Every other week, I am blessed with the opportunity to meet with 2 guys from my church. We call our group a Triad. We meet to discuss life as Husbands/Fathers/Businessmen/Men of God etc.. The time I spend with these Gents, is cleansing and full of value. No, this isn't bromance. They challenge me, keep me accountable, provide more wisdom than I can absorb (at times) and add an immense amount of value to my life.
What does this have to do with navigating turbulent, violent, volatile markets that don't care about you, your money or your family? My Triad focus's on the F 4's........let's unpack this.
1) Faith
What is faith? It is a firm belief in something, although there may be no tangible proof. The more you have, the more you need. Faith keeps you centered. Faith keeps you grounded. Faith reminds that you are not the center of the universe. During tough times, faith provides peace. During great times, faith provides the joy to appreciate the success. Faith provides wisdom. Here is 4 ways to build and maintain your faith.
a) Take quiet time everyday - Remove yourself from the madness of life. Relax, focus, meditate.
b) I am a Christian and I read the Holy Bible everyday. If your not Christian, read a faith based book of your choice. Tony Dungy has written some great books.
c) Pray. Pray for others. Pray for your family. Pray for yourself. Pray that you are blessed and your territory is expanded.
d) Meet with other like minded people. I cannot understate the importance of surrounding yourself with people that you WANT to be like. Go to church, small groups etc.. Hang around in the gutter, you smell like the trash.
A strong Faith will help you control your emotions. Controlling your emotions, frees us to look at the market through a lens we can understand and appreciate.
2) Family
Some of you are married, some are not. Some have children, some do not. We all have different family structures. I am married, have 2 boys and am the oldest of 5 boys (Yes, a starting 5). I once heard, "you are either trading time for money or money for time", in most cases. The trading world offers the opportunity to take advantage of both. The market is a sweet siren though, calling your name in the evening, dominating your thoughts and dreams at night and stealing all of your focus during the day. But, the market is always there. The first tenet of successful trading is Capital Preservation, make sure you are there tomorrow. Make time for your family. Spend quality time, investing in your wife, kids and/or siblings. Spend time with Mom and Dad. Time waits for no man and you cannot get it back.
3) Finances
Let's get it out in the open, we trade because we want to acquire money. At the end of each day, we are measured by our PnL. Unlike most other people, when we have a "rough" day at work, we take money OFF our table. We don't necessarily get paid for everyday we work. Here are a few things I do to reduce money stress/pressure and enjoy life.
a) Give, Give, Give. I actively give to the church I serve in. I also try to make it a point to give locally, in situations that make a real difference. Check out James Altuchers' most recent blog post http://www.jamesaltucher.com/2011/03/how-to-become-a-superhero/
I know two guys that literally cannot give enough. They give incredible amounts of money away to quality people and organizations. As soon as they give it, it returns to them , in many cases many-times-over. It is a true blessing to know these guys and watch my God work in their lives.
b) When trading is especially tough, spend some money on yourself, a friend or a family member. Buy that little toy you have been eyeing. Buy your kids that XBox 360 game they have been begging for. Take a friend out for a unexpected dinner or lunch. Buy your wife/fiancée/girlfriend a gift for putting up with your market related moods swings/tantrums/desk pounding. Take your family on a 2 day staycation.
Following these two financial principles, helps me keep life and money in perspective. I usually return to the market refreshed and recharged. Again, the world doesn't revolve around me.
4) Fitness
This may be the glue that keeps everything together. Not the most important of the 4 F's, but the binding agent. Fitness for me means running. I love running. I love the physical challenge. I love the mental challenge. Running helps you build perseverance. Running is not the most pleasurable activity to partake in. It often hurts before it feels good. However, I have never went on a run and came back feeling worse, never. I am going to put this out there. I am a clydesdale. 6'2", 250 lbs (30lbs overweight). In 2007, I ran the Chicago Marathon (The Hot One) and finished. 2008, I ran the Denver Half Marathon with my bro. I felt so good after each of these events. I was really spent after the marathon, but the accomplishment overshadowed any physical pain. It has been 2 years since I competed. I focused on building a trading business and I let one of my F's fall to the wayside, Fitness. Here are two things I am doing to get back in the groove.
a) Setting small, short-term goals - I was in 2 mile shape in Jan 2011. I want to be in 4 mile shape by the end of March, I am right on pace. I finally feel like a runner again, lungs and heart feel "Strong Like Bull".
b) Set a longer-term goal - In September 2011, I am running in the Rock Cut 3Day Ultra Trail Run. A total of 52 miles on the trails of Rock Cut State Park over 3 days. This will be a true test of my physical abilities. I WILL be ready.
I have 2 great Book recommendations
1) Born To Run - Christopher McDougall
2) Ultramarathon Man, Confessions of an All-Night Runner - Dean Karzanes
I guarantee that beginning to apply these 4 F's to your life will help you re-prioritize and find more balance in your life.
Thank you to my Triad, you know who you are.
Be Blessed,
Hemi
Wednesday, March 30, 2011
Saturday, March 19, 2011
Chihuahua Alarm Clock
On Thursday afternoon, I was taking a nap around 4:15pm CST. I trade the London and US open sessions and was stealing a few minutes of respite from the stress and volatility of the last week. I didn't get much sleep earlier in the day as I spent the afternoon eating a St. Patty's day lunch with my beautiful wife (First wife, only Wife, the Best Wife). Translated as, we ate lunch at our favorite local Mexican restaurant, Front Street Cantina (I cannot stand Corned Beef and Cabbage).
I had only been resting for 10-15 minutes, you know that kind of rest when your eyes are closed, your close to dreaming but still aware of what's going on in your environment. As I am laying in my bed, I hear my 3 Chihuahua's Enzo, GiGi and Guapo (I'm Italian, my wife is Mexican) going crazy, as they usually do when someone knocks on our front door (or sneezes, or belches, or a multitude of other things that catch the attention of these notorious yappers). My seemingly unwanted alarm clock. I initially remember thinking, it must be one of my boys' friends. Then I heard a male voice. No, maybe it is my wife's uncle. He lives a few blocks away and checks in with us every once in a while. And then, that little voice in my gut said, "something is not right" (I think that is God, you may have another opinion).
I get out of bed, slide into my fleece lined crocs (I love these crocs as they keep my feet warm at night when trading the London session) and head to the living room. My 9yr old son catches me in the hallway and says "My friend's (I won't be using names for obvious reasons) dad is here, the police are chasing him and I'm scared"........WHAT? I tell him to go into my bedroom and close the door.
What just happened to my world? We live in an established, middle class neighborhood, literally right across the street from my sons' grade school. Our community has very low crime, is extremely safe, kid's run the sidewalk in front of our house to the playground. Now I have an episode of Chicago Code (Great Show in a Great City) developing in my house. I go into my living room to find a man, I barely know, talking between his phone and my wife. Evidently, he kindly let himself in when he noticed our front door open. I introduce myself to him, shake his hand and ask him if I can help him. He is profusely sweating and speaking with some fear in his voice. He says he needs a ride to the bus station. I tell him I may be able to help him and then I ask him, "What is going on here"?
I start to see marked and unmarked police cars speeding up and down my road, as well as circling in the grade school parking lot. I point out to him that there are multiple police outside. He asks me to talk to his wife on the phone, "She can explain it all". My response is, "Listen, I am a minister, how can I pray for YOU, what can I help YOU with"? He asks to use my bathroom, I show him where it is and when he goes in, I rush back to my living room and say to my wife, "Get the kids and get the hell out of the house, I don't know where this is going".
It was almost as if time had stopped. Immediately after saying this, I cannot believe this combination of words has come out of my mouth. He emerges from my bathroom. I know he just flushed something down my toilet.
He says he needs a ride to the bus station, I tell him, "I can probably help with that, I just need to get my keys". At this point I am just stalling as the number of police, only 50 feet outside my big picture window, are starting to grow and they don't know he is in here. I tell him, "Listen, there are cops everywhere outside, I am not sure what I can do for you, but you need to tell me what's going on here and you need to leave my house". My wife chimes in "We are not aiding and abetting you" (she is a strong, courageous Mexican woman). He says, "They are gonna send me to jail, I have a warrant out for a domestic". My wife says, "You need to go outside and fess up".....and he did.
As we exit my front door together, someone shouts "HERE HE IS" and they sprint to my front door. My wife stops them and says, he hasn't done anything to hurt us, he is giving himself up.
"GET DOWN ON THE GROUND", I don't know if they are talking to all of us or just this fugitive. I say "This is our house, I work overnight and I was just napping, I really don't know what is going on here".
So this is the picture, there is 8 marked and un-marked police cars that have descended in my driveway, in front of my house, in the neighbors driveway, plus 10-12 plain clothed and uniformed police officers all over my front yard, neighbors mulling around wondering why this scene has materialized in my front yard......A real scene from Cops..................Bad Boys, Bad Boys, Watcha gonna do!
The Police take a short statement and confirm to us that they were trying to serve him with a warrant. He ran out the back door and through backyards. He was avoiding taking his loss like Nick Leeson running from Barings Bank, it's not a loss till you realize it, right?
So, why do I bring up this story. Well, it is an entertaining situation, after the fact. It also lends itself directly to trading and one of the single most important traits of a professional trader. Making quick decisions, under stressful situations, with little to no time to fully process all of the factors, all while keeping your cool and not putting your hand through a screen or breaking your keyboard.
This whole situation occurred in 2-3 minutes. Within 3 minutes, I go from napping to managing a situation that involves a man in my house, visibly panicked, police circling and my most important asset exposed, my family.
As traders, we are constantly put in stressful situations that require quick decisions (earthquakes, tsunami's, the mornings of Bear and Lehman, the first TARP vote by US Politicians) that involve major risk and reward consequences.
I made the decision to fade the move. I didn't know all the facts 1) why is he here? 2) who is he? 3) is he dangerous? 4) what was his crime? 5) did he have a weapon? 6) was he desparate? I could manage the heat, I didn't feel threatened, but I needed to stall and give myself more time and wait for a calculated "revert to the mean".
I hedged my loss by getting the kids out of the situation, the unknowns were just too risky. I relied on my faith to provide the wisdom to calmly, but sternly, talk to this man, who was obviously hurting, while not agitating the situation. I attribute my inner peace to my faith and all of the trials and tribulations I have endured and conquered as a trader with 10 years of experience trading through crisis (Nasdaq Tech bubble, 9/11, $140 Oil, Credit Crisis).
Although I consider this a winning trade, their is always unintended losses, trading is a zero-sum-game. I may have won this battle, but I feel horrible for my son's grade school friend. He is a genuinely good kid and he is invited to our house because we know his family background. He definitely losses with an unstable father in-and-out of jail. My 9yr old is asking if this man will come back and try to hurt us because we got him arrested. My son losses because a part of his innocence was just stolen from him. These are the unintended consequences that this man didn't even consider while running from his trade.
I am extremely thankful for my wife and my 3 Chihuahua's. There yapping is usually viewed as a nuisance, Thursday it acted as an alarm clock and tornado warning.
Thanks Enzo
Be Blessed,
Hemi
I had only been resting for 10-15 minutes, you know that kind of rest when your eyes are closed, your close to dreaming but still aware of what's going on in your environment. As I am laying in my bed, I hear my 3 Chihuahua's Enzo, GiGi and Guapo (I'm Italian, my wife is Mexican) going crazy, as they usually do when someone knocks on our front door (or sneezes, or belches, or a multitude of other things that catch the attention of these notorious yappers). My seemingly unwanted alarm clock. I initially remember thinking, it must be one of my boys' friends. Then I heard a male voice. No, maybe it is my wife's uncle. He lives a few blocks away and checks in with us every once in a while. And then, that little voice in my gut said, "something is not right" (I think that is God, you may have another opinion).
I get out of bed, slide into my fleece lined crocs (I love these crocs as they keep my feet warm at night when trading the London session) and head to the living room. My 9yr old son catches me in the hallway and says "My friend's (I won't be using names for obvious reasons) dad is here, the police are chasing him and I'm scared"........WHAT? I tell him to go into my bedroom and close the door.
What just happened to my world? We live in an established, middle class neighborhood, literally right across the street from my sons' grade school. Our community has very low crime, is extremely safe, kid's run the sidewalk in front of our house to the playground. Now I have an episode of Chicago Code (Great Show in a Great City) developing in my house. I go into my living room to find a man, I barely know, talking between his phone and my wife. Evidently, he kindly let himself in when he noticed our front door open. I introduce myself to him, shake his hand and ask him if I can help him. He is profusely sweating and speaking with some fear in his voice. He says he needs a ride to the bus station. I tell him I may be able to help him and then I ask him, "What is going on here"?
I start to see marked and unmarked police cars speeding up and down my road, as well as circling in the grade school parking lot. I point out to him that there are multiple police outside. He asks me to talk to his wife on the phone, "She can explain it all". My response is, "Listen, I am a minister, how can I pray for YOU, what can I help YOU with"? He asks to use my bathroom, I show him where it is and when he goes in, I rush back to my living room and say to my wife, "Get the kids and get the hell out of the house, I don't know where this is going".
It was almost as if time had stopped. Immediately after saying this, I cannot believe this combination of words has come out of my mouth. He emerges from my bathroom. I know he just flushed something down my toilet.
He says he needs a ride to the bus station, I tell him, "I can probably help with that, I just need to get my keys". At this point I am just stalling as the number of police, only 50 feet outside my big picture window, are starting to grow and they don't know he is in here. I tell him, "Listen, there are cops everywhere outside, I am not sure what I can do for you, but you need to tell me what's going on here and you need to leave my house". My wife chimes in "We are not aiding and abetting you" (she is a strong, courageous Mexican woman). He says, "They are gonna send me to jail, I have a warrant out for a domestic". My wife says, "You need to go outside and fess up".....and he did.
As we exit my front door together, someone shouts "HERE HE IS" and they sprint to my front door. My wife stops them and says, he hasn't done anything to hurt us, he is giving himself up.
"GET DOWN ON THE GROUND", I don't know if they are talking to all of us or just this fugitive. I say "This is our house, I work overnight and I was just napping, I really don't know what is going on here".
So this is the picture, there is 8 marked and un-marked police cars that have descended in my driveway, in front of my house, in the neighbors driveway, plus 10-12 plain clothed and uniformed police officers all over my front yard, neighbors mulling around wondering why this scene has materialized in my front yard......A real scene from Cops..................Bad Boys, Bad Boys, Watcha gonna do!
The Police take a short statement and confirm to us that they were trying to serve him with a warrant. He ran out the back door and through backyards. He was avoiding taking his loss like Nick Leeson running from Barings Bank, it's not a loss till you realize it, right?
So, why do I bring up this story. Well, it is an entertaining situation, after the fact. It also lends itself directly to trading and one of the single most important traits of a professional trader. Making quick decisions, under stressful situations, with little to no time to fully process all of the factors, all while keeping your cool and not putting your hand through a screen or breaking your keyboard.
This whole situation occurred in 2-3 minutes. Within 3 minutes, I go from napping to managing a situation that involves a man in my house, visibly panicked, police circling and my most important asset exposed, my family.
As traders, we are constantly put in stressful situations that require quick decisions (earthquakes, tsunami's, the mornings of Bear and Lehman, the first TARP vote by US Politicians) that involve major risk and reward consequences.
I made the decision to fade the move. I didn't know all the facts 1) why is he here? 2) who is he? 3) is he dangerous? 4) what was his crime? 5) did he have a weapon? 6) was he desparate? I could manage the heat, I didn't feel threatened, but I needed to stall and give myself more time and wait for a calculated "revert to the mean".
I hedged my loss by getting the kids out of the situation, the unknowns were just too risky. I relied on my faith to provide the wisdom to calmly, but sternly, talk to this man, who was obviously hurting, while not agitating the situation. I attribute my inner peace to my faith and all of the trials and tribulations I have endured and conquered as a trader with 10 years of experience trading through crisis (Nasdaq Tech bubble, 9/11, $140 Oil, Credit Crisis).
Although I consider this a winning trade, their is always unintended losses, trading is a zero-sum-game. I may have won this battle, but I feel horrible for my son's grade school friend. He is a genuinely good kid and he is invited to our house because we know his family background. He definitely losses with an unstable father in-and-out of jail. My 9yr old is asking if this man will come back and try to hurt us because we got him arrested. My son losses because a part of his innocence was just stolen from him. These are the unintended consequences that this man didn't even consider while running from his trade.
I am extremely thankful for my wife and my 3 Chihuahua's. There yapping is usually viewed as a nuisance, Thursday it acted as an alarm clock and tornado warning.
Thanks Enzo
Be Blessed,
Hemi
Thursday, March 17, 2011
Futures moving with Every Power Plant Headline
The market is bobbing and weaving with every headline. This news item came over my squawk (Sigma Squawk, shameless plug) @ 7:17am CST, "Reactor #2 is smoking or steaming", which sent Equity index's down very briefly. IF (and that's a big IF) TEPCO is able to generate power from Fukushima in the near future (I seen a headline that said as early as Friday) Equities will go strong bid and my ES v Dax trade will trade into the +200/+100 bps differential quickly.
Good luck today.
Hemi
Good luck today.
Hemi
How to manage difficult markets, during times of intense volatility and devastation.
We Americans are so spoiled, no matter how you dice it. As I have been pounding my desk and yelling "unmentionables" at my screens over the past 4 trading sessions, the people of Japan have been reeling and facing trials that my family and I could not imagine. I pray for the people of Japan.
While Japan has garnered most of the focus of the financial markets, the debt crisis in Europe is still charging forward with fresh downgrades of Portuguese debt and the Middle East (Bahrain) is still boiling over as videos of government soldiers killing and beating protesters have gone viral.
The following is a list of the major Futures Indexes I watch and their percentage changes since the close on March 10th. (Values taken at 03/17/2011, 3:30am CST)
ES (June) -1.86%
Dow (June) -2.18%
FTSE (March) -3.28%
EuroStoxx 50 (March) -4.83%
CAC (March) -5.41%
Dax (March) -6.11%
NKD (March) -14.07%
My initial reaction to the news on Friday was to sell ES (S&P 500) and buy Dax, knowing that there was some real inherent risk, but the volatility would be good and provide some back and forth. I looked for the greatest differential or spread to the S&P, as my initial analysis. I could not have been more wrong, in the short-term. In typical fashion, the spread rallied in my face, with no relief to move some inventory. I managed the trade well, initiated a max of 4 units, and ended the day with 3 units and a scratch P&L after financing my new core position with scalps throughout the day. The following chart is basis point differential of the ES over the Dax, using the close of March 10th as the benchmark.
I still believe this is a gross overreaction in the German Dax index, not to minimize the devastation experienced by the Japanese people. I covered all but 2 units during the European session on Wednesday and then had to make a decision. As news surfaced that the Japanese were having difficulty cooling Reactors at Fukushima, the markets came under intense pressure and never looked back. At the time, I wrestled with the idea of covering the entire position and taking the profit I had in the trade. I held on and handcuffed myself for the US session. Hindsight is 20/20, but that is what we deal with as traders. Major decisions need to be made, with accuracy, in a minimal amount of time, time being measured in seconds. Wednesdays US session gave us many opportunities to scalp and finance this position as we wait for the core position to revert back to the +200/+100 bps level.
Stay tuned.......Be Blessed
Hemi
While Japan has garnered most of the focus of the financial markets, the debt crisis in Europe is still charging forward with fresh downgrades of Portuguese debt and the Middle East (Bahrain) is still boiling over as videos of government soldiers killing and beating protesters have gone viral.
The following is a list of the major Futures Indexes I watch and their percentage changes since the close on March 10th. (Values taken at 03/17/2011, 3:30am CST)
ES (June) -1.86%
Dow (June) -2.18%
FTSE (March) -3.28%
EuroStoxx 50 (March) -4.83%
CAC (March) -5.41%
Dax (March) -6.11%
NKD (March) -14.07%
My initial reaction to the news on Friday was to sell ES (S&P 500) and buy Dax, knowing that there was some real inherent risk, but the volatility would be good and provide some back and forth. I looked for the greatest differential or spread to the S&P, as my initial analysis. I could not have been more wrong, in the short-term. In typical fashion, the spread rallied in my face, with no relief to move some inventory. I managed the trade well, initiated a max of 4 units, and ended the day with 3 units and a scratch P&L after financing my new core position with scalps throughout the day. The following chart is basis point differential of the ES over the Dax, using the close of March 10th as the benchmark.
I still believe this is a gross overreaction in the German Dax index, not to minimize the devastation experienced by the Japanese people. I covered all but 2 units during the European session on Wednesday and then had to make a decision. As news surfaced that the Japanese were having difficulty cooling Reactors at Fukushima, the markets came under intense pressure and never looked back. At the time, I wrestled with the idea of covering the entire position and taking the profit I had in the trade. I held on and handcuffed myself for the US session. Hindsight is 20/20, but that is what we deal with as traders. Major decisions need to be made, with accuracy, in a minimal amount of time, time being measured in seconds. Wednesdays US session gave us many opportunities to scalp and finance this position as we wait for the core position to revert back to the +200/+100 bps level.
Stay tuned.......Be Blessed
Hemi
Friday, March 4, 2011
Update: 3 ways to keep your shirt and your dignity as a Trader
Here is a list and an update on a trade I have been in since Jan 11th, felt like forever.
Let's start with the list, 3 ways to keep your shirt and dignity as a Trader.
1) Have a Legitimate reason to trade.
Don't trade out of boredom or a blog post or an article or because Max, sitting next to you, is a great trader and he is long TY_Future Fly, so I should be long too. Put the time in, do the research and formulate plan, which is my next point.
2) Develop a Business Plan for each trade.
Entry, Risk Exit, Reward Exit, Time duration (if applicable). Each trade is a new Business venture, treat it that way. Very few of us have an endless supply of soldiers to deploy into the market, protect each soldier with a well defined plan. You accomplish 2 things:
a) You define whether or not your approach is actually working in current market conditions, and
b) You have a well defined plan that preserves your most important resource, Capital.
Your business plan needs to define your approach. It can be tweaked to account for nuances among asset classes, risk may be different in Treasury products when compared to risk in Equity products, for instance. But, the overall theme of your business plan should be consistent so you have a benchmark for comparison.
3) Execute
Once you have well defined business plan, execute it. You have to pull the trigger to put the risk on. Executing is not just initiating the plan, it is also following the plan once your in the trade. Don't override the plan once in a trade because you have a hunch. A hunch has ruined many a man in this business, market makers and HFT programs will eat your "hunch" for lunch. Execute the plan according to the rules and be disciplined.
By following these 3 points, you will ultimately improve your approach to the market. A well defined plan will help you keep your shirt, preserve your capital and save your dignity as a trader. You will be able to walk away from the market each day, with your head held high, knowing that you followed your plan. Some of my best trades are losers, that I take early, according to my plan, and save me a lot of mental and financial capital.
Update on SP vs Eurostoxx 50
This trade has worked according to plan and I have exited all units as the S&P and the EuroStoxx 50 have traded back to par for the year. As you can see in my previous post, dated Feb 24th, I have been in this trade since Jan 11th. I took some of this trade off when the market traded into the -100 bps diff on Feb 22nd, reinitiated some at the -200 bps diff level and am totally out of the trade now.
Have a great weekend and Be Blessed.
Hemi
Let's start with the list, 3 ways to keep your shirt and dignity as a Trader.
1) Have a Legitimate reason to trade.
Don't trade out of boredom or a blog post or an article or because Max, sitting next to you, is a great trader and he is long TY_Future Fly, so I should be long too. Put the time in, do the research and formulate plan, which is my next point.
2) Develop a Business Plan for each trade.
Entry, Risk Exit, Reward Exit, Time duration (if applicable). Each trade is a new Business venture, treat it that way. Very few of us have an endless supply of soldiers to deploy into the market, protect each soldier with a well defined plan. You accomplish 2 things:
a) You define whether or not your approach is actually working in current market conditions, and
b) You have a well defined plan that preserves your most important resource, Capital.
Your business plan needs to define your approach. It can be tweaked to account for nuances among asset classes, risk may be different in Treasury products when compared to risk in Equity products, for instance. But, the overall theme of your business plan should be consistent so you have a benchmark for comparison.
3) Execute
Once you have well defined business plan, execute it. You have to pull the trigger to put the risk on. Executing is not just initiating the plan, it is also following the plan once your in the trade. Don't override the plan once in a trade because you have a hunch. A hunch has ruined many a man in this business, market makers and HFT programs will eat your "hunch" for lunch. Execute the plan according to the rules and be disciplined.
By following these 3 points, you will ultimately improve your approach to the market. A well defined plan will help you keep your shirt, preserve your capital and save your dignity as a trader. You will be able to walk away from the market each day, with your head held high, knowing that you followed your plan. Some of my best trades are losers, that I take early, according to my plan, and save me a lot of mental and financial capital.
Update on SP vs Eurostoxx 50
This trade has worked according to plan and I have exited all units as the S&P and the EuroStoxx 50 have traded back to par for the year. As you can see in my previous post, dated Feb 24th, I have been in this trade since Jan 11th. I took some of this trade off when the market traded into the -100 bps diff on Feb 22nd, reinitiated some at the -200 bps diff level and am totally out of the trade now.
Have a great weekend and Be Blessed.
Hemi
Wednesday, March 2, 2011
SP v Russell 2000
As this market is moving higher today, the small caps, represented by the Russell 2000 are not over-performing. In my experience as a spreader, when the broader market is moving higher, the Russell 2000 tends to outpace to the upside as traders can get more "bang-for-the-buck" in small caps. In a situation like today, where the SP's are up 90 bps and the Russ is +100 bps, there is no significant outpacing. I tend to not have much faith in a broader market move higher, when the riskier trade, buying the small caps, are not leading the way up. On a similar note, with the SP's down yesterday, the Russ under-performed as traders poo'ed on the small caps, thus pushing the spread higher (see chart below). I am not a fan of this rally in the broader market and will look to position myself accordingly to profit, lately that means being long US indices and short EU indices. Please see prior blog posts for explanation of the US vs EU spreads.
Be Blessed
Hemi
Hemi
Crude vs Naty, Multiple Time Frames
Crude vs Natural Gas Ratio
The Chart below is a weekly and as you can see, we are approaching a double top and Make or Break level at 26.5. The last time we were at this same point was in August 2009 and Natural Gas was trading the range of $3.00,which is now 33% higher and Crude was in the $70.00 range, which is now 42% higher. I don't like selling this spread until confirmation comes in and the spread trades back through Upper Momentum, aka +1 Standard Deviation, currently at 23.6 on the Weekly. It is a long time to wait, but it is a safe and conservative way to put the probabilities of momentum on your side to gain exposure.
If you would like to be a little more assertive with this trade, you could move down a time-frame or two and sell when it trades through their respective "Upper Mo's".
Daily Upper Mo is at 25.3
And the Upper Mo on the 240 is at 26.2. If you trade off the potential signal on the 240, please trade with a well defined plan that includes a risk stop, as the longer term does not look attractive.
Be Well
Hemi
Tuesday, March 1, 2011
3 Traits of Successful Traders
Last night, I was taking my 9 year old to his Boxing lesson. On the way, I asked to him to start putting on his hand-wraps, as coach has been telling him to practice doing this himself. It takes us about 25 minutes to get to the gym and I thought it was a good time for him to practice, while in the car. Within 2 minutes of him starting to wrap, I hear him start to grumble and get frustrated. I encouraged him to keep going and reminded him that coach wants him to start wrapping his hands on his own, an accountability thing. Well, that didn't help much, too say the least. My son said, I am just gonna wait till we get to the gym and coach will wrap me up.
I proceeded to talk to him about 3 points, Patience, Confidence, Commitment to Excellence.
These 3 points are also very important in the developmental journey of a trader.
1) Patience - I encouraged him to keep wrapping his hands and that we were in no rush, be patient my son. Often times in my own trading, I want my trade to pay off immediately and not endure any pain in the duration of the trade. Displaying patience in a trade is most difficult when our trade is not attached to a proper plan. Create a business plan for each trade including Entry, Risk Exit, Reward Exit, Time Duration, and you will have a much easier time being patient and allowing the trade to evolve. Focus on consistency and accuracy in following your plan.
2) Confidence - I also told my son to be confident in his ability to wrap his hands. Even if he did not succeed right now, by practicing, he would develop the skill. If he allowed this situation to dampen his spirits, how could he climb in the ring and prepare himself for a match. Building confidence in a trade, asset class or strategy can take time. It often takes making mistakes, but most importantly learning from those mistakes. I suggest keeping a detailed trade journal. Include information like Entry Time, Product, B/S, Entry Price, Exit Time, Exit Price, Why did you take the trade, Why did you get out (emotions, plan, boredom) and a Grade. Every one of the successful traders I have been around, keep some sort of journal. As your confidence increases, don't stop keeping a journal, stay disciplined. Your journal quickly becomes a reference guide of what and what not to do, learn from it.
3) Commitment to Excellence - Finally, I encouraged my son to be Committed to Excellence. Neither his Coach or myself expected him to perfectly wrap his hands, but we both expected him to give his best. I have been telling both of my boys, since they were born, to be Committed to Excellence, especially in their Four F's (Faith, Family, Finances, Fitness). Excellence is defined as "Performing at a High Level, for a Long Period of Time". Be committed to that journey and growth. Trading success does not happen overnight. It tests you in every way possible and exposes your weaknesses, it is up to you to develop patience and confidence to identify and overcome those weaknesses. Commit yourself to being prepared. If you trade with multiple time-frames in mind, do your homework and know in advance what the longer time-frame looks like, be prepared for battle.
In the end, my son continued to wrap his hands and I re-wrapped them when we got to the gym. He didn't quit and showed up to boxing in the right frame of mind, ready to take a beating (haha).
In the end, my son continued to wrap his hands and I re-wrapped them when we got to the gym. He didn't quit and showed up to boxing in the right frame of mind, ready to take a beating (haha).
Peace,
"Hemi"
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