Tuesday, October 31, 2017

Cognitive Biases

It is a must to understand how cognitive biases work in trading. This is a great article by Allen Cheng on Cognitive Biases in general.

This post by Galen Woods is particularly about biases in trading.

Tuesday, October 17, 2017

Week Ahead 43

SP500 was a few cents from the measured move target of 2560. 

NQ is around 50% in the measured move channel. 

DAX is in tight range around 13k which is a major technical and also psychological level. We can identify two measured level targets. 

Technology and Industrial are leading the rally.
Consumer Discretionary and Metals and Mining are struggling with making a new high.

Utilities and Health Care show some signs of weakness.

The oil driven Energy sector is in a narrow channel and exhibits two big bearish bars.

Consumer Staples technically is mixed.

The US 2Y yield is making new high whereas the 10Y shows some sign of weakness.

The  German 2Y yield - unlike the US - is still not in a breakout mode that results in a pressure on EUR/USD.
Commodities in general failed to close whereas Base Metals succeeded to close at a new high.
 Agriculture and in particular Grains and Coffee are still weak.

Gold seemingly can't  break the 1330 level that acts as a resistance now.

Dollar Index could not break the resistance and the 50 day SMA provided some support.

Friday, October 6, 2017

Interview with John Carter

This is a great interview with John Carter by Aaron Fifield. 

For me the key points are:
- Difference between good and bad traders is patience.Patience to wait for the right setup and patience to sit in a winning trade. "I promise you that the markets are gonna be open tomorrow and there's gonna be another opportunity.
- "When you get emotional and you chase (a missed trade) you get yourself into a mindset that you really miss what's going on, when a real opportunity comes along you're just not ready. You're chasing and emotionally vested in something that really wasn't a setup. You usually end up to be the last to get in."
- "I went from 10k to 100k so I thought wow I could go from 100k to 1m. Instead of focusing on trading I started to focus on the 1m. That changed the trading approach. I can't afford  taking this loss I have to make it to break-even.'" This was distractive. Don't try to make 1m!
- Books: Mark Douglas The Disciplined Trader and Trading in the zone
- The biggest problem with being too fearful is that you wait for the confirmation. The problem with waiting for the confirmation in trading is that by the time something is confirmed and all the indicators are aligned that is usually the time to take profits. Everybody is looking at the same chart and if everybody thinks that it looks good than everybody is in position so nobody else is left to jump into and move the prices in your way. That coincide with the saying that the best trades are the most uncomfortable to make.
- "Sooner you get to the point when you focus on probabilities and you let go the emotional attachment to the outcome the sooner you become consistent."
- There are three type of trading: scalping/day trading, swing/position trading and investing. "The best thing I've done I took my 5min charts and throwed them away."
- "The best traders I've met they don't care what's going on, they don't watch the news, the don't look at the latest tips", they just focus on their setups. "The less information you have the better you will do." 
- "You don't do the same trades all the time. Markets are changing. There are three positions to have, you can be long, short and flat. Longer I do this I more realize that flat is one of the best positions. Because if you are flat your mind is neutral. If nothing you can do go away and just do something else, be patient. If you can be patient in the course of a trading year, there is gonna be one or two days in a month where if you are focused and you have a neutral state of mind you can dive in and have a larger than normal position and make a killing. Then get out and go flat again. Don't trade just to get read of boredom.
- "Out of the money options are designed to expire worthless."
- "I don't look at a chart more than a split second." Good setups are right there in front of your face. You look at a chart longer it means you're trying to force something onto that. 
- I would rather have three or four larger positions than 18 smaller ones. "Diversification is for people who don't know what they're doing." If you see something you like get in and focus on it instead of shotgunning an hoping for the best. Focus is the key.
- "In early years I had a pressure to make a  big trade. The main difference now is the confidence in my skills."If I don't make money today that's fine, markets are gonna be here tomorrow"
- "This is the only profession on planet where you have to develop confidence in a situation where the result is always uncertain. When you feel comfortable to be uncomfortable then you are there. "

USD Index is at a minor resistance

USD Index bounced back from the L/T support and back in the almost 2 years old channel. It is facing a minor resistance now. Should it break the the measured move target is around the July 2016 high.

EUR/USD is at strong support, whereas GBP and AUD have broken important levels.

Wednesday, October 4, 2017

Tuesday, October 3, 2017

Dynamic Risk Taking

This is a good post on TraderFeed how to achieve trading consistency by taking small risk.Once you grow your confidence you can increase the risk you're taking. I time to time do this exercise when:
- I have a break in trading and I need to sync with the markets,
- after a loosing stake I loose a little bit my confidence.

It is important for me to be in the market. Watching the charts or trading a demo account is just not like opening positions with real money even if the risk I take is small. The risk level is to be determined way before making any trading decision.

Three warning signs on the weakly Gold chart

UK Construction PMI

Another sign of Brexit impact.

USD MACD Divergence

Various USD instruments exhibit MACD divergence particularly on 4h charts that could be a sign of some sort of USD correction ahead, as these setups could trigger bottom/top fishing trades.

EUR/USD which trades at a strong resistance:

Also 1h



Manufacturing PMIs






Monday, October 2, 2017

Consumer Prices

Consumer Prices are up most probably due to stronger oil.

Week Ahead 40

SP500 is moving to the measured move target of 2560.

DAX broke out strongly and is heading to 13k level.

US-DE 2Y spread is widening.
All commodity classes are facing strong resistance levels.

Gold has broken the 1300 level and technically still bearish.

USD Index break from the L/T channel was seemingly false.