Long & Wrong

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…

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!

This Blog is Paused

3 possibilities, the probabilities(!!) are in brackets…

1. “Pause” is swiftly followed by “Stop”. (60%)
2. I return with something different, a blog  focussed on actual trades, or more specifically actual FX trades. (30%)
3. More of the same here. (10%)

In the event of…

1. It has been a pleasure.  It has allowed me to ‘meet’ some intelligent and interesting people, you are probably too modest to realise it though. Thanks for reading.
2. I will post details here shortly. I could do with some constructive feedback on this potential idea so please comment if it happens, even if you have never commented before.
3. Whilst the probability of this is the lowest, it also requires the least explanation.

Sometimes all you need are 3 lines, they don’t have to be this unpleasant shade of brown though. If I had drawn them early on in this chart then I would be very rich, the trick is not to draw them so late that you are poor, I drew them somewhere inbetween those two extremes.

They don’t always work (which is why you use tight stops), there is not an exact level at which to enter (which is why you intelligently position entry/exit) but they work well enough, often enough.

I’ve had a tough morning, for the first couple of hours I was convinced that 3 weeks of R+R was all it took for my trading-mojo to evaporate.  I know that it is just statistical noise, but it doesn’t feel like it is… 

My First 10 trades of 2010 (Unit=Average Losing Trade)

 … so I am up 0.35% for 2010, more importantly though the ‘yearly’ column has gone green.  For now. A bad run like the above wouldn’t bother me when buried in a series of 100 trades, it does bother me (slightly) at the start of a new year, an entirely arbitrary ‘clean sheet’. Silly isn’t it? 

Don’t answer that.