Balance of Trade and Crude Inventory Data Out Today
Top Day Rec
Business picks up today in terms of eco data points. Balance
of Trade out at 8:30. Crude inventories as measured by the
Department of Energy out at 10:30 while the Beige Book comes
out at 2pm.
Supreme Court allows Chrysler to proceed with bankruptcy
Dollar was whacked a bit on the idea that Russia may swap US
debt for IMF debt.
The second of three treasury auctions today. Yesterday had a
surpassingly good bid to cover ratio. Also, there was more
foreign buying than previously thought.
rising Baltic dry weight index evidently lifts all ships.
views, speculations and suggestions
till close of business today)
June Yen: potential reversal
June Swiss: pos with support at
92.35. Expect a test of 93.35
June EC: pos with support at
June Canadian: pos with support
June BP: potential reversal day
despite political turmoil and metro strike.
June ES: pos with res at 953.00
June NQ: pos with support at
June Mini Dow: pos and already
at outside res at 8840
Aug Gold: potential reversal day
July Silver: potential reversal
July crude: potential reversal
July Soybeans: pos and as long
as it trades above 12.29, look for a test of 12.42
July Wheat: potential reversal
Sept Ten Year: neg. needs to
build time under 113.11 to set up a test of 112.28
Sept Bund: pos and as long as
it trades above 118.00, look for a test of 118.55
June Dax: neg with res at 5057
NKD: pos with support at 9761
N.B.: if you initiate a trade
using any of these numbers use a stop at least equivalent to 2
Ĺ%. Repeat: use stops. Donít think about using stops. Use
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
Aphorisms from a Trading Life
Copyright 2008 Charles Kespert
Trading isnít about winning or
losing, itís about self discovery.
You only learn from losing
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.
Never meet a margin call.
Liquidate. The margin clerk is your best friend.
In trading, he who has the best
rules wins. Your innate, intuitive brilliance only talks to
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 doesnít, 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.
Donít worry about winning or
losing on a particular trade. Thereís only one concern: does
the trade help to grow your bottom line.
Hope is not a plan.
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
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 doesnít fill you, go to the market.
If your trading begins to
resemble an exercise in madness, at least take a break for a
A market trades to try and fill
all orders: limits, buy stops, sell stops, everything. If
there arenít any orders, thereís no reason for the market to
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 donít
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 arenít on the same schedule. (No one ever
does this). Hitting the reset button is a psychological
When all your trades are going
incredibly well, when youíre seeing the market as if youíve
already read tomorrowís papers and youíre just about ready to
thicken the callous that resides just below your left shoulder
with your right hand, get out Websterís 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.
Donít think of the market as an
opponent to be bulled, bloodied, battered and beaten. Its
resources are far greater than yours. Itís better to concede
the conceit of market as ocean in all its obvious metaphoric
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 isnít about winning or
losing, itís 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 doesnít have to make sense. A market is
only obliged to itself.
Just as persistence allows
mediocrity to soar, a persistent, rule driven trading approach
seasoned with just the right touch of intuition can turn your
sowís 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. Thereís very little thatís true
about a market.
Beware of the new paradigm; it
may not be wearing any clothes.
If you donít crave profit,
profit may be attracted to you. If you donít fear loss, loss
may not be attracted to you.
If you want to be condemned,
keep doing what youíve always done.
Worst positions leave last.
Trading is like procreation;
if youíre nervous it just isnít 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 donít know all variables and bluff by itself can win
You only learn from losing
trades. A winning trade is simply a confirmation of your
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.
Donít convince yourself that
youíve 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 donít
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 doesnít
have to be a seller and the life of a stock is theoretically,
potentially, infinite. Regression to the mean should be a
ďless frequentĒ event at Wall and Broad.
Good trades are often counter
Thereís far greater skill in
trading well when youíre behind than in trading well when
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
Markets are mechanisms that
foster irrational behavior.
Donít 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
Before entering a trade,
mentally understand and accept all potential loses.
If you have to win youíll lose.
If you have to lose, you will.
The seeds of doubt are self
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 canít continue to court
disaster without eventually landing a date.
Youíre 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; itís all derived from fear.
Anger is the clash of
Whatever you believe is
undoubtedly correct until the passage of time offers another
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 youíre using.
Markets generally lack
conviction, especially post 9/11. Thatís 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
Life is, at least, the
non-annihilating coexistence of opposites.
Ultimate sorrow is to love as gravity is to mass.
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.