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Euro Island
71

Euro Island

by The MoleMay 10, 2017

The 2nd round of the French presidential elections almost seemed procedural to me in that Macron was clearly the front runner plus it was clear that various voting blocks would coalesce in order to prevent Le Pen from gaining a majority. So suffice to say that Monsieur Macron’s overwhelming 65% win wasn’t exactly a big surprise to me. Which is exactly why I had been accumulating a big stack of € cash ahead of the final round. Although I anticipated a bit of weakness after the election I did not think we would find ourselves near the lower edge of the current island again.

2017-05-10_EURUSD_island

Now it’s quite possible that the current sell off is just an extended round of profit taking, a.k.a. sell the news. But it’s gone a bit further than I for one had expected. The daily panel currently shows a very well developed island formation with a 100 pip gap just below.

2017-05-10_6E_volume

I think there’s a good chance to see a drop to a little further below to 1.085 at which point the EUR bulls will have to show their cards. Either run it back higher or let her drop through the gap and then regroup. As you can see there ‘s not much accrued volume within the gap which should accelerate a slider lower.

Caveat – I do however not see a huge potential for an extended sell off and based on the current formation it seems that the EUR is going to remain above 1.065 at least for the foreseeable future. Unfortunately for me of course as life is going to be a wee bit more expensive for me over here in Europe. If the EUR continues to strengthen from here I may even be forced to cut down my nudie bar visits from four to three times per week. The horror! 

2017-05-10_soybeans_addendum

By the way whoever is making market in soybeans did a great job stopping me out and bouncing right back. No comment…

2017-05-10_soybean_meal_update

Speaking of crack smokers I don’t know what’s going on in soybean meal but I’m starting to get dizzy. More seriously though – if you’re deployed just like yours truly then this can be either very good or very bad. Good as in that it establishes more and more context above your entry position which later provides valuable buffer space above your b/e spot. Bad as in well, just take a look at soybeans above….

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P.S.: About the title image – I couldn’t find a good EUR island, so bite me 


About The Author
The Mole
Mole created Evil Speculator amidst the chaos of the financial crisis in early August of 2008. His vision for Evil Speculator is a refuge of reason, hands-on trading knowledge, and inspiration for traders of all ages and stripes. You can follow him and his nefarious schemes at various social media waterholes below.
  • Mark Shinnick

    VRX options doing nicely from last week. Still long miners, near ST objective.

  • Tomcat

    “patience is a virtue” and something Mole has been talking a lot about. What I seem to struggle the most with is what I consider my hunger for “action” and I am kinda identifying with the term “animal spirits” as well.
    Example 1: I had called for $CL when it was in low to mid $50 (my entry was $53) that was going down to low $40s. Well, about a week ago, I became impatient, and flipped my position around $48 or so. The positive in me, will point to the profit realized, but the negative will point to the underwater position which ended up with a realized loss. I think the why is…I needed some action.
    Example 2: I went long DX (USD) a while back with a strong conviction that it was going up, well, because I was “pissed” with my oil shenanigans I booked profits there just to counter my stupid move in oil.

    Any advice on how you guys have overcome this chitty thinking???

  • Tomcat

    Closed mine yesterday. Got lucky with 40% return.

  • Mark Shinnick

    Its extremely serious and insidious; an excellent topic !!!

  • Mark Shinnick

    I think we should have shared even more notes about this because it had viciousness of short covering written all over it.

  • http://evilspeculator.com Sir Mole III

    I may just do a post on that as well :-)

  • http://evilspeculator.com Sir Mole III

    Going to be quiet here without GG – we need to pick up the slack! A lot of people are on vacation it seems – I may just join in…

  • saltwaterdog

    I overcame it by developing entry and exit rules that were a function of lots of work and a subsequent belief system that kept me obeying them. So I don’t make “calls” or have “convictions” – that’s the first problem because it produces the need to be right.

  • kudra

    You raise a great point and question. How does a trader keep each trade in its own vacuum and not let the results of trade A influence the results of trade B. I have had TZA in my stable since Nov. and am seriously underwater. This sour position has adversely effected not only my trading capital and psyche but also my technique with other trades. With remaining capital, I have been trading NUGT and DUST. This year already have a sizable loss on NUGT and a sizeable loss on DUST. In both cases, the positions ended up turning profitable after I bailed.

  • Tomcat

    Agreed, that would have been smart to compare notes, especially on my part. But if you read my post above, this was another retaliation trade taken to realize profits in counter to losses incurred from another trade.

  • kudra

    ^^^ This looks like a solid answer, Tomcat.

  • kudra

    Nice call on longing miners from yesterday.

  • Mark Shinnick

    That is truly an interesting part of the topic, really great stuff to look at.

  • Mark Shinnick

    I wish you would get very real about the damn 3x’s; cannot be viewed as any long term hold. These are vicious instruments of hardcore capital warfare requiring top game mental conditioning and tools.

  • kudra

    The one positive move I made this year was dumping two micro-cap, long-term holdings that were eroding my mental capital on a daily basis.

  • kudra

    Agreed.

  • Mark Shinnick

    Miners entering objective area.

  • Mark Shinnick

    Remember too…that its frequently the case that the best way to be right…is to be wrong…and get the fuck out of the way of the market!!

  • kudra

    This is great advice. My downfall has been stubbornness, needing to be right, contrarian thinking, and initially, too much $ in the trading account leading to detrimental position sizing. Now, having lost a small fortune, I no longer have this problem.

  • http://www.captainboom.com/ captainboom

    Had to take care of a varmint problem this morning. Damn woodchucks dig under my storage shed. Got this one in a trap, and number two died from a severe case of high velocity lead poisoning.
    https://uploads.disquscdn.com/images/ecffe8e20e10c7a38df51b240b9b11d7b23000e4bd192afc1e7bebfe12e31695.jpg

  • Mark Shinnick

    That’s one duty I may never get really used to.

  • BobbyLow

    Saltwaterdog, I wish I could give you a thousand likes on this answer.

  • saltwaterdog

    Kudra we’ve all tried to help – all I can say is that if you come to a rules-based trading approach by way of a pile of painful losses then you are not alone (by a long shot) and shouldn’t beat yourself up. If you stick with your approach though and don’t make the necessary changes then you only have yourself to blame if things don’t improve.

  • saltwaterdog

    Thank you Mr Lowman

  • Darkthirty

    Must have hit the trigger at top speed

  • evilasevildoes

    Good morning everyone great post as usual Mole

  • evilasevildoes

    tough to know when kep players buy and dump they run the crude and brent markets

  • evilasevildoes

    why i love point and figure

  • Brishort

    Hello Mole!!! Hello Rats! Long time no see….

    FYI, A bit of action in Corn with an exceptionally long base that is worth watching…. while the paint dries on soy….

  • Darkthirty

    Look for other trades, EG grains/metals/et al. As long as you can acknowledge that you’re forcing the trade, you’ve got it halfway beat. When I realize I’m fighting a dead market, I close everything and go fishing and take a day or two off.

  • http://evilspeculator.com Sir Mole III

    OMG – it’s been ages. How’s tricks?

  • http://evilspeculator.com Sir Mole III

    Thank you sir.

  • http://evilspeculator.com Sir Mole III

    Someone oughta have filmed that one.

  • http://evilspeculator.com Sir Mole III

    Ummmmh – are you a Zero sub?

  • http://evilspeculator.com Sir Mole III

    “This sour position has adversely effected not only my trading capital and psyche but also my technique with other trades.”

    Simple question: Why the fuck didn’t you just sell it when it went > 1R in losses? Trading 101 my friend…

  • Brishort

    Looking to be a bit more active here.
    I recently suddenly got more time on my hands….
    And I will surely be back with my P&F charts and MA on them!!!! seems they don’t get the love they deserve from the modern crowd….. See ya around!

  • BobbyLow

    Another name from the past. Welcome back Brishort. :)

  • Brishort

    Hey Bobby!!!!!! pleased to see you here.
    Hopefully my comeback isn’t any sort of contrarian indicator of anything!!!
    ;-P

  • saltwaterdog

    I can’t be sure but my guess is there was no R value to begin with, no defined risk unit, and a completely arbitrary position size. So once the losses piled on and emotions took over, the R value became “all of it”.

  • Brishort

    Another flash from the past (credit ULTRA who used to be around here too).

    Not as deep as Mole volatility analysis, but only 6 occurrences since 2012. A relative view on the relationship SPX:VIX Not a call to action in itself, but certainly interesting to witness at this juncture.

    https://uploads.disquscdn.com/images/fef327c239b0144b48f2ab091fc21c8aa229acaa2eabc375c55fe5e2eea77c0d.png

  • kudra

    ^^^ this is the answer to Mole’s question. This TZA position will be the last one I trade like that.

  • saltwaterdog

    May have said that before? Think about this – you took a 3x short in the higher beta benchmark (ie more than 3x vol vs the S&P in all likleyhood) during a clear uptrend in the market with no precaution (stop loss) in the event that what was a high risk bet with a low probability of success was wrong. People who take these types of positions are better the hard six on the craps table – all ego from the camp of “watch me call this one”. I know because I’ve been there and traded this way. I had to blow up to change it. Please stop – you can’t just add “rules” now, you need to do the work to establish the belief in those rules or it is a hopeless exercise.

  • http://evilspeculator.com Sir Mole III
  • kudra

    The exit rules seem simple: Have a set stop once trade is entered. The stop should be set so that it results in a loss of no more than 1% of trading capital.

    As for the entry rules, it is my understanding that these 1) are used to provide an edge, 2) can be almost anything, and 3) are hard to come by and require “lots of work” (math, back-testing).

    Can one have discretionary entries and strictly rule based exits?

  • kudra

    You are spot on. Once the losses became too big, I lost the courage to take the loss. Now loss is 6 figures.

    Can you elaborate on the work needed to establish the belief in those rules. Do you mean paper trading?

  • http://evilspeculator.com Sir Mole III

    Kudra – how much money have you lost over the past year or two? Because you talked about six figure losses several months back and I’m frankly wondering when you’re running out of assets to trade.

  • http://evilspeculator.com Sir Mole III

    (I’m almost thinking he’s punking us)

  • http://evilspeculator.com Sir Mole III

    Entries do not matter as much as you think. You should really drop by here on a regular basis as we constantly teach this stuff.

  • http://evilspeculator.com Sir Mole III

    You may also just get yourself a fucking Gold subscription and trade alongside yours truly. Couldn’t possibly turn out worse than what you’re doing now. It’s a lot less exciting however as I’m the slow grinder one trade at a time type.

  • http://evilspeculator.com Sir Mole III

    Some learn the hard way. And some never learn unfortunately.

  • kudra

    since 2012, I have had only one positive year out of 5 and lost $279K during that time. I have roughly $300K in trading cap left.

    I wish I was punking you.

  • http://evilspeculator.com Sir Mole III

    Boy you’ve got a LOT of catching up to do. I strongly recommend you work yourself through the past few months of posts as we’ve been covering very cool stuff on all fronts.

  • http://evilspeculator.com Sir Mole III

    Glad to have him back.

  • kudra

    I’ve been coming here everyday for many years.

  • http://evilspeculator.com Sir Mole III
  • saltwaterdog

    If I were you and wanted to continue taking risk I’d trade 0.5% with stops on your discretionary entries and the same size on Mike’s trades via the Gold sub. Keep records and on Dec 31 see how each has done. Also set a hard stop on your acct size below which you will cease trading.

  • http://evilspeculator.com Sir Mole III

    I actually posted a similar ratio chart the other day in my MOMO update. Scroll down in the front loop and you’ll see it.

  • http://www.captainboom.com/ captainboom

    That’s what I was thinking. He got a long way into that trap, and those traps spring very quickly and easily.

  • BobbyLow

    We’ve been talking about this problem for what I think is a couple of years now. This is why some people think you might be jerking us around.

    A lot us have shared our own painful stories although perhaps not as painful a story as yours. But here is part of my story again. I began trading during the beginning of the tech bubble and made a 6 figure profit during my first year. For the next few years, I was like a heroin addict chasing his first high. Like most addicts nothing good came out of my first year’s high of making a shit load of money. I thought I was a “trader” and nothing could stop me now. I ended up giving it all back and then entered a vicious cycle of making money, giving it back and making money and giving it back etc., etc., etc.

    Get the Picture?

    I finally realized that I really didn’t know my ass from my elbow about trading and I had better get my head straight or I would lose everything. Learning how to trade is one of the most difficult thing anyone can do on a consistent basis. And although intelligence might count for something it really doesn’t matter because average intelligence will do. I heard a neat saying the other day and that was “he didn’t know what he didn’t know”. It’s taken me years to get to this stage and I can honestly say that I still don’t know shit but I do know enough about what I don’t know to stay out of serious financial trouble.

    If you insist on doing this on your own, get an edge, make a plan based on R Size (THE FIRM AMOUNT OF MONEY YOU ARE WILLING TO LOSE) and how you are going to trade that edge. AND ACQUIRE DISCIPLINE. Without these things, not only will you not survive you are guaranteed to lose.

    After all that’s been said, it’s amazing that you have continued to do the same self destructive things over and over again expecting different results.

  • http://www.captainboom.com/ captainboom

    I lost some 6 figure paper profits a few years ago, and then a few 10’s of thousands again. I decided to stop trading completely maybe 3 years ago. We’ve recommended you stop on numerous occasions. With what you have left, you could probably not work for a year, work full time building a system that works, and still have cash to start over with.

    I hang around here for the education. At some point, I’ll have a system in place and start paper trading. Then small money until I’m ready. For now, it’s my busy season, so I’ll get serious again after July 4. In the mean time, I’ve been holding some AAPL for a few years, and that alone has been better than giving it all away.

  • saltwaterdog

    Hypothesis:
    If a market gives three bars of either Higher Highs/Higher Lows, or Lower Highs/Lower Lows, and the ranges are contracting [ rng (bar1) > rng (bar2) > rng(bar3) ] then sell a break of the 3rd bar low (for the HH/HL ex) or buy the break of the high of the 3rd bar (for string of LL/LH example), stop at opposite end of setup bar

    daily EURUSD provides an example of the buy case

  • Darkthirty

    Was trapping coons out of a city park, shining them in the trash cans, setting em up and coming back in half hour to collect. Damn trap fired on my hand and had to head home to get it off. They slap you pretty good!

  • http://evilspeculator.com Sir Mole III

    So you’re looking to sell NLBL and NLSL breaches? The added rule is that the range is contracting? I’ve been coming up to speed over on Quantopian and may just test that as an alpha factor. They only have stocks and futures however.

  • saltwaterdog

    In the case of 3 bars of HH/HL, if I recall correctly after the 3rd bar the NLSL is at the low of bar 1? I’m proposing an entry after a breach of the low of the 3rd (final) bar. Yes the contraction of ranges being an added parameter signaling waning strength of trend. When I test this I will also track SS and Hammer bars as a potential incremental edge

  • Brishort

    OMG, no lazy rats backlog reading allowed…. ;-P
    As a former new rat reporting for a new call of duty, I will now go auto-punish myself until my stainless steel armor shines again.

  • Scott Phillips

    Yes. You have one problem which rules them all.

    You want too much control over your trading. Stated another way, you don’t like being wrong. You don’t like feeling powerless over the market when you think it’s going up, and then it goes down.

    You THINK you have trading psychology issues but you don’t. You have trading SYSTEM issues.

    We all WANT unlimited freedom and flexibility to do whatever the fuck we want, because fuckit, we know technical analysis.

    But what happens is that to our subconscious we are not making one decision, but a constant stream of decisions (should I stay, should I bail, should I buy, or not). When the time comes to make a real mission critical decision (should I bail on oil) to your subconscious it’s not even that important, after all you’ve been making decisions all day every day.

    Get the clutter out of your process. Scan the markets at the same time, in the same order each day. Trade only the markets on your approved markets to trade. Decide in advance what you are looking for and trade that ONLY.

    Even if wave theory worked (it doesn’t) it is a TERRIBLE way to trade because of the subjectivity and flexibility involved.

    Most trading psychology problems are trading procedure problems. Your trading psychology is fine, your system and method sucks.

  • Scott Phillips

    Not for you. You will never be a profitable discretionary trader.

    You’ve already proven that. Why prove it again?

    Build a system. Stop being a lazy cunt. Or stop altogether.

  • sutluc

    “By the way whoever is making market in soybeans did a great job stopping me out and bouncing right back.”

    Tim Knight is also having this problem….

  • sutluc

    What date did you enter the trade if I may ask?

  • Scott Phillips

    Welcome back matey!

    I was watching corn thinking it should probably go down yesterday, but it going up so strongly is a sign the market really really wants to go up.

  • BKXtoZERO