JS Global Macro Notes

Quote from darkhorse:

...Well, that's the rub. The Keynesian approach may be perfectly good in theory, but it falls on its face in the real world...
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Yes, that is unfortunate. However, the mechanism is there for those who can and wish to operate it properly. On the other hand, laissez-faire doesn't even work in theory, because as Galbraith observed, "Left to themselves, economic forces do not work out for the best except perhaps, for the powerful." I'm inclined to agree with Galbraith that the Invisible Hand is so invisible because, quite often, it's just not there. Bush's record speaks for itself insofar as the Invisible Hand goes. And I trust we at least agree that supply-side trickle-down is just self-serving BS. Even bubbleboy Greenspan admitted that tax cuts don't pay for themselves.
 
Quote from darkhorse:

Yep, true.

As a general rule, it's good to remember too that the crowd is not always wrong... the crowd is only wrong at major turning points, which by definition are less than frequent. Being contrarian at the wrong time is akin to arguing with a herd of cattle.

Trading (in my humble opinion) thus becomes a curious mix of going with the flow, but also knowing when to selectively fade the flow.
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Agreed. Outstanding!
 
Quote from darkhorse:

As the exchanges go electronic, the trading that floor traders used to do is replaced by computers.




Now this is an interesting comment, because I would argue that extremely short duration traders actually take on MORE risk than swing traders like me, not less, as a function of the extreme leverage that is employed.

The theory is that shorter time in the market equates to less risk taken overall. But this theory is challenged by the risk of getting nailed in a repeat "flash crash" event with extremely concentrated exposure going in.

There is also the matter of volatility expansion. Consider the debate of tight stops versus wide stops.

On one level it could be argued that "the wider the stop, the bigger the risk." But this is not necessarily true, because risk is a function of total market exposure, not the stop itself.

To see what I mean, consider that Trader A could have twice as wide a stop on the exact same trade as Trader B, and yet both traders could be sizing their trades so as to represent 50 basis points of planned risk.

Also, the tighter the stop, the greater the chance of surprise volatility expansion resulting in a bigger loss than intended. Again a hypothetical example: Trader A buys a volatile stock (say BIDU) with a $4 stop for a swing trade. Trader B takes the same position on an intraday basis, but sizes his trade off a very tight (for BIDU) 50 cent stop. That same afternoon, while both traders are still in, the Chinese government comes out with a content crackdown announcement that is very bad news for BIDU. Which trader is more likely to see his planned risk assumptions blown out of the water?

Then, too, there are the offsetting characteristics of a balanced long / short book, the ability to adjust the portfolio on a holistic basis to account for different market scenarios and profiles, the ability to dial leverage up or down in terms of initial position sizing across the board, the ability to vary position size dramatically based on situational equity curve and conviction factors, and so on.

Point being, it's not necessarily the case that swing and position trading is more risky. It certainly can be, but nothing is set in stone...
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This is a tremendous thread!

And you swingtrade like me!

VERY glad you're back!:)
 
Quote from Gabfly1:

Yes, that is unfortunate. However, the mechanism is there for those who can and wish to operate it properly. On the other hand, laissez-faire doesn't even work in theory
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I more or less agree... in fact, most of the 'isms' and 'ologies' are too pure for this world it seems. The hazards of trying to pigeonhole a messy and complex reality.

Ever read 'Origin of Wealth' by Beinhocker? He does a good job of pegging where we are headed (or should be headed anyway)... towards a world free of ideological orthodoxy.

p.s. I didn't know you could post youtube clips in here, how did you do that?
 
Quote from darkhorse:

...Now this is an interesting comment, because I would argue that extremely short duration traders actually take on MORE risk than swing traders like me, not less, as a function of the extreme leverage that is employed...
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Your argument that follows makes sense. I cannot dispute its validity, but I have chosen a different course for myself. In my own case, I found that I was able to identify much more reliable setups in a very short time frame than in a much longer one, "noise" and all that notwithstanding. I would prefer to look at a longer term chart and identify a low-risk point of entry, but I simply cannot do it. On a very short term chart, I can do it quite handily. Unfortunately, it is more screen intensive but that is my burden to bear.

The other thing is that I am an atheist. As such, I'm not that big on leaps of faith. I consider fairly wide protective stops to be an article of faith, irrespective of the testing or reasoning that may or may not have gone into such stop placement. Therefore, I prefer small steps rather than leaps. However much we may wish to believe that it's a matter of probability, the fact is there is no probability distribution for future price action. There is only uncertainty and, at best, a balance of probability, which is a far less elegant measure of confidence. And so, I prefer an approach characterized by incrementalism.

At the end of the day, we each do our own cost/benefit analysis and arrive at a conclusion that gives us the most comfort. As you correctly pointed out:
Quote from darkhorse:

...nothing is set in stone...
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Quote from darkhorse:

p.s. I didn't know you could post youtube clips in here, how did you do that?
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On the Youtube page below the video, you will see an "Embed" button. Click on it and then copy the highlighted text. Then simply paste it in your post.
 
Quote from Gabfly1:


The other thing is that I am an atheist. As such, I'm not that big on leaps of faith. I consider fairly wide protective stops to be an article of faith, irrespective of the testing or reasoning that may or may not have gone into such stop placement. Therefore, I prefer small steps rather than leaps. However much we may wish to believe that it's a matter of probability, the fact is there is no probability distribution for future price action. There is only uncertainty and, at best, a balance of probability, which is a far less elegant measure of confidence. And so, I prefer an approach characterized by incrementalism.
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Elegantly stated, although a wee bit specious. Regardless of time frame and philosophy, the true "articles of faith" are that (1) the chosen methodology works, (2) the trader has a sustainable edge, and (3) the light is worth the candle. All traders have "faith" in respect to these three things, even if the faith is only in ourselves.

(As for disputing probability distributions, that is a good way to start a long and most likely fruitless debate, with patterns of conceptual disconnect akin to the parable of blind men and elephant.)

There are many paths up the profit mountain, the three uniting factors being internal consistency, empirical validity, and practical longevity. Without those uniting factors in play, the width of the stop (or even a lack of stops entirely) matters not a whit...
 
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