What Does It Take?

The greatest games have always been dominated by the masters of obfuscation, misdirection, misinformation, if not outright deceit. Of course the financial game is no exception and the price of admission to be paid every single day differs depending on personality, cunning, intelligence, fortitude, discipline, greed, market type, market cycle, liquidity, etc. Although we are all trading the very same market, the hurdles we encounter in our respective journey are a product of exogenic and endogenous factors.

Long term participation and success therefore has always been limited to a very select minority. To quote Jesse Livermore: The game of speculation is the most uniformly fascinating game in the world. But it is not a game for the stupid, the mentally lazy, the man of inferior emotional balance, or for the get-rich-quick adventurer. They will die poor. 


Most of us would list intelligence for instance as a cardinal predicate to becoming a successful trader. But like with many things in life the real picture is a bit more complicated. Because if it was just a matter of intelligence then why don’t we see more billionaire mathematicians or scientists? Many of them die poor and are often considered social outcasts. As I mentioned above, we all must face our own personal hurdles and challenges. Very gifted people don’t get a pass here as intelligence comes with a price. Former software engineers for example are more often than not inspired by complex models and convoluted solutions. Their own intelligence and ability becomes the drivers of their endeavor as they assume that the key to success lies in cracking some secret code hidden inside the market’s gyrations. The fact that chaos rules the day is an inconvenient truth equally ignored by the smart and those with lesser neuron counts. As such a smart but righteous or misguided individual may be no different to someone of lower ability who ventures nomadically from one trading site to the next or absorbs dozens of trading books in hopes of finding that one system that beats them all.

The motivations may be different but the eventual outcome will be the same as the underlying premise feeding ones action is identical. One that is inspired by an assumption that we may one day overcome some final hurdle and from then on it’ll be easy time. Make no mistake – as soon as you overcome that last hurdle there magically will appear a brand new one. Because as human beings we are wired in a certain way that assures an unlimited supply of hare brained cognitive biases and misconceptions – no matter how smart or talented we are individually. In other words – intelligence or talent doesn’t offer us a free pass. Your journey will simply be a different one and success is not guaranteed. As a matter of fact all of the most successful traders I have come across are or were a lot more street smart than brilliant. Of course there is a baseline on the IQ front and I would hazard to put it somewhere around the 120 mark. But that’s not exactly a high bar and I have met traders dumber than that who did just fine pressing that one button that they somehow figured out works on a long term basis. As such success is a side product resulting from a series of positive choices. In fact this place was created years ago to aid us all on a daily basis.

Some of you may wonder why I often crack the whip early when I see signs of decay, impulsiveness, or an abandon of some of the prime directives we all aspire to abide to here at Evil Speculator. Naturally the dynamics of a virtual community, whilst permitting global collaboration and instant communication, also serve a certain bubble mentality with little to no personal consequences. For one we seek information that already supports our current view and we are quick to dismiss anything that at the surface violates any of our core beliefs. But there is also a social aspect to this. In the past the guidance of a mentor or group of peers came with implications and personal responsibilities. Your seat at the table had to be earned (with significant hurdles to entry) and cutting and running was frowned upon and may cost you your career. At the same time success and especially failure were exposed to the people around you and there was no easy way of hiding them either.

In a digital world we are however free to simply extract ourselves in periods of discord and thus avoid personal consequences of actions, decisions, or personal behavior. Stomping your foot and running off is a character trait mostly exhibited by children but online it seems to have become the norm these days, often after angry insults have been exchanged. It takes quite a bit of discipline to overcome the temptation of avoiding negative experiences and stress but I believe cutting and running to be a cowardly choice with long term implications. Successful people are never the product of easy choices and a careless upbringing. Like a good sword the friction of life, e.g. personal strife, being forced to overcome personal limitations, creates a person who is able to face challenges with easy that would quickly thwart others.

Money is just the result of being successful. You can chase simply money but drug dealers and career criminals do that a lot more effectively than the rest of us. Personal growth however bestows wisdom and experience which will lead you to new challenges you didn’t even know existed. And that my dear steel rats is what we really should aspire to as it is the real key to happiness and a successful life. Not one of convenience and easy answers. If you seek those, well – there are plenty of people selling that out there and I’m afraid you’ve come to the wrong place for that.

And there’s your answer – I crack the whip early because you need it. We all do – nobody gets a free pass. You may curse me today but you’ll thank me later (one hopes).


Alright, let’s get to work. I’m tempted to grab a long here as the tape is getting ready for a big move. Directionally this could go either way but I don’t see anything bearish just yet so I’ll stick with the long side – for now. Watch the Zero for a hawk today and tomorrow – something’s going to give here soon.


EUR/CAD – very small short here on a bounce higher. I do like the daily panel and the idea here is a ride lower to the 100-day SMA. The trend has been to the upside until recently and until now I expected a sharp push higher. However we have accumulated quite a bit of resistance now and I think the upside will be plastered with hurdles.


Gold – things are coiling up here and this chart is starting to look pretty bullish. But we can always be easily fooled and thus we should not relent to directional thinking. For now the long side looks good but only with a small position. I would actually like to see a drop lower near that NLSL at 1129.6 – that would be a wonderful long opportunity given the current context.

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Nicely Done

Quite a ride over in equities yesterday but miraculously the long positions I placed early in the day survived various shake out attempts. Thus far things are looking positive but don’t get too comfortable as we may see another attempt to scare the children today.


That was close! My stop was two ticks below 1860 and it almost got taken out. That would have been annoying to say the least. The good news is that we’ve produced a whole latter of Net-Line Sell Lines which on the hourly which should offer layered support on a retest.


AUDJPY – I very much like the configuration on the daily and am currently waiting for a little drop lower toward the 100-hour SMA to grab some long exposure.

More goodies below the fold for my subs:

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The Road To Hell

The biggest news yesterday was not that the Fed once again chickened out and left the federal funds rates untouched at zero. I could have told you that ahead of time. And guess what – I actually did on several occasions. No, real big shocker yesterday was some very carefully worded mention of negative interest rates. Say what? The sheer fact that these three words were uttered by Mrs. Yellen during her address speaks bounds about the growing fear deep inside the bowels of 33 Liberty St.


Who of us would have thought a year ago that we would be entertaining the thought of NIRP instead of raising interest rates perhaps for the second or third time by now? And that exactly is the crux of the matter isn’t it? There is absolutely no predicting as to what Fed will do next as its actions appear to be not only reactive but also fearful of causing a market dislocation years after resorting to ZIRP.


The big paradox however is that this is exactly what we may be getting. Had the Fed been crystal clear about the possibility of NIRP to begin with then it would have been part of the equation for investors and traders like us. And I’m not saying all this to complain – rather it’s to make a very important point. Clearly market participants are throwing in the towel here as confusion now reigns high. Overnight equity futures across the board have sold off heavily and one wonders if the speculators are now taunting Mrs. Yellen to cross the Rubicon and bring about NIRP.

You may have heard the old saying: The road to hell is paved with good intentions. The deeper meaning of which is that a series of well meant decisions can sometimes put you on the path of accomplishing the exact opposite of what you set out to do to begin with. By mention of NIRP during a time when an interest rate hike was on the roster the Fed now has clearly signaled that it is afraid of a major market dislocation. Whether or not we will ever see NIRP is beside the point here. What matters is that we should continue to expect seeing the level of intra-day volatility we all have come to enjoy so much over the past year. And as traders that affects our daily reality quite profoundly. At minimum it means wider stops, smaller position sizing (those two usually go hand in hand), different campaign management (e.g. closer trail), and very stringent capital commitment guidelines (e.g. correlations, markets, etc.).


On to the setups: The EUR/USD is a possible long while it’s hovering near 1.4. In my mind that has been a long time coming and unless we hear some jawboning by Mr. Draghi in the near future I thing my days of enjoying a favorable exchange rate may have come to an end now. Just looking at the daily panel screams short squeeze to me. Of course the ECB could smash this chart in a heartbeat but thus far I have not seen/heard anything.

If we drop below 1.4 I’ll try to ride it lower back to the 100-hour SMA. But that one thus far has served as support quite well, and if that one gives I think the 25-day SMA is where the Euro specs will once again make their stand.

A few more goodies below the fold:

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.


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