I think I have been honest enough here when I have made bad decisions to excuse the posting of charts that show lucky, lucrative decisions.  I was always going long at the bottom of the range, and then along came a rumour about an EU rescue for Greece.

Unfortunately a denial of that rumour wiped 7% off in a matter of seconds.  It’s difficult to feel hard done by though.

Rumours, denials and sheer good fortune.

It becomes tedious if I write yet again that I am uncertain of the future direction of this blog.  So let me write instead about why I might not be very good at  making that decision.

Trading is the simplest job in the world, we only have to make three decisions…

1. When to buy.

2. When to sell.

3. And how much.

You can dress it up all you want but that is what it boils down to, it’s the ‘boiling down’ though that is the difficult part.  Distilling all the available information into those three decisions is where the years of hard work go.

One of my earliest conclusions during that period of hard work was to decide that three decisions were one too many. So I fix my risk per trade, if I know when to buy and when to sell then some simple maths (that’s “math” for my American friends) makes the third decision redundant.

So I just need to decide when to buy and when to sell. Could there be a job with fewer choices?  Think of the job you used to do, the one you may still do or the one your partner does.  I can almost guarantee that it will require many more decisions than that before the first coffee of the day. Is it any wonder that I become paralysed when the number of choices exceeds the number of sides to a coin.

It seems self-evident to me  that, in term of mental outputs, trading is as simple as it gets.  I have long been arguing that in terms of inputs it doesn’t need to be as complicated as many make it (turn off those indicators, those news-feeds, those views about where the market is headed, the self-criticism about that last trade…). That however is a more challenging argument to win and I just can’t decide how to do it. Or what colour socks to wear.

Update, 5/2/10 : He kept his job, you can read details here.

There am I trying to build a cogent and polite argument against the Tobin Tax, thinking this might in some very small way help keep us out of the list of the most hated professions, when this video starts doing the rounds…

 

For the unobservant, concentrate on the guy in the background at about 1:12.  I’m still trying to decide which is less professional, looking at that kind of material at work, doing it on live TV or turning to face the camera once caught.

I had written previously of the threat to our little money winner (/loser) if a Tobin Tax were to be introduced.  Whilst it had always seemed unlikely, we live in interesting times where anything is possible.  Financial speculators could have gone the same way as steam train drivers, fax machine salesman and honest politicians.

It was therefore an especially pleasant slice of toast and marmalade this morning when the Sunday newspaper contained a story that the chances of the tax being implemented are diminishing.

The prospects of a global tax on financial transactions were receding fast this weekend amid signs that countries were swinging behind an alternative plan to impose an insurance levy on banks.

Both David Cameron and Alistair Darling expressed support for Barack Obama’s proposals to force banks to pay into a fund that would provide compensation in the event of the failure of a financial institution.

Cameron said at the World Economic Forum summit at Davos that he thought a so-called Tobin tax was unworkable because of a lack of international support, but said he would back an insurance levy if he became prime minister in this spring’s election.

The full article, from The Observer, can be found here. I’m all in favour of taxing banks with an insurance levy, just leave us small-time traders in our garden sheds (is that just me?) well alone.

… you aren’t really interested in these…

(xx986ish was resistance throughout D-1 pm, if I zoomed out to show it then the chart would be even more illegible.)

A loser, two winners, a wafer-thin winner and an early start to the weekend. US GDP later and that’s not the kind of excitement I need on a friday afternoon.

 As I write this we are approaching my original target on that last trade that I closed for a meagre number of pips.  Another reason why nobody should listen to me or have any interest in these charts!

Yo! Sushi” is a chain of restaurants that sells, well, if you can’t work that out for yourself then you probably shouldn’t be risking your money trading. They have a time-limit on all the dishes placed on the conveyor belt, if it is unsold after 2 hours then it is thrown away. Actually, a recent TV documentary challenges this claim but I will say no more because (a) this blog is meant to be about trading, (b) they probably have a very large legal department and (c) I don’t.

I am increasingly convinced that charts should be treated in a similar way to tuna.  I have started binning them a few times a day (right click, delete all items, yes I am bloody sure but thanks for asking).

I can only speak for myself but during 10 hours at a screen it is all too easy to become wedded to an idea which may now be a lot less relevant, if it is still relevant at all.  Similarly, as time passes the number of lines drawn increases and the ease with which they may be interpreted, especially when there is  sudden action, decreases.

Sometimes I find myself drawing lines so that they fit the story, whereas a clean chart helps me realise that an entirely new story started ninety minutes ago.

I’m not suggesting  scrubbing a major support level just because it has passed its ‘best before date’, it’s OK to leave some stuff on there all day (like unscrupulous sushi chains that definitely aren’t called “Yo! Sushi“), but there seems to be real benefit from starting afresh every few hours.

I was surpised a few moments ago to receive an e-mail, from a respected financial news provider, with the title…

China and eurozone fear shit risk appetite,

…it took me a few moments to realise that the space is in the wrong place (on my Blackberry at least)…

China and eurozone fears hit risk appetite,

It made me chuckle, but perhaps it’s been the kind of day that lowers your humour threshold!

I’m posting this ‘live’ so a fuller explanation will probably follow but I just got caught on the wrong side of this…

The most liquid market in the world looks a bit 'dry' tonight.

A number of feeds show the same, no obvious cause apart from a lack of liquidity and/or shenanigans.  The other thing I don’t know is whether to go to bed or wait and sell any rally back to 4260 area.

UPDATE: Thanks to daytrader233 for explanatory comments below. I stop paying attention to the US after 21:30 GMT, I shouldn’t.

CFTC in the US is proposing to limit retail forex leverage to 10 (yes, ten).

If this should come to pass then I am opening a UK-based trading arcade for my North American friends. Yours for $2,137/week. Bangers’n'mash, jellied eels and other British delicacies delivered to desks for only a small charge…

State of the art IT infrastructure.

Whilst I ponder the future of this blog, and the possible start of a new one in a different flavour, I can’t stop having these ‘3AM Thoughts’…

Poker players may be familiar with the concept of Sklansky Dollars (named after the legendary poker theoretician David Sklansky).  If you go all-in pre-flop with a pair of aces against a pair of kings then you are 83% favourite to win. If the pot is $100 then you have ‘won’ 83 Sklansky dollars no matter what happens.  In reality you are subject to the whims of the poker gods and 17% of the time you lose the pot, but you always win 83 Sklansky dollars.

Today I lost money trading, but I am certain (as much as I ever can be) that I did the right things at the right time. I metaphorically called all-in bets when holding the best cards, the trading gods weren’t on my side though.  So I lost real money but I claim to have won (named after that legendary trading theoretician called ‘L&W’ !!) a heap of L&W-dollars. Just like in poker, averaged over a sufficiently large number of events, the theoretical currency should converge with the real currency. I hope it does anyway.

Pocket aces win 85% of the time against a random hand, better odds than a MA-cross!

Mini About

My only qualification is moderate profitability, and that might end any month.

I present here a thought or two each week on trading (not economics or investing). These posts are often highly rational in outlook, that is another way of saying you might well find them boring.

Comments are welcome and occasionally begged for.

 

February 2010
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