Head For The Beach

It’s the height of summer and over here in Spain we are mere days away from the entire country shutting down in August. Yes, I am dead serious. Starting next week it will be impossible for anyone on the Iberian Peninsula to make a doctor’s appointment, get a haircut, fix your car, meet with an attorney, negotiate a contract, etc. Just found some tentacle growing out of your ear? Tough luck José – it’ll have to wait a few weeks. Got hit by a truck riding your moto and you may have severed your spinal cord? Better walk it off tough guy – those x-rays will have to wait until the doctor’s back from the beach.

Anything business or health related will have to wait until September as most offices here simply shut down for a minimum of two weeks, economic crisis be damned. For a born German who spent over 20 years in the United States this is a rather alien concept to wrap one’s mind around. It’s not that the Spaniards lack sufficient holidays during the rest of the year, if you get my drift. So apparently it will once again fall on me, the lowly Mole, to keep the Spanish economy running for the next four weeks as my lair will apparently be the only business open during August. Hey, but I can’t make any promises – it is brutally hot over here and it’s getting hotter by the day. I think I may have to raise subscription fees just to be able to afford the electricity bill as my industrial scale air conditioner is blowing day and night. And did I mention the humidity? It’s not California, that’s for sure.

Alright, and now that I have properly set the mood let’s see where we are this morning. Still bouncing around in the range of pain – the high volatility sideways range persists and entries near the center are veritable coin flips. But the good news is that it gets worse:

This is the event calendar for today and tomorrow and guess what, it’s that time of the month again. Wednesday the Fed is scheduled to announce its interest rate decision and also report on its MBS and treasury purchase programs. I don’t expect any type of resolution before tomorrow at 2:00pm EDT and most likely we’ll be seeing sideways flat or gyrating tape in the interim. May actually be a good time to watch the Zero Lite indicator if you happen to be a sub as sideways days like that make for good scalping/swing trading opportunities.

For the rest of you guys I recommend you discover your inner Spaniards and find yourself a nice beach, preferably with bar service. And if there’s no beach nearby you live then find yourself a lake, a cool mountain resort, or if everything else fails head to your favorite coffee shop or watering hole. Bring a book and turn off your laptop/ipad/iphone what have you so you’re not tempted to check the tape. Anything will be better than trading for the next 30 hours. That’s it – see you guys tomorrow!

What – you’re still here? What part of taking the day off wasn’t clear to you? You are an addict, you know that, right? Well, I understand because so am I. Which is why I kept hunting around a bit for short term setups to bridge us over until tomorrow. Very loose correlation to U.S. markets would be good. Here’s the EUR/SEK (swedish krona) which is in a very interesting configuration. I want to be long above 9.185 with a stop below the 25-hour SMA.

And then there’s platinum – may be affected tomorrow at 2:00pm of course. So if you grab this long above 1490.6 then be out and about by 1:30pm tomorrow. Otherwise it looks like a solid long setup after a nice correction. Decent odds and worth 1R on my end if it makes it over my trigger.

Alright, and that’s it for today. UNLESS of course something very exciting/dramatic happens during the session ;-)


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Entries Do Not Matter

From the very first moment fledgling traders look at their first chart they being taught all the exciting things which seem to matter and none of the (somewhat) boring things that really do matter. More often than not there is an almost obsessive focus on trading tools, various indicators du jour, technical analysis in all forms and shapes, trading books/videos, trading seminars what have you. The average trader expends thousands of hard earned Dollars and many available hours on all of those things, and that is before getting their account funded and approved.

If you have visited here then you probably already know that none of this really makes an iota of difference when it comes to placing a successful trade. That doesn’t mean you don’t need to know your stuff – by all means you do need to understand the basic tenets of trading. But more does not equal better – as a matter of fact when you really boil it down to the most basic level all you really need to know is where to place a trade and where to get out. Sounds simple, right? Actually yes and no – it is simple once you know how to do it. Getting there takes years of hard work and quite a lot of practice.

What’s making matters more difficult are certain aphorism you will invariably come across – most of which are actually completely wrong. One of the biggest ones is that entries matter – more specifically known as ‘buy low and sell high’. Well duh – that’s common sense, right? Actually no – it is not. I assure you that entries are the most trivial aspect of a campaign. Your exit is much more important – so is your money/campaign management. There is a lot to doing the latter two properly and we have discussed some aspects of that in the past and we’ll probably be doing it again.

Now, I can literally hear you thinking right now: This is completely bonkers – of course my entries matter, what the hell is he talking about? So, you’re not convinced? Well, I can’t really blame you – after all years and sometimes decades of misinformation and brain washing are difficult to reverse. But there is hope for you (you’re here after all – which is a big step forward) and to put you on the right trail let me prove to you that entries do not matter via a campaign we launched twice in the past few days:

Here’s gold which if you’re a sub you recall I suggested as a very juicy short at the 2x inside day candle. I really wanted this one to resolve to the downside and for once I actually got my wish the next day. Entry at 1307.9, stop at the 1R mark at 1319 and Bob’s your uncle. yesterday it was testing our patience and today it dropped hard and earned us over 1.5R (thus far, the day ain’t over yet). If you took this one then don’t forget to lower your stop to the 1R mark at 1296.8.

However yesterday that little inside day candle (which tested our patience, remember) presented late comers with a second entry opportunity. Which I sincerely hope you took advantage of for obvious reasons. Now let’s see – that entry was at 1303.5 and the stop, based on the previous candle) was at 1311.8, again representing one R (risk ratio of 1% exposure). And what happened today? It banked 1.5R thus far and once again anyone who took it is advised to lower their stop to the 1R mark at 1295.1.

And there you have it – conclusive proof that entries to not matter. Yes, of course it would matter had you used the same stop but that is context and chart specific – it all depends on your particular lens and how price advances. Another big implicit lesson to be learned about price in general is that it doesn’t matter where it has been – all that matters is where it’s going. Let me repeat that because it is absolutely crucial that you wrap your reptilian brain around this little mind teaser:

It doesn’t matter where price has been – all that matters is where it’s going.

Which by the way also applies to your life in general but let’s not complicate matters by turning philosophical.

Some of you older dogs may remember Yahoo back in the late 1990s – while it was going up up up it was one of the most hated stocks out there. After all everyone knew that search technology was a trivial business to be in and that any value invested or perceived was all built on smoke and mirrors. Well, they were partially right but that really didn’t help them on the trading front. Many hobby bears got taken to the woodshed week after week attempting to short this thing which obviously went completely exponential all into 2000, pushing from single digits in 2006 to over $120 in 2000.

When it all came crashing down it did the very same move to the downside (in one year I may add – volatility is a bitch on steroids). But what was most remarkable to me was the change in sentiment among the average retail trader who either had been holding YHOO while it was going up or was now considering a steal based on where it had been. The guys who got burned watched it crater week after week constantly thinking that it couldn’t possibly drop any lower, could it? The dip buyers found themselves in their own little hell as they watched it drop from $120 to $100 to $80, $60 – all the way down to single digits again. Of course buying every single dip because after having dropped 20, 30, 40 bucks and more it suddenly was such a great deal now, wasn’t it?

Alright, so just in case I haven’t blown your mind just yet, how about this: Some of the most experienced and time tested trend traders like Bill Eckhard or Ed Seykota, and even the venerable Jesse Livermore actually follow(ed) an inverse approach – buying high and selling low! Yep, you read that right. But that’s a story for a different day ;-)

I have only one setup tonight and I’ll have to keep that one for my intrepid subs. But it’s an awesome one, so grab your decoder ring an meet me in my air conditioned luxury lair:

More charts and commentary below for anyone donning a secret decoder ring. If you are interested in becoming a Gold member then don't waste time and sign up here. And if you are a Zero subscriber you get free access to all Gold posts, which gives you double the bang for your buck!

Please login or subscribe here to see the remainder of this post.

You have been briefed – now have fun but keep it frosty. See you guys later this afternoon.


Three Strikes You’re Out

Equities have been whipsawing near our inflection point at 1982 which led me to lose 1/2 R twice (one short and one long) and it looks like my third short entry is about to meet its maker at any moment. Looking at equities across the board the odds seem to support a continuation higher but this is where I have to draw the line.

Three trades per campaign is my maximum no matter what. Either way this one swings it’s going to be annoying as I did not have any directional bias and thus attempted to get positioned near inflection points. But as I internalized my emotional response today I realized that this was exactly when I needed to step back and follow what I preach – not let my emotions get in the way of trading. Fact is that right now I don’t see a good entry here and let’s be clear: the worst thing one can get drawn into are revenge trades or attempting to chase a big move.

Fortunately however my AUD/JPY campaign has made up for some of the damage on the equities side and then some – plus it may have legs. Nice breach there yesterday and today it managed to climb just a few pips short of the 2R mark. I’ll be putting my stop at 1R now and now we see if we got a runner here.

By the way, this goes to show that it doesn’t make sense to fall prey to one-ities (a.k.a. an obsession) for a particular symbol. I’ve said it before and I’ll say it again – I don’t HAVE to trade equities just because it’s on everyone’s radar all the time. As a matter of fact if it wasn’t for the blog I would probably only look it once or twice a week. The forex side is actually where most of the action is these days which is why I have been trying to get more of you retail rats up to speed. More on that in the coming soon – I actually have an exciting announcement planned for next week.

Two more goodies below the fold for my intrepid subs:

More charts and commentary below for anyone donning a secret decoder ring. If you are interested in becoming a Gold member then don't waste time and sign up here. And if you are a Zero subscriber you get free access to all Gold posts, which gives you double the bang for your buck!

Please login or subscribe here to see the remainder of this post.

You have been briefed – now have fun but keep it frosty. See you guys later tomorrow.


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  3. recent misdeeds

    1. Post FOMC Musings
    2. Bear Time!
    3. Head For The Beach
    4. Insurance Is Still Cheap
    5. Don’t buy the dip this time
    6. No Crying Over Spilled Milk (Or Beer)
    7. Entries Do Not Matter
    8. Last Chance For The Bears
    9. Three Strikes You’re Out
    10. Binary Proposition

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