my journal 3

Europe Factors to Watch-Shares seen flat to lower, all eyes on Cyprus | Reuters
Thu Mar 28, 2013 3:27am EDT
PARIS, March 28 (Reuters) - European stocks are seen flat to lower on Thursday, as concerns about a potential run on Cyprus's banks, which are set to reopen almost two weeks after being shut by the government, kept investors on edge.
At 0715 GMT, futures for the Euro STOXX 50, for the UK's FTSE 100, for Germany's DAX and for France's CAC were flat to down by 0.07 percent.
Tight controls will be imposed on transactions by Cyprus's banks to limit cash withdrawals to no more than 300 euros ($380) per day, ban the cashing of cheques and bar businesses from transferring money abroad unless they can show it is for imports.
"The market will be watching unenviably at the droves of individuals who will be waiting in line to withdraw the small amount of cash they can to basically survive in Cyprus," IG chief market strategist Chris Weston wrote in a
note.
"One has to wonder about the longer-term implications on this tiny economy. It can't be good, and we will go through this all again with Slovakia at some stage given the 7 billion euros of bad loans - around 20 percent of GDP - on its balance sheets."
On Wednesday, investors shied away from Spanish and Italian bonds, with sluggish demand at an Italian debt auction, and turned to low-risk German debt.

Italian banks will be in the spotlight on Thursday, with Banca Monte dei Paschi di Siena set to post a 2.5 billion euro loss as it books higher bad debt provisions and losses on derivatives trades targeted by a fraud investigation.
European stocks have sharply rallied since mid-2012 - with the Euro STOXX 50 gaining about 30 percent - lifted by the European Central Bank's pledge to safeguard the euro, which eased fears of a break-up of the region's currency bloc.
The rally lost steam recently, however, stalled by the return of jitters about political risks in the euro zone, such as the political impasse in Italy following last month's inconclusive election, a corruption scandal in Spain and Cyprus's mounting debt crisis, which have prompted investors to book some gains and move to the sidelines.
The pull-back has been particularly sharp for banking stocks, with the euro zone STOXX banking sector index down 21 percent since a peak in late January, while the broad STOXX Europe 600 is down 2.2 percent from a
near five-year high hit earlier this month...
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Remember Italy? The Market Does - The Euro Crisis - WSJ
“Oh yeah, Italy. Forgot about that.”

That’s the line in financial markets Wednesday.

For a week or so, traders seemed to forget all about it. Cyprus was the only game in town, with shock at the initial deal put together and wrangling over how to forge a new one.

The drama is not over, clearly. Capital controls on the island could be in place for months. Savers and holders of bank bonds may never sleep quite so easily in their beds again, amid genuine confusion over whether the Cyprus bailout may prove to be a model for others in future. (If you drink an espresso every time you see a conflicting headline on this theme, you’ll be feeling pretty wired by now.)

Still, there’s a deal for Cyprus. The worst-case scenarios have not materialized, yet.

So, traders and investors appear suddenly to have remembered that Italy held an election last month, and there’s still no government in place. This is what everyone was worrying about before the Cyprus crisis came along.

Helping to jog traders’ memory, Pier Luigi Bersani — he who was expected to be king by this point — today saw a fresh setback in his efforts to form a governing alliance after the upstart Five-Star Movement refused to back him. Given that Mr. Bersani says he would never seek an alliance with Silvio Berlusconi‘s center-right coalition, it is tough to see a way forward.
Click to expand...

In Italy, Talks on Forming Government Break Down - NYTimes.com
...As the stalemate continues, the difference in borrowing costs between Italy and benchmark German bonds has been rising, putting Italy at greater risk of market speculation. The Italian economy is expected to contract 1 percent this year, according to the Bank of Italy, and unemployment is now beyond 11 percent...
Click to expand...

Today, according to the journalists, there will be some news that will drive the BUND down, any news. And then the papers will say it all happened because of the news, whereas it was because it had risen too much.

Every week, for the past 10 years, there has been a tendency for markets to rise in the second part of the week, and viceversa in the first part, especially on Tuesday. The opposite tendency is in place for bond futures (GBL and ZN). Each time the newspapers motivate these rises and falls with news releases. Obviously these journalists, too, are lower forms of intelligence.
 
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Ok, this is it maybe:

esigchartspon.jpg

This could be the beginning of the fall. Watch it. If it keeps going, it will keep falling for a few weeks, and then the papers will say it was some news - someone who said something, whereas nothing really happened, neither related to Cyprus, nor Italy, nor Germany. And yet today is probably the peak and the beginning of the fall.

The bund's yield has never been so low:
German Government Bonds 10 Yr Dbr Chart - GDBR10 - Bloomberg

Snap1.jpg
 
Yeah, that was it, the peak:

esigchartspon.png

Watch it... now the journalists will come up with some news release, such as Obama said something reassuring so the markets rose and the Bund fell. It simply was too overbought.

...

I knew it!

Sure enough, a couple of hours later, some lower form of intelligence came up with the explanation, as they do on a regular basis:

Snap2.jpg

Snap3.jpg

It was OECD's data that allowed the markets to catch their breath and rise, the spread to fall (spread to the Italian government bond)... usual lower forms of intelligence.

Just two hours ago, according to the same newspaper, it was terror and catastrophe in the world, due to Italian politics and the situation in Cyprus, but hey, now they say all worries are suddenly gone, because, thanks to OECD's data, everything is fine in the markets.

Yeah, sure. These journalists must know. They clearly know the markets, given that they write these explanations about the markets every day, for a salary of 1300 euros per month.

They could exploit their knowledge and invest based on it, but nope, they're committed to their job, and they prefer to give this information to us, for such a small salary. Wow, such dedication.
 
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Damn me for not being aware of the importance of reports on wheat and the other grains futures:
USDA releases bearish corn, soybean, and wheat data

esigchartspon.png

Luckily I only had 1 contract. But my profit went from plus 3000 to minus 500 dollars.

Watch it, now it'll bounce back up. I am long 4 contracts:

2.png

...

Nope, it didn't bounce much. Didn't go any lower either.

Still keeping 2 contracts long for tomorrow.

Capital is at about 30k, because while I lost a profit of 3500 on ZW, I gained a few thousands on GBL.

Don't know what will happen tomorrow. I feel pretty crappy because I was expecting to close ZW today, just a few points higher and this awful thing happened, that it lost 7% in a few minutes. Never saw anything like this anywhere else!

Good thing I never go long on anything that's already gone up. So I just lost profit. But I deeply regret the mistake of not monitoring grains' reports.

This I can definitely regret. Not other things. You don't always lose money because you're guilty, but in this case I was slightly guilty.

Today was a sad day, mostly because of ZW.

But I must endure, and hold out for about two more weeks, regardless of how these positions have made me suffer for weeks already.

If I can manage to keep them open, I will make this whole thing worth it. If I end up closing them at break-even due to the wear and tear of holding them open for weeks, then it will be an awful behavior, totally unprofitable one.

I must hold out because these positions are awesome. Most likely I should hold everything open for another week, including GBP, JPY and ZW.

...

But probably even just one more week will be enough. Probably by tomorrow I will be at 35k. By the end of next week I should reach about 50k.
 
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About to go to bed, in less than one hour.

This is the most depressed I've felt in weeks.

The positions aren't looking as good as they used to, or rather they've been wearing me out.

But today the biggest blow to me clearly came from that surprise on ZW. Who would have ever expected something like that?

The damage is limited compared to the surprise, although I still did lose a good 3500 dollars of profit, so far, because I have now 2 long contracts on it and I'll probably make it all back tomorrow, which is the most bullish day of the week.

I would not be too surprised if tomorrow my overall balance will be at 38k from the 30k of now.

GBL could easily fall another 80 ticks.

That'd give me about 7000 dollars, and the rest could easily come from the other positions. I could even end up above 40k.

I am pretty depressed though, right now.

That's why I better stay away from TWS for the next two weeks because I am so worn out and depressed that I might even close everything as soon as I see a balance of 37k. Just out of fatigue, to end this endless nightmare.

Not that I would have been doing any better had I stayed out, because I'd be below 30k, given that my systems last week would have made me lose 4000 dollars.

Damn, screw it. I'll play my song today, too, and dance to it as well, because after all, I made it to one more day of patience, and pretty good trading:

Queen - 'Another One Bites the Dust' - YouTube

Another day bites the dust.
 
I don't think it would have made any difference if you were monitoring the grain reports, you know. I mean, what would you have done? You wouldn't have known in advance that it was going to fall 7%, so you might have thought that at any point it could stop and turn around.

To a certain extent, you can consider yourself fortunate that it didn't fall further than its previous lowest low on that chart.

Anyway, as much as it's painful to take a big hit, you've got to expect stuff like this to happen. You can't expect all your trades to be winners. No-one can.

Live by the sword, die by the sword, is what they say. You're the risk taker, and your profits (when they come) are your rewards, what the hedgers and the farmers and industry pay to you for off-loading their risk.

If I believed in luck, I'd wish you some.
 
Replying as I read.

Yes, instead, because I know how these reports work. Markets tend to fall before them, regardless of what the report will say, so I would have definitely closed my position in the few hours prior to the report, and I will do so every Thursday from now on, in case I have any grains futures open.

No, I can't consider myself lucky when a future falls 7% in one day.

"Live by the sword, die by the sword, is what they say". This kind of bothers me. It's as if someone falls on his face and you tell them "it serves you right". If it weren't for the fact that you've been a non-sarcastic sensitive reader until now, I would take offense. In other words, the fact that I've had one long contract on ZW for three weeks doesn't make me a risk-taker at all, and being told "live by the sword, die by the sword" intended as "it serves you right" for incurring a loss caused by the rarest event, doesn't sound right nor fair. But, as i said, since this is not your typical remark, I am just going to try to forget about it.

Right, good point. I tend to expect to be able to will the market to behave as I wish.

Thanks for the feedback.
 
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Ok, here I am, back at the office.

This morning, what do I expect when I'll open TWS?

I expect no margin calls for sure, because my margin was very abundant last night.

Given my estimates I should be above 32k this morning, and if I am not, I'll be very disappointed.

My ongoing ZW trade should be closed by now or at least very profitable, by the thousands.

Let's see.

Today I'll have my 4 hour long math lesson, so I really hope to have at least 35k by the time I go there, because we're talking about portfolio theory, and the less capital I have, the less this makes sense.

...

Unbelievable. It is "Good Friday" and I hadn't even noticed. My systems are automatically all disabled given that it's one of those US holidays. And it seems the Bund is closed as well. They might trade for a few hours though.

Well, Monday I'll probably make thousands and thousands of profit, all in one day. This is what happens with these holidays.

Ok, then for today there definitely won't be anything to write about in here.

It is going to be a painful 4 days without the markets. No, wait: three days, because Monday is a holiday here but the markets are open. Pretty funny, because today is not a holiday for us and yet it is a holiday for the markets.
 
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Adamus, I've been thinking about your "Live by the sword, die by the sword" remark. You have to be careful what you say, because these things later occupy my mind for hours if not days. Usually you're a reasonable commentator, but I think this time you have been unfair and not tactful. You shouldn't go to someone who has just incurred a loss and tell them they deserved it, which is more or less what you've done. That is not according to your usual style and so I am still not afraid of reading your posts, expecting poison from you. But now I am definitely more likely to expect poison from you than I did in the past. I will mark this comment in my mental book, as the second unpleasant comment from you in the past few months.
 
One more week of suffering is ahead. The good news is that Monday is a holiday so I can sit at home instead of being at work. The bad news is that I am at risk of tampering on Monday.

On the other hand, I feel like I'll make money because of it. I am good with discretionary trading when I am faced with a volatile session, and Monday most definitely will be a volatile session, as always after 3 days without trading. Check out what happened on the Bund after New Year's holidays:

Snap1.jpg

Hopefully the same thing that happened after New Year's holidays, will happen after Easter's holidays.

And hopefully I will be rewarded by the gods of the markets for having put up with Adamus' remark.

Hopefully by the end of Monday, even before going back to the office, my account balance will be back above 35k. My self-esteem totally relies on my account balance to keep growing.

...

My estimate is that by Monday night, GBL will close 150 ticks lower than now, and bring me a profit of 12k.

That alone will bring my account above 40k.

Then those two ZW contracts should bring my account 3000 dollars higher, to about 44k.

Then, I should make another 2k, at least, on JPY and GBP.

All in all, my account should be above 45k, in my hopes, but, realistically, it is very likely to be above 35k.

So, I really don't know what I am worried about.

I am just worried about the fact that I am bored in these coming 3 empty days.

Other than this, I am expecting my account to be at about 40k at the end of next Monday, and at least above 35k if things do not go my way.

Yeah, this is really crazy, worrying about all this, when my account will be higher than ever by the next time I set foot in my office on Tuesday.

Really, I should just take it easy, because this time it's all in my pocket. All the profit is already in my pocket, finally, and my only... the only thing to avoid is looming over TWS, because only mistakes can come from tampering at this point.

I still feel awful about what happened on ZW and all that money disappeared from my account, unexpectedly, but what counts is how much money I will have on Tuesday, which is more than satisfactory, and not how much more money I could have had.

This is good enough and let's not allow perfect be the enemy of good:
Perfect is the enemy of good - Wikipedia, the free encyclopedia
Perfect is the enemy of good is an aphorism or proverb meaning that insisting on perfection often results in no improvement at all. The phrase is commonly attributed to Voltaire...

...Aristotle, Confucius and other classical philosophers propounded the principle of the golden mean which counsels against extremism in general.[2] The Pareto principle or 80–20 rule explains this numerically. For example, it commonly takes 20% of the full time to complete 80% of a task while to complete the last 20% of a task takes 80% of the effort.[3] Achieving absolute perfection may be impossible and so, as increasing effort results in diminishing returns, further activity becomes increasingly inefficient.
Click to expand...
Right.

Let's just... let's just go to sleep, get drunk for the next... 96 hours. This will be my slogan throughout next week: go to sleep for the entire week. All I must do is turn on the systems and look away. I must not even be aware of account balance or anything. Let's do it. One more week of apnea, of holding my breath: one more week, one more week, one more week. And if Adamus comes with his "told you so" and "you deserved it" to break my concentration, he will get banned. What comes first is my own mental stability. I cannot allow anyone to come here and write anything that annoys me. Do it one more time, just one more time... You've been warned.

one flew over the cuckoo's nest taber best moments - YouTube

Dale Harding in One Flew Over The Cuckoo
 
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Done with math, came back home, neighbor is running around and annoying me, we've got our math formula all figured out, I am pretty satisfied overall.

Our automation goes like this:
=IF(AND(new sharpe ratio>=18%,no.forward-tested trades >= 20),TRUNC(capital/50/average deviation),0)

As explained before this short formula includes two phases:
1) selection of systems that can trade: systems that have A) enough forward-tested trades and B) a good enough "new" sharpe ratio (average profit / average absolute deviation)
2) allocation of contracts to these systems based on capital: A) capital divided by fifty, then B) divided by the average absolute deviation of each system, so that each good system is given a 2% of capital for its average deviation.

That's all. Everything is now entirely automated.

Now I just have one more week to stick with my discretionary trades and all my problems will finally be solved. The maid is a whore, she just plays dumb and most likely she stole the jewelry, but we can't accuse her if we're not positive.
 
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You have no idea how anxious I am feeling, due to my open positions.

On top of it, the neighboring child keeps running all day long in his house and... you can feel vibrations from his running on the floor as if you were living over the subway.

Endlessly running up and down his house. I wonder if the neighbors below ever complain at all.

I can't say what I wish for this kid, because otherwise the forum management will keep deleting my post.

...

Other than talking about this nimrod, what can I say...

I've done some testing and my money management formula seems just about perfect. The only thing I am wondering about is how much it will slow down my fall.

I checked on the blender, blending my past 10 years of back-tested trades for the systems/contracts selected by my money management formula. The results showed that, after blending and blending, I kept getting about a 98% chance of going down less than 33% at any given time. That is pretty reliable and what we do not know is the chance of going down more than 33% but my blender estimates that it is at about 2%.

Let's say that this is not realistic, because the future is always worse than the past, and let's estimate that probability at about 5%.

Obviously there will always be a slight probability that I'll still blow out my account no matter what I do and no matter how good my systems are.

But if that is one probability out of millions, I can be OK with it, because it is more likely that I'll get run over by a car before that happens.

At any rate, let's say that I have a 25% chance of losing more than 20%, which is the % drawdown that will make me uncomfortable.

I still do not know how high that % probability is when I apply my fixed fractional approach, in other words: if I do not decrease the contracts as capital decreases, I have a 25% of losing more than I can stomach.

But, if I do apply my automated fixed fractional approach, how low does that 25% chance go?

No idea how to calculate that. And frankly I am quite exhausted from my trading systems' work to work on that formula now. What is comforting is that I know that I have a 25% chance of losing more than I can stomach at some time, and that it will be much less thanks to my fixed fractional methodology.

Another interesting thing is that my worst drawdowns could last about 2 months, and maybe happen once a year, if not less.

Those are the drawdowns i have to be afraid of, and so, given that I cannot appraise my contracts/systems every day... actually I could easily do that.

No, but it's not a good idea. I'll allocate contracts once a week, so the slowing down will happen once a week. That's the perfect frequency of updating it.

The problem with the continuous updating is that... wait, there is no problem.

I set up the table on my excel workbook, they calculate the contracts from... no, wait... too complex. I will update it once a week.
 
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travis said:
Adamus, I've been thinking about your "Live by the sword, die by the sword" remark. You have to be careful what you say, because these things later occupy my mind for hours if not days. Usually you're a reasonable commentator, but I think this time you have been unfair and not tactful. You shouldn't go to someone who has just incurred a loss and tell them they deserved it, which is more or less what you've done. That is not according to your usual style and so I am still not afraid of reading your posts, expecting poison from you. But now I am definitely more likely to expect poison from you than I did in the past. I will mark this comment in my mental book, as the second unpleasant comment from you in the past few months.
Click to expand...

I don't think there was any bad intention in Adamus comment, as you can profit from news announcements as well. He's just saying, that's what we traders do in general. We live and die by the sword, not literally, but we are bigger risk takers than the average person. Which i believe you are and all of us on this forum trading, because we're not trying to make 2% returns each year. So in a way we live and die by the sword. It's all part of trading. I really don't think he was just talking about you, but traders in general.

I believe that he was making your loss in ZW more justified, by making that remark. Justified in that you are being consistent with yourself and your system, and that's what can happen, which I believe discipline and consistency has more to do with being profitable than actually having a good system, or is a bigger step to becoming profitable.

In a way, he was trying to make you feel better about holding onto the trade.
 
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Replying as I read.

Oh, ok, in that case, I will be less offended than before reading your interpretation of his remark. Ok, then I guess I am a bit paranoid, yeah. Well, but at any rate I said so, just in case he had meant to be critical, as it had seemed to me (interpreting it as "you have died by the sword because you weren't doing it right", which is not the case for my ZW trade).

Well, thanks for the feedback.
 
travis said:
Replying as I read.

Oh, ok, in that case, I will be less offended than before reading your interpretation of his remark. Ok, then I guess I am a bit paranoid, yeah. Well, but at any rate I said so, just in case he had meant to be critical, as it had seemed to me (interpreting it as "you have died by the sword because you weren't doing it right", which is not the case for my ZW trade).

Well, thanks for the feedback.
Click to expand...

It's easy to become emotionally attached to trades, but like you've said you've done all your statistics. As long as it's forward testing close or near to how your back test would have gone then, there's nothing to worry about. Let it ride. Set and forget.
 
Yeah, good points.

...

Today the president of Italy decided, oddly and unexpectedly, that Monti will simply go on being the prime minister despite the fact that there is a new parliament and, up to now, for the past few decades, this has always meant a new prime minister. Even if the new prime minister didn't always have a majority in the parliament.

But since there's no agreement on the new prime minister, this time, the president of italy says we'll keep the old one. Don't know if it's good or bad for the markets, and my short bund position. I wonder.

It reminds me of what happened in greece in the summer of 2012.
 
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The Silver Linings Playbook – Il lato positivo [Sub-ITA] (2012) | CineBlog01 | FILM GRATIS IN STREAMING E DOWNLOAD LINK

Not a masterpiece but watchable, enjoyable. Low expectations, modest and understated comedy.

Furthermore, by now, with all the knowledge I've accumulated, I can find interesting things in every movie.

Besides, a movie with De Niro is always worth watching.

In the second part, minute 18 of the second part, there's a situation that is familiar to me. I started off being totally rational, and maybe I still am, but I've developed some sort of magical thinking along the way, that, much like for de niro's character (the father, cooper plays the son), goes according to this rationale: if you spend time with your family (in my case with my parents, in de niro's case with his son), this will bring you good luck with your bets. It is quite a coincidence that I developed this magical thinking theory about a month ago, so close to watching it in this movie.

In reality, this is sound thinking, although the magical thinking is probably unfounded - it is sound thinking because when you spend time with your family, you're more stable, and when you're more stable, you trade better. So it is not that they bring you good luck, but it's the fact that you have a clean conscience and a stable mood, that in turn affects your trading in a positive way.

In the same way, writing this journal helps my trading, because I am feeling the support by the readers. I know there's about ten readers who follow me very regularly.

Just 3 more hours till the markets open again.
 
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