TIME TO CHILL OUT

After having read a few recent entries in here I have noticed I have gotten a bit on edge. As that comment that attacked me suggested that I am just trying to draw attention to myself, it got me to thinking. My first thought was, "well of course isn't that what anyone doing a blog is doing?" Clearly you are bringing attention to yourself when you have a web site. You try and provide content that is interesting enough to get people to return. This is pretty obvious. However, the other function of doing something like what I am doing here is that it helps me to organize my thoughts. When I peruse the stats for the blog, I see that at even the busiest days I only get about 500 readers, so the traffic is not very heavy. However, that is still 500 people that I can embarrass myself in front of if I am not careful. Further, there are readers from virtually every country in the world now, which is really cool. I can embarrass myself in countless foreign languages, what an opportunity!

I do try and lay out as clearly as I can what I am doing, with the one asterisk being that I hold back a few of my own proprietary tools to protect myself. It is not easy when I am dead wrong on something knowing that many people are reading my views. So, the question that naturally follows is, why do I do this?

The very first reason I decided to do this was that I thought it would help me. There is a big difference between just trading in remote isolation, where only you know the mistakes you make. You can get over them very quickly and move on. When I make them in this forum now, I field questions about them afterwards, so I wind up being in blunder recovery mode much longer. This is actually a good thing because it has a desensitizing effect. I don't like being wrong or losing more than anyone else does, but I have learned to accept it. I know I am going to make poor market calls at times, but I also know that I will recover and make very good ones. Reaching the point where an individual knows this is a big step. This blog has helped me do that. Anyone who is ever going to manage a large pool of money had better be able to handle this aspect of this business. I have no idea if or whether I even have a desire to do that, but I wanted to do some things to help me prepare for that in case I decided to go down that road. This has helped a great deal in that area. 

Today I noticed I was a bit on edge recently, in what I have written. These types of very low volatility environments like we have had the last few weeks are the toughest markets for me to trade. When markets just creep every day in the same direction either up or down, my tools do not work as well as they do in other environments, so I get a bit edgy. You have to know yourself and what your strengths and weaknesses are. As you get older they become painfully clear. I try to use this knowledge to protect me when I know I am in a situation that does not fit my approach very well. I trade smaller knowing it is likely I will have more losses than normal.

The second reason is that I am not aware of another blog such as this where someone who actually trades, calls out what he is doing pretty much live. I have had to modify this some unfortunately to protect myself, once I found the government URL's spending hours reading my posts. I suppose it could have been just someone who works for Uncle Sam who happens to trade, just reading, but one of them looked at virtually every post I had ever made. This has never happened before, and I think it is unlikely that was a trader. In spite of that I still try to stick close to that mantra, and I openly discuss wins and losses. It is my hope that people can learn from this. I think I am accomplishing that based on comments and emails.

The third reason, was to help drive traffic to my web site once I re-opened it if I decided to do so. I don't know at this point if I am going to do that or not, I am leaning toward not doing it. The thought of the government having to approve every single comment I make about things is not a pleasant prospect to me. We have such a strong trend towards big government now that it is just not the right time for this. Maybe in the future if the politics change, this will be different. I know in the old days when I had my trading service that was very successful, it made me feel so good when I got emails from clients telling me about the money they had made in some of the trades. I had one guy who was just a classic. He had an incredible knack for sleeping in and missing trades, and he always seemed to miss the ones that lost. During the last year of my Bond service, there were only a handful that lost the whole year, yet he was able by sheer luck, to over sleep and miss the entries on every single loss! Of course I then had the guy who managed to lose money during a streak of 22 consecutive winning trades in my service. He of course wanted to cancel and was upset with me. It is still only speculation on my part as to how he lost money during the best streak my service ever had. This guy was the driving force behind me shutting it down, I just did not want to deal with people like him. Obviously, he did not follow the trades correctly and yet it was my fault. Ironically during that same time period, there was a good sized hedge fund in Brazil that had caught on to me and wanted to use my Bond system with their clients. We just could not work out all the legal aspects of that venture unfortunately. It was complicated due to his relationship with a US affiliate and I was not a CTA, etc.. The big guy loved me and the one lotter hated me, go figure!

The fourth reason, is that trading is such a solitary business, I was hoping to meet some other traders in other parts of the world to exchange ideas. That is also happening, so mission accomplished on this one. This is a tough business, and it is nice to know others that pursue it. I only have two local friends that trade, and neither of them is profitable, and they basically do it with a passing interest most of the time. They have good skills in other industries. It is nice to know you are not alone when you have bad trades, or just need someone to bounce something off.

With all this aside, I apologize for my being a little too "chippy" recently. I am still going to poke fun at myself for being an attention whore since I still love that take.

I was watching the America's funniest home videos show last night and saw one that made me laugh so hard I literally was worried about a heart attack. We all have had these times when something is just so funny too us we can't control ourselves. The video was of a high school cheerleader wandering out onto the field where the banner was that the team would ultimately run through when they came charging out of the locker room. It was being held on either side by a couple of groups of people. It was a big banner and was sagging a little in the middle. The gal walked up to check out where it was sagging a little, and right at that moment the whole football team charged through the banner ripping it to shreds and just trampling the cheerleader. It was almost like a cartoon. She wound up being fine by some miracle, but it was just incredibly funny the timing of her curiosity. I have had this same feeling trying to short stocks during this incredible up move.

The CTAS trade was finally exited today for a loss of 1.02 a share, so now I am on the board finally with a loss. Two others were exited with small profits, WY and SHAW. The 1.02 was more than the two wins combined by a little, but basically an overall scratch. I think this does in a way justify this method, but tells me I need to enter the trades a little better. I am finding that once the overbought condition gets to the extremes I am looking for, that I need to place the orders as limits above the prior days close by a certain percentage. Trades will be missed doing it, but it does insure about the max level of overbought something can get before it reverts to the mean. Extremes do not get pushed too much more than what we have now, so this again is an excellent test of the worst case scenario. If that worst case scenario is barely losing any money, that is very very good. We are not that extreme in terms of price but more so in the way of amount of time where we have had no meaningful pull backs at all.

When we look at charts we do see periods like this at times, so this will happen again. This is why I am glad this happened right out of the gate.

This chart shows the entry and exit in the CTAS trade. I believe this is about the worst case scenario from this method. If you just look at the daily chart of the DOW it is a miracle any of these have worked in my opinion. I have two others I am sitting on now, one is a profit and one is a loss at this point.

As for futures, I am still trying to find a way into the short side of the energy markets, but have not gone in yet. I think Heating Oil is the weakest, yet Crude is a better setup from a pattern standpoint. Maybe I will take some of each, I am not sure yet.

This is Heating Oil and it is just meandering down here. My short term indicators are showing we may bounce here, and it that were to happen I think this would be good to go. You can see how low the POIV is here, telling us there is distribution going on here. I would like to get in sync with that if possible. I did get stopped out in the Soybean Oil trade which resulted in a profit of about 1/3 of what I had. I am trying to ride some trades longer this year so this type of thing is going to happen from time to time. I just don't think you can ever get rich scalping, you have to catch some big ones. To catch big ones you have to give trades a little room, and that results in this happening.

Here is the Bean Oil trade, entry and exit. One good thing about exiting on stops is that it takes the second guessing out of things. If I leave myself too much room to second guess sometimes I do that and it is counter productive.

Other than that, as long as the stock market just goes up and up,  most other markets are going to rise. We are so overbought, we could decline sharply for a day or two at any moment, but it is any one's guess when that will happen. The corrections on these types of moves tend to be very sharp first days down that gets everybody out, then they resume going up again. I will be trying to buy into that sharp day or two down when it comes.

Good Trading