I love getting up in the middle of the
night to find that the market is at an extreme for the week and it's
been pausing for an hour or two; then continues on its way. A low risk entry and potentially unlimited upside.
In the last 2 weeks of December I cease
my trading. Since markets are a "human behavior"
phenomena, just about all the stupidity for the year has already been
expended by mid-December, and everyone [rational] who trades has
either booked their year's profits or accepted that they aren't going to
recoup their losses until 2016.
The few irrational confirmed losers
that feel the need to trade past the 15th are welcome to whatever
profits I might miss from their passing my way. Trading statistics
have proven it too, so feel free to avoid the anemic volatility and
waste of time playing a lowered-edge environment.
And have an extra single malt or two
over the two weeks. Preferably an 18 year old Macallan, recommended
it to me by Barry Eisler- known for his John Rain series. Thanks
Barry.
Trading is Not Hard
How you think about yourself, the
markets and its other participants really helps you maintain an
overwhelming edge.
In an interview Paul Tudor Jones was
asked about his overall trading philosophy.
His reply:
I have very strong views of the
long-run direction of all markets. I also have a very short-term
horizon for pain. As a result, frequently, I may try repeated trades
from the long side over a period of weeks in a market which continues
to move lower.
When it was suggested that it sounded
like he was performing a series of "probing trades" before
he hit gold...
He replied:
I consider myself a premier
market opportunist. That means I develop an idea on the market and
pursue it from a very-low-risk standpoint until I have repeatedly
been proven wrong, or until I change my viewpoint.
The reason I mention this is due to his
comment about pursuing the market from a very-low-risk-standpoint.
Whether you do this from a trending standpoint (my preference)
or a counter-trend point of view; the fact that you are doing
it completely cognizant of the risk and make that part of your series
of actions - is why your odds of success rise significantly over
competitors who H-O-P-E that the market will go their way every time
they put on a trade.
There are a lot of them - thankfully.
Even governments get wrong minded. As large and as wrong as they can
get; they represent Trillions in total profits-to-the-prepared when
they're wrong.That's why trading is still a great feeding ground for
prepared speculators who have their monkey under control.
Knowing without a doubt that you will
act correctly when something big happens makes you the odds-on
favorite in the race.
Over the next week, see if you can
round up a copy of Zen in the Markets, by Edward Toppel. A perfect
read this time of year, even if you've read it before. It'll get your
mind right for the beginning of 2016.
ZITM is great not because it tells you
the secret of making profits from the market. But because it lets
you realize that you already know how and then facilitates you to do
it.
Ed came up with some great TradeStation
software that emulated what he wrote in the book for the E-mini S&P.
I know that a few tried using it, but I doubt anyone does any
longer.
You have to have absolute faith in the concept that the
market knows better than you where it is going.You turn it on and
it buys the market if it goes up and turns around and shorts the
market if it goes down, and then long..., and then short.... Until
you either lose your account or make a ton of money.
If you do a tick-by-tick simulation
over many years..., always-in-the-market; it is slightly profitable
after commissions. But where it was REALLY profitable was when you are in a well-defined trend, the market is just paused-- and then it
takes off again. What an idea to trade only at those times!!!!
If you haven't read Zen in the
Markets; make a point of it. Let me know if you can't get a
copy.
We are at a serious juncture in the
Forex markets.
Oil prices are as low in real dollars as they've been
for decades. Same with most commodities, and gold and silver.
Countries (and currencies) that depend on commodity sales for their
financial health are affected negatively. When commodities bottom
and turn up, so do their respective currencies. We'll be watching
the Aussie and Canadian Dollars closely this year.
Speaking of silver, the 1330 ounces of
silver carried over from last year currently have a liquidation value
of $18,526.90 (based on the 12/31/15 spot price of $13.93).
In the last few weeks I took some low
risk breakouts in the AudUsd and the GbpJpy that I am holding over to
the new year. And ONS has been treating us well this year.
I wish that I had been even more
attentive to the Challenge account, as I'm sure I could have doubled
the profits very easily. The forex side of the Challenge account
from 2014 was $1,156.60, and we added an additional $619.78 this
year.
Quick summary:
Silver value: $18,526.90
Forex account: $1,776.38
---------------------------------------
Total: $20,303.28
Still significantly above the $500 (40
times initial capital) we started with, but very significantly below the peak of over
$50K a few years ago. Since big money is made in the fullness of a
major trend I have no doubt the financial mistakes of numerous
countries will provide some great opportunities and launch us into new
equity highs.
I encourage you to take note of a quote
by ― Sun Tzu, from The Art of War:
“If you know the enemy and know
yourself, you need not fear the result of a hundred battles. If you
know yourself but not the enemy, for every victory gained you will
also suffer a defeat. If you know neither the enemy nor yourself, you
will succumb in every battle.”
Knowing that there are things that can't be known-- is
valuable too.
If I KNEW that silver would be at
$13.93 today back in early 2010, I wouldn't have as much silver in
the Challenge account. But I do know from history that when the
rush into metal starts, it can be fast and furious and very difficult
to accrue. And having actual physical silver, while currently a
less-preferred investment globally, is part of a larger risk/reward
scenario – for me.
Fortunately, even with imperfect
knowledge of the future, knowing how and having the WILL to trade
your specific assets precisely is more than enough for any success
you could desire.
Best wishes to you in 2016.
Joel
leonardo@infiniteyield.com
PS: Check back in a week or so. I'll post some data that I think you'll find useful. JR
