Global Macro Trading Journal
- Thread starter Daal
- Start date
EWZ is down today because a Senate committee didn't approve the Labour reform bill. Doesn't mean a whole heck of a lot because this is still quite likely to be approved by the Senate (the committe merely gives a stamp of approval or not), yet this does suggest that the current government lost strength. I mentioned in the past that I had a moving average stop in this position, I then decided to override after the big tank because I suspected the president would then resign, be removed or be impeached and things would continue as usual.
Somehow none of those possibilities look likely now, most likely he will stay on as a lame duck president until 2018 end, unable to do any significant reforms. So I can't jusfity that overriding of the stop (which never fully triggered so the overriding was merely mental).
So now I'm planning to do something else, I plan to sell 50% of my position when the stop triggers (if it triggers that is). This way I avoid part of the whipsaw risk but at the same time, I control for downside risk. Which is important in high risk countries such as Brazil, looking at my database of returns, brazilian stocks have had some nasty bear markets in its history (-95% real max DD in 1990/91) so control for risk is crucial. I will rebuy when the MAs crossover again (to the upside), as it stands now, it looks like it will trigger soon
But I'm glad I was ahead of this problem by cutting back 20-25% of my position before I had to.
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I trimmed my position two times, at 36.70s and 34.60s. They were not great exits relative to short-term peaks before them ($39s and $35s) so one of my goals is to improve my tactical 'rebalancing' of locking in some gains to prepare against future vol or other surprises and invest the proceeds in safer investments. In the case of EWZ, the time to do it was when everything was looking wonderful. But I need some kind of sentiment criteria, perhaps combined with a price action indicator (RSI, Stochastics) to make those rebalancing periods a mechanical process. Often times, its hard not to be infected by the sentiment and then delay the tactical selling. By the time things turn, its too late
I learned 2 lessons related to this that I need to apply and improve on, one from Macro Man "hedge when you don't need to" and one from David Tepper "selling when the price is no longer that attractive is an important discipline"
I learned 2 lessons related to this that I need to apply and improve on, one from Macro Man "hedge when you don't need to" and one from David Tepper "selling when the price is no longer that attractive is an important discipline"
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What's tough about selling into strength and doing the tactical rebalancing is that the data does indicate that new all-time highs usually lead to excess returns in stocks. I posted an article from the the Daily Wealth showing just that, even outside the US. So cutting down size into strength might not be optimal, I guess it would depends on the person's assesement of risks (like gap risks, crash risks, etc), if those risks are there, then it probably makes sense to cut back immediatly rather than wait for anything. If those risks are low, perhaps using a very short-term dynamic moving average to time the cut back might make sense
I posted a New Yorker article a while back that, using statistics and history, suggested that the Republicans would lose seats in the 2018 mid-terms. Its still quite possible that it will happen, it is noteworthy however that so far in the 2017 special elections, the Republicans are 5-0 over the Democrats.
This even though the Democrats are spending money like crazy to try to get the narrative that Trump has imploded the party going. Trump's mouth (or fingers) are not helping but its quite possible that economic insatisfaction (from secular stagnation/new normal) means that the Republicans will get a chance for a while, they might the benefit of the doubt because people want a different agenda, if that's the case, they will have a higher chance of keeping seats (or even get more seats) in the 2018 mid-terms despite what statistics with small sample sizes say
I don't know what will happen there but I have to bring this up because the stupidity of the media in these matters is rampant. By reading articles you would think the Republicans got no chance, the agenda is dead and people need to bail out of stocks, yet if that's wrong (that is, the Republicans keep/expand seats and the agenda moves forward), the consequences are exponential to assets like stocks.
Therefore, one has to be VERY careful about joining the media perma view that the Republicans are done for. This is not a situation where an edge is achieved by being right 51%+ of the time, you have to be right a lot more often than that because of the exponential component of the stock market payoff (that plays out through either a huge year or two or by an extra few percent in returns over long periods of time).
This even though the Democrats are spending money like crazy to try to get the narrative that Trump has imploded the party going. Trump's mouth (or fingers) are not helping but its quite possible that economic insatisfaction (from secular stagnation/new normal) means that the Republicans will get a chance for a while, they might the benefit of the doubt because people want a different agenda, if that's the case, they will have a higher chance of keeping seats (or even get more seats) in the 2018 mid-terms despite what statistics with small sample sizes say
I don't know what will happen there but I have to bring this up because the stupidity of the media in these matters is rampant. By reading articles you would think the Republicans got no chance, the agenda is dead and people need to bail out of stocks, yet if that's wrong (that is, the Republicans keep/expand seats and the agenda moves forward), the consequences are exponential to assets like stocks.
Therefore, one has to be VERY careful about joining the media perma view that the Republicans are done for. This is not a situation where an edge is achieved by being right 51%+ of the time, you have to be right a lot more often than that because of the exponential component of the stock market payoff (that plays out through either a huge year or two or by an extra few percent in returns over long periods of time).
The trades were busted apparently, balances reversed. Nuts.
I wonder what happened to the folks who thought they bought at the flash crash lows and then sold when prices recovered, are they short like it happens in stock markets? This is like the wild west but without sheriffs
GDAX is saying that trades are final and will not be reversed but some traders from twitter that I follow are reporting that their trades (buying the flash crash lows) were reversed and the money is gone. Good lesson here is that if you get a huge benefit in one of these brokers, convert it to bitcoin/tetherUSD/something else and transfer it immediatly., preferably to cold storage Do not let them reverse it. Its kinda like what Jim Rogers said about being worried about the exchanges taking his profits when a bubble crashes.