Wednesday, 5/29/13

Crude set a minor local DB in the ON session, suggesting a bullish tone...




However, it looks like it will open out of range to the downside, suggesting possibly the opposite, but could go either way..




And, to be as ambiguous as possible, is sitting in the middle of the big picture bracket.

Today was somewhat as I had expected, not that I had a directional bias, but that I knew not to, with crude not sure where it wants to go yet. This morning saw a directional run up, then a spike reversal down into and through the close to form a double distribution trend day down, with B period forming a responsive selling tail. Longer term direction remains unclear as price still hangs in this larger view balance.

Net +49

josh 

Gary, since you are looking at risk appetite as it pertains to adding/scaling, have you ever looked into the Prospect Theory in the realm of behavioral finance?

Thanks Josh

Playing with my MRI in Photoshop, thinking about it. I was supposed to go salmon fishing in Alaska this summer, with Tuna Can... Told my chiropractor I was feeling a lot better, went to the gym, was... She stopped me. "Gary, I want you to feel better, but just so you know, reading your MRIs, you should be in a lot of pain".

Psychological impact is not completely known. Possibilities include; depression, trying to feel stronger through trading, feeling more risk averse, being angry and taking it out in my trading, not staying focused due to not feeling comfortable in my chair.

GaryD 

Today felt weird to me, and I did not trade it well. When I look at the day after the market closed, it always looks so easy to have gotten into the zone. But today had a strange vibe to it, and because of that, I think, I wound up on the wrong side twice, then got gunshy and poked away at it. My initial reaction was to fade the move up, and tonight as price explores below the day's range it seemed like a great trade. But this morning it was somewhat defiant of the open, and I knew that, but even with that knowledge I could not pull anything out of it. TRying to describe the vibe, maybe it was like, "everyone was wrong"? That is not it exactly, but I don't have words for it tonight. We wanted a reason to trade it, just because that is what we do, but so many traders remained convinced to buy, and an equal amount remained convinced to sell, or something like that. And maybe it was the pace of the motion that had me turned around. Price was so hesitant to choose a direction, and so reading direction became tricky. I had thought earlier that maybe I came to the market lazy, thought it was going to hand me money. But I sat out on the porch reflecting on that, and no, if anything I was less confident than usual. As much as I wish it were not true, no matter how hard I study or how many years I trade, there will be days I just don't get. In the past, not understanding what happened during the day could send me back to charts, books, webinars, backtesting... looking for something to learn. Tonight, sitting out there with the breeze coming in off the lake, actualy laid back in a lounge chair about to nod off, I just took deep breaths, feeling content that whatever I did not understand today, it was ok. And for me, that is progress in some strange way. I was very near bringing the opposite effect to my trading last week. Where I felt I "knew" what was going to happen and should press, but didn't. And it wound up doing what I thought it would that day, and while I made some money on it, it was nothing like what was almost, if it were not for some rules I have learned. Learning and unlearning. But that was ok too. I felt good about having remained conservative. That too, is progress in a strange way. My hope, or even expectation, is that I can expand on both directions. Mostly from the point of knowing when I am "in tune", and when I am not.

Your writing is truly prolific.

Sitting on your porch and richoeting these thoughts - these insights that every trader can relate to - in a lucid manner - you almost make me visualize a Thoreau sitting by Walden pond.

For him it was nature, and you the market.

Thanks for sharing!

Since you had asked to be introduced to the Indian ancient texts, I wante dto mention this:

He had the Gita with him during his stay by Walden Pond. Thoreau wrote in Walden:

In the morning I bathe my intellect in the stupendous and the cosmogonal philosophy of the Bhagavad Gita, since whose composition years of the gods have elapsed, and in comparison with which our modern world and its literature seem puny and trivial and I doubt if that philosophy is not to be referred to a previous state of Existence, so remote is its sublimity from our conceptions.


Thoreau's reading Indian literature is an astounding fact in itself.

- He read Bhagvad Gita at age 28.
- He read Jones' translation of Shakuntalam
- He read Wilson's translation of the Sankhya Karika / Vishnu Purana
- He read Wilkins' translation of Harivamsa and he also rewrote it in English



In your contented state I would like to - and also leave these lines to ponder upon (from Annie Besant's interpretation of the Gita:

“the man who rejoiceth in the self, with the self is satisfied, and is content in the self, for him verily there is nothing to do; for him there is no interest in things done in this world, not any in things not done, nor doth any object of his depend on any being.

“It is not necessary that a man should earn his living by the sweat of his brow, unless he sweats easier than I do,” (Thoreau, 1670)

and

“I do not wish to be any more busy with my hands than is necessary.” (Thoreau, 1685)


Our society makes us believe that we need to live in a certain way, that we much work hard in a conventional and safe job, and own this and that - but he showed that it is possible to be wiser than the norm and to transcend all of these preconceived notions and drill down to only the basics needed for human survival.

Thoreau moved into the woods because he believed that the majority of the American society was living in a style that he did not agree with. He chose his own duty, followed his calling, and persisted with his experiment even when people tried to dissuade him.

He performed the most minimal amount of work necessary for himself to survive, and he was not bound to a job, or to his estate, or to any material possessions or desires. He lived as one with nature until he discovered a more natural state of human existence, becoming nature himself.


He chose his life as that of inaction, rather than a life of perpetual servitude. How different from our society of perpetual lack! We crave and crave in spite of having everything!



As you rightly understand, even in trading it is not more knowledge that helps, it is doing the duty that needs to be done that sets us apart.

An excerpt from Walden, where Thoreau is by the lake, like you, contemplating :-)

"This is a delicious evening, when the whole body is one sense, and imbibes delight through every pore. I go and come with a strange liberty in Nature, a part of herself. As I walk along the stony shore of the pond in my shirt-sleeves, though it is cool as well as cloudy and windy, and I see nothing special to attract me, all the elements are unusually congenial to me. The bullfrogs trump to usher in the night, and the note of the whip-poor-will is borne on the rippling wind from over the water. Sympathy with the fluttering alder and poplar leaves almost takes away my breath; yet, like the lake, my serenity is rippled but not ruffled. These small waves raised by the evening wind are as remote from storm as the smooth reflecting surface. Though it is now dark, the mind still blows and roars in the wood, the waves still dash, and some creatures lull the rest with their notes. The repose is never complete."

Thursday, May 30, 2013

I went throuh my trades for the past two days, and it has helped me answer my own recent question about "what is overtrading?". Between the one day loss, second day gain, and the commission costs of the two, I am basically flat for the week.

Overtrading = when commission costs significantly impact trading profits.





Will the bracket hold around 92, or is 90 up next? That area will define my approach today.

I really liked my email from The ReThink Group this morning. That has been my experience as well. I tell my wife all the time, that trading is a pursuit of self-awareness above all else.



"Twice in the past month, two very successful traders - one a bank desk head and the other a proprietary firm partner and head trader - said the same thing. Paraphrasing but getting the essence "You know Denise, in reality trading is at its core a self development exercise".

Of course they are right. There is nothing else like the markets that can so effectively deliver the equivalent of a Rorschach ink-blot insight into one's central perceptual and behavioral patterns. Naturally we project our expectations onto what the price is about to do - and about to do to us. We can't argue with it, cajole it or in any way influence it. That leaves us to explain its treatment of us according to how we have historically expected to be treated.

Are we by nature shy? Outgoing? Gregarious? ... It might look like a numbers game but those personality traits will find their way into our relationship - and yes it is in fact a relationship - with the market.

If we are shy, we might expect it to embarrass us. If we are outgoing, we might expect to be able to influence it with our charm. Of course we rarely CONSCIOUSLY realize we feel this way.

And in that reality, is a new edge. Becoming conscious of these unrelated expectations - and dealing with them through feeling and describing them - gives us a psychological edge over everyone who is just reacting."

GaryD 

Thanks Josh

There is a lot of value here, but it's a very dry read, here is a better (more intuitive, and easier to read) example of "Path dependent" prospect theory.



Deal or No Deal? Decision Making under Risk in a Large-Payoff Game Show by Thierry Post, Martijn J. Van den Assem, Guido Baltussen, Richard H. Thaler :: SSRN

Ahead of the EIA I am long-biased. The area from late March / early April (yellow highlight) held and price came back above the open.




I still am too freaked out by the report itself, and going to let it shake itself out, and will go with a sell below the IB.