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It ain’t called catching, its called fishing


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It ainít called catching, its called fishing

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  #101 (permalink)
 suko 
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This real time performance stuff is maybe less relevant to me since I am not a day trader.

One thing I have been able to observe about myself using Lumosity is my tendency to choke or panic under pressure after errors. It's very clear. For instance, when I am doing one of the high speed matching games and I make an error, many times it can throw me into a long slump or blow the entire game score. I can't seem to get back into the groove for quite a while.

At the same time, though, having observed myself choking like this again and again, I am becoming able to get back on track and back to focus faster now, just by telling myself to "let it go" and get back to the next sprite that's coming onto the screen.

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  #102 (permalink)
 suko 
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I watched a buddy blow up an account with Forex, and it's also something that a lot of housewives here in Japan are famous for blowing the family savings on, so I have the FEAR of it.

When I started this whole process of learning about trading a year back, I was just going to "do a little investing" -- I never had the wildest idea that I would be learning to trade Forex a year later.

But I am slowly letting go of my old ideas and becoming willing to learn from you all here at futures.io (formerly BMT). I finally got my futures.io (formerly BMT) elite membership. I see that Forex is suggested as a good starting place to learn trading in the futures.io (formerly BMT) Intro Webinar, so I am going to override my fear and just do it with a $500 account.

Actually, the catalyst of this was Forex guru Rob Booker. I am a fan of his podcast, and in the past month or so Scot Welch was on a guest talking about Forex trading via robots. I became fascinated by this concept of robots. Toyz for boyz.

Then I found a discounted signup for Rob's Trifecta2 Forex trading course. The course only costs $27, and frankly the first webinar was so good that I think I have already got my $27 out of it. WTF, it's only $27, but that's enough of a committment to get me to follow through to the end.

Today I got my sim account on FXCM. Baby steps.

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  #103 (permalink)
 suko 
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I watched my first live trading webinar on the Trifecta2 course last night. Working my way through the introductory webinars for Trifecta2, going to learn to trade Forex.

In addition to the Kahneman book, for the Steve Ward trading psychology course, we are reading "The Hour Between Dog and Wolf: How Risk Taking Transforms Us, Body and Mind," which seems to be about "neuroeconomics" among other things. The brain chemistry of irrational exuberance.

Amazon.com: Customer Reviews: The Hour Between Dog and Wolf: How Risk Taking Transforms Us, Body and Mind

And also "The Attention Revolution: Unlocking the Power of the Focused Mind" which is totally what I need. Focus.

Amazon.com: The Attention Revolution: Unlocking the Power of the Focused Mind: v.ution eBook: B. Alan Wallace Ph.D., Daniel Goleman: Books

Some of the exercises in Steve's webinars remind me of Lumosity focus exercises, which I am enjoying doing every day.

Also "Mindfulness," which reminds me of zen training I did in the past.

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  #104 (permalink)
 suko 
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Rant time. Yesterday I was struggling to do some simple task in Excel. I'ts pretty pathethic, and also infuriating.

Despite my fancy brand name education, I have never learned how to use Excel properly.

I need to put that on my task list, Excel skills brushup.

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  #105 (permalink)
 tturner86 
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suko View Post
Rant time. Yesterday I was struggling to do some simple task in Excel. I'ts pretty pathethic, and also infuriating.

Despite my fancy brand name education, I have never learned how to use Excel properly.

I need to put that on my task list, Excel skills brushup.

I use Lynda.com and khanacademy.org to teach and train my employees. Lynda has an entire section for excel.

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  #106 (permalink)
 suko 
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Thanks. That Excel stuff on her site looks really good.

I need a lot of remedial training, it seems.

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  #107 (permalink)
 tturner86 
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suko View Post
Thanks. That Excel stuff on her site looks really good.

I need a lot of remedial training, it seems.

I thought I was good at excel, a few videos from her and I learned I knew nothing. but it is all there for me to learn.

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  #108 (permalink)
 suko 
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I despise Excel because a large part of my life is consumed with translating internal documents for Japanese corporations that use Excel for text, not numbers. Vast amounts of text in zillions of cells.

So, they are using Excel in place of Word. And they also use it in place of Powerpoint for graphic display of text information.

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  #109 (permalink)
 SMCJB 
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Do you still have your USLV position?

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  #110 (permalink)
 suko 
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As for USLV, I need to work on my black humor before I answer you.

I should say that the last time I did something this stupid was AAPL in 1999, which I bought at 62 and held down to the price of 6, when I finally capitulated just before they announced the iPod.

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  #111 (permalink)
 tturner86 
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suko View Post
I despise Excel because a large part of my life is consumed with translating internal documents for Japanese corporations that use Excel for text, not numbers. Vast amounts of text in zillions of cells.

So, they are using Excel in place of Word. And they also use it in place of Powerpoint for graphic display of text information.

Why?

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  #112 (permalink)
 suko 
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Why do they do that -- or why do we translators despise it?

My theory as to why they do it is that character based languages like Japanese and Chinese involve are organized by putting the characters each in the center of their boxes, instead of lining them up along a single base line as with Western type. So, there is at tendency to think in boxes and to organize blocks of text in tables.

And if you like tables, then Excel is a heck of a lot more powerful than Word.

Now the real question is why use Excel in place of Powerpoint. I still lack the insight into that one. Maybe it's like the people who somehow use Illustrator in place of Photoshop. I don't understand that either.


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  #113 (permalink)
 SMCJB 
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SMCJB View Post
Do you still have your USLV position?


suko View Post
As for USLV, I need to work on my black humor before I answer you.

I should say that the last time I did something this stupid was AAPL in 1999, which I bought at 62 and held down to the price of 6, when I finally capitulated just before they announced the iPod.

If your saying this whole journal is "Tongue in Cheek" that would make a lot of sense.

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  #114 (permalink)
 suko 
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SMCJB View Post
If your saying this whole journal is "Tongue in Cheek" that would make a lot of sense.

USLV has been a very good failure for me.

It has forced me to stop trading and go back and start over and get honest with myself.

I am not ready to trade yet.

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  #115 (permalink)
 suko 
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SMCJB View Post
If your saying this whole journal is "Tongue in Cheek" that would make a lot of sense.

If you asked me, "What did you learn between capitulating on your APPL trade in 2003 and the moment you took that USLV trade in 2013?"

I would have to answer "Absolutely nothing."

Painful admission.

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  #116 (permalink)
 SMCJB 
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So assuming this is a serious conversation, I would ask again; do you still have the USLV position?

If yes, it's clear that you still have not learnt anything.

If no, this journal is incomplete without an explanation of your capitulation.

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  #117 (permalink)
 suko 
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Yes, I still have it and it's eating at me.

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  #118 (permalink)
 suko 
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I have been asking myself lately if I learned absolutely nothing during the 10 years from 2003 when I capitulated on AAPL and my 2013 USLV trade.

And if not, why not?

During that 10 years I certainly spent a lot of time reading and studying, all this market-related infotainment we are exposed to on a daily basis. But did I learn anything of value about trading? Nope.

In 2003, I thought I had learned lessons like "do not trade" or "I am an idiot."

But looking back on it, I wasted that opportunity in 2003, which was truly a "teachable moment." If I had taken the opportunity that presented itself for some very serious introspection and focus, like I have been doing in this journal, then I might have learned something.

But instead I took the easy way out with an intellectually lazy-ass conclusion like "do not trade" or "I am an idiot." WTF, that's just a sort of reductio ad absurdum. The message is not "do not trade" it's "learn to trade, dammit."

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  #119 (permalink)
 Adamus 
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Hi Suko, I don't think you should underestimate your ability to forget what you learn. 10 years is a long time and if you're not doing it all the time, then your mind will offload the information. It's not like riding a bicycle - or at least not for me.

You can discover what your enemy fears most by observing the means he uses to frighten you.
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  #120 (permalink)
 SMCJB 
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suko View Post
I have been asking myself lately if I learned absolutely nothing during the 10 years from 2003 when I capitulated on AAPL and my 2013 USLV trade.

And if not, why not?

During that 10 years I certainly spent a lot of time reading and studying, all this market-related infotainment we are exposed to on a daily basis. But did I learn anything of value about trading? Nope.

Learning to trade (entries, exits, etc) is only one part of being a successful trader. You also need to learn discipline and have the right psychological make up. I think as many people fail at trading because of the latter as the former.

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  #121 (permalink)
 suko 
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SMCJB View Post
Learning to trade (entries, exits, etc) is only one part of being a successful trader. You also need to learn discipline and have the right psychological make up. I think as many people fail at trading because of the latter as the former.

SMCJB, I appreciate the fact that you, Big Mike, and others are telling me what I need to hear.

And I hope you all will keep following my story as I struggle to get my head together.

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  #122 (permalink)
 suko 
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One of those great Steve Jobs quotes, "You have to be willing to start again."

I continue to study and get my ducks in a row toward re-starting my trading. If I have learned anything, it's that I am not ready. And that I have to go all-out and prepare -- like I was going to law school or med school or something.

The other day I started watching the remarkable series of videos in which Tom Sosnof teaches his 24-year old daughter Case how to trade options, from a totally cold start.

Quite some time ago I happened onto one of those videos, about six months into the series, and there is Case talking iron condors and it was like she was talking Chinese algebra to me. I thought she was too darned smart and advanced for me, I could never do that.

Anyway, so the other day I drilled down into their archive and found the very first video, from January 2013. She's got a bright and shining face and an insistence on asking questions, getting definitions, going back over and over until she gets it cold, meanwhile putting Tom in his place. She says she watches an episode 10 times if she has to.

It's really hard stuff, and I have to admire and emulate the attitude of this 24 year old.

Gee, if she can admit that she has to watch something 10 times, I guess I can too. With sharp pencil in hand, taking notes.

https://www.tastytrade.com/tt/shows/wdis-season-1-tom-case/episodes

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  #123 (permalink)
 suko 
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QOTD: "The brain is designed with blind spots, and one of its cleverest tricks is to confer on us the comforting delusion that we, personally, do not have any ... Social psychologist Lee Ross calls this phenomenon "naÔve realism," the inescapable conviction that we perceive objects and events clearly, "as they really are."

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  #124 (permalink)
 suko 
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My corporate brokerage account was finally uapproved by IB. It's taken nine months to get to this point, so many obstacles and blind alleys.

I now have corporate bank account, business plan, accounting system, accountants, log software, investment strategy, risk management and game plan.

My ETF rotation strategy for my investment account, which I started back in November, is up 25% since inception, 14% YTD.

Slow and steady.


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"Persistence is very important. You should not give up unless you are forced to give up." -- Elon Musk
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  #125 (permalink)
 SMCJB 
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USLV?

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  #126 (permalink)
 suko 
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I have decided to start getting rid of it, finally.


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"Persistence is very important. You should not give up unless you are forced to give up." -- Elon Musk
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  #127 (permalink)
 deaddog 
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suko View Post
I have decided to start getting rid of it, finally.


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Why now? It seems to be in an uptrend since the beginning of June.
A trailing stop would make sense but why exit a position that is moving in your favor?

"The days when I keep my gratitude higher than my expectations, I have really good days" RW Hubbard
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  #128 (permalink)
 suko 
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Not going to sell all of it right away, but I need to free up some of that capital to fund a TOS account. Learn to trade options.


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"Persistence is very important. You should not give up unless you are forced to give up." -- Elon Musk
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  #129 (permalink)
 suko 
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One thing I've learned from holding that USLV position is that geopolitical shit can happen, like this ISIS thing, and suddenly PM reacts violently.

I think that if ISIS should take Bagdad I am going to be glad to have some USLV.


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  #130 (permalink)
 deaddog 
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suko View Post
Not going to sell all of it right away, but I need to free up some of that capital to fund a TOS account. Learn to trade options.


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TOS? Why not IB?
If you are learning you should practice on demo.

"The days when I keep my gratitude higher than my expectations, I have really good days" RW Hubbard
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  #131 (permalink)
 suko 
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deaddog View Post
TOS? Why not IB?
If you are learning you should practice on demo.

I do have the IB account now, although I am not sure they will allow me to trade options. Anyway, I think I can papertrade options via IB. I did notice their Probability Lab, and I look forward to playing with that.

The reason why I want a TOS account though is that I have been learning about options via Tastytrade, and they of course teach everything via TOS screens.

TOS has high commissions, though, so I do not think it's a realistic approach for trading once I get beyond the novice stage. Maybe use them for reference and trade via IB or Optionshouse is a better approach?

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  #132 (permalink)
 tmurray 
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You could open a TD Ameritrade account through Tasty Trade and get there discount. Option contracts are $1.50.

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  #133 (permalink)
TimingZones
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new here but read over your posts and can relate to your persistence.

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  #134 (permalink)
Limitless100
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Just read through most of your thread, thanks for posting! I admire your attitude towards trading/investing.

Any updates?

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  #135 (permalink)
 suko 
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I am gone fishin for the summer.

One of my rules is that trading and fishing don't mix.


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"Persistence is very important. You should not give up unless you are forced to give up." -- Elon Musk
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 suko 
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That's it, I am selling the USLV. And fuck me.

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 suko 
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Maybe the only thing I really learned in one year of carrying this loser is that it's a heavy psychological weight. It just crushes you to hold on to something like this.

Now that I have decided to sell, it's like the weight is lifted.

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 suko 
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A year ago I didn't even know there was such a thing as "revenge trading."

Now, as soon as the sobering weight of this bad trade is lifted, my first impulse is want to take the balance of my account and make a drunken hail mary revenge trade in something, anything at all, related to Ali Baba. Something that will instantly redeem me.

Ahem.

Ok, so one of the things I learned from the Steve Ward course was to simply stop, count to ten, and try to get awareness of these toxic feelings that are trying to push me back into trading blind. Once you get some awareness of the feelings, if you can identify it, then you can a grip on it. And then sobriety can set in again.

Awareness. Fear.

The first thing that comes to mind after revenge is Fear Of Missing Out. As in "Every darned retail investor out there it gonna make a bundle off $BABA, except me."

Well, um, no. The voice of sobriety tells me the Goldman Sachs is going to make a shitload of money.

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 suko 
Kyoto, Japan
 
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A little mystery quote for today:

"A person filled with gumption doesn't sit around dissipating and stewing about things. He's at the front of the train of his own awareness, watching to see what's up the track and meeting it when it comes. That's gumption."

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 ratfink 
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suko View Post
A little mystery quote for today:

"A person filled with gumption doesn't sit around dissipating and stewing about things. He's at the front of the train of his own awareness, watching to see what's up the track and meeting it when it comes. That's gumption."

What's done is gone, there's only now and what's to come.

Travel Well
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 Adamus 
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suko View Post
A year ago I didn't even know there was such a thing as "revenge trading."

Now, as soon as the sobering weight of this bad trade is lifted, my first impulse is want to take the balance of my account and make a drunken hail mary revenge trade in something, anything at all, related to Ali Baba. Something that will instantly redeem me.

Ahem.

Ok, so one of the things I learned from the Steve Ward course was to simply stop, count to ten, and try to get awareness of these toxic feelings that are trying to push me back into trading blind. Once you get some awareness of the feelings, if you can identify it, then you can a grip on it. And then sobriety can set in again.

Awareness. Fear.

The first thing that comes to mind after revenge is Fear Of Missing Out. As in "Every darned retail investor out there it gonna make a bundle off $BABA, except me."

Well, um, no. The voice of sobriety tells me the Goldman Sachs is going to make a shitload of money.

Fantastic post. Proof that longer time-frames don't make it any easier emotionally.

You can discover what your enemy fears most by observing the means he uses to frighten you.
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 suko 
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What's done is gone, there's only now and what's to come.

I just had a talk with my American-based accountant, who told me it was a mistake to open the account with Interactive Brokers and to close it and stay away from American banks, to go Singapore or Hong Kong.

I feel like I just got smacked win the face with a shovel.

Gotta pick myself up and move right along to the next task.

I really need a gumption-fix to keep going with this process.

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 suko 
Kyoto, Japan
 
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OK, so I have found one possibility, SAXO. And they have a local office here. Somebody else recommended them, too.

Looks like they only handle Forex and CFDs here.

So if I want to trade ETFs it would have to be through CFDs.

Anybody have experience trading CFDs?

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 deaddog 
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I just had a talk with my American-based accountant, who told me it was a mistake to open the account with Interactive Brokers and to close it and stay away from American banks, to go Singapore or Hong Kong.

.

Did your accountant say why?

"The days when I keep my gratitude higher than my expectations, I have really good days" RW Hubbard
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 suko 
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Well, I don't have the LLP set up right, it's too complicated, it's going to end up costing me a lot more in taxes, etc., etc.
"Plus you will have to pay me a lot, and that's unnecessary if you are in Hong Kong or Singapore."

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 suko 
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Having slept on it, I think I will get a second opinion on the tax accounting, or just ignore this advice. I have a tendency to let the tax tail wag the dog in my life. I think it's a much better approach to just go all out to make the money and then deal with the taxes.

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 suko 
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Restart Game Plan

Investment capital -- trend trading with "adaptive hedging" of ETFs on monthly rotation aiming at max. volatility of 20, max drawdown of 20%, Sharpe ratio of 1.4 (90% of capital)
Trading capital -- educational/experimental $500 accounts in Forex, microcap, options, etc.

We are going to trade according to the trading plan and follow the rules strictly. Results will be logged and journaled (here). I tried to use the Excel journaling spreadsheet I found here on futures.io (formerly BMT), but I think it's too fancy for my needs (maybe someday I will figure out what it all means). So for the time being, I am using a Mac App I got in the Appstore called "Alesco Trade Journal." I don't like it all that much, but it's pretty simple.

The investment for this month I made at ILF at $43.07 and this is hedged 50/50 with EDV at $110.98. Both positions are losing, but I am going to follow the rules and hold until Oct 1, then follow what the algorithm tells me to do. I am mentally prepared for a 20% drawdown.

I am going to follow Big Mike's advice and just stick with this one approach for a period of time, a year, and not switch around to other strategies and approaches.

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 suko 
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A distinction that I should append to the first post in this thread, but it's taken me a year to understand this.

In my lexicon:

Trading journal is record of the subjective thoughts about the trade, trading, markets, money, psychology -- words

Trading log is a record of the objective facts of the trade, the charts, PL, etc. -- numbers

You must have both of these, and they may overlap in the presentation, but they are distinct.

This journal of mine is intended to be mostly words, in other words a subjective journal. I do also include some objective log info, but not all of it.

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 suko 
Kyoto, Japan
 
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I posted that excerpt about gumption traps above, and I wonder how many people identified the origin of it.

Journal software. The reason why I came to futures.io (formerly BMT) a year ago is that I did a google search on "free trading journal software."

Turned out to be the absolutely best kind of serendipity.

It's like I came to an AA meeting as a homeless wino off the streets because I heard they had free coffee and cookies. Then I sat down and the message started slowly to penetrate my foggy brain.

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 suko 
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So I have been stuck in a gumption trap with the journaling software here on futures.io (formerly BMT).

The first part was that I found myself stuck in a thread with about 1000 posts. I just wanted the software and for it to just work. But first I have to struggle with this monster thread.

I finally get the version 4.5, unpacked on my machine, and then Mac Excel chokes on it. Debugger is throwing up tons of little screens. I shrug it off. Then I get the spreadsheet itself open at last.

Nirvana.

#1 Gumption trap: Except I cannot understand most of the Journal spreadsheet 4.5. Cannot figure out why the hell I would want to know all of this analytical information about my trades, even if I could understand what it's about.

#2 And then there's the further gumption trap that I cannot understand Excel well enough to understand what is going wrong, or why. Except that it's probably a version problem to begin with, and Mac-related.

#3 So there's a third gumption trap, that I need to be running this on Windows. And I need a decent working installation of Windows, anyway. Excel needs to run on Windows.

OK, I have identified these three issues. They are all doable if I break it down into small steps and just keep plugging away at it. Nothing outlandishly difficult here. It'll take no time at all if I just get my ass off Facebook, TV, and all my other time-wasting distractions and knuckle down with a little grit and determination. Sheesh, this is nothing.

And meanwhile I have found a couple of workarounds, including Panda Warrior's much simpler spreadsheet. All Praise Panda warrior!

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 suko 
Kyoto, Japan
 
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QOTD:"The financial and commodity markets are a never-ending experiment in social
psychology rather than an experiment in a physics laboratory."

--Murray Gunn "Trading Regime Analysis: the Probability of Volatility"

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  #152 (permalink)
 suko 
Kyoto, Japan
 
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My September ILF trade was a loser, and I am certainly glad I went ahead with the EDV hedge. Looks like for October I am going to sell the ILF and get some more EDV. Not sure yet.

As far as I can tell, electoral politics in Brazil, a tight race for President, had a drastic impact on their stock market. Add to this this ongoing debt debacle in Argentina, and it looks like the little Latin market rally is taking a breather. I guess that is one sketchy explanation of what happened.

On the positive side, for the first time ever I traded with a plan, according to the plan, and according to the rules. I was sorely tempted on a daily basis to break the rules. The psychology behind this was purely fear. And also a newbie desire to get points on the board on my first trade back.

I held fast.

In response to the voice in my head that is full of doubt about my strategy, I was able to respond calmly with a determination to exert discipline and follow the rules. If I go off track right from the start, that will set a bad precedent, and then the pattern will repeat again and again, buy high and sell low, lather, rinse, repeat, and I get chopped to pieces.

If there's one thing I have learned about trend trading, it only works for those who can stomach the drawdowns.

If I wanted to engage in a little unfair criticism of myself on this trade, I got hurt a little bit on cost basis, since I was not able to execute the purchase at the time I wanted. For October I expect to be spot-on.

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 Big Mike 
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Nice job journaling @suko.

I want to let you and all your readers know that in October futures.io (formerly BMT) has a Trading Journal contest w/prizes. The contest runs October 1 to October 31, and the three best journals (as decided by futures.io (formerly BMT) members) will receive a 150K combine from TopstepTrader.

The contest thread is here:



That thread will be open for posting starting Wednesday, October 1. As the author of your journal, you need to make a post in that thread linking to your journal, and then ask users to press the "Thanks" button on that post if they want to vote for your journal to win the contest.

Members can vote for as many different journals as they want. Votes are cast in the Contest thread only, and only on the first post made by the author of the journal that contains a link to their journal. This is done so I can easily count the "Thanks Received" by author/journal, and award the three prizes.

Mike

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  #154 (permalink)
 suko 
Kyoto, Japan
 
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Finally getting around to logging my Sept. ETF rotation trade:

ILF 904 buy 43.06 sell 10/02 35.89 LOSS 16.67%
EDV 9/04 buy 110.97 hold
EDV 10/02 buy 111.69 hold

Analysis: ILF trade was the worst performing trade for this strategy in the backtests since 2008. It came close to triggering my stoploss at 20%. Statistical anomaly, an outlier.

Criticism:
Bad -- did not enter trade at indicated time, due to technical issues. Failed to exit at indicated time due to user error. Good -- chose to put on the EDV hedge; followed the rules.

Psychology: my first trade back since sitting on the sidelines for a year; to have the first trade be a loser like this -- I mentally went through some changes over it. I can see that my mind goes all over the place during a trade like this, it's like the fog of war, and the only thing I have to hold onto is the Rules. Looking at how this trade went wrong, I am tempted to think that I am jinxed. Inside my head I identify this "jinxed mentality" as a pattern of magic thinking that I have always fallen back on. But actually, I am not jinxed. I show up and I execute and the results inevitably follow. I have a trackrecord that demonstrates this.

Something that I have discovered about myself is that I am good at following simple rules, I can overcome my inner fear, anger, and greed and just sit with it. Once the position is on, I can sit with it calmly. I don't give a fuck what that monkey inside my head is telling me to do this particular instant, I am going to hold fast.

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  #155 (permalink)
 suko 
Kyoto, Japan
 
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I wasn't planning to put any trades on yesterday, and so I dozed off at the NY open, which is bed time here, only to wake up a half hour later and discover an amazing looking looooooooong red wick on the EDV candle, shooting up 10 points. "That can't be real," I said.

Then the monkey trader in me took over, and pretty soon I was logged into the platform and contemplating buying some TMF or some other leveraged bond ETF. This is in spite of the fact that I am already perfectly positioned with EDV with a bunch of shares.

I'm looking at all sorts of issues that have gone up around 10% at the open, and Monkey Trader is saying "me too, me too."

And then I think back on the Year of Penitent Reflection I have just gone through over USLV, which I bought in exactly the same mindset. How painful that was.

Q: Did you learn anything in the past year?
A: Don't chase.

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  #156 (permalink)
 suko 
Kyoto, Japan
 
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So, next thing that catches my eye after TMF is UVXY (which is VXX on steroids).

I wanna buy me some vol in the worst way! (I wanna name my dog "vol")

So, I think back on the lessons of the last year, again.

Q: Did you learn anything in the past year?
A: Don't ever buy VXX. Ever.

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  #157 (permalink)
 suko 
Kyoto, Japan
 
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By now I have had time to assess the day's action for all of the trading ideas I had, mentioned above, etc.

Every single idea I had would have been a loser on the day, the way things played out. Far better that I just sat on my hands and let my EDV position run.

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  #158 (permalink)
 suko 
Kyoto, Japan
 
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QOTD: "Contango our old friend is back!"

[re VIX futures term structure]

This market has got me emotionally seesawing all over the place. It's amazing to me that one comment by somebody at the FED can have such an impact on sentiment. But it's been like this all year. One comment by the FED and...

My education continues. I find myself focusing my studies on volatility products even more. Tomorrow I am going to try a small swing trade in ZIV, as the term structure has reverted to contango. I am still not comfortable with the idea of fooling around with VXX for any time frame. I think a simple strategy of swing trading ZIV according to term structure, contango risk on, backwardation risk-off (instead of fooling around with VXX) may be worth trying out.

I am learning so much from all of this.

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  #159 (permalink)
 suko 
Kyoto, Japan
 
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QOTD: "What we are really talking about here is a derivative of a derivative."

Clarification: that last post was a bit elliptical. What I should have said was that volatility ETF traders seem to follow a strategy of XIV or ZIV risk-on when the front month(s) of the VIX futures term structure is in contango, which is 80% of the time, and then switching to VXX when the VIX spikes and backwardation of the term structure occurs on the front months, which is usually times of crisis. "Crisis alpha"

So, the typical trading strategy is to alternate between ZIV or XIV and VXX.

I spent a couple hours last night studying a charted timeline of the VIX term structure from 2004 to the present, with reference points at all of the historical events that affected volatility, such as FED announcements, yield curve inversion, invasions, etc. (As a Japan resident, I was a little surprised to see that the most cataclysmic event we have ever experienced over here, the Tsunami/Fukushima, hardly registered in terms of VIX -- I guess that shows how little Japan matters to US market sentiment).

Anyway, now I have a much better cause/effect grasp of VIX spikes and the resulting very scary spikes in VXX and XIV.

The much less volatile ZIV is a better vehicle for a newbie like me. I will leave the pursuit fo crisis alpha to the veterans.

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  #160 (permalink)
 suko 
Kyoto, Japan
 
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All day yesterday I was in the torment of the retail trend trader with a large position on. I spent all night reading the financial infotainment, blogs, twitter, futures.io (formerly BMT), etc., trying to bring up my market awareness. I am seesawing back and forth in my mind whether or not I should break my trading rules and take a very nice little profit in the trade I have on, or follow the rules and let it ride.

It's the very same torment I went through last month over ILF and BABA. I want to break the rules and then chase some momo, try and get one huge win. I need a huge win. Last night I wanted to sell my EDV and put on a significant ZIV position.

But I was unable to yield to temptation, after all, and I decided to follow the rules and sit on my hands.

I need to reconcile myself to the fact that I am going to be in the same torment every time I have a position on.

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  #161 (permalink)
 suko 
Kyoto, Japan
 
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QOTD: "Think of you and your intuition as friends, and your heart as a tag along younger brother. You don't like your heart but can't get rid of him, as he's family.

Everytime your heart plays up, and throws a tantrum, instead of getting distracted, you just ignore him, and follow your intuition. Your heart will eventually feel, silly and alienated and frantically run to catch up with you both.

This really puts in to frame that listening to and following emotion is like listening to a child."

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  #162 (permalink)
 suko 
Kyoto, Japan
 
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Closed out my EDV position at 113.83, for a 2.5% gain. The rules dictate that I hold until the end of the month, but I decided, after a lot of deliberation, to to ahead and break the rules and book the win now. Part of my reasoning is that I just don't want to hold this through the FED.

Objectively speaking, in terms of PL, this is the best winner I have ever had. Woohoo!

I am going to focus on the fact of the win. I can do this!

Trading results in a stew of pleasant and unpleasant emotions. I get blown back and forth by emotions all day. The only thing I have to hold onto is the rules.

(I have also decided that I am going to have to modify my trend trading rules somewhat, and modify the trading plan. My policy is that it's alright to revise/amend the rules, as long as it's written down.)

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  #163 (permalink)
 suko 
Kyoto, Japan
 
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Trades for November:

EDV 11/02/14 buy 114.14 still holding for December
MDY 11/02/14 258.3 stopped out 259.89
JPNL 11/03/14 50.14 still holding --a bad trade, and I think I will close it, because the position is not behaving the way it should be.

Over the past month I have picked up a lot more knowledge about volatility products, and I now believe I've got an edge, so I am going to take a position in ZIV.

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  #164 (permalink)
 suko 
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JPNL 11/03/14 50.14 stopped out 42.4.

Bad trade for a number of reasons, but I think the key point is that the stock did not do what I was expecting it to. Somehow it became decoupled from the index it is supposed to be tracking. Something broken there. I think this is another case of a trade that did not do what it was supposed to do and should have been closed right away when that became apparent, instead of waiting.


Working on my short volatility ETF strategies:

XIV 12/15/14 32.19

My first paper trade via TOS (account finally funded). Rationale is that the 1) VRP indicator is positive. 2) The VIX term structure was flat. Basic strategy here is to range trade XIV with short-term positions on a timeframe of days or weeks and collect weekly roll yield.

I need to learn more about futures, since this is all based on VIX futures.

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  #165 (permalink)
 suko 
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Doing lots and lots of study of volatility products. Starting to reference option greeks to enhance kitchen arguments.

Drilling down into volatility on the the TT "Learn" tab, which has a number of their best educational segments organized by topic:

https://www.tastytrade.com/tt/learn/volatility-products?locale=en-US

XIV 12/15/14 long 32.19 closed at 30.64 at 5% loss as VIX spikes up again

let's try again, term structure is flattened out again & VRP is still positive

XIV 12/18/14 long 30.84 holding at 31.99

A nice little round trip. Neither of these trades felt like high probability. I will keep playing with it.

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 suko 
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XIV 12/18/14 long 30.84 holding at 33.05, other indicator turned positive.
I am going to try a small live trade in XIV next.

Otherwise, my EDV rotation play stopped out at 24.81
This turns out to be the best trade I have ever made, in PL terms. Woohoo.
Who'd a thunk it, 20-year Treasuries?

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 suko 
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This nifty graphic sums up my state of mind at the moment:


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  #168 (permalink)
 suko 
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Taking advantage of the New Year's extended holiday here in Japan to evaluate my 2014 trading.

Bad:
-- held onto losing FOMO position too long
-- set stop too wide on ILF position
-- did another FOMO trade
-- swapped in and out of my core positions instead of sticking to plan

Good
-- identified my primary weakness as being FOMO
-- actually started saying "NO" to the FOMO voice in my head
-- decided to move to dollars based trading platform, from yen, made out big on FOREX
-- properly applied my hedges, for the most part
-- practiced pretty good discipline as for following rules and plan
-- kept writing this journal, and implemented a log in Excel
-- incorporated as a business, set up bookkeeping, got corp trading account
-- stuck to my core strategy without losing faith and switching (although very tempted)

Outcome, in PL terms, I was up about 14%, thanks to JPY FOREX. I do not take that to mean that the position trading was good, just that I got lucky, and I'm going to die another day.

I am reworking my trading plan based on what I have learned. I need to tighten up the risk management parameters. Up until now, I have been willing to accept a 20% drawdown for the year. Maybe later, I can come back to that, but for right now I need to focus on cutting the losses while following the rules.

One idea I am toying with is implementing the 3% rule I saw Hedge Fund Wizards; if you lose 3% on starting capital for the year you go to half positions, lose another 3% and you are sidelined.

Strategywise, I am going to break the portfolio down into three main parts +
A -- main rotation strategy of macro index ETFs 85%
B -- volatility strategy with VIX-based ETFs 10%
C -- educational portfolio with options, mainly credit spreads to learn how to trade volatility products with options 5%
D -- FOREX tiny allocation so I can learn day trading with FOREX and because we have a local FOREX traders club that I want to join for the human contact (lotta FOREX traders in Japan) 1%

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Thxo
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Congrats ... great performance.

suko View Post
JPY ...

Just curious, do you take multiple positions on that trade or just a single position ?

suko View Post
I do not take that to mean that the position trading was good, just that I got lucky, and I'm going to die another day.

well, maybe not, if we can catch another CB Divergence ...

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 suko 
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Thxo View Post
Just curious, do you take multiple positions on that trade or just a single position ?

I am not a FOREX trader, but my bank tells me that since I have a FOREX account I am one. That was the first big lesson of 2014, that I am a FOREX trader, whether I like it or not.

So, as for JPY, that trade was just a single round trip into and out of yen.

Incidentally, although I am short yen as a strategic, conviction based position, I cannot see myself day or swing trading JPY at this point. I think you place yourself at a lot of risk of very sharp gaps due to BOJ jawboning.

So, as for my tiny FOREX educational account, for 2015 I want to learn to trade USD/EUR, and maybe get a robot running. And I intend to learn all the Japanese FOREX trading lingo so I can hangout with the local traders. I love talking trading.

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  #171 (permalink)
 suko 
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Got my first options order filled. Bearish copper.

Single contract JJC vertical:
bought Feb 20 33 Put
sold Feb 20 29 Put

It took me nine months of studying and thinking and tinkering with my setup to get here.

Now I am going to practice with single contract trades until I really master this domain.

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  #172 (permalink)
 suko 
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Closed my first options winner, Feb 20 XES Vertical long put. Made $85 on the single contract in one day. Decided to manage the winner at 85% of max profit.

Wow, that was such a lot of hard work to get to the point where I could do this trade. I almost want to get TOS to cut me a check for $85 to frame and hang on the wall just to commemorate.

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 suko 
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JHFC I am learning so much since I started trading live in the past week.

Options trading -- I get it now. A little shaky on the execution, but that will come.

Just have to focus on the mechanics.

Mechanics skills will come only with making lots of trades.

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  #174 (permalink)
 suko 
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One of the first things I have learned is that the TOS commissions are too high. Sheesh. I need to get my IB account upgraded to Portfolio Margin options. I'll use TOS and dough to figure out the optimal trade, then place it on IB.

Platform arbitrage.

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  #175 (permalink)
 suko 
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I think I posted here back at the end of September that I posted a pretty painful loss on the first trade I made back from licking my wounds on the sidelines for a year. That loss was a statistical outlier for my rotation strategy, according to the backtests, a full standard deviation move -- I realize that now

But if I were superstitious or an adherent of magical thinking I would have taken that as a signal to give up on active trading.

Anyway, I modified my rules to include tight stops on my positions, in addition to hedging, and although I suffered a little bit of performance loss as a result, I have managed to grind back to break even these past four months. Whew!

Going forward, I am going to break the portfolio down into a couple of smaller segments and trade a couple of other strategies in tandem with the ETF rotation. I need to get the position size down. I am going to try out convexity capture hedging with the rotation strategy using TMV and SPX, and I think I can cut my position size in half that way.

Strategy No. 2 is short volatility ETFs, and this also involves convexity capture in terms of roll yield. Once I get portfolio margin options permissions, I should be able to reduce size here, too. That is a few months away.

Strategy No. 3 will involve selling premium. This will also free up a lot of capital. But I am not there yet.

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  #176 (permalink)
 suko 
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I broke down and decided to take a profit on EDV at 136.15 And now I am officially back from my loss in Sept.

When I get back into bonds I am going to do the convexity capture trade by shorting TMV.

Meanwhile I decided to double down on short UVXY at 25.19. This trade is very up and I think I will just go ahead and take a profit. Volatility is not going to stay down for long in this market.

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  #177 (permalink)
 suko 
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I had a eureka moment this morning over options.

I was looking at my Portfolio page in dough, which is the app I am using to trade options, and I saw that my long inverse ETF ZIV position was lined up on the screen right below my credit spread UVXY position.

Two positions with almost a 1 to 1 correlation, being both short VIX.

The amount of capital consumed by the options trade is 1/10th that of the long equity trade, but nevertheless the PL on the day was 3 to 1. And moreover the options trade is defined risk while the long equity trade is undefined risk.

Wow. I had heard all of this before, but it took seeing it on the screen to make it real.

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  #178 (permalink)
 suko 
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As for Strategy 2 Vol: This has been a hell week for me with a long equity XIV core position. My indicators are still lined up, so I will hold the position, but I am beginning to become very doubtful about the performance of XIV and think that it may be better to just short VXX. Honestly, these Vol products are sort of a maze, but slowly I feel I am getting to the core of the matter.

Strategy 1 Macro Rotation: I decided to sit on the sidelines with my rotation strategy. I did very well with bonds and also SPY over the past three months, but at the start of the month I felt that for now I just wanna go fishing with the core portfolio. Especially bonds.

Strategy 3 Learning options: I've got a 3 to 2 win/loss ratio, and that's encouraging. The losses have been mainly due to learning the mechanics. One of the things I have learned is that I have to get up at 5:30 in the morning and catch the market close (I have never been able to get up at such an hour, but I have been doing it, and if that is what I have to do, go totally against the grain and change my entire fucking life trade, then I am going to do it).

Another thing I have learned is that I really have to watch the liquidity on options, to just stick with the big names and forget about chasing the small fry on some lame directional theory. Those freaking market makers are just lickin their lips when you place a trade with a wide spread.

Another thing that's become clear is that FOMO is bred into the bone of my trading mentality. I cannot just make a rule or say that I am not going to chase or the like, I have to actively question my motives for placing a trade. Afterward, I am finding, when I look back on a trade that I made on my own trading ideas I usually see a FOMO element. Damn! There I go a again! It's a knee jerk reaction.

OTOH I resist the idea of contrarianism. But maybe this is the medicine to fight against my FOMO mindset. I put on a couple of contrarian trades in bonds in the past couple of weeks, and both of them came through with perfect execution. One credit spread in TBT I managed the win at 50% after about six days, and I came away feeling that I had really done a good trade for the first time ever. Size was small enough that I did not give a shit about PL, just getting the trade.

Finally I feel like I am starting to get into the "ain't called catching, it's called fishing" mentality that was my starting point for this journal. I just need to keep the momentum up and make a bunch more trades and keep the size down. I can always scale it up later, once I really know what I am doing.

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  #179 (permalink)
 suko 
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Starting this week, I have ratcheted up the game and been getting up at 5 am to trade the market close. This is damned painful. As a lifelong night-person, trying to trade the open and then the close of the NY market from Japan is a severe test of dedication. Almost makes me want to move back to the US just to trade. Just kidding, no decent ramen in the US.

Still sitting on the sidelines with my macro Rotation strategy. Thus far doing nothing is working out for Feb.

Strategy #2 -- Still holding my core XIV position at 29.95. Now that both the Greeks and Germans have blinked, and earnings are mostly over. VIX is settling down some. If Putin would just put his dick back in his pants.

I am keenly aware of the fact that I had plenty of chance to get back into XIV at 26, which is where my indicators said to, but I was too scared and/or lacking faith in the strategy. I think I entered around 29 merely because that number was anchored in my mind back in October, when I first started paper trading Vol.

This strikes me as anchoring bias.

Secondly, as for Trading Psych. This week for the first time, I took a couple of contrarian positions with the aim of starting to combat my FOMO complex. It's becoming clearer and clearer, once I go back and look at the logs, that there is an element of FOMO in almost every discretionary trade I make. Damn. I now have a trading plan pre-trade checklist with a box that says "FOMO?".

"Once you know better, you do better."

Strategy #3

So I put on a one contract bullish March credit spread in TLT on at 128.47 and a one contract bearish March credit spread on in SPX at 2050. These trades are small enough that I don't really care if they are both losers. The point is that they are contrarian, and that sticks in my craw. Goes totally against the grain. I wanna chase momo.

I put on another contrarian play this week in USO, a bullish Mar 16.5 17.5 vertical, on the thesis of mean reversion with oil. That one has surprised me by working out (why would I be surprised, well, or course because I am negative and pessimistic by nature, which is Trading Psych point #3 for today). I am currently at 35% of max profit on that one and look to take it off at around 50% next week.

Finally, to wrap up, my UVXY position from 1/28, a bearish Mar 25 26.5 vertical, is now at 40% of max profit at day 16, which you could say is right on schedule. I look to take that off at 50% next week. Then again, I might just let it run to 60%. In self criticism, at 10 contracts this one is sized too large for my level as an options trader. I realize that now. Maybe the best thing for my development would be for this one to turn out a loser, because that would convince me to keep the size dialed back until I get my legs under me better. Nah.

OTOH, if this one works out, it will be a convincing demonstration that I could transition my Strategy #2 Vol away from long equity to options. I don't like being long XIV period. I would much rather trade Vol defined risk. For that matter, I could do Strategy #1 with options. That's basically what I am doing with my TLT and SPX trades from this week.

Long post. I am learning a hell of a lot. Finally feel like I am gaining some traction here.

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  #180 (permalink)
 suko 
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Another thing I learned since starting options is the importance of liquidity. Big factor in two of the three losers I have had to date. Bid ask spread way too wide. An early object lesson.

This is the result of choosing underlyings based on some news or fundamentals related financial infotainment, instead of just looking at the numbers. The too clever-by-half complex. Gotta start out always with scans based first on volume, then focus on the spread.

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  #181 (permalink)
 suko 
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Chasing momo and trying to trade news. That's what I naturally want to do.

Indulge my addiction to financial infotainment.

I cannot overcome my prejudice that tells me reading the news is going to give me some edge.

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  #182 (permalink)
 deaddog 
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suko View Post

I cannot overcome my prejudice that tells me reading the news is going to give me some edge.

Can you define the edge that you might get? By the time you get the news it is probably already been acted upon by those who got the news before you.

"The days when I keep my gratitude higher than my expectations, I have really good days" RW Hubbard
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  #183 (permalink)
 suko 
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deaddog View Post
Can you define the edge that you might get?

Ha. I should have said the "illusion" of an edge. It's like the chasing momo thing, even though I know intellectually that it's useless, like a phantom limb or something, it's itchy.

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  #184 (permalink)
 suko 
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At one point last week every single position I had on was looking bad.

I ended up closing my JJC spread just before expiration. It was a winner at one point, but I held it to long, and when I went to get rid of it I realized there wasn't enough liquidity. This is a familiar pattern with my options trading thus far. The losers have been the ones where there wasn't enough liquidity. Duh.

So that's a lesson learned. Stick with the big names with lots of volume on the strikes I am trading.

I had another spread in USO, which is about as liquid as they get, bullish, and I managed that one at 50%. Good fishin'.

I've got a contrarian spread in SPY and one in TLT. I think I will just keep doing the contrarian thing until my FOMO behavior is well regulated.

As for my vol strategy, last week was good and I am up on my XIV and short UVXY spread. I will manage the both of those next week if the Greeks behave themselves. I have losing position in ZIV that I entered at the way wrong price, and I think I will close that one too, take the loss and reload at the next signal on VIX.

So the Vol trading has been a good proof of concept. Very good return on capital despite lousy execution. I need to work on the execution, enter at the right time. My indicator said go long XIV at 26 on Feb 9th, which would be up 18%. I sat on my hands.

Progress not perfection.

I need to get more mechanical. One means toward this end is that I am now trading a checklist, both for Vol ETFs and options. This is something I had wanted to do since day one, but could never figure out what I wanted the checklist to say.

Liquidity and execution are gonna be the focus for next week.

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  #185 (permalink)
 suko 
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Trading by checklist this week. I like being locked in by the structure of the checklist.

First big win with options this past week, closed my UVYX short at 90% max profit, 11 days to expiration. I played this one really well. Maybe I could have managed it a day or two earlier is all. Then I promptly turned around and opened another UVXY directional play.

I closed out my JJC short copper position close to expiration for a small loss. This was a case of FOMO and poor liquidity. Bad trade, let's move on.

In the volatility long equity trading, I am holding fast until my indicators change. We had a remarkable 35% run in XIV since Feb 9, and though I was poorly positioned on that, having entered at 30, contrary to the indicators (FOMO, impatience), anyway, I am above water now, and this turns out to be the best trade I have made to date.

I also have a too-big ZIV equity position that I entered even more poorly, at 43 (FOMO, impatience), and that one is also about to come out of the water. Once I close that one, since it's in my options account, I am going to re-deploy the capital with VIX options. Going forward I may just focus on trading volatility products in the options account, really get that strategy down cold.

Patiently following the indicators mechanically is the antidote to FOMO. This is what I need to focus on.

Also, for my Long ETF Rotation strategy #1, from March I am shifting from global markets to a 50/50 mix of short SPXS and short TMF. This is the so-called convexity capture hedge -- it allows you to capture the roll yield on the leveraged ETFs (same strategy as with XIV and ZIV -- "contango always wins in the end").

Actually, I don't want to be long either of these at the moment, so I may sit on the sidelines for awhile longer. Going fishing until some of this froth in the market blows off a bit. Maybe I will just dial the size on this strategy way back and put the trade on, just so I can have some skin in the game.

A side note, I did some poking around on my Japanese brokerage account this week. I don't use it. I was delighted to discover, way down at the bottom of the ETF listing, that they are now, at last, offering a VIX based ETF on the TSE. I think this one shadows VXX. Anyway, it trades during the daytime here in Japan, has pretty decent volume, so that looks like it might be offer some fun scalping, give us something to do here during the daytime. Something for our kids to watch on the screen. Dunno yet if there are options on it.

Kokusai S & P500 Vix Short Term Futures Index Etf (1552.T) Quote| Reuters.com

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  #186 (permalink)
 suko 
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Strategy #2, long equity vol products: still holding fast on my core XIV position. Not much upside possibility on that one, so I am very tempted to manage it 80/20, then sit around until vol picks up.

Strategy #1: Not rotation trading either SPY or TLT now. Time to go fishing.

Strategy #3 In my options learning account, I have been learning some things about money management. Decided to increase the capital in the account, duh. I have been mopping up the bad trades from the first month doing this. Today I closed my ZIV position for a small loss. Bad trade, OK, next. For now, I have only one bad position still on, a single contract bet on CBI. I say it's bad not because it's a loser but because it's the last of my FOMO trades. Bad thinking.

Meanwhile, with bonds moving down in Feb and then SPY moving on Friday, I have been learning a couple of things about delta neutrality. I am actually starting to look at the portfolio delta number on the platform. Golly gee, what a concept. I now have both bearish and bullish positions in UVXY.

In the volatility forum had a discussion yesterday about using SVXY options for hedging long equity positions in XIV. Feh. My perspective now is that for me SVXY is untradeable, just not enough liquidity. With UVXY we had a single point spread on Friday and 24 million shares traded. As long as you can keep it small and "tame the most savage beast" using defined risk, UVXY is the way to go. Selling a short put on UVXY monthlies when VIX is down like at present.

When I started out on my Strategy #2 trading volatility products, I reluctantly embraced the notion of long equity with the primary vehicles being XIV and ZIV, with a preference for ZIV. However, since I started trading options, I have begun to believe that the idea of position trading XIV is not the way to go. With options I can get the same result with much less risk and much less capital deployed. The tradeoff is that I really have to be a lot more active managing the options trades.

Hence the getting up at 5 am. I am already used to it. I wake up at five am to trade the close now even without an alarm clock!

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  #187 (permalink)
 suko 
Kyoto, Japan
 
Experience: Intermediate
Platform: TW TOS LiveVol
Broker: TD, TW, IB, Saxo
Trading: VXX, VIX, SPY
 
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Closed my core XIV position after hours today at 31.65, based on a "high probability" of change in the VXX indicator I use. I eked this one out for a 7% win, so the portolio is now solidly in the black for the first time since the ILF disaster in September, up a hard-fought 5% YTD.

In self-criticism, XIV was a bad FOMO trade that turned out OK. The reason I say this is that I made decision to enter at 30 on my own discretion, out of impatience and a desire to get some action (FOMO), rather than waiting for the indicator to turn. As a result, I ended up suffering a lot of brain damage as the trade went way underwater for awhile, as XIV trended down to 25. All that drama involving Greece and the Germans. Then on Feb. 9 when XIV was at 26.5 we had a buy indicator. Followed by a remarkable little run bringing us to where we closed today.

Patience. This is the best single word takeaway from Jesse Livermore.

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  #188 (permalink)
 suko 
Kyoto, Japan
 
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Since last Friday I have been long Vol, starting with a 10 contract short put in UVXY. Today I closed my core XIV and reloaded with a bunch of UVXY equity. In honor of this, here's a great little quote from "Fooled by Randomness," this maybe my only takeaway from the book but it's a good one (and it's a quote I need to keep above my desktop if I am going to trade Vol):

"One weekend Soros exhibited in his discussion a large amount of bearishness, with a complicated series of arguments that the narrator could not follow. He was obviously short the market. A few days later, the market rallied violently, making record highs. The protagonist worried about Soros, asking him at their subsequent tennis encounter if he was hurt. 'We made a killing.' Soros said. 'I changed my mind. We covered and we went very long.'

"What characterizes speculators like Soros from the rest is that their activities are devoid of path dependence. They are totally free from their past actions. Every day is a clean slate.

"There is a simple test to define path dependence of beliefs. Say you own a painting you bought for $20,000, and owing to rosy conditions in the market, it is now worth $40,000. If you owned no painting, would you still acquire it at the current price? If you would not, you are said to be married to your position. There is no rational reason to keep a painting you would not buy at its current market rate ó only an emotional investment. Many people get married to ideas al the way to the graveÖ.Some medical researchers find that purely rational behavior on a part of humans is a sign of a defect in the amygdala, that the subject is, literally, a psychopath. Could Soros have a genetic flaw that makes him rational as a decision maker?"

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  #189 (permalink)
 suko 
Kyoto, Japan
 
Experience: Intermediate
Platform: TW TOS LiveVol
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Long Vol now, guess I will just sit back and wait. Patience.

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  #190 (permalink)
 suko 
Kyoto, Japan
 
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Closed a little credit spread in GOOG this week at 90% max profit. Now short FXI, IWM, TLT and SBUX.

I have a couple spreads long UXVY and VXX that are kicking my ass. Rolled to May.
Didn't follow my vol indicators, too early to be long Vol. Same story in my equity account. Sold my core XIV position way, way too early on a false signal at 31.6, now I a raging with FOMO as XIV flirts with 40.

Looking at PL thus far on my options account, win ratio is about 50/50 on 20 trades. Account was actually in the black at one point last month, a pleasant surprise. (I don't actually expect to be in the black as an options newbie in a low volatility environment.) Now we are back underwater due to the long Vol positions, and I guess I will just have to wait for some mean reversion.

Amazing how long/short delta status affects political views. Last month when I was short I was praying for the Greeks to behave themselves and pay their debts, lazy fucks, and hoping for Vlad the Impaler to grease his tanktreads with some guts. Now that I am long delta I am all pissed off that Greece and Russia are all kissy kissy.

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  #191 (permalink)
 suko 
Kyoto, Japan
 
Experience: Intermediate
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Took off several options wins in the past two weeks, SBUX, AAPL, and FXE, all at around 50%
of max profit. Good mechanics. Long TWTR, USO, FXI.

Strategy #2 still long Vol, and that is really hurting. Learning to trade Vol products is as hard as I expected. Need to work on trade size.

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  #192 (permalink)
 suko 
Kyoto, Japan
 
Experience: Intermediate
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Got my ass kicked by Lady Vol, trying to be a contrarian. What did I learn?

1. contango always wins in the end
2. keep calm and trade on
3. if something isn't working, modify it.

So, I am going to tweak the trading plan for the Vol product trading to "rule based". Going to trade a combination of indicators strictly. The reason being that over the past 8 months I have seen unbelievable gains in the paper trading based on strict rules. Just letting the contango lumber on most of the time and then pulling back when Lady Vol gets a little crazy.

On the Options trading learning account, I have about a 50-something win ratio. I am going to strictly limit the size of all trades going forward to 1-contract and focus on getting the win rate up to 60%. I now realize that I really need much more capital to do better than about 60%, because the small account really limits you to relatively low probability trades.

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  #193 (permalink)
 suko 
Kyoto, Japan
 
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Tweaked the trading plan this week. Following my Vol indicators now with hard rules.
Sold my XIV position and now sitting in cash until the indicators line up again. What I would
like to see is for this Greece thing to kick up a bunch of dust over the next week so that we can
put on a long Vol trade.

This year thus far the correctness of this Vol trading strategy with hard rules has been proven out.
We have basically been long XIV since 25 over the entire run up to 47 since February.

As for the options trading, I am going to re-orient to having UVXY as the core strategy. I've understand
that I've got some edge as to the directional assumption with UVXY, so I think I can just put on one
trade of a few contracts for each expiration cycle and let contango do its work. I am also going to continue
to add one more single contract trade at a time some highly liquid product like TLT. TLT been very good
to me this year. But I am going to try to keep it very simple and see if I can get the win rate and PL up some.

I am still trying to re-train/unlearn so that I can be more contrarian, mean-reversion oriented. My kneejerk
reaction in all situations is still FOMO. It's like my native language. I speak FOMO.

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  #194 (permalink)
 suko 
Kyoto, Japan
 
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Was all in cash waiting for Vol to pop. Was expecting the Greek thing to get kicked down the road further.

When the Tokyo market opens I am gonna make my first ever trade in 1552.T, which is VXX traded on the TSE.

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 Lady 
MedellŪn, CO
 
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Was just thinking exactly the same as your Journal title as I was doing my sim. Just throw in in the bait and watch it...

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  #196 (permalink)
 suko 
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Lady View Post
Was just thinking exactly the same as your Journal title as I was doing my sim. Just throw in in the bait and watch it...

There are all kinds of fishing.

There is even some guy who fishes for blue fin tuna off Nantucket with a rod and reel -- out of a kayak.

The Greek Vol spike is over, so I went ahead and sold the 1552.t (VXX) shares for a profit. This was in the kids' accounts, and I made the trade more or less as a teaching point about crisis alpha and blood in the streets, so I am very happy that it turned out as a win.

These Vol spikes could be just regarded as "back up the truck" moments for the short Vol trade. UVXY will open at around 40 this morning with a fairly high vol percentile, so I will put on a call spread at the open in the August options.

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  #197 (permalink)
 suko 
Kyoto, Japan
 
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I have a bearish UVXY 42 38 vertical spread in Aug options on, and otherwise I am all in cash as the week starts.

Gonna stay there until there is the VIX term structure reverts to normal and there is some frikken roll yield for my XIV trading.

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  #198 (permalink)
 suko 
Kyoto, Japan
 
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Put my core position in XIV stock back on at 47.25. I don't like this setup all. I wanted to get in at 37 a week ago. But I am trading this account according to hard rules, and it took until today for my Vol indicators to signal a buy.

So it doesn't matter how I feel about the trade. We have already established that my feelings are irrelevant to setting up a trade.


Now, as for my options trading account....again, this account is for study purposes. I came close to blowing it up. Technically I did blow up, getting down to 48% of the starting balance recently during the Greece thing when UVXY spiked. Anyway, now that the UVXY trade has gone my way, the account is back to a viable level. I am going to take the position off on Monday morning at about 75% of max profit, then reload with another short Vol trade. So, the strategy for this account until I get it totally back into the black (which I am now confident I can do) is core position short Vol and then some one lot positions in things like TLT and FXI.


As a side note, I set up accounts for our kids and started trading them this month. The purpose is education on the one hand and saving for college, etc. on the other. Core strategy for these accounts, again, is short Vol. I found some re-branded vol ETFs traded on TSE -- 1553.T is VXX and 2049.T is XIV. With the kids we traded the first weekend of the Greek vol spike via VXX, then later put on XIV at 13,150 yen. Now the accounts are up 15%. Kids are also going to research and put on some small positions in Japanese stocks, probably retailers, for educational purposes.

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 suko 
Kyoto, Japan
 
Experience: Intermediate
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My UVXY credit spread took some heat on Monday with the crash in Shanghai and I closed it at about 40%, then turned around and redeployed with a SEP 20 34 credit spread for 6.23 cr. in UVXY at 31.73 and an IVR of 46. UVXY immediately crushed back to 26 level, for a nice little overnight gain. I set the software to automatically close at 60%. So, that was deftly done, and I am now considerably ahead of where I was a week ago. I am now positioned with UVXY to cruise right into September.

I also sold a FCX SEP 11 14 call spread for 1.23 cr at an IVR of 90. I see this as a China play, and I am bearish on metals. Readers of this journal will recall that the last time I played copper was with JJC back in January, and I got killed, partly due to liquidity. Now I only trade liquid names.

Account balance is now looking a lot better an I am becoming more hopeful of pulling it off with the options trading. I am going to redeploy some capital from elsewhere and get this small account upgraded, as I am currently very limited in terms of strategies.

I see my playbook going forward as putting on monthly bread-and-butter core positions with strangles in SPY and credit spreads with UVXY, and then doing a lot of small miscellaneous trades like the FCX one above for learning purposes. I have a lot to learn.

As for my core equity position in XIV, I had a signal change on Monday after the Shanghai crash but I decided to just leave it on an extra day, because I foresaw myself getting whipsawn. It was a judgment call and I was right and now we are back. I am adding some refinements to my rules, hopefully avoid a bit more of this whipsaw.

Likewise, I left on the kids accounts positions in 2049.T (Tokyo market XIV) and the name broke through the 15000 yen level on Friday. I have the kids here with me in the cabin for the summer, and the market action is creating some engagement.

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 suko 
Kyoto, Japan
 
Experience: Intermediate
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suko View Post
Likewise, I left on the kids accounts positions in 2049.T (Tokyo market XIV) and the name broke through the 15000 yen level on Friday. I have the kids here with me in the cabin for the summer, and the market action is creating some engagement.

Took a bit of heat today with my long deltas. But I am still here, and still have lots of dry powder.
So I am going to focus on the opportunities that present themselves.

I had a big UVXY short call position on that I closed last week, perfect execution. Sold the 2049.T (XIV) positions in the kids' accounts. We bought a whole bunch of 1552.T (VXX) on Friday, Tuesday will take a profit. Pretty good execution so far.

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