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Crude inventory numbers out at 10:30 and the Beige book from the Fed at 2:00Top Day Rec 12.02.09 The ADP private job forecast, which sometimes throws a light on the big number at the end of the week, came in at -169K, slightly worse than a projection of -150k. Also, we get crude inventories from the Department of Energy at 10:30 and the Beige book from the Federal Reserve at 2:00. Last report focused on weakness of commercial real estate. Can’t believe I haven’t mentioned Dubai yet. The tree will be lit this evening at Rockefeller Center as 2009 accelerates towards its end.
Current views, speculations and suggestions (good till close of business today). These are technical in nature only, not fundamental.
Dec ES: pos with support at 1096.50 Dec NQ: possible reversal day Dec Mini Dow: pos with support at 10360 Feb Gold: pos with support at 1183 and 1166 Mar Silver: potential reversal day Mar Copper: pos with support at 317.80 Dec Yen: pos with support at 114.41 Dec Swiss: pos with support at 99.50 Dec EC: pos with support at 150.05 Dec Canadian: possible reversal day Dec BP: neg with res at 167.20 Dec Aussie: possible reversal day Jan Crude: possible reversal day Jan Soybeans: pos with support at 10.48 Mar Wheat: neg with res at 5.95 Mar Ten Year: pos with support at 119.05 Mar 30 Year : pos with support at 120.23 Mar Eurodollar: pos reversal day ************** International Markets Mar Bund: pos with support at 122.86 Dec Dax: neg with res at 5817 ********** N.B.: if you initiate a trade using ANY of these numbers use a STOP at least equivalent to 2 ½%. Repeat: use Stops. Don’t think about using Stops. Use Stops. Some find it appropriate to look at the margin requirement and use that as a stop or if it’s a steep initial requirement, use half.
Please feel free to visit www.vfmarkets.com. For those without accts use 999999 and 1293 as a pin for access. (pin changes monthly) ********************************************
Futures trading entails considerable risk and is not for everyone. An account can lose more than its initial investment. Stops are not necessarily filled at the stop level. Past performance is not a guarantee of future results.
The Tractatus of Trade Or Aphorisms from a Trading Life Copyright 2008 Charles Kespert
Trading isn’t about winning or losing, it’s about self discovery. You only learn from losing trades. Along with the probability that your trade will be profitable, there's probably a greater probability that it won't be. Think about the trade you'll make if things don't work out. Don’t be afraid to go where the market wants to take you. Moving averages are very important. The steeper the slope, the better the trade. Markets tend to overshoot. Never meet a margin call. Liquidate. The margin clerk is your best friend. When someone says “Believe me, it’s different this time” don’t believe it. Markets are expressions of hope, fear and greed, in other words, human nature. Human nature doesn’t change. The fact that human nature doesn’t change is why Shakespeare is relevant, we read Plato and are in awe of Sophocles. Technology changes, human nature doesn’t. In trading, he who has the best rules wins. Your innate, intuitive brilliance only talks to you occasionally. To panic is human. The market will all too soon locate, expose and exploit your weaknesses. All strategies have a weakness. Know yours, Achilles. When you put a trade on, it should work almost immediately. If it doesn’t, seriously consider bagging the idea and look for a new setup. At the same time, take trades. The only way you are going to make money is by taking trades. Don’t worry about winning or losing on a particular trade. There’s only one concern: does the trade help to grow your bottom line. Hope is not an action. The more efficient a market is, the more random it is. If a market is inefficient, the more that market will trend. The efficiency of a market is inversely correlated to its liquidity. Do you look at your positions as assets or liabilities? Liquidate the liabilities with extreme prejudice. If you are in a position and you are losing more in that position than you can reasonably expect to make, get out. It is far easier to lose money trading than to make it. It is far easier to make money trading than to keep it. A margin call argues for your continuing status as an amateur. If the market prints your price and doesn’t fill you, go to the market. If your trading begins to resemble an exercise in madness, at least take a break for a day. A market trades to try and fill all orders: limits, buy stops, sell stops, everything. If there aren’t any orders, there’s no reason for the market to move. If your indicators are lagging but your data is high frequency, you should be okay. If your data is low frequency, your indicators are useless. Your ability to discriminate, to successfully think critically, is inversely proportionate to the profitability of your positions. You can go broke taking profits, very small profits. This type of trading behavior will also convince you that you're performing better at the buy/sell game than you really are. When the pundits start talking about a barrel of crude oil and a bushel of wheat as not really a barrel of oil or a bushel of wheat but an asset class and you are long, get nervous. Your next trade could be your last trade for a very long time. Be aware of this and don’t let it happen. Use stops. Markets are challenging: when illiquidity meets volatility parallel lines converge, divergences converge, convergences diverge and mathematical certainty is forced to embrace new theorems. If you are down a certain, predetermined percentage of your equity (for some this could be as little as 2.5 and for others this could be as much as 15%) and you have open positions, liquidate and go to cash. You and the market aren’t on the same schedule. (No one ever does this). Hitting the reset button is a psychological palliative. When all your trades are going incredibly well, when you’re seeing the market as if you’ve already read tomorrow’s papers and you’re just about ready to thicken the callous that resides just below your left shoulder with your right hand, get out Webster’s and reread the definition of coincidence.
Markets are thematic. In fact, those flashing numbers are always trying to tell or sell a story. Become a better reader.
Don’t think of the market as an opponent to be bulled, bloodied, battered and beaten. Its resources are far greater than yours. It’s better to concede the conceit of market as ocean in all its obvious metaphoric diversity. The Myth of Sisyphus resonates in the experience of trading. Remember that irony is alive, well and constantly at work in the universe; irony, the cornerstone to the construct of the divine comedy. Trading isn’t about winning or losing, it’s about building equity. Taking strategic losses is a key to building equity.
Winning or losing on any one particular trade is meaningless. A market is a market. It can do anything it wants. It doesn’t have to make sense. A market is only obliged to itself. In fact, exploiting this fact will lead to your best profits. Just as persistence allows mediocrity to soar, a persistent, rule driven trading approach seasoned with just the right touch of intuition can turn your sow’s ear into a silk purse. What you want to have happen in a market often prevents you from doing what you should be doing in a market. That which is true, never changes. A market, a dynamic revaluating, discounting mechanism, always changes. There’s very little that’s true about a market. Beware of the new paradigm; it may not be wearing any clothes. If you don’t crave profit, profit may be attracted to you. If you don’t fear loss, loss may not be attracted to you. If you want to be condemned, keep doing what you’ve always done. Worst positions leave last. Trading is like procreation; if you’re nervous it just isn’t going to work that well. The market is an imperfect game. Chess is a perfect game. All information is transparent. Either you are a smart player and can see the board or you are a challenged player. There is no luck. Poker is an imperfect game. You don’t know all variables and bluff by itself can win the day. You only learn from losing trades. A winning trade is simply a confirmation of your current infallibility. Do everything you can to keep a losing trade an annoyance rather than a memorable event. If you are in a winning position, remain aware that just as the sea reclaims land, the market wants its money back. Never disrespect the possible (especially option expirations). A trade is a trade. It is a financial event. It is not a justification or repudiation of your geopolitical or eco-political model. Don’t convince yourself that you’ve figured out the puzzle. The puzzle keeps changing. Eventually the puzzle just disappears.
You have to be willing to give back, to fold, to square your position to cash. If you don’t give something back they will end up taking it back. Markets spend as much time going up as they do going down, the only difference is amplitude. As the futures market is a zero sum game and the instruments of trade expire continually, regression to the mean should be a frequent event. The stock market is totally different; for every buyer there doesn’t have to be a seller and the life of a stock is theoretically, potentially, infinite. Regression to the mean should be a “less frequent” event at Wall and Broad. Good trades are often counter intuitive. There’s far greater skill in trading well when you’re behind than in trading well when you’re ahead. Ascertaining the correct value for 6 variables before making a trading decision is not better than ascertaining the correct value for 3 variables. When it comes to heuristics, kiss. All your answers have questions. Markets are mechanisms that foster irrational behavior. Don’t let your trading be held hostage to the need for discernment. As soon as market action can be explained and generally understood, expect the market to change. Before entering a trade, mentally understand and accept all potential loses. If you have to win you’ll lose. If you have to lose, you will. The seeds of doubt are self sown. On initial order placement, never be impetuous. Wait for your price. Look for ways to take action. Idle brilliance addles. Good trades usually set up with a sense of inevitability and unfold in slow motion. Remembrance may be the inability to let go. In trading, feeling comfortable should be an uncomfortable feeling. You can’t continue to court disaster without eventually landing a date. You’re only as young as your last winning trade. People feel more comfortable with losing positions and more nervous with winning positions. If you have a position in a market and the average true range of that market is 128 points and the market has only had a range of 28 points so far, start figuring out which side of the market is going to deliver the next 100 points. When asked to play a game, then stopped mid game and asked how they are doing, people invariably state that they are performing at better levels than they actually are. Work on four things: fear, anger, frustration and judgment; it’s all derived from fear. Anger is the clash of desires. Whatever you believe is undoubtedly correct until the passage of time offers another suggestion. Simplify. If you are using 4 indicators to trade, use three. If you are trading 5 markets, trade 4, then reexamine the number of indicators you’re using. Markets generally lack conviction, especially post 9/11. That’s why trend traders have a low incidence of winning. Take advantage of that. What funds buy, they sell. No fund is ever going to take delivery of a barrel of oil or a bag of coffee. Take advantage of that. You manifest the world through interpretation. Life is, at least, the non-annihilating coexistence of opposites. Ultimate sorrow is to love as gravity is to mass.
Charles Kespert
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HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM. ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, AL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETIOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS.
*The risk of loss exists in futures and commodity investing. Past performance is not indicative of future results or performance. Only risk capital should be used when making investments in the commodity markets.
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