Trillions in total profits-to-the-prepared when they're wrong.That's why trading is still a great feeding ground for prepared speculators who have their monkey under control.

Knowing without a doubt that you will act correctly when something big happens makes you the odds-on favorite in the race.

Over the next week, see if you can round up a copy of Zen in the Markets, by Edward Toppel. A perfect read this time of year, even if you've read it before. It'll get your mind right for the beginning of 2016.

ZITM is great not because it tells you the secret of making profits from the market. But because it lets you realize that you already know how and then facilitates you to do it.

Ed came up with some great TradeStation software that emulated what he wrote in the book for the E-mini S&P. I know that a few tried using it, but I doubt anyone does any longer. 

You have to have absolute faith in the concept that the market knows better than you where it is going.You turn it on and it buys the market if it goes up and turns around and shorts the market if it goes down, and then long..., and then short.... Until you either lose your account or make a ton of money.

If you do a tick-by-tick simulation over many years..., always-in-the-market; it is slightly profitable after commissions. But where it was REALLY profitable was when you are in a well-defined trend, the market is just paused-- and then it takes off again. What an idea to trade only at those times!!!!

If you haven't read Zen in the Markets; make a point of it.  Let me know if you can't get a copy.

We are at a serious juncture in the Forex markets. 

Oil prices are as low in real dollars as they've been for decades. Same with most commodities, and gold and silver. Countries (and currencies) that depend on commodity sales for their financial health are affected negatively. When commodities bottom and turn up, so do their respective currencies. We'll be watching the Aussie and Canadian Dollars closely this year.

Speaking of silver, the 1330 ounces of silver carried over from last year currently have a liquidation value of $18,526.90 (based on the 12/31/15 spot price of $13.93).

In the last few weeks I took some low risk breakouts in the AudUsd and the GbpJpy that I am holding over to the new year. And ONS has been treating us well this year.

I wish that I had been even more attentive to the Challenge account, as I'm sure I could have doubled the profits very easily. The forex side of the Challenge account from 2014 was $1,156.60, and we added an additional $619.78 this year.

The Forex

We are observing typical pre-holiday trading.  Every few years we get something exciting just before the end of year.  I'm always willing to accept it if we get it.  So far, the markets are pretty range bound.

I started off exiting my OneNightStand trade this morning at Midnight (00:00).  On Friday we sold GBP/USD @ 2.0181.  I exited this morning at 2.0184 for a 3 pip loss pluss a little for interest.  That cost me about $1.00.

Shortly thereafter, I had 4 FirstStrike trades executed this morning.  They were:

• eud/usd:  SELL 1.4391, stop 1.4451.    -Still in with a small profit.
• gbp/jpy:  SELL 227.81, stop 228.41.    -Stopped out for a 60 pip loss.
• gbp/usd:  SELL 2.0134, stop 2.0194.  -Stopped out for a 60 pip loss
• usd/chf:   BUY 1.1570, stop 1.1510.     -Stopped out for a 60 pip loss.

One of my readers emailed me this morning:
From the Oanda chart, it looks as if the short trade on GBP/USD has been opened and stopped out by 7:00 a.m. CST. Is this correct? If so, will you reinstall the reverse FirstStrike order to go long on this market or are you done with GBP/USD for the rest of the week? And generally, are you going to have some rule regarding reverse FirstStrike orders for your challenge or you will rather decide on whether or not to use reverse orders on case-by-case basis? --T.K
Thanks T.K. for the questions.  I'm sure others would like to know more too.

---Yes. No. Yes. No.---Yes, GBP/USD was opened and stopped out. No, I won't reinstall the reverse FirstStrike order to go long on this market. Yes, I am done with the GBP/USD for the rest of the week. No, there will be no rules added about adding reverse orders. If anyone wishes to do reverse orders, they are welcome to do that of course.

The reverse FirstStrike can sometimes be THE trade of the week, and by not taking a second or third trade, you can miss the largest move of a week.

READ THIS CAREFULLY: If this Alpha account only traded the second FirstStrike trades after a losing first trade, trading this way could still be very successful. But not the best. You would miss the largest and most profitable outliers. Trading "seconds" is not as risk-adjusted, or profitable as taking the very first trade of the week.

The problem many people have is they become action junkies in their trading. I know, because I've had to tremendously modify my own behavior in this area. The more you enjoy trading the greater the problem you can have in this area.

To summarize:If you know what your systems edge numbers are, trade those numbers.

Does this mean that you can't deviate at all from your trading plan? Depending on who you are, yes, or no. Certain people need to have an absolute plan or system that they will never deviate from. That is their security.

Others understand the cause of the edge behind the numbers, so they occasionally may deviate from a rigid plan because they are after additional return that they may know is hidden behind the scenes.  If you can do this and not hurt your bottom line, "go with God".  I personally ONLY take trades that have proven to have a risk-adjusted edge.  

Long explanation for T.K's questions, but in short:I plan on making very few deviations from the systems traded here. In the long run, trading mechanically with OneNightStand and FirstStrikeshould exceed anyone's financial wishes.One last comment on this subject.  If I see free money sitting out in the market, I will take advantage of it.  And then I will try to explain to you later why I "had" to take the additional trade.  Deal?
-----------
I still have the following USD/JPY orders working-- 
BUY 113.61, stop 113.01--SELL 112.61, stop 113.21.  OCO (One cancels the other)

• If either of these orders gets elected, the other is cancelled.  
• If the elected order gets stopped out for a loss, FirstStriketrading is done for that pair for the rest of the week.
• If the order is elected and is not stopped out by the end of the week, I will exit the market just before 15:00 CST on Friday.

So far, we have had nothing but resounding losses this week.

Last week's ending equity:                       $535.40
4 loss trades (1 ONS, 3 FirstStrike:       15.62 -                    
Current total:                                              519.78

Forex Related News

I love getting up in the middle of the night to find that the market is at an extreme for the week and it's been pausing for an hour or two; then continues on its way.  A low risk entry and potentially unlimited upside. 

In the last 2 weeks of December I cease my trading. Since markets are a "human behavior" phenomena, just about all the stupidity for the year has already been expended by mid-December, and everyone [rational] who trades has either booked their year's profits or accepted that they aren't going to recoup their losses until 2016.

The few irrational confirmed losers that feel the need to trade past the 15th are welcome to whatever profits I might miss from their passing my way. Trading statistics have proven it too, so feel free to avoid the anemic volatility and waste of time playing a lowered-edge environment.

And have an extra single malt or two over the two weeks. Preferably an 18 year old Macallan, recommended it to me by Barry Eisler- known for his John Rain series. Thanks Barry.

Trading is Not Hard

How you think about yourself, the markets and its other participants really helps you maintain an overwhelming edge.

In an interview Paul Tudor Jones was asked about his overall trading philosophy.

His reply:

I have very strong views of the long-run direction of all markets. I also have a very short-term horizon for pain. As a result, frequently, I may try repeated trades from the long side over a period of weeks in a market which continues to move lower.

When it was suggested that it sounded like he was performing a series of "probing trades" before he hit gold... 

He replied:

I consider myself a premier market opportunist. That means I develop an idea on the market and pursue it from a very-low-risk standpoint until I have repeatedly been proven wrong, or until I change my viewpoint.

The reason I mention this is due to his comment about pursuing the market from a very-low-risk-standpoint. Whether you do this from a trending standpoint (my preference) or a counter-trend point of view; the fact that you are doing it completely cognizant of the risk and make that part of your series of actions - is why your odds of success rise significantly over competitors who H-O-P-E that the market will go their way every time they put on a trade.

There are a lot of them - thankfully. Even governments get wrong minded. As large and as wrong as they can get; they represent Trillions in total profits-to-the-prepared when they're wrong.That's why trading is still a great feeding ground for prepared speculators who have their monkey under control.

Knowing without a doubt that you will act correctly when something big happens makes you the odds-on favorite in the race.

Over the next week, see if you can round up a copy of Zen in the Markets, by Edward Toppel. A perfect read this time of year, even if you've read it before. It'll get your mind right for the beginning of 2016.

ZITM is great not because it tells you the secret of making profits from the market. But because it lets you realize that you already know how and then facilitates you to do it.

Ed came up with some great TradeStation software that emulated what he wrote in the book for the E-mini S&P. I know that a few tried using it, but I doubt anyone does any longer. 

You have to have absolute faith in the concept that the market knows better than you where it is going.You turn it on and it buys the market if it goes up and turns around and shorts the market if it goes down, and then long..., and then short.... Until you either lose your account or make a ton of money.

If you do a tick-by-tick simulation over many years..., always-in-the-market; it is slightly profitable after commissions. But where it was REALLY profitable was when you are in a well-defined trend, the market is just paused-- and then it takes off again. What an idea to trade only at those times!!!!

If you haven't read Zen in the Markets; make a point of it.  Let me know if you can't get a copy.

We are at a serious juncture in the Forex markets. 

Oil prices are as low in real dollars as they've been for decades. Same with most commodities, and gold and silver. Countries (and currencies) that depend on commodity sales for their financial health are affected negatively. When commodities bottom and turn up, so do their respective currencies. We'll be watching the Aussie and Canadian Dollars closely this year.

Speaking of silver, the 1330 ounces of silver carried over from last year currently have a liquidation value of $18,526.90 (based on the 12/31/15 spot price of $13.93).

In the last few weeks I took some low risk breakouts in the AudUsd and the GbpJpy that I am holding over to the new year. And ONS has been treating us well this year.

I wish that I had been even more attentive to the Challenge account, as I'm sure I could have doubled the profits very easily. The forex side of the Challenge account from 2014 was $1,156.60, and we added an additional $619.78 this year.

Quick summary:

Silver value:        $18,526.90

Forex account:     $1,776.38

---------------------------------------

Total:                  $20,303.28

Still significantly above the $500 (40 times initial capital) we started with, but very significantly below the peak of over $50K a few years ago. Since big money is made in the fullness of a major trend I have no doubt the financial mistakes of numerous countries will provide some great opportunities and launch us into new equity highs.

I encourage you to take note of a quote by ― Sun Tzu, from The Art of War:

“If you know the enemy and know yourself, you need not fear the result of a hundred battles. If you know yourself but not the enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle.”

Knowing that there are things that can't be known-- is valuable too.

If I KNEW that silver would be at $13.93 today back in early 2010, I wouldn't have as much silver in the Challenge account. But I do know from history that when the rush into metal starts, it can be fast and furious and very difficult to accrue. And having actual physical silver, while currently a less-preferred investment globally, is part of a larger risk/reward scenario – for me.

Fortunately, even with imperfect knowledge of the future, knowing how and having the WILL to trade your specific assets precisely is more than enough for any success you could desire.

Forex News

Even though 13% gain in equity sounds OK, especially compared to the pitiful gains by CTAs this year - all of it was the gain in value of the 1330 oz.of silver being held over from last year.

It's been just over 9 years since I started this Infiniteyield Forex blog.  Of course, the bulk of posts were in the first couple of years. 

I appreciate the feedback I still receive from traders that read it back then and actually tried out the concepts discussed here.  There is no substitute for proving your own edge and then trading it.  Only real, lasting, successful traders do that. 

Only by the crucible of actually taking trades based on the faith of your proven convictions gets the success of having the correct (and large)positions on mammoth trends that others are too fearful of placing even token positions.

Most professional traders start being successful (and stay professional) by trading relatively simple trading systems/concepts.

Maybe they end up trading multiples of them and use sophisticated money-management, but their core trading systems tend to remain uncomplicated.

The best thing about simple systems is that they are not hard to test.

And one of the main reasons that systems like OneNightStand andFirstStrike keep generating profits for so many.  They're robust and SIMPLE.

I get emails every week from someone somewhere that's been trading ONS and/or FS for 5 years and they've been making $$$ in the Euro or Pound.  And then they've some questions about  whether it is OK to [fill in the blank...] 

I don't really mind all that much, but the reason I bring it up is this:  Traders make money from taking opportunities that are only available for a very short period of time.  We must be opportunistic in how we expect to profit from those situations.  The textbook definition of opportunist is:

"Opportunists are people who see a chance to gain some advantage from a situation. An opportunist seizes every opportunity to improve things for himself."

That could mean taking ONS and finding "robust" ways to profit from it by changing the official rules of the system.  Very possible - if you have valid reasoning and proof behind your alterations.  Not just optimizing the parameters until your backtest shows a higher return.

Trading systems are just systems that profit from (human) behavioral tendencies.  If you are able to significantly "drill down" to an even more "telling" behavioral tendency..., so be it.  May the profits accrue.

Forex Exchange Market

The foreign exchange market (forex, FX, or currency market) is a form of exchange for the global decentralized trading of international currencies. Financial centers around the world function as anchors of trading between a wide range of different types of buyers and sellers around the clock, with the exception of weekends. EBS and Reuters' dealing 3000 are two main interbank FX trading platforms. The foreign exchange market determines the relative values of different currencies.
The foreign exchange market assists international trade and investment by enabling currency conversion. For example, it permits a business in the United States to import goods from the European Union member states, especially Eurozone members, and pay Euros, even though its income is in United States dollars. It also supports direct speculation in the value of currencies, and the carry trade, speculation based on the interest rate differential between two currencies.
In a typical foreign exchange transaction, a party purchases some quantity of one currency by paying some quantity of another currency. The modern foreign exchange market began forming during the 1970s after three decades of government restrictions on foreign exchange transactions (the Bretton Woods system of monetary management established the rules for commercial and financial relations among the world's major industrial states after World War II), when countries gradually switched to floating exchange rates from the previous exchange rate regime, which remained fixed as per the Bretton Woods system.
The foreign exchange market is unique because of the following characteristics:

• its huge trading volume representing the largest asset class in the world leading to high liquidity;
• its geographical dispersion;
• its continuous operation: 24 hours a day except weekends, i.e., trading from 20:15 GMT on Sunday until 22:00 GMT Friday;
• the variety of factors that affect exchange rates;
• the low margins of relative profit compared with other markets of fixed income; and
• the use of leverage to enhance profit and loss margins and with respect to account size.

As such, it has been referred to as the market closest to the ideal of perfect competition, notwithstanding currency intervention by central banks. According to the Bank for International Settlements, as of April 2010, average daily turnover in global foreign exchange markets is estimated at $3.98 trillion, a growth of approximately 20% over the $3.21 trillion daily volume as of April 2007. Some firms specializing on foreign exchange market had put the average daily turnover in excess of US$4 trillion

The Currency Trading For Newbies: Introduction

When you choose to get involved in CashTrading, also known as Forex, you may realize that one small yet effective item about forex trading for newbies will probably fall far short of delivering 100% of the info you require. There are a ton of things to consider if it turns out you are going to begin the process of dealing in the Forex market. One must learn about the lingo, strategies, methods, and tactics that may help you to carry out winning deals. This is without doubt one of the major markets in the world and money is traded 7 days each week, on a 24 hour time frame.

Here in it’’s simplest terms, foreign exchange dealers, gamble on currency exchange levels between a variety of countries. A majority of these quotes frequently adjust by the minute and are powered by a huge number of things. The FX is actually a a hundred percent level arena. No company gets information in advance. Profitable dealers have techniques and signs that help them to spot a general change in track for a precise currency and take action on it without waiting. It takes some time and understanding to be able to grow this entrepreneurial expertise.

There are many environmental effects that affect the foreign exchange rates for countries. Conflicts, hardship, alterations in the economy of a country, illness of heads of state, etc. Everything that has an effect on the men and women in a nation alter the valuation on the currency in that land.

Guessing fluctuations in the price and choosing which pairs will result in the greatest profit is the main ambition of dealers. “Pairs” are, of course when ever one currency is traded against another country’’s money. Primary pairs most likely to be traded always include the United States dollar. Any sort of “cross currency pair” is a pair that does not include the United States $. For example the most popular cross currency pairs are JPY, GBP, and EUR. An illustration of the cross currency pair is GBP/JPY (British pound/Japanese Yen).

The more substantial currency reflected on a pair is by default shown on the right of the record. A good example would be when you see EUR/USD, you realize that the Euro is more substantial than the US dollar. This is identified as the “base currency.” Buying and selling automatically starts with your base currency. Subsequently, if you sell 1000 EUR, you”re buying one thousand USD at the same time. That’’s why it is called pairs. Think of it as elementary Algebra. Exactly what occurs on your left, the reverse takes place on your right at the same time.

In writing it will look like this, 10000 EUR/USD. The currency to the right is known as the “counter currency” or “secondary currency.” The price of this currency whenever you buy or sell your base currency will establish what your return or deficit is on the deal.

Looking through this fails to convey the rate with which deals are occuring. Trading is occurring right through all day and night each and every day of the year. Market conditions can also fluctuate by the moment with most of the currency pairs. There are pairs that offer less risk and extremely high risk pairs. You should establish which pairs fit in with the level of exposure you are likely to take.

It is so clear that, this is certainly just a tiny little peek at what you have to understand. FX trading for those seeking guidance is simply not a short topic. You will want to examine strategies and approaches. You will also need to explore Forex with successful traders by utilizing websites and forums to understand which strategic methods they use and what they have used that didn”t perform. When you are considering software packages and resources, you will need to be diligent to be sure they have been constructed by a person who is a real effective dealer and that this course they”re offering is constantly successful.