Xi'an - 18-22.11.2008

well it have been well over a month of my stay in Wudangshan - body gets stronger and purifies the toxins of some previous mistakes..

once the energy is stored and guarded the mind enters a truly different perspective of clearness

the only thing to save the balance is close watching the subtle changes and immediately reacting to fix the issues as they arise

this is just a memo of the present state of mind that is an aim to preserve so that a sustainability of the development is attempted to be reached..

this takes both patience and perseverance -- next will and intent - and of course hard practice every day so that the process is assured a continuity..

Losses, Losses, Losses

Just read this nice peice from Brett Steenbarger:

Learning to Win at Trading by Learning to Lose
One of the fascinating conclusions of the research I posted yesterday is that traders learn by trading; that it is the number of trades placed--not the amount of time spent trading--that best predicts success in markets. That same research, however, finds that there is a very high attrition rate among traders; the most common learning that occurs in markets, quite literally, is that traders find out that they can't make money at what they're doing.So we have a catch: traders need to learn by trading, but they also need to preserve their capital as they traverse their learning curves.As I stressed in the Trader Performance book, much of learning in trading is pattern recognition. If that is the case, than it may be the frequency and intensity of exposure to patterns--and not the trading itself--that facilitates learning. This very much fits with my experience that traders can accelerate the development of competence by engaging in simulated trading (with live data) and by reviewing their trading via video. "Any techniques that you use in trading--whether for money management, self-control, or pattern recognition--require frequent repetition before they will become an ongoing part of your repertoire" (Psychology of Trading, p. 154). Traders drop out of markets, perhaps not because they lack talent, but because they fail to achieve the necessary repetitions to internalize skills prior to depleting their capital.They also fail because, even with repeated trading, they do not have a system for reviewing their performance, setting goals for improvement, intensively working on goals, and holding themselves accountable for those. Instead of a week's worth of experience, they repeat a single day's learning five times over.The research cited yesterday, as well as this interesting study, suggest that an important component of learning to trade is learning to avoid behavioral biases in taking profits and losses. The traders who lose their disposition to sell winners early and hold onto losers are those that tend to be most successful. Ironically, turning loss-taking into routine behavior may be one of the most important learned skills in the evolution of a trader's success. The key is staying small enough, long enough to learn from the experience of losing.

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just to remind myself in future about the critical period I have been going thru here..

It's 8.11.2008 - my third week in China.

I lost the first stake of $6k I had in the GFT account upon departure for China - don't really remember how I did it - it just happened so quickly in a monday morning - I have been crying and maning and feeling desparately helpless.

Then I transferred another $5k - made them $9k in a week and lost them 2 days ago...

Then the only $450 lost in the account I made a nice trade with 50pip stop and 150 pip target -- it was great and it happened nicely to my profit.

Then I had a long long day starting with 1 mini lot in eurusd, then added 1 in gbpusd - then 1 more in eurgbp, then also 1 in audusd, then also 1 in usdcad...

well from a starting point of 650 I nearly managed to make them 2 times 800 then I closed it a few times around 500 or 450 - the last time I just lost control and hit the sell with 6 mini lots audusd and I just lost all.

At that time I was also trying to trade futures contracts in gold, S&P and Crude Oil..

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Man, what the fuck?!?!?!?!

Just anybody looking at me would say the obvious: Stop!

I felt very sick and I was and I kept saying well stop you are very sick and it doen't help to try to strain your nerves for noting but I just kept.

Then I just realized I would have benn much wealthier /and I keep reminding to myself every day/ if I just didn't try to multiply all the money I had. Instaed it was just pure gambling and loss after loss -- what did I learn actually?

...................................................................................

Thinking critically I realize a few points:

1. I overtraded massively

2. I didn't have any plan

3. I didn't have any specific goals or targets for both risk or profit

4. I didn't let my SL to be hit nor let the profitable trades to proceed

5. I kept changing my mind on a 15-min chart swings and was just jumped from timeframe to timeframe - from 15-min - to daily > to weekly > and all the way back = just to realize I was totally lost ..

then it was like a revelation to me once my mind started clearing and the sickness starting fading away...

here is the Daily chart of EURUSD -- I have been trading this chart 2 weeks and lost 2 accounts -- what do you see?

It is a 2 week extended rangebound congestion!

Damn - isn't it so hard to recognize it -- 2 week congestion without any sign of a breakout or anything -- pure consolidation after the steep trend...

they say usually time of price movement is spread like this:

60% consolidation and 30% trend... anyway that's technical analysis discussion..

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So am I doing or thinking wrong:

1. Clearly I lost only because I was impatient

2. I overtraded

3. Never ever got a plan to follow

4. Didn't have any risk management rules to go by

5. Switched my mind and reversed my positions on 15-min chart swings so many times - most of the time just to realize if I made just one trade with 1 lot I would have made /MADE!!!/ money instead of losing them all.

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So why is this story so long?

Think it's long because of the pain and the insight I get after the pain starts to diminish and the mist is starting to clear.

You can't get rich in a flip of a coin - you made it a few times just to realize it was due to massive and totally unexcusable risk!

I clearly remeber August maybe 19 or 20 when I was in Ljubliana on the Euro trip - then I was chatting with my Mentor AL Benjamin -- then I told him I was feeling something was very wrong with me and my trading.

It was too easy back then -- getting at the average daily range's high /low and just averaging out with huge 1, 1.5 mio positions for a nice 10-20 pip profits...

I also felt I had stopped learning. I felt dumb as a stone. Had lost my spark.

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Anyway I feel a bit different now - think I got the spark again.

I know I need to develop a system that fits me and represents my understanding of the market.

I know I have to make and follow my risk management rules.

I know I have to manage my position sizing to reflect my Equity size.

I know I have to kep things simple. KISS rulez!

I know I have to undertrade! Bruce Kovner says 'whatever the position you think - cut in half'.

I know it's good to take losses!

I want to take the losses. Every time I have stop loss level I want to let it go.

I want to learn to be disciplined and control my own decisions.

I know it is important to have a plan and execute it step-by-step.

I know hard work is the source of satisfaction.

I know one is purified by hard work, exhaustion and determination to reach his goals.

I know one has to go through a very miserable period to understand the reality.

I know there is no easy way, no shortcuts.

I know too much - better just start doing. Period

Wudangshan, Hubei Province - China - Oct 2008

Losses are hard to handle once they overwhelm you...

Just got to train a couple of months Daoist Taiji in Wudangshan - the birthplace of Zhang SanFeng Taiji.

On 24.10.2008 the day all the markets were liquidating and saw huge losses I lost my GFT account of 6000 USD.

I was again trading against the trend and my positions were way over-leveraged..

Then after the range as already 350 pips in GBPUSD who could think it would make another 300 pips more... Crazy stuff but nobody to blame for this stuff.

Trying to get back to basics and to fix the long time issues I had been putting aside while it was easy to make money just averaging out of the daily range trading..

So back to school. and back to hard training.

FX & Futures LOSSES... 13.10.2008

just to make a note of how much money I made and lost these 2 last months:

:: in the end of spring - April 2008 I depostied 10k USD in GFT --outcome:

1. in August I made 55k - withdrew 7k -

2. again made it to 55k and lost it on a single trade in 5 minutes when the GBPUSD daily range from 300 pip overextended to 400+ pips ina liquidation trade..........

3. deposited 15k USD again made it to 21 k and lost themm in a trade

4. Oct 2008 deposited 15k USD more -- made them to 34k - withdrew 6k

5. these left 27k - I made into 38 k the same week and then lost them today in a single trade while shorting GBPUSD - AGAINST THE TREND!!!!!!!

6. the 9K I had in CMC CFD trading account I made to 12k and lost them while trying to buy the bottom in S&P and Dow futures... AGAIN AGAINST the TREND!!!
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how much money I have to lose to get this simple idea that to be consistently successful I have to act right :

1. discipline -- to wait for the right moment and for the opportunity to reveal

2. discipline -- to use leverage only when in profit and when the edge is in my favor!!!

3. discipline -- to develop scanerio and risk level and respect the RISK levels and initial strategy!!!

4. disicipline -- to use leverage only to the level I can manage the drawdown and to be able to come back if I am wrong or late to bail out...

5. DISCIPLINE -- to make the hard choise of being with the trend - buy high - sell higher if in trend mode!!!

6. TREND - to start trading first define the market mode :: Trend or Range ?

SOFIX - 585 - 10.10.2008

I saw Sofix 575 had a support level..

I entered when Sofix close at 585 on 10.10.2008

6000 shares - MONBAT /5MB/

4000 shares - CHIM /6C4/

3000 shares - EUBG /4EH/
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today monday 13.10.2008 seems a reversal is in the works - a bull rally in bear market actually

Dow closed like 800 points up - from a bottom at 7 890 - to a intrtaday high at 9 440...

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however my losses in FX and futures keep me crashing - my 'wealth' shinks too fast in the last 2 months...

SOFIX and BG Stock Exchange

well my secong or maybe third attempt to long the SOFIX shares proved another failure and I exited in the end of August 2008 with a 30% loss.

I tried to long CHIM /6C4 at below 7.95 - had 10 000 shares at that price and then some 2000 more in the 8.70 and 8.50 area -- unfortunately the move was weak and I even had to sell from 8.35 till 7.95 so it was a failure again.

The big stake of 8800 share in EUBG/4EH I had for a repo-credit that I bought around 5.20 I had to sell around 4.80.

FIB / 5F4 also was weak and I sold it around 5.85 but now it looks better and holds above 6...

I watch the main indices close as I'm very intereseted how the post bubble effects will affect the market.

4 September 2008 -- Black Swan upon me -- 55k USD loss

it was Sept 4, 2008 when i was struck by the Black Swan event.

I lost all my trading stake of 55 000 USD in blink of an eye on a 'sure trade'

the event: I longed eurusd & gbpusd at the session lows after they had both descented 200+ pips so I felt pretty sure I would get a little profit riding the quick retracement

needless to say I was stupid enough not to use stops!!!

for a minute the prices backed down so I loaded more to a 1 mio per both positions - then once they reached breakeven they both stalled -- then I thought 'they are pretty weak maybe I'd better sqaure here and wait and see'

well I didn't square - instead they started free-falling and I kept buying until I had 5 mio Long GBPUSD and 3 mio long EURUSD and then they just kept falling until the dayly range extended to the surprizing 300+ pips in both...

pretty unusual event -- but that doesn't excuse my mistake not to manage my risk thru stops!

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well what can I say - just as I fel sure in myself and I thought I had a basic system to trade I lost it all - now again I have to start from a scratch

in the last 6-7 months I turned 10k stake into 57k and it would be even greater since I drew on the account around 21k...
nominal return was 550%
........
well man, next time please do it better!

Stock Portfolio Rebalancing - 07.07.2008

Today I rebalanced my Stock Portfolio on the Bulgarian Stock Exchange - Sofia.

I dumped the old holdings of:
1. Alcomet
2. Doverie United Holding

they were both very poorly performing - the Alcomet P/E has risen above 58 and the basic materials were giving it a huge toll over earnings.
Doverie I believe is watering the stock holdings as he new shares are in the market the value has long ago disappeared.
>>> I know I was dead late for this move - worse I don't find any reason for consolation - I was reckless and overstayed bad trades

Alcomet - long average at 1760 for around ~ 9.30
liquidated ~ 6.70

Doverie - long 2000 around 10 - liquidated at 6.60-80

>>> all the freed capital is invested now in the doubled position of Eurohold - today 8888 shares.

Possible Double Bottom formations - 30.06.2008

Here are the major and the broad indices - Sofix & BG40.

The charts suggest possible Double bottom formations >>

thus I decided to hold my investments in the major companies.

The portfoilo consists of 9 positions with slight bias to the financial sector as I suspected a rebound there to be stronger than the market as a whole.

However I realise the stock market is actually dominated by the infractructure companies and financials seems to have lost their shine.

The plan is to liquidate the BSE stock holdings on the subsequent rallies as I expect the overall economic conditions to get better for the time being in the US and the Euro zone but the Autumn to bring some very bad consequences of the credit crisis expansion.

25.06.2008 - EURJPY 2.3 mio short trade

>>> What a day today - we had a historical High in EURJPY at ~ 169.49

Somehow I feel those old tricks now seem a bit plain to be fooled.

Anyway I had like 10 exhausting hours of waiting until EURJPY grinded down and finally it just broke --> then I covered the short.

I was originally short ~ 169.15 but also added 169.30 lower highs - there I saw confirmation that was weak trend so I added 169.10 - last add was 168.81 where the action was still not so strong but whenit broke 168.50 I was sure and just waited for 168.28 to cover.

Today US Stox broke the recent bottoms badly and it was evident that we see a liquidation in carry trades. But now in hindsight it is easy to say..

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A word of caution to myself:

"Dude, why the fuck did you forget to put a stop to that stupid Gold trade, you silly punk!!!"

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I know it is useless to point this after the fact but it is absolutely important that I put a stop at every single trade and start with only a mild leverage until I gather enough conviction and have a profit in the trade until I start to commit more!!

Today besides my perfect trade in EURJPY and the previous short in AUDJPY which I closed way too early I LOST and actually HAVE A NEGATIVE BALANCE in my other account which I have to cover now!!!

All just because I entered a stupid Short gold trade without any conviction and didn't pay enough attention - but above all because I just carelessly left it without stop!

You silly boy!! Never do that again!!

23.06.2008 - trading against the trend

Today I had the strong conviction to trade conservatively and protect my capital after the last Friday 2.5 mio trade in Sterling/Yen.

No matter I started testing the market with only 100k positions the 3 consequtive attempts to long the bottom in EURUSD & GBPUSD with tight 30 pips stops proved to be expensive.

Also it was my impatience to wait for confirmation that those trades were advancing properly and I added leverage too soon which weighted additionally to the testing cost.

However I traded strictly with stops and adjusted them for the position size and location.

Given the average trading ranges I got very confident that I must see some reaction from the lows -- that is why I entered in my last attempt a considerably sizeable position from the outset:

400k in EURUSD & even riskier

500k in GBPUSD

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I had a sore realization that while I am incessantly looking for trends and constantly convince myself that I am on my steady way to spot and manage trend following trading style I seem to be going for contra/reactionary style.

I found myself today trying to pick the bottom instead of getting on the trend and just riding it...

Well, after I see these weak spots in recent times much more clearer I feel I am at least a step closer.

Baron Rothschild quote.

>> Old Baron Rothschild when asked how he makes so much money:

"I have found an easy way and I stick to it. I simply cannot help making money. I will tell you my secret if you wish. It is this: I never buy at the bottom and I always sell too soon."

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Again just to reiterate and confirm for my own conviction:

> Always try to bend against common logic!
> Always do the HARD thing as the easy way always leads to ruin.
> There is no easy way for the common human being as the mainstream Joe is always too busy to study and live in accord with nature >>

so 95% of people always live against the natural way and that's because choosing the easy way is wrong as this is just the wrong human perception..

>>> Just as one evolves and finds energy and courage to live by the natural way he finds that the HARD thing and the RIGHT thing converge - and then the simple is not easy but correct.

That's why in the beginning there is always necessity to apply unhuman portion of intent to change the life, the rules, the perceptions, the decision-making process, the thoughts, the areal, the people.

A TURNAROUND doesn't happen in one day - it is a PROCESS. Such as LIFE - it is a constant process of evolution, change, transformation and sublimation.

Just need an vigilant eye and courage to appy change.

20.06.2008 - 2.5 mio trade in GBPJPY

>> This was a bit of a wild card trading as I overleveraged in a purely declining market that was obvious in the chart.

Certainly I will remember however that the most easy looking trades always turn to be actually the toughest. I sure shot I thought turned into an all day grinder -- anyway the averaged short around 212.49 was covered 212.08 before the Friday close because the rollover would be considerable expense.

Well, that was it - now going back to risk management and trend spotting.

19.06.2008 - 3 mio trading as usual...

.....

>> Yesterday /18.06.2008/ I made a mistake as I abandoned the disciplined trading process and engaged in some overleveraged positions as I ultimately realised I was PUSHING the market.

The problem was I got some view that I was trying to validate thru increasing my positions while was impatient to get a clear confirmation from the market and the price action itself.

Logically this was followed by a large drawdown in the Equity as I was switching directions too fast and while trying to get the right opportunity the leverage size appeared to be very expensive >>> ultimately by the end of the day my account was -42%.

At the end of the day I went short EURUSD, GBPUSD, AUDJPY & EURJPY.

Those positions were held overnight but they all were in loss in the morning.

The 3 trades on the picture were the last ideas I had and I actually bet the farm on them as after I had the 1 mio trade back in April >> now I did my 3 mio trade. Congratulations as at the exit my trading return was approximately 128% and I reached Breakevenpoint from the peak on 17.06.2008.

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The ultimate lesson learned is respect your risk management rules, trade consistently and never engage in a such an over leveraged gamble until you have an equity base that would not be hurt in a case of adverse market reaction!

>>> While I had Feb & March 2008 a very good trading period > then till June 2008 I actually was constantly losing while I was very diligently researching Trend following methods and traders.

I lot of information on Ed Seykota, Richard Dennis and Richard Donchian was digested to give me a better idea of the prospective direction of further development.

A search for an EDGE and disciplined PROCESS somewhat seem now a bit closer.

Trend trade - 06.06.2008

>> following a tight consolidation I expected a very powerful trend to emerge so I fully leveraged my adversely damaged equity starting with a 100k position near 1.54 and once the trend broke out I was adding to reach a full position of 200k till it reached 1.55..

I rode the trend till 1.56 where I was scared and shaken off the trade location as I closed the position just before the NFP a bit below 1.56...

Data came in worse than expected but then it was all clearly reflected in the charts and I take it as a very important lesson to not let myself get pushed out of a great trade location.

I had before the data 20k position that I closed at 1.5660 and watched the trend reach the high above 1.58..

Pretty good lesson to belearned!

06.06.2008 - Breakthrough day

> 6 June 2008 -- a good day to turn things upside down?

I figured if I had been doing so much mistkes, always making the wrong thing -- then it was probably logical to assume that if I changed my perception and reactions in the exact opposite I would then be doing the right thing?..

>> Einstein said: how do you expect to fix something if you come at the problem with the same mindset that created the problem.
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A new moment of reflection and estimation of the future impact of our present decisions..

LEVERAGE kills...

Just a quick reminder to myself why my last 3 weeks trading was a mere disaster ::
LEVERAGE!

I somewhat unexpectedly started trading maynly in standard 100k lots and this makes the profits huge but so are the losses...

the P/L is swinging around like crazy and my trading is more like gambling and this adds immense pressure on my decision making and self -esteem as this should be a sustainable business not a means to entertain myself at the cost of huge losses or crazy swings from big gains to total loss...

I made a few killings with 7 to 10 standard lots but also I suffer great setbacks and this seriously damages my perfornace so I pledge before myself to stop the irrational behavious and get back to business as usual.

Purgatory - March 31 - April 4, 2008

I feel I've been in the Purgatory this whole week.

Fixed on my Opinion and on imaginery things to do in future I neglected the present developments.

Since March 31 till I lost the account equity yesterday in the 1 mil trade I have lost my flexibility, correct judgement and actually I lost my life to my poor EGO that clouded my mind.

The thing is that I WANTED things to happen >>> worse, I FORCED things to happen >>> went the whole length and pushed to the limit just to fail --- and the whole process was so tangible - I knew thigns would happen this way and didn't act to stop ot correct.

All the time I had my exits and good profits but failed to take them - locked myself in the DESIRE to make a huge bet and even larger profit.

MONEY ain't nothing to talk about here as they really don't matter. It's the EGO that blinds the soul and clouds the mind - it makes you act wrong and suffer the pain.

So whatever you make money or not, there is far more to life than this. It's the right balance that is so hard to achieve -- even harder to maintain.

There is no easy way!

Lessons to be learned... Humbled by the market!

Yes - I did my first 1 mil trade - I actually lost the account today -- pretty stupid as I had almost made it to like 75% of the initial equity from 30% on the previous day.

A few major things to remeber and learn for future reference:

1. TREND FOLLOWING - well, not an easy job.. need to work more on a systematic approach and actually more testing before risking the equity.

2. GREED / LEVERAGE -- needless to say the position size was times bigger than my equity and also a major factor to the demise of this trade.

3. LEVERAGE / FLEXIBILITY --- this might actually be the most important point as I had several times seen a monster profit and wasn't unable to make myself to take profit.

Then on the other way I was unable to cut loss where I would normally would.

4. PSYCHOLOGICALLY - I was a failure as I wasn't able to act right and in timely manner to adjust position size and to take advantage of the intraday directional movements.

5. DAILY RANGE -- here was a major break today as I actually realised the use of the range. It is still a new part of the intraday analytic tools.

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Well wasn't a good experience at all.

However it was something I felt unevitable -- just a violent and painful reminder of the market forces and the need to adjust one's trading to the market.

Street smarts: "Lose your opinion - not your money"

I was so eager to earn a great profit with a huge position -- and I had numerous possible exits but blew them all -- can't think of a nice rationale out of this - I just think I had a too good time and it was due to get back on me and show me that there are NO EASY WAYS in life.

1 mio trade

my first 1 mio notional value short GBPUSD was a failure.

I did 3 or 4 different trades on Monday, 31.03.2008, where I had profit in each of the trades but stayed too long and at the end had a substantial loss.

Then I shorted GBPUSD at 1.9860 > it hi a low of 1.9740 but I had the idea of using the measured move concept: AB=CD (2.04 > 1.97 :: 2.02 > 1.95) . The notional value was 7 standard lots.

Next day - Tuesday 1.04.2008 was a fools game again - it went against me and I shorted 1 more standard lot at 1.9859. Now the position was 8 X 100k lots.

Wednesday - the day of reckonging - day started around the lows 1.9750... I didn't do nothing all day but watched it hit new highs around 1.9890...

What a stupid act. WHen it first probed 1.9800 I also shorted 2 more standard lots so I just wanted to do my first 1 mio trade no matter how much it would cost me.

Now I cut my position to only 300k and will look to withstand the move with what's left in the account -- right now onle about 30% of the starting equity..

That's how greed and selfishness take revenge over you. Once you lose control of yourself your inner enemy will just creep out and take you by surprise. I knew it was going to happen and just watched it inflict pain over me. How strange is that I did this damage to myself in full sense. Pity.

Days to remember

Just a quick note to remember my extreme trading experiences I had today - probed the market twice and leaving the secong shor trade around the high area of the trading range as I sensed there will be unwind - this was true due to the Easter holidays in US, England etc..

Anyway >>> TREND FOLLOWING is the main theme right here.

Seems I got skill to carch reversal points but I now see the major success actually comes with trend following as there is the best profit opportunity.

I increased my trading leverage to 5 Standard lots in the last 3 days -- opportunities were ceased but I lackes the skill to follow the major length of the moves and I now will focus even more rigorously on this area.

Taking LOSS & Important points

Here's a good example of how to cut loss at the very first indication that one is not right.

Here are some of the arguements:

-

I opened those 2 longs while attending a class and thru my mobile phone on the back of the rising US indices. The trades were entered as I felt too emotionally attached to the market performance and I felt I am missing something.

> I guess I just did it because of boredom and that was the first thing to make me think twice!!

-

Other thing is that I longed 1 standard lot in EURJPY but due to some mistake I longed 2 standard lots in GBPJPY which doomed this trade from the outset.

> Next thing I didn't cut exposure in GBPJPY immediately and left emotionally vulnerable.

-

Well the rest is history - but what makes me feel uncomfortable is that I was CONFIDENT that FED liquidity injection (200 bio USD - matching a 75bp rate cut on 11.03.2008) was just a short term cure for the financial sysytem and the TREND was DOWN.

I entered LONG on the assumption that the short covering would extend also today but on the charts I see I actually hit the exact top both in S&P and DJIA and the EURJPY & GBPJPY. Well if I had my seat comfortably looking the charts unfold I wouldn't venture into sucha a stupid act!

***

One thing to be ahppy about is I didn't HESITATE to take the loss (36 pips in EJ & 52 pips in GJ).. Well, I could have cut both positions once I saw on the mobile phone that things didn't work as expected but this I take as my MISTAKE - as I procrastinated to take the loss immmediately I had a signal that I was wrong.

///

That's all - trade with the trend - run the profits and cut the loss immediately.

GBPUSD - 10.03.2008

Today I actually got into this trade by chance as I saw the strange reaction to the UK Manufactoring data. It came just a bit better and thus gave some credit to the Infaltionary fears but as the price oscillated around the 2.0200 level it shoot up to 2.0217 where it hit the roof and came straight down under 2.02.

-

I actually made 5 trades before letting it run. Here is my actions:

First I shorted 2.0188 - doubled up on Stop & Reverse to long at 2.0207 > shorted the same amount at 2.0192 >>> reversed the same amount to long at 2.0211.

-

Well finally I saw the European indices all were liquidated - thus EURJPY and GBPJPY were under huge pressure of unwinding. This was mainly done thru the USDJPY strengthening below the 102 mark.

>>>

The hourly GBPUSD chart was also looking very toppish with an uptrend begging to fall under its own weight --- the upmove made too much in too short time and MAs were giving signs of reversal.

>>>

TWEEZER TOP - Daily candle shows reversal>

The Daily chart also added to my conviction as RSI and Momentum were also at very high levels. I actually assumed the YEN crosses unwind would drag also the majors which were too high already.

-

So my final trade was Stop and Reverse to Short the whole position at 2.0201. Then added 1/3 more at 2.0211 averaging the price to 2.0204. Then I left it and covered before midnight at 2.0094 for +110. An hour later it broke down to 2.0040 and it will possibly go much lower.

***

I want to mark this ride because of the large leverage involved (3). It made me remember the ultimate joy when I rode a GBPUSD long for 120 pips with 1,2 standard lot position - how romantic those early days were.

EURJPY -> SAR trade - 05.03.2008

ok - I got a nice reversal today - starting lightly probed the short side as indicated by the red lines I sold EJ at 157.17 & GJ at 204.93.

However my conviction in those shorts was deeply undermined by the strange divergence in the DAX soaring at +1% and FTSE almost flat. The answer came from the surge in EURGBP an hour before the EZ Retail Sales data that came in slightly better than expected.

Anyway my first entry was based on the breach of this diagonal lines - which was rather vague argument. That's why I cut my Short GJ rather soon with a 3 pip loss before it broke down to 204.50. It soon after reversed and went straight back.

What I did is focus on the less volatile EURJPY since EZ retail data was good; DAX was doing rather good >>> last piece of info came that big shorts in USDJPY from 120/117 were unwinded - which would boort the USDJPY higher giving strength to the EUR cross.

As I had a short at 157.17 I reversed the whole position as soon as I saw it breaking the intraday highs around 159.35 - long position was established at 157.37.

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I was a bit scared and shaken as the first initial leg after the Retail data to 157.42 actually reversed - however my conviction in the fundamental factors kept me in and I also added some when I saw 157. 17 again.

> After 2 hours I covered at 157.76. Bollinger Bands didn't suggest strong continuation so I decided to keep the profit.

EURJPY & GBPJPY scalping - 04.03.2008

Just a quick reminder of a swift SAR trade on EURJPY and GBPJPY crosses - again I didn't capitalise enough on the trades but I'd like to remember the principle underpinning the successful outcome.

*** What doesn't come up > must come down! ***

I longed both crosses at indicated on the charts with the assumption that the Support trendlines in Green would offer a very good R/R ratio as price was very close and I would reverse if they didn't hold.

As Nikkei 225 closed flat I expected crosses would gain some momentum but at 7:00 GMT London traders just took the highs and started unwinding again.

>>> Once the Support TL were breached I Reversed to short and then averaged lightly above the initial reaction prices which actually gave me a better trade location and I could exit recoupling the initila trade losses + gaining an average 20 pips on each trade.

*** Again this could have been executed much better and the EURJPY actually descended to the BLACK trendline Support where I could have enhanced the outcome. However I would like to mark the underlying principle in ana attempt to reinforce my conviction in the technical significance of broken S&R TLs.

EURJPY 29.02.2008 - Anatomy of a missed opportunity..

* This is here to mark a great missed trade I had planned but failed to execute.

Given the AB = CD measured move - it's obvious that the first move 152 - 159.50 yielded ~750 pips -- so original idea was to short the second move that started at 154 and its measured target TURN level was 161.50.

>> Actual High was 161.40! So much in hindsight. Missed opportunity that is.

* The 4-hour EURJPY chart confirms the strong resistance by the Descending Resitance trendline.

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The Daily USDJPY chart presents the other missed trade which is based on the failure to hold above the 20 dayMA.

This is reinforced by the breakdown of the Bearish flag consolidation inside the major downward channel - nicely outlined in the chart!

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Finally a word on LABOURED move >>> EURJPY initial move 152-159.50 was a swift one -- then in contrast the 154 - 161.40 move came in a slow and LABOURED manner.

My initial response to the chart was hesitation! When in reality is should have been a dramatic reinforcement of my CONVICTION in the feasibility of this trade.

Then I got the answer in the wisdom of a friend I regard as my FX trading mentor who was generous enough to share his knowledge with me! Here is in short what a LABOURED move represents:

***

> means trapped longs - not willing to turn round

> yes the shorts capitulated and become longs

> now they will buy all the way down and have stops at each new low

> yes it is an unwillingness by which ever side to acknowledge what is happening - then a the very moment they should be operating they get stopped out and reverse -- it becomes the if only ....;..

> easy to describe but hard to enact -- the opposite side

> have to let the mkt breathe sometimes

*** So much trading and psychological wisdom in so few words!

The revelation for comes after I find these words quite clearly describing my own reaction. The rationale of this missed trades/opportunities is >>> Have a plan and execute it!

EURJPY scalp trade - 29 February 2008

I just got out of this trade here at 00:00 GMT - 2 AM o'clock local time.

A pretty nasty selloff in the Yen Carry crosses induced by the breach of the 105 Exporter defended level -- the rumored stops sub 105 / 104.90 were triggered leading to an extended plunge of the pair to 104.70 in a swift manner.

Playing with the drop in EURJPY I decided to enter a swift counter trade at the previous Resistance level around 159.50 - which coincided with 50 day MA on 4-hour chart.

My Initial idea was to get out fast if I see a breach there.

Well so much for discipline and cutting loss early :>> I averaged down at 159.30 level --- here by mistake I was trying to buy 1 standard lot but I actually sold I one and took some little 20 pip loss but the dynamics of the trade were going even lower.

Then I checked the Daily chart presented above --- the 159.22 stood for the 50 day MA which I started to believe that will make the drop at least stall or pause (no matter it would reverse or continue even lower).

***

I want to make sure I never forget this insane scalp trade as it was ultimately risky and it exposed the whole week's labor at a plain collapse. Actually the whole equity was at stake.

***

My view that I still could exit at least at Breakeven led me to add more longs at 159.23 >>>

a that point I guess I touched the largest leverage I ever used - 7 standard lots with average trading location at 159.35.

I swiftly covered 3 lots at 159.43 at the first bounce. Then it broke sub 159.25/29. So on the next quick bounce I saw 159.42 I immediately squared the last 4 standard lots and went flat with a little gain to make up for the emotional strain and clearly irrational use of leverage.

......... .......... .......... ............ ...........

What is worse is that I had an excellent trade location around 160.70 at the start of the European session - I closed it with 30 pips since it was a bit sluggish - but I should have locked in initial profit and run stops above clear level indicated by the Descending Triple top formation quite evident on the 4-hour chart -- Daily is seen as 3 candles with lower highs.

-

So this is just a mark to remember that good trades demand CONVICTION, PATIENCE, PROPER MANGEMENT and certainly stop and limit. Those 30-40 pips with 1 standard lot are nice but what makes trading professional is going with a trend and managing the trade properly - otherwise it is plain gamble - let's face it!

-

:: After it bounced to 159.42 it went straight down to 158.70/80 - it would have just wiped me out completely!!!

>>>>>>>>>> Now regarding conviction - this is what Stanley Druckenmiller recalls:

Soros came into my office, and we talked about the trade.
"How big a position do you have?" he asked.
"One billion dollars," I answered.
"You call that a position?" he said dismissingly. He encouraged me to double my position. I did, and the trade went dramatically further in our favor.

Soros has taught me that when you have tremendous conviction on a trade, you have to go for the jugular. It takes courage to be a pig. It takes courage to ride a profit with huge leverage. As far as Soros is concerned, when you're right on something, you can't own enough.

>>>>>>>>>>>

And another classic - this is from the Interview with Paul Tudor Jones in Market Wizards by Jack Schwager:

JS:: What are the trading rules you live by?

PTJ:: Don't ever average losers. Decrease your trading volume when you are trading poorly; increase your volume when you are trading well. Never trade in situations where you don't have control. For example, I don't risk significant amounts of money in front of key reports, since that is gambling, not trading.

*
If you have a losing position that is making you uncomfortable, the solution is very simple: Get out, because you can always get back in. There is nothing better than a fresh start.

*
Don't be too concerned about where you got into a position. The only relevant question is whether you are bullish or bearish on the posi­tion that day. Always think of your entry point as last night's close. I can always tell a rookie trader because he will ask me, "Are you short or long?" Whether I am long or short should have no bearing on his market opinion. Next he will ask (assuming I have told him I am long), "Where are you long from?" Who cares where I am long from. That has no relevance to whether the market environment is bullish or bearish right now, or to the risk/reward balance of a long position at that moment.

*
*** The most important rule of trading is to play great defense, not great offense. ***

Every day I assume every position I have is wrong. I know where my stop risk points are going to be. I do that so I can define my maximum possible drawdown. Hopefully, I spend the rest of the day en­joying positions that are going in my direction. If they are going against me, then I have a game plan for getting out.

*
Don't be a hero. Don't have an ego. Always question yourself and your ability. Don't ever feel that you are very good. The second you do, you are dead.

*
Jesse Livermore, one of the greatest speculators of all time, report­edly said that, in the long ran, you can't ever win trading markets. That was a devastating quote for someone like me, just getting into the busi­ness. The idea that you can't beat the markets is a frightening prospect. That is why my guiding philosophy is playing great defense. If you make a good trade, don't think it is because you have some uncanny foresight. Always maintain your sense of confidence, but keep it in check.

GBPJPY short trade - 14.02.2008

Brief post of my last trade - based on the 4H chart I entered a short GBPJPY position at 213.19 - however I entered my trade a little early and I was close to getting scared off.

After studying of the Daily chart I assumed that the recent high at 213.88 will pose a good resistance area I decided to double up my short trade and actually added 2/3 short position around 213.80 so that my average price moved up at 213.38.

Soon after the testimony of FED Chairman Ben Bernanke and Treasury Secretary Henry Paulson at the Senate Committee DJIA, NASDAQ and S&P all started to slide.

As presumed the GBPJPY upsurge stalled around 213.70/80 and after a brief congestion around 213.30 - 50 it broke thru the 213 level. >> Because of the aggresive leverage involved I squared my position around 212.78 - for +60 pips.

:: Respect to Tonbridge AL (rule:: instant gratification required when excessive leverage is applied).

BG40 Weekly - 17.02.2008

BG40 Weekly chart gives a clear view how the bear market has stalled its decline above the 345 level - a breakout gap support that if broken targets the 260 level where a breakaway from the price base emerged

SOFIX Weekly - 17.02.2008

SOFIX Weekly chart update - bear market rally seems to stall at the previous high around 1420 --- next Support level test comes at 1222 - with scope turned to 968 last Strong base if 1222 gives way..

'Blue chip' SOFIX continues the descent -- Rising triangle breakdown targets the Yearly Support line ~1155

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Declining RSI 20 confirms the downtrend momentum.

Update of the broader market index - BG40 unwid.

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Targets are set at the projected Descending channel bottom ~ 290 below the strong Support ~350.

What is named Yearly Support ~~ 350 is a mistake as it solid Support because of the Upside gap and the recent low -

- however ~ 270 - where is the projected Channel bottom marks another confluence of technical levels -- predominantly the June 2007 Low which formed a base for the followed bull run -- this should be a very emotional level as it was the first test and I expect a major turnaround after that Gap is closed.

SOFIX Weekly - 01.02.2008

The 'blue-chip' index SOFIX just like the broader market index BG40 shows more downside to be seen before a strong base is set for a reversal to the long term uptrend.

Basic elements like the cross of the 20 & 50 week MAs confirm this imminent scenario and MACD points to a continuation of the downward momentum.

A good point for a reversal and building a solid base should be the 1150 level where we have a confluence of a Long term trend line support and a major low.

Of course we can't argue with the tape - market will show if I am right or wrong.

BG40 Weekly - 01.02.2008

Here we have the Weekly chart of the broader market - BG40.

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On intraday basis the market shows some signs of strength - also on Friday US markets shrugged off the -17k NFP (+ 70k expected) and focused on the 44.6 billion deal in which Microsoft offered to buy Yahoo.

...............

Anyway the weekly chart has some technical inclination to show more of a drop before resuming the upward trend represented by the long term trend line support that comes around 310 / 320.

MACD hasn't signalled any reversal of the downward momentum and I assume we have to first close the gap around 310 where the tredn line support will help to develop a strong base for reversal.

BG40 - Daily chart - 24.01.2008

The broader market index - BG40 - we have a base from which we rebounded today - slightly above the Gap at ~ 345.

This Support level is to be viewed as highly emotional - so a failed break should be entered for a swift upside move. Just like the 'blue-chip' index SOFIX - the broader market sentiment took a massive hit due to unwinding of the highly leveraged speculators and the withdrawal of foreign buyers.

The brief rally till the FED meeting in the month end is to be faded.

SOFIX - Daily chart - 24.01.2008

The Major BSE index - SOFIX.

Chart points that the massive unwinding of the leveraged speculators led to panic selloffs.

Now that the break of the major Support at 1419 was broken - we can at best assume there will be some tests to regain that level and possibly a visit of the 20 day MA.

This goes well with the short term rally in DAX, FTSE, Asia and US markets in anticipation of the FED scheduled rate cut at the Jan 30 FOMC meeting.

There are basically 2 scenarios - we either see some relief rally due to next cut and confirmation that the intermeeting 75bp cut this week was for the right reasons - or we just drop lower.

As in this shaky global situation our local market is tightly correlated to the global market sentiment I expect we will follow the global market moves with a bit lagging effect.