Note: another reason for a trading journal and questions to ask yourself - bulleting to questions and bolding are my edits.
Coming Back from a Loss
A friend of mine in the pit had been having a rough time lately when he asked me a typical question among us traders - How do I come back from a loss? Since he had been having a "rough patch" and not just one bad trade, I gave him the following advice that is to be used over a period of time.
First I asked him, "What does your trading journal look like - or maybe you don’t have one?"
He didn’t think it was necessary, which was his first mistake. It is critical to keep a trading journal.
In my journal I ask myself everyday:
Did I follow my trading plan properly?
Did I do anything wrong and if so, why?
If I did follow my plan correctly but I lost money, I am not hard on myself. Sometimes this happens! If I didn’t follow my rules but still made money, however, that’s a problem.
I highlight these days so I never repeat this fatal flaw. One of the worst things you can do is ignore your rules and make money, because then you feel that "winging it" is a good plan. It is not.
If this happens, you have to ask yourself;
'Why didn’t I follow my rules?
Was it lack of confidence in the system?
Or did my ego want to be the hero that sold the high?"
If you lack confidence in a system, paper-trade it religiously and keep a massive amount of statistics on the outcomes. Be honest with each trade and if the results are good, immediately ban all second-guesses.
If you are playing blackjack and the dealer has a six showing while you were dealt a ten & a nine for nineteen, would you HIT IT because "maybe this time the dealer won’t bust!?" Of course you wouldn’t! You know that the long-term outcome of that decision would be certain disaster.
It is the same with trading: don’t question a trade if the statistics show it’s a winner over the long term.
Fear also exists when a trader doesn’t believe in his system yet. Or it may just be the fear of being wrong, which is another ego-based problem. You have to let go of being right. Trading is about probabilities and making money; not about being right or wrong.
I’ve found that traders who used ego-based decisions to mess with their system or break their rules added little to no value to their trading. In fact it almost always hurts more than it helps. Trading for ego satisfaction is not a good idea, because your ego risks getting damaged during a rough trading patch.
I like to go back and look at my trades over the last week and last month, to see how they performed.
Am I repeating my mistakes?
If I bought or sold too soon, I want to find out why.
Be honest, and ask good questions:
What will I do differently next time?
What was I feeling when I ignored that trade?
Keep notes on trades you liked but didn’t make.What held you back? Do you notice any patterns causing you to miss opportunities? FIX THEM!
My friend listened intently and took notes. He will be a better trader for it.
Best trades to you,
President & Founder- Trading Advantage
Good trading to everyone.
Last edited by aquarian1; July 6th, 2012 at 04:25 PM.
I thought it was unusual that nobody in the Lame Street Media mentioned the recent momentous accomplishment of the Obama administration: it has already racked up enough (current) DEBT, when added to the prior DEBT, equates to a sickening $16,000,000,000,000.00 (that’s trillion$) in the red. Yes sir, like Fraud Street, Congress just keeps kicking that can down the road that never seems to end. But when it might, Congress decrees that another 10 miles of road lay beyond the horizon…jut trust them.
If you haven't heard yet, the United States of America just hit $16 trillion in debt yesterday. On a gross, nominal basis, this makes the US, by far, the greatest debtor in the history of the world.
It took the United States government over 200 years to accumulate its first trillion dollars of debt. It took only 286 days to accumulate the most recent trillion dollars of debt. 200 years vs. 286 days. This portends two key points:
Anyone who thinks that inflation doesn't exist is a complete idiot; To say that the trend is unsustainable is a massive understatement. At an average interest rate of 2.130%, Uncle Sam will shuffle $340 billion out the door just in interest payments this year... and it's a number that's only going up. To put it in context, China owns so much US debt that the INTEREST INCOME they receive from the Treasury Department is nearly enough to fund their entire military budget.
It's rather disgusting when you think about it.
Yet when you look at the raw numbers, there is no sign of improvement anywhere on the horizon. Last year, the Treasury Department brought in about $2.3 trillion in tax revenue. They spent $2.9 trillion JUST on -mandatory- programs like Social Security and Medicare, plus the very sacrosanct defense budget.
In other words, the US government was $600 billion dollars in the hole before paying a dime of interest on the debt, or paying the light bill at the White House. In fact the governments own numbers reflect a budget deficit through the end of the decade, i.e. the debt level is only going to get higher. These are their own figures.
In the 19th century, the Ottoman Empire was facing a similar debt crisis. In just 11-years, the Ottoman central government went from spending 17% of its tax revenue on interest payments, to spending over 52% of its tax revenue on interest payments. Then came default. Eleven years. The US is at 15% right now. How long will it take for the interest burden to become unbearable?
History is full of examples of superpowers bucking under the weight of their debt. This is not the first time that it's happened, and it won't be the last.
Sovereign debt is a giant confidence game. Investors buy bonds on the belief that governments can (and will) pay. When that confidence is chipped away, the cost of capital becomes debilitating. And people tend to notice a $16 trillion debt burden
Russia has just declassified news that will shake world gem markets to their core: the discovery of a vast new diamond field containing "trillions of carats," enough to supply global markets for another 3,000 years.
The Soviets discovered the bonanza back in the 1970s beneath a 35-million-year-old, 62-mile diameter asteroid crater in eastern Siberia known as Popigai Astroblem.
They decided to keep it secret, and not to exploit it, apparently because the USSR's huge diamond operations at Mirny, in Yakutia, were already producing immense profits in what was then a tightly controlled world market.
Good trading to everyone.
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Monday’s sudden dive in oil prices appears more and more unusual with hindsight, and poses questions for traders, regulators and exchanges alike about just who or what caused such a major turnaround in the market.
Explanations range from a “fat finger” trading error or a high-frequency computer trading programme run amok to a concentration of stop-loss orders being triggered or a single large trade by a hedge fund selling up to 10 million barrels of crude in a single clip, though no one appears to know for certain.
What caused the oil flash crash?
The veil of secrecy surrounding derivatives trading also makes it hard to reconstruct the sequence of events that led to the plunge in Brent futures shortly before 18:00 GMT.
Only market regulators and the exchanges themselves have access to the detailed trading data — including the identities of buyers and sellers — that would make it possible to describe the chain of events in full.
In recent years, the only sudden move that has been properly explained was the flash crash in U.S. equity markets on May 6, 2010. And that was only possible because the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) set up a detailed enquiry that took more than four months to publish its conclusions. (“Findings regarding the market events of May 6, 2010: Report of the staffs of the CFTC and the SEC to the Joint Advisory Committee on Emerging Regulatory Issues” Sep 30, 2010)
The CFTC is looking into Monday’s oil price drop and is collaborating with Britain’s Financial Services Authority (FSA) which regulates the London-based Brent market.
CME Group, which operates one of the two principal oil markets, has described the drop as a “coordinated selloff” not caused by any technical failures.
Intercontinental Exchange (ICE), which runs the main Brent contract, has declined to comment on whether it saw any unusually big orders placed during the period.
It did however say: “Following rumours regarding the Strategic Petroleum Reserve (SPR), volume was widely distributed and oil prices declined over a period of time. Circuit breakers were not triggered and markets were orderly.”
In the absence of a study like the one into equity prices in 2010, the trigger for the drop in oil prices may never be known with any certainty.
That should concern oil market participants because the Sept. 17 price drop had characteristics of both a flash crash and a more significant and long-lived turning point.
Trading that day was far from normal. In trading activity on the day and two days later on Wednesday Sept. 19, another day on which prices fell heavily, the total price range on both days was similar: $5.52 on the Monday and $5.58 on the Wednesday. But in other respects the trading action could not have been more different.
On Monday, the plunge in prices and surge in trading volume was concentrated in 20 minutes between 17:50 and 18:10 GMT, with an extraordinary 10,000 contracts traded in the space of 60 seconds at 17:55 GMT.
On Wednesday, by contrast, prices slid steadily throughout most of the day, with volume never exceeding 5,000 contracts a minute, and no obvious discontinuity in pricing
Although something unusual clearly occurred just before 18:00 GMT on Sept. 17, such aberrations may be becoming more frequent as computer-driven trading accounts for a rising share of turnover and market-making.
It is tempting to write off the events of Sept. 17 as merely a flash crash. But they also appear to have coincided with, and perhaps caused, a much bigger turning point in the oil markets.
After rising steadily by almost $25.70 per barrel or 28 percent from June 28 ($91.35) to Sept. 17 ($117.02), the ICE November Brent futures contract has fallen $9.75 (8.4 percent) in the space of three days, in what appears to be a decisive turning point.
In their report on the 2010 equity market crash, the SEC and CFTC staff found that “against a backdrop of unusually high volatility and thinning liquidity, a large fundamental trader (a mutual fund complex) initiated a sell programme to sell a total of 75,000 E-mini contracts (valued at approximately $4.1 billion) as a hedge to an existing equity position”.
“This large fundamental trader chose to execute this sell program via an automated execution algorithm (”Sell Algorithm“) that was programmed to feed orders into the June 2010 E-Mini market to target an execution rate set to 9% of the trading volume calculated over the previous minute, but without regard to price or time,” the report noted.
“On May 6, when markets were already under stress, the Sell Algorithm chosen by the large trader to only target trading volume, and neither price nor time, executed the sell program extremely rapidly in just 20 minutes.”
The fundamental trader’s sales were initially absorbed by high-frequency traders (HFTs) and other intermediaries causing a sharp rise in volume. But that fooled the sell algorithm into thinking there was more liquidity than was really the case, causing it to step up the pace of sales even further.
In effect, the large fundamental trader sold faster than the HFTs and other intermediaries could find other long-term fundamental buyers, and ended up trading against itself.
“The Sell Algorithm used by the large trader responded to the increased volume by increasing the rate at which it was feeding the orders into the market, even though orders that it already sent to the market were arguably not yet fully absorbed by fundamental buyers or cross-market arbitrageurs,” according to the report.
The SEC/CFTC study highlights the interactions between liquidity, market fragmentation, a single large bungled trade, and the responses of HFTs and other market makers.
This week’s fall in oil prices looks similar, and comes amid a period of high tension in the crude market.
By Sept. 11, hedge funds and other money managers, betting prices would rise further, had amassed a near-record long position in WTI and Brent-linked futures and options equivalent to 410 million barrels of crude, according to position data published by the CFTC and ICE.
At the same time, the White House has been hinting it might order a release of emergency oil stocks from the SPR to cap prices and prevent rising fuel costs harming the economy.
And on Sept. 18, the day after the flash crash, a Saudi official said Riyadh wanted prices to come down and was “working to bring it down.”
From the published data, it remains unclear whether Sept. 17’s price drop was an accident, or if someone decided to give the market a good hard shove, putting on a large position in a short space of time with the intention of moving the price.
Whatever the cause, it has triggered a cycle of liquidation that has pushed prices much lower. That will be welcome in the White House, but for hedge funds and other investors who had amassed a big long position on the expectation of further rises it is exceptionally painful.
For both sides of the market it raises unsettling questions about just what happened on Monday that could produce such a big turnaround in the whole direction of the market.
John Kemp is a Reuters market analyst. The views expressed are his own.
(Reuters) - Two Spanish investment firms that own 31 percent of French property company Gecina (GFCP.PA) have filed one of the biggest bankruptcy actions in Spanish history after a bank refused to refinance a 1.6 billion euro ($2.1 billion) loan.
Alteco and MAG Import said in a statement on Wednesday that they were up to date with their payments on the syndicated loan, and the refinancing effort had been supported by other banks involved.
The uncertainty over the fate of the firms' stake in Gecina, which has a market capitalization of 5 billion euros, knocked the French company's shares down 4 percent to 77.5 euros.
Spanish banks have already written off hundreds of millions of euros in losses on soured real estate investments after a property market crash in 2008 and are now waiting for rescue funds from Europe.
The banks with the highest exposure to the syndicated loan are Popular (POP.MC), Bankia (BKIA.MC), NCG, France's Natixis and Royal Bank of Scotland (RBS.L), sources said.
One source said Natixis had balked at refinancing the loan.
The bank had no immediate comment.
Many businesses related to the property and construction sectors, once the main drivers of the Spanish economy, crumbled after the market crashed. Others have relied on bank refinancing to stay afloat.
One source put Bankia's exposure to the syndicate at 234 million euros, while newspaper El Pais said Popular's was 264 million euros.
Shares in Bankia, which has already been taken over by the Spanish state, fell 3 percent, and Popular's were down 1.5 percent in Madrid trade.
Popular was the largest non-nationalized bank to fail a stress test on Spanish banks last week, forcing it into a 2.5 billion euro rights issue to bolster capital and avoid international aid.
"We understand this (Gecina) will be one of the credits included in the stress test to the sector," Banco Sabadell said in a note to clients on Wednesday.
Gecina, which manages a roughly 11 billion euro portfolio of offices, residential and student housing as well as health facilities, last year launched a 1-billion euro asset sale program to shore up its balance sheet and reduce its debt.
The company, France's biggest office landlord, underwent a boardroom shake-up in October 2011, when its CEO was dismissed over strategic differences, replaced by Bernard Michel, a former executive at French bank Credit Agricole.
Alteco and MAG Import are owned by one-time real estate magnates the Soler family and Joaquin Rivero, who was also the chairman and shareholder of Spanish real estate developer Metrovacesa (MVC.MC).
Metrovacesa is Gecina's other main shareholder, with 26.8 percent, but it is now controlled by Spanish banks after a debt-for-equity swap.
The relationship between Gecina and its Spanish shareholders has been murky from the start. As chairman of Gecina in 2009, Rivero tried to navigate its purchase of a 49 percent stake in another Rivero property firm, Bami, for 108 million euros.
The deal fell through when Gecina's other shareholders rejected it. Rivero is facing corruption charges in France as a result of his attempt to take over one of his own companies through Gecina.
($1 = 0.7731 euros)
(Reporting By Carlos Ruano and Tracy Rucinski; Additional reporting by Sonya Dowsett; Editing by Will Waterman)
Good trading to everyone.
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