Snow!We woke up to snow this morning, this is a free photo from freefoto.com (they request we link back to their site and attribute the photo to them) as I am too lazy to get a photo of my yard.
Saturday, December 4, 2010
Weekend Open Thread - Trading Rules Edition
Snow!We woke up to snow this morning, this is a free photo from freefoto.com (they request we link back to their site and attribute the photo to them) as I am too lazy to get a photo of my yard.
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(copied from the bottom of yesterday's blog:
ReplyDelete@ICan
hit the post button my mistake...
just wanted to tell you I went back to that tandoor place and had the mutton masala, and some kind of mixed vegetable with dark gold-colored sauce
oooohhhhhh, gold, my prrresssssssssciousss....
and 2 garlic nan's for 5.50 $D. That's about $3.95 U$D.
and it was the best I've ever had.
Just wanted to make you jealous.
@Dss
ReplyDeleteI'd like to suggest that we might do the open thread on our personal trading rules. It'd be nice to get comments from folks about what we are thinking and how we go about this thing so we all make money. I always used to tell my son that "it's OK to be wrong. That way, you know exactly what you need to learn. If you're always right, you never learn anything".
In that light, I'd like to give some of my "rules".
1. I define support and resistance points on the chart by evaluation of $value, not price. $value is defined by price * volume. So if there is a price inflection with no value, I discard that inflection point as a point of support or resistance. I use TDA "average daily volume" to assist in the determination of these support and resistance points.
2. I look for the lowest risk/reward ratio trade. I calculate my risk, in $ amount as being the entry point - support point. The reward is calculated as the 2nd Fibonacci point of the range. I don't have a good method if there is no resistance point for a long entry, if there is an "up up and away" stock. But if I have one of those, I just set a trailing stop of some percent, calculated by the average of the daily bar point range.
3. IMMEDIATELY after I make my trade, I put in a stop loss order, at the support point or resistance point depending on if it's a long or short position. I ALWAYS use a market order because I have had losses result from a limit order because of the speed of the change of price of the stock. If you need more info about the difference between a market order and a limit order, I can expand on that.
4. I NEVER trade looking for an inflection point. I ALWAYS use the 3LB to determine the trend, and make the trade in the direction of the trend. (Thank you eversomuch, AmenRa).
I have more, but let's see what happens with these.
@Rock(3:27)
ReplyDeleteGot it. SE Asia, a foodie's dream heaven, if you like it HOT! I could not believe that an acqaintance form HK(Chinese decent) could eat hotter curry than me.
I Can
All you unemplyeed in the U.S., if you want to make good money, come to Canada-
ReplyDelete"Labour crunch looms in Oil Sands". www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/
"Construction companies are preparing to bring in workers from outside the province even looking to the U.S. Midwest for Skilled Trades.
Others are exporting engineering work to Texas and India....In B.C, It's aluminum and natural gas, Saskatchewan, it's potash and uranium, east coast it's oil and nickel".
"It's a full-blown crisis and I mean that, 2012 will make 2008 look like picnic..". Talking about labour shortages in Canada.
I Can
Here comes Q3.
ReplyDelete"QE3 on the table?". www.marketwatch.com
Bernanke tells '60 minutes' he's not ruling out more purchases to aid economy.
Bernanke should keep a printing press behind his desk and whenever someone 'big enough' to bail out comes to see him, he should hand them a sack full of dollars.
No need to save. Can you imagine if most of the people in the world really 'get it' this bail out idea? Morals and ethics and hard work, and saving, whatever happened that notion?
That volcker guy made my parents pay 22% intrest on our home and business mortgage in 1980s.
I Can
@Anonymous:
ReplyDeleteI Like it.
BEBO. Or maybe BETBO.
By the way, I think Indian cuisine is the best and tastiest in the world.
Of course, when I was in Jackson Hole, I thought OpenPit Bar-B-Que was the tastiest in the world.
And when I was in Campabello, I thought lobster was the tastiest. And in Boston, the cheesesteaks with peppers onion and mushrooms. And in Chicago, the pizza. and in Birmingham, the BBQ pork sandwiches. And in California, the burritos. And in Seattle, the, well, the,well....anyway....
But after living in Japan for a couple of years, I never, never never ever thought Japanese food was the best. No wonder they're all so skinny.
This comment has been removed by the author.
ReplyDeleteD-2 before bank run
ReplyDeleteCantona's REVOLUTION against banks!
Don't forget to book your ticket on Facebook(already 34k attending, and growing), as there won't be paper for everyone!
:p
List of facebook bank run groups for each country
Wolfie,
ReplyDeleteThat is so exciting. Keep us informed of how it goes today.
@WolfStreet:
ReplyDeleteI'm not exactly sure how that works. If I go to my bank and withdraw my money, they give me a check. Until I use that check, the money stays in the bank. So I go to another bank to deposit the check.
It just moves, bank-to-bank.
So if I go to a bank and say "gimme my cash", even a FRB bank can say no. They don't have to provide cash. Besides, what would we do with suitcases filled with Buckies? We'd be wearing a bulls-eye on our back for sure.
so I'm not sure how this works, or the mechnics. I see how it works in Mary Poppins, but not how it works in real life.
We have a great little local bank that we have used for years and a credit union account. Our bank treats us like people, not a number and they have free coffee and cookies!
ReplyDeleteAn Index That Charts Risk
ReplyDelete"Zlotnikov pointed out a few months ago that investors "will go to great pains to avoid repeating the most recently made mistakes, but have few qualms about repeating mistakes from long ago. Today, this shows up as investors' extrapolating of the historically highest volatility" of 2008 into 2009."
Rock - If you went to a bank and withdrew all of your money and then immediately deposited that money into a new bank account at another bank, it would be the same as getting cash, thus the same as a bank run.
ReplyDeleteAlso - keep in mind that Wolfie is in France, the rules for withdrawing cash (and a banks ability to refuse to give you cash) may not be the same in France as it is in the US
ReplyDeleteVery insightful article.
ReplyDelete"And the tape itself isn't showing very much vulnerability yet, with cyclical leadership intact. And it's not simply the hopes and prayers of Fed money-printing at work, either. Since Treasury yields bottomed (and fixation on Fed bond buying arguably peaked) on Oct. 7, payroll processors Automatic Data Processing (ADP) and Paychex (PAYX) have handily outperformed the S&P 500. These jobs-sensitive names had every excuse to pull back Friday, but refused."
The stock market didn't crack with the bad unemployment numbers which is bullish, and payroll processors are out performing the S&P.
Have to give the zombie bears something to think about.
It must be that some of the QE money is going into the payroll processors, just to fool everyone. That's the ticket.
ReplyDeletere Technical feasability: Thor, I don't think it's quite the same if they give you a check instead of "real" cash. The reason this move puts pressure on the banks lies in the fact that they DON'T have the cash.
ReplyDeleteBut you're right about different rules. In France,banks have to give you your money back, all of it. However, above 1500 euros, the bank can impose a delay (1 week I think).
Quite surprising banks can refuse that in the US(are you sure??) I mean, it's YOUR money right?
As for what you do with the cash, maybe buy physical silver? screw big banks, with a special mention to JPM.
re Denise:I too find it very interesting. However, that's still only 34k (let's say 50k before Tuesday) people withdrawing their money. That probably won't put much pressure on banks, but (hopefully) it will sound as a warning for the governments to regulate these jerks, once and for all. The sheeple is slowly awakening, and doesn't like what it sees.
@Wolfie,
ReplyDeleteNo, 34 or even 100k is not a significant amount of money but the publicity is the most important thing, calling attention to the fact that the little people are angry.
www.safejaven.com
ReplyDeleteDoug Noland has weekly wrap. This week -"Kicking the Can".
Guy Lerner,"Still about the dollar".
I Can
^ Safehaven.com
ReplyDeleteI Can
This is still happening in 21st century! In Canada. Why did they, the govenment, even allowed it happen, up until now?
ReplyDelete"Is Polygamy a lifestyle choice or abuse? Court will weigh in".
I thougt Talibans abused women like that. Keep 4 spouses at the same time, because they were sanctioned by God!
I Can
Wolfie - Ah, I understand. I worked in a bank all through college - Wells Fargo - yes, you're right, most banks don't have more than a couple hundred thousand dollars in cash at any one time. The larger branches might have more, but cash is nothing something banks today are big on holding.
ReplyDeleteMust, must, must watch video.
ReplyDeletehttp://watch.bnn.ca/#clip384325
David Stockman, very fair, outstanding interview. Blamed both Reps. and Dems, and the Fed.
"American empire is in sunset".
Very funny, he said, "Our economy is like a giant casino where day traders and robots push money back-and-forth without adding any real value".
I Can
@Wolfstreet:
ReplyDeleteIn the US,because of the drug wars, it's impossible to get over a certain amount of cash.
Additionally, we limit the amount of cash because of the huge cash underground (illegal aliens, payments to politicians, other things) and the government doesn't want more untraceable cash to enter that arena.
Every transaction over 10K is reported to the government, who has computers looking for trends. BigBro is watching.
We got six inches of the white stuff yesterday. Really pretty outside today.
ReplyDelete@ICan
ReplyDeleteYes a good video. down to earth and solid.
The one thing he neglected to say is that the monetary policy needs easing while debt destruction is happening because if not, the interest rates will go up and the US won't be able to destroy debt while paying back interest on all this accumulated debt.
So the Bernank is giving Congress the opportunity to cut spending and destroy debt while unemployment is high, jobs aren't being created in the middle class, and interest rates are low.
It is obvious that Congress won't do that.
So be prepared for the next step: the dollar will be destroyed, and the ND or New Dollar will replace it. Overnight, banks will disappear. Mortgages which require the Dollar won't be paid because there won't be any.
As he said, cataclysmic failure will result.
So be prepared for it. Get rid of all your debt now. Pay off your mortgage with your trading gains so the bank which won't exist anymore will own your real property.
I finished my last mortgage off with BIDU gains, so my houses are now debt-free. My kids will appreciate that, I hope.
It's coming, ladies and gents. It's coming. Try to put yourselves in a position, over the next couple of years, where your kids won't be angry with you at being part of the problem.
I'm still full of bull for the short term. Looking for that advance through the end of the year.
Rock - Very sober words. I was just thinking tonight of asking everyone when they think the next big leg down is going to be. Are we going to skate along the bottom like this for the forseable future? Or are we going to slowly get better while the stock market continues on it's next bubble until it bursts? I'm thinking we skate along the bottom for a couple of years, and then 2 - 3 years from now some world event will start the ball rolling on the next crash.
ReplyDeleteRock - do you really think paying off property is a good course of action? In an inflationary environment, that would be a debt that would be easier to pay back with inflated dollars over time.
Manny - Wow! Is that normal this time of year? We're having such a cold winter so far. London is also apparently getting very cold.
ReplyDeleteYou know I must say, I really appreciate the overall openness of this blog, I like being able to talk about macro stuff along with the trade talk. We're all affected by the macro stuff whether we trade or not, so I think it's nice!
ReplyDeleteOh, all very normal, Thor. In fact, since I've been here, we can almost always count on having a fair amount of snow in December, as it's been among our snowiest months of winter (even though "winter" hasn't even technically started yet!). January and February in recent years have actually been quite dryer, but VERY cold. We tend to get most of our snow in December and maybe early January and late/Feb/March when it starts to "warm" up a little. How can I tell that I've acclimated to winters here? It was 22 out today, but sunny and no wind, and I didn't feel cold at all. Was very comfortable, actually. Crazy.
ReplyDelete@Thor
ReplyDeleteYes. Debt destruction is important for both the private and public sectors, as ICan's link report said.
How important is it?
One thing to remember. The "Reset Generation" is taking over. What is the RG? It's the kids who've grown up playing video games, and when the game isn't going their way, they simply press the reset button and start over.
I have had the opportunity to review some resumes for various levels of positions for people I used to work with. It's obvious who the resetters are.
Even CEOs are beginning to fall into this category. Think about those guys who sell the company 6 months after they take over. That's the ultimate reset button.
It's important to know and understand the people who are directly responsible for affecting your future. Important? No, it's Critical.
Interesting thoughts, Rock. Hard for me to disagree with any of it.
ReplyDeleteManny - Hah, I know what you mean. I had the same sort of revelation this summer out in the desert. As long as I have plenty of water, I can work out in the yards in 100 degree heat for quite awhile. Amazing how your body adapts like that. Someone told me that the hemoglobin in your blood thins out when it's really hot, it's why old people like heat. No idea whether or not that's true.
ReplyDeleteRock - I understand. It's a grim future isn't it?
You know what I see a lot lately, I've talked to my friends as well and they see it too. More and more managers who do nothing but "manage". My boss is more or less one of those, he doesn't actually do all that much, he spends the vast majority of his time either in meetings or reading and responding to emails.
ReplyDeleteMeetings are another thing that seem to be breeding like flies. I've never understood the need for a lot of meetings, the more time you spend in meetings, the less time you spend doing work.
iThe U.S. Federal Reserve may commit more money beyond the $600 bilion of asset purchases it announced last month, Fed chief Ben Bernanke says in an interview.
ReplyDeleteA few more rules:
ReplyDelete5. Besides the trending 3LB, I want to see higher lows. Higher highs isn't as important to me, but I want to see buyers come in as the price dips. I look for higher lows on the 60 minute chart or slower (daily, weekly). Some call this a "W" formation with the right side of the W higher. When the right side of the W is turning up, and I get a confirmation on the stochastics, that's my entry point. If the stock is trending up and looks like it won't be going lower for awhile, I go back to the 15 minute chart and look for a higher low. If I don't get one, I do not chase the stock I just move on. I always enter with the stochastics at the 20% level, turning up.
6. After I enter on the 60 minute chart, I go back to the 15 minute chart to make sure I don't have lower lows. If I do, I get out. That simply means the price support is not there with enough volume commitment. If I get higher lows later, I may re-enter.
7. I will invest in 5 stocks and consider myself lucky to keep 2.
8. On trending stocks, I adjust my trailing stop by volume. If your stock trades < 30% of its daily volume in the first hour, then it is weak. For a successful trade, you want to see increasing volume and increasing price, which means increasing commitment.
9. When the VIX is high, be looking to buy. When the VIX is low, you go. That is, you look to sell. What does "look to" mean? That means because you've already set your stop-loss points, you don't worry about going or staying in your positions. It means you evaluate the stocks that are holding their value as the VIX rises, they are strong, and when the 3LB turns around, they become the buy candidates.
ReplyDelete10. Stocks always do what they're supposed to do, but never when they're supposed to do it. In our case now, the FED is forcing the stocks upwards. When? When you're not long, of course.
11. Fundamentals only tell you what to buy, never when to buy it. Never trust work that begins with FU.
12. The most important "quick" fundamentals are debt position, free cash flow, and profit margins.
13. Never equate the money you make with your intelligence level.
Toddo over at Minyanville has published some trading rules.
ReplyDeleteHere's his:
http://www.minyanville.com/articles/print.php?a=13711
And another Stephen Hansberger's are here:
http://www.minyanville.com/investing/articles/trading-smart-minyanville/9/23/2009/id/24624
If you want these, get them now because Minyanville has continually changed their site, and a lot of the training posts by contributors have disappeared.
The weekly (or weakly) relative strength numbers are in for the herds I'm following.
ReplyDeleteThe winners are XME (metals and mining) and XES oil & gas equipment, at 0.09 above the S&P. While XME seems to have stalled, XES is still rising in relative strength.
Next is XOP oil & gas exploration, tied with OIH, big oil. These appear to be topping in relative strength. This is the highest they've ever been, in relative strength over the S&P. We'll see if they stay there this week or not.
KOL is choppy, and has fallen off a little, As has SOX.X and SMH. They're still strong, but seems to have come over their peak. This means the S&P is trying to catch up to them, or they are falling relative to the S&P.
The *extremely interesting* thing is that KRE and KBE (regional banks) are both improving, their relative strength is on the rise. This may be the forerunner of the bank runs where the local banks get the money, as explained by Mannwich above.
If anybody's interested, I can put out the relative strength of the banks in this herd. I don't trade the financials, I just use them as a tell. Because as the piggies go, so goes the poke. If the big banks are going to fall as a result of the bank runs, the local banks won't be there to support the sector enough, so we'll see the financials start selling off. Then.....who knows? other things follow the financials? Maybe.
Sorry, I meant WolfStreet, above. Please forgive an old man.
ReplyDelete@DAstro:
ReplyDeleteS&P: We're basically level, at the same price we were 4 weeks ago. We had the 40 point correction, but it's back, level again. We'll see where we go from here, I suspect it will continue the trend upward.
DRQ: stable at around .12 above S&P. Great relative strength. It didnt pull back when the S&P did.
VAR: another great performer. Relative strenth on the rise from about even on Nov 2, and is now around .07 above S&P. Again, no pullback when the S&P pulled back.
BKE: Falling off a little, since Nov 28, but it's been a great relative performer going from .06 up to around .13 since Nov 2.
MEE: Another good relative strength performer. When the S&P pulled back, MEE stayed around .25 above the S&P, but it's dropping off a little lately to around .18. But still doing very very well.
MW: a good performer. It too did not pull back with the s&P, but started out around even with the S&P on Nov 2, and has risen to around .12. The last couple of days, though, it looks like it might be topping out because its relative strenght has fallen off a few percent.
DFS: Not as good a performer. It's still better than S&P, but it pulled back along with the S&P in November. Last 2 days it's pulled back even more, and is now almost even with the S&P. I don't think I'd go here, you've identified better ones.
@Dastro:
ReplyDeletecontinued....
DKS: A trend follower (even with S&P) until that huge buy on Nov 16. Now it's above the s&P by .20. I never get those good deals, but I've been watching big buys and sells, and looking at what happens afterwards. After this big buy on Nov 16, the relative strength has risen from .14 to almost .20.
KLAC: Another trend follower, until lately, it's been on the rise a little. There are better choices, listed above.
NTAP: A trend follower, to a little below the S&P in performance. Again, there are better choices.
RL: since Nov 2, it's outperformed the S&P handily. Running around .12 above now. It doesn't look like it's falling yet.
MIPS: Your consolidation started around Oct 28. Has been performing substantially below the S&P since then, and is currently around -.06. I wonder why, after that big buy on Oct 26, usually I see relative performance go up after a huge buy like that one.
Off topic - Why is it that people who think they are smarter than everyone else are never very smart?
ReplyDelete