Global Macro Trading Journal

[dhpar]

Quote from Butterball:

...

nb. ( Why exactly did my risk go up? that was an assumption i used for convenience - not a corollary of some specific event.)

a. so you say stops define your risk - that is funny.
stops may define how much you lose (assuming no slippage) but they have nothing to do with risk. i guess all our misunderstanding comes largely from here...

separately, i believe hard stops are not an optimal way to control ones psychological shortcomings...it is better to learn to be disciplined. stops are a negative gamma for which you did not get paid theta...i like to work with mental stops which are continuously re-evaluated. they are based more on how the picture changed fundamentally. if i ever use hard stops i used them in a sense of time, i.e. i give myself some time (theta) and if it does not work i exit for whatever price.

to use a stupid example let's say that M&A deal in US is about to close , you are long/short and then something external happens (say tsunami or earthquake in asia) and the spread blows through your stop. you get whipsawed despite the probability of the deal closing is completely unrelated to the cause... good luck with that. the stops need to have some flexibility to it - which of course require a trader to be disciplined and not to abuse it. that's why i say that the initial strong confidence in trade is paramount - in your parlance it allows you wider "stops" and therefore more time to catch/consume the move.

c. about 15 years.


but in general if stops=trading works for you then great - it does not work for me...

 

[Butterball]

Quote from dhpar:

stops may define how much you lose (assuming no slippage) but they have nothing to do with risk.

Completely disagree. To me stops (and of course slippage and gaps) define everything I worry about risk-wise. I am sure a hardcore value investor would disagree but that's what makes a market doesn't it.

Quote from dhpar:
but in general if stops=trading works for you then great - it does not work for me...

See, just because it doesn't work for you shouldn't lead you to disqualify the approach for others.

There's always multiple ways to skin the cat. IMO none is 'better' or 'worse' than the other in a qualitative sense. All that matters is that your approach fits your personality and discipline.

 

[Martinghoul]

Quote from ralph00:
I'm short CHF also, but weren't Blocher and his ilk behind forcing Hildebrand out? What went on with his wife has to be SOP for European power types - I wouldn't think there would be a chance of forcing him out over something like that unless he had lost serious political support.

Well, Blocher had been out for Hildebrand's scalp for a while. Hildebrand f*cked up, Blocher got tipped off and went for Hildebrand. Given that there was evidence, no amount of political support could help Hidebrand. Interestingly enough, Swiss authorities are now after Blocher for breaking the bank secrecy laws, which in Switzerland are sacrosanct. Blocher is claiming parliamentary immunity and I might add it's not the first time he's been in trouble. All in all, it's one tangled web.

 

[dhpar]

Quote from Butterball:

Completely disagree. To me stops (and of course slippage and gaps) define everything I worry about risk-wise. I am sure a hardcore value investor would disagree but that's what makes a market doesn't it.

See, just because it doesn't work for you shouldn't lead you to disqualify the approach for others.

There's always multiple ways to skin the cat. IMO none is 'better' or 'worse' than the other in a qualitative sense. All that matters is that your approach fits your personality and discipline.

fair enough. did not intend to fight anyway

 

[Debaser82]

Quote from Martinghoul:

Well, Blocher had been out for Hildebrand's scalp for a while. Hildebrand f*cked up, Blocher got tipped off and went for Hildebrand. Given that there was evidence, no amount of political support could help Hidebrand. Interestingly enough, Swiss authorities are now after Blocher for breaking the bank secrecy laws, which in Switzerland are sacrosanct. Blocher is claiming parliamentary immunity and I might add it's not the first time he's been in trouble. All in all, it's one tangled web.

Its the same everywhere in Europe.

Traditional parties mostly still in power, being called out by "populists" and more extreme newcomers who get minimalised or marginalised... Untill their backing get's too big and they earn a place at the table.

Where their new and unstable party structure and the price of governing costs them their uberclean integrity making room for another alternative to rise to fame in a couple of months.

In a way it is really waiting for the ketle to really boil over as tensions keep on rising and actually implementing the fringe alternative in stead of just talking about it will earn more votes then the status quo.

 

[Martinghoul]

Quote from dhpar:

separately, i believe hard stops are not an optimal way to control ones psychological shortcomings...it is better to learn to be disciplined. stops are a negative gamma for which you did not get paid theta...i like to work with mental stops which are continuously re-evaluated. they are based more on how the picture changed fundamentally. if i ever use hard stops i used them in a sense of time, i.e. i give myself some time (theta) and if it does not work i exit for whatever price.

to use a stupid example let's say that M&A deal in US is about to close , you are long/short and then something external happens (say tsunami or earthquake in asia) and the spread blows through your stop. you get whipsawed despite the probability of the deal closing is completely unrelated to the cause... good luck with that. the stops need to have some flexibility to it - which of course require a trader to be disciplined and not to abuse it. that's why i say that the initial strong confidence in trade is paramount - in your parlance it allows you wider "stops" and therefore more time to catch/consume the move.

+100 again.

 

[Debaser82]

People are overreacting to the Sarkozy defeat imo.

Right wing votes in round 2 from Front National should be sufficient to secure another term.

 

[Ghost of Cutten]

Quote from dhpar:

well that certainly is a difference between us. if i have a bias i never trade against it - at worst i am flat. it is very difficult to stay with the trade which is against your convictions to start with when the going gets tougher...

He is not trading against his 'bias', it's just that his 'bias' or market view is based more on market action rather than fundamental themes. He's more technical and you are more fundamental.

A technical trader does not get his convictions from fundamentals, he gets them from market action. So, this 'dilemma' of having on a position opposite to conviction is illusory. The technical trader's convictions are based not on his fundamental opinions (which he places little value on), but rather his interpretation of the market action. And a competent technical trader will not put on a position contrary to his interpretation of the market action.

Finally, a technical trader can have just as much conviction from price action as a fundamental trader can have from fundamental data, so there's no reason to think it's harder to stay in a technical trade than a fundamental one. In fact, I'd argue it's much easier to hold a position that is in harmony with the prevailing market state than one which is getting crushed every day by enormous hostile momentum.

 

[ralph00]

Quote from Debaser82:

People are overreacting to the Sarkozy defeat imo.

Right wing votes in round 2 from Front National should be sufficient to secure another term.

Votes for Le Pen will not automatically go to Sarkozy. Le Pen drew support from anti-establishment types, anti-incumbent types, anti-German/Franco relations types, from Communists. These votes are not going to Sarkozy. In fact, Sarkozy is lucky the Communist party did so well. If these votes had gone to Le Pen, she may have knocked Sarkozy out of the runoff. He's still in trouble.

Hollande still has a comfortable lead in a 2-man race.

Mind you, I don't think Hollande becoming President means a lot. He'll fall into line just like the new governments elsewhere in Europe have.

Bigger deal from this weekend is probably The Netherlands.

 

[Specterx]

Hussman on gold stocks:

In Strategic Total Return, we raised our exposure in precious metals shares to about 12% of net assets in response to recent price weakness in that sector. The ratio of gold prices to the XAU is now nearly 10-to-1, which is close to a record high. Historically, gold stocks have been treated as having "insurance" features, and their negative correlation with other stocks was accompanied by premium valuation multiples. At present, many precious metals shares have higher yields than most S&P 500 stocks, and are also significantly depressed relative to gold prices, which suggests a relative margin of defense even if gold prices were to decline substantially. This sector still has substantial volatility, which is why our exposure in terms of net assets is not aggressive (though we would likely increase that exposure on significant economic weakness). Overall, we're comfortable shifting to a moderately higher exposure in this sector, recognizing that we may observe additional volatility as market conditions change.


Supportive of my GDX longs I suppose.