Monthly Archives: September 2007

Week 46 FX trading results

Trading: 0%.

Behavioural road-map score: 7 out of 10.

Well, well, my trading strategy just doesn’t seem to be delivering anymore. I seem to be averaging just under a percent or so in recent weeks (after expenses, this turns neutral or negative), and there hasn’t been a single ‘big score’ in a very long time. I’m going to carry on for a while because I don’t know how to do anything else, but I do not have high hopes. I really didn’t expect things to fizzle out the way they have, especially after all the progress on the behavioural side, but I am at least happy that I didn’t lose money hand-over-fist in the process of discovering that I was losing my edge. Overall, it’s been an upward journey, albeit one of many twists and turns.

I’ll keep posting my results on a weekly basis, but after week 50 I may switch to reporting at the end of each month.

Week 45 FX trading results

Trading: 0%.

Behavioural road-map score: 7 out of 10.

More of the same this week: limited trading, limited profits, and limited expenses.

Bees teach trading

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A study on bee invasions reminds us of the importance of a strong defense:

“We’re now seeing that the introduction of even one single insect can cause a potentially costly invasion, so we have to be extremely vigilant with reducing the number of animals that are unintentionally transported around the globe,”

Think of the bee as a tiny behavioural trading problem. We simply cannot afford to let it through the gates.

A spaghetti western on trading

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‘In these parts, a man’s life often depends on a scrap of information’

– Esteban Rojo to Joe (Clint Eastwood), in ‘A Fistful of Dollars’

Wall Street 20th anniversary

Photo Sharing and Video Hosting at Photobucket

Photo Sharing and Video Hosting at Photobucket

Photo Sharing and Video Hosting at Photobucket

Photo Sharing and Video Hosting at Photobucket

Macro trading

Macro trading can be thought of as a simple trinity of considerations:

1) Your views on the economy

2) The market’s view on the economy

3) Policy makers (central banks) views on the economy

When everyone is thinking along the same lines such that 1 = 2 = 3, there is no trade to be had. Also, in many instances 2 & 3 are similarly aligned and unless you have a strong conviction that everyone has it got wrong, it can be psychologically difficult to place a trade. In the current climate, however, there is a large gap between the market’s perception of the economy (and required policy action) and the Fed’s perception. Somebody is definitely wrong. 

Following the weak non-farm payrolls print, the market is now aggressive in its pricing of Fed rate cuts. It is important to appreciate that placing a bearish trade now would be equivalent to making a statement that the market is not sufficiently bearish enough. Fed opinion seems to be quite firmly on the other side, and history suggests that saddling up to the Fed view in times of extremes could prove profitable.

PS – I don’t take macro positions these days, as much as I enjoyed my ego being stroked from calling it ‘right’.

Galbraith on manias

Dipping into my trove of quotes yields a particularly relevant insight from Galbraith’s ‘A Short History of Financial Euphoria’.

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All crisis have involved debt that, in one fashion or another, has become dangerously out of scale in relation to the underlying means of payment.