Ziad, 2009, 2010, 2011, 2012 & 2013 (Cut The "The World's Ending In 2012" Crap!)

play around with what feels natural
don't let anyone mess up your swing

From Ziad.

I always love Ziad's emails. He writes in a way that I can fully understand. Reading him is like reading Enid Blyton. Not a single word bores.

I'm not paying Ziad a tribute. After all, he's well and alive and kicking ass.

Ha.

Sorry, Ziad.

The 2 lines came in 2 separate emails 2 months apart. I've been messing around with my swings since, and seriously, I enjoyed it. Tremendously.

Fun aside, the info gathered in the process is priceless. Had I not ventured/ fooled around, I wouldn't have found the missing pieces of the puzzle I've been searching for for the longest time.

Since the beginning of this year, D has been telling me over and over that all I needed to do was to stick to what I do best. Problem was, I hadn't the slightest inkling what that was. There was absolutely no proof that I was doing anything right in fact. D brought up the 200, 300, the occasional 400 and 500 daily gains - I mentioned the 800, 1000, 1200 and 2000 daily LOSS. D said that I was good at scalping. I said I needed to be good at LOSING. I know, I'm yawning too. Cut your losses quick, let your profits run. YAWN.

D's impression has always been that I am getting way ahead of myself, that I am not happy with my small consistent gains. He's totally right. I am indeed very unhappy. I have been miserable as a matter of fact. Trading was all about protecting whatever amount I had made for that particular week, and about not letting a few stop outs wipe them out. That's no way to trade!

Anyway, I really digressed.

This post is really to thank Ziad for his emails. If there's anything I do well, it's to have fun doing serious work. I just needed a reminder. And I will never let anyone mess up my swing. Not that anyone can anyway unless they know the way to my cave.

Something I found out about my trading in 2009 - the losses and the agonies were necessary. I don't know how else to put it across, and I won't attempt to.

That said, I'm not giving myself 10 years to enjoy the pain.

I graduated.

I'm serious. I always hated school.

TF - Posting Of PnL

TF Sim Trading

TF 3min

Giving up 6J and all the other forex futures for now. I like to trade something that I can trade almost everyday and forex futures are just not in that category.

So I'm back trading TF, and have finally settled on a method of trading it. The method is still highly discretionary, but I'm comfortable coz I know TF and am working within a familiar structure. There are certain rules that I observe now and setups that I stick to. I'll trade a few of my preferred setups once the context allows me to trade them, and am giving up the ones that call for wider stops.

It's been a long break for me. Much of it I spent doing some meaningless soul-searching (biggest achievement: buying USD 100k of URE at 4.80 for my aunt, and selling it 2 weeks later ie. last Thurs right at market open, at 6.66 helping her earn more than USD 32k - URE follows TF's trend and is easy for me to monitor - before market started to go into a range, and this had D suggesting that maybe I should really swing trade coz I tend to get a sense of where market's going....ha ha). Some good came out of it though. I shan't say more. Let's say I finally decided that NOW is the time that I quit berating myself for a past that I cannot change, and start doing what's necessary to move on.

I owe a big THANK YOU to those in my circle of trust (just a handful of you and you know who you are). It's strange that while I find cyberspace a highly dangerous place, I've shared with my trading/blogging community the most intimate details of what's been eating me. For the first time, I have 3rd opinions, and I am receptive (SURPRISE!). I haven't the slightest clue on how I'm going to go about expressing my gratitude now. But I'll know what to do when the time comes.

Thank you Ed, Cory, PT, EJ, JK, James, MVW, Jack (J), MM, Solfest, JE, Jimmy, De'Trader, UF (I know you really meant to say something LOL!), Sage, Lonely, Leon, Daytrader, Jaya, my coach Michael, my broker Anthony, for having listened to my rants for the past days/weeks/months and given me a shoulder to cry on.

JE, have you gone private?

I'm posting my TF results (live trading) starting tmrw.

Ed's Blog

Ed has something on his blog that's PRICELESS: http://edsfreedom.blogspot.com/2009/08/gladiator-xs-trading-tips.html

Michael Woo

I took a break and went out with Michael, my trading coach.

We talked about many things. I told him that I have been very afraid these days, and I can't seem to snap out of it. Michael asked what it is that I'm afraid of, and left me with these words to ponder on:

"It's just money"

Michael is one of the coolest, if not absolutely the coolest, trader I've ever met. His are the only trading statements I've seen (trainers and coaches can claim how good they are, but without the statements to support, they can say whatever they want and they aren't going to convince me, not anymore) - and each new batch of students sees his months of trade logs/ statements updated to the last day he receives his statements - and they simply confirm my belief that he is without a doubt good - DAMN GOOD!!

I asked if trading is stressful for him. He said no, unless he's trading other people's money, and if he has to explain his trades as he's making a move (he holds live trading classes).

When trading his own account, Michael's NOT trading scared money. He takes his profit and cuts his losses according to what the market tells him. I take my profits and cut my losses based on the level of adrenaline that has built up in my system.

Unlike many celebrity trainers here in the local scene, Michael's extremely low-profile, grounded, and calm. He trades every single day, throughout the US session. He teaches once a week, and he's probably never going to give it up. His knowlege of the market and the instruments he trades is so deep that if you were to ask him what tells him that the market's going up or down, you'll always get the same answer: INTUITION. That's always good enough for me, coz I'd rather have that than his thesis.

Michael said that my postings from way back showed that I had a different approach towards trading then - I talked about volatility, about emotions in the market and such - and I kind of get where he was going with that.

Somehow, along the way I've veered off course and am now desperately wanting to get back on track.

Something that he suggested, which HPT did too, was to really cut down on the number of hours that I spend in front of my screen. Another thing is to go back to look for my edge - a deep understanding of single instrument. Forget fib, forget waves, and a whole bunch of other stuff, he said.

This will be the umpteenth time that I'm going back to my very old postings to grasp what I was really doing then. Sounds odd, but that's what this is about. I've changed, the way I think about and approach the market and trading have changed - not for the better, unfortunately.

I know that this is going to come out sounding REALLY wrong, but I think it's time that I stop looking TOO HARD for reasons to enter a trade, as well as reasons to NOT trade.

When you try too hard, the market slaps you really hard too. I say this from personal experience.

I remember the words I used to use to describe the market: fluid, dynamic, eccentric, erratic. I accepted the market as such then. These days, I try so hard to make sense of it, to identify the structure that guides it, and the harder I try, the more success evades me.

There are a lot of things that I don't know about the market still, but I know this about me: I need to be cool. Cool like Michael, cool like I was before. Nothing else is going to help me. I need my cool back. I need to go back to NOT being able to explain my trades. Yes, it sounds wrong. But what was seemingly wrong had worked for me, and everything that's seemingly "correct" and "proper" hasn't.

Update:

D is a super fast learner. I shared with him exactly what I had written above, an hour before market open, and I wasn't even sure he understood my babbling.

But he apparently did.

He just took 2 points on the ES. FOR THE FIRST TIME, D took 2 points!!! D usually flees with 3 ticks!!!

THANK YOU!!!

(Update: As I'm going to be using my gmail account to compile the list of emails that I will be sending invites to, would appreciate it if you can send your email to gmail account if you're writing me (my yahoo mailbox is jammed by the way, for reasons I've yet to find out). For those that have written, I've already included you on the list. Again, thanks for your emails! Those on my blogroll - you're on the list by default (unless you don't have an email on your profile page, in which case, I would appreciate it very much if you'd send me an email for me to capture your email address), but please let me know if you do not wish to be included.)

My heartfelt thanks to ALL who have emailed me. I've spent the bulk of the day dealing with some frustrating personal issues, and haven't noticed the mails that came in. To the "quiet crowd" that has written me long emails - I am beyond touched, and I wish I could reply to each and every one of you in the next few days. I should be able to, given that I'm going to be trading very light for the rest of this month.

To my fellow countrymen (and women) - I have to say, I am very surprised to be hearing from so many of you. If only you had spoken before the really nasty ones came in....I really appreciate your notes, and to those who have asked specific questions, I will definitely reply in the next 72 hours.

My Nieces Say That I Should Entitle This "Yee Yee" - It Doesn't Matter - I SPOKE

Something interesting that I found again on my traffic report. It dawns on me that most of the folks from my part of the world are always going to be negative, critical and ignorant. Yes, I can trade 10 contracts with 5K - coz the margin for each contract is $500 (there are many in the US that offer such margins). That said, I did mention that I will be trading a max of 2 contracts. Not that there's anything wrong with trading 10, if you know what you are doing. Leverage is always a double-edged sword.

But I'm talking to numskulls. Why do I even bother?

Oh, yes, coz I can say anything that I want.

I'm setting the record straight - I'm not doing this just to prove someone wrong. This is my plan to start trading with a realistic goal, within a more realistic timeline. The reason that I'm sharing my plan and details of my trading activities and my result is to show those who are just starting out that they can build up their capital STEADILY by achieving small but consistent results. Ok, maybe I'm doing this primarily for myself. I need a public diary to keep me on my toes - 3 years is a long time, and I have a short attention span.

Again, why the hell am I explaining to people who will never see any good in the things that other people are doing, as long as they are NOT the way that they are doing them??

I am taking the weekend to think about going underground with my diary. There are too many people who shouldn't be here that are here wasting their time. Once I'm decided, I will send out invitations to those who are interested in following my progress. Meanwhile, if you have been following my blog, don't hate the way that I trade, don't hate me for who I am, please drop me an email (would appreciate a brief introduction) so I can start putting together a list of email addresses.

If you fulfill ALL of the following, please do NOT write me:

- You are SINGAPOREAN

- You are NOT:
1) Sage
2) Michael Woo
3) Michael Woo's student
4) My personal friend
5) My ex-colleague

- You are a graduate of WAT, and an ardent fan of C.A.Lim

Yes, I'm hyper-sensitive, hyper-thin-skinned, hyper-territorial, and always going to be disgusted with people who love to see / look forward to seeing others fail. I write my thoughts here and everything about my trading, and I don't like sharing them with HOSTILE and UNKIND people.

Sage, you might want to consider NOT publishing your results too. We may live on a tiny island , but our people are NOT nice at all to each other. You should have somekind of traffic report just to keep tabs on who those reading your posts are. They mentioned you and the comments are not kind. Why are we putting ourselves out there for people who totally deserve to make their own mistakes?

Reply To Long And Wrong, NQJ and Jimmy 's Comments On Volume Charts

Long and Wrong (Formerly Uncertain Futures) asked:

Jules - I've been trying to get my head around these vol charts but it just makes my brain ache too much when I try to think about what the differences will/should be compared to time. Have you got any thoughts/references etc?

UF (I'm assuming what you're asking is why the switch from time to volume charts and I'm responding accordingly...let me know if I got it all wrong....),

MY THOUGHTS

I hadn't given this much thought before you asked, and was just exploring volume-charts after having been exposed to footprint charts (I knew about footprint charts a few months back but just couldn't get pass that stage of understanding how they work - it's a tad like reading those 2000-page TWS instructional manual) in a chatroom that a friend had invited me to join for free for a few days.

I still wasn't sold after that few days, but began thinking about volume again. The fact that I rely so much on market depth tells me that I DO appreciate the significance of volume, and that the footprint chart is probably many times more informative than market depth. But there's just too much processing of info that's needed when using footprint.

I always believe that when it comes to trading, you only need an edge to lay a bet, whatever form that edge comes in. My edge is not in processing multiple sources of data before making a decision. A footprint chart is just too cluttered and requires too much pondering on the "structure" aspect of the market and comes with too many "numbers" for my liking.

Now I could always use a time-based chart and add a volume indicator to it. Doing that however, would require the analyzing of the volume indicator, and that's TOO MUCH thinking to do for me (i did say I can only process one piece of info at a time).

So in a spark of genius (I do get this once in a blue moon), I pulled out Sierra's volume charts and started experimenting with the volume size. I must have put in at least 10 different numbers before I settled for one that shows a chart that I can see very unambiguous supports and resistances, and candles that are not too ridiculous in size (something similar to 5-min was very appealing as it means I won't have to take on more risk for a "less noisy" chart).

With range and tick charts - I just simply cannot understand their workings, and I can't use anything until I can understand them. So I'll be doing more studies.

With volume charts, I understand them but I'm not able to explain in a coherent way why and how they work FOR ME. That's why my plan going forward is to explain by "showing" how I trade using these charts.

To put it even more simply, I have gone over the selected volume-charts - a few weeks of data - and I can "see" certain patterns and I can understand how the candles' opening and closing and the size of the candles relate to one another. So I decided to give volume charts a shot. I trust my understanding enough to start using them live. As I mentioned, I would explain to the best of my ability how they work as I go along. For now, I can only show that they work.

REFERENCES

I managed to find a few (click here, here, here, and Daytrader 233's Blog) and I have to say, reading them (with the exception of Daytrader's) gives me a BAD headache. I am only doing this for you ;-) ...I knew they were out there, I just didn't bother to read up coz to me, the theory per se isn't quite as important as the application and the BOTTOM LINE. Anything that helps me to make money consistently is good enough for me. :-)

Hope I haven't given you more headache...

NQJ and Jimmy:

About Top and Bottom Picking:

Depending on the context, I think it's ok to fade a trend. I can't come up with an example off the cuff now besides 2nd entry setups (I'm still feeling very drowsy...), but will show them on more charts to come. On days that are not trending, top and bottom picking is not only ok but actually necessary if you want to be able to get in on a fairly profitable trade. Brooks has some of his methods listed and Chp 15 is a good place to start (this is for Jimmy, I'm not sure if Jaya's reading Brooks).

ok, now I'm going back to sleep.

I know I'm a broken record, please bear with me. If you are reading this, I BEG you to please check out Denarii's blog and help him if it's within your means. Here's a fellow trader who might not have the resources (time, energy, capital, etc) to trade anymore, and that in itself is something that's tearing me apart. If you're a trader, and you understand how that feels, and you feel the same, I really hope you'll extend a helping hand.

Intermission

I am not going to be trading for a while. For how long, I don't know. I have underestimated the impact my negative emotions have had on my trading behavior, and I want to do the right thing for me this time.

I will never stop hating self-righteous, selfish, hypocritical asses, and for as long as I keep a public blog, I will be exposed to them - the wolves in sheepskin. I need to find a way to become immune to them, and I need to pick up skills that will help me sniff them out before they can get close enough to affect me emotionally.

I am desperately needing a cure to my most fatal flaw: my inability to live and let live. When I bite, I won't let go. I will see to it that my enemy bleeds to death, even if it's at my own expense. My mind doesn't stop playing the images of people that annoy me, and the only way that it will stop is when I can begin to feel sorry for them.

If I don't get this part of me fixed, I'll never trade with consistent result.

So, as Emini Player has pointed out, I either get my emotions under control, or learn to not let my emotions get in the way of my trading.

Either way, I need time.

Now I'm Really, Really Mad!!! FUCKING MAD!!!

I was going over my bravenet traffic report and saw that someone had goggled "jules taichiseal". So I followed the links, and arrived at this: https://www.blogger.com/comment.g?blogID=1205659781589645866&postID=6323668938784973956

To the 40 over people who were here that didn't use to drop by, I hope to never see you again.

To those who claim I didn't have to read taichiseal's blog if I don't like his opinions & views: well, I stopped visiting his site months ago (I have always been very straightforward about this: if I know I'm not going to like what I read, or if I feel I'm going to get affected and influenced, I simply stop visiting the site. It doesn't mean that I hate the writer. I've stopped visiting even Don Miller's site before because I felt I was not ready for what he had to share. I went back in when I felt I was coping better. Don knows about it. I had shared that with him in an effort to spur him on in his blogging endeavor.), it was taichiseal himself who wrote to ask me to check out his own post (POMPOUS ASS!). The same person who claimed I was making too little at first, and even sent me his trading results to show how his method is far more superior, and then a few months later, seeing that I'm making consistent progress - trading MY OWN WAY - sends me a warning that I could be expecting too much.

I know it when someone's sincerely wanting the best for me. I'm more perceptive than what most of you out there can imagine.

I can smell a false teacher from miles away.

For someone who claimed to have started a blog just to share your trading insights with your friends, you were a real busybody to have initiated contact with a total stranger (ME) to tell her how to trade.

Please, spare me all the hypocrisy. Not swearing doesn't mean you are a good person.

You invaded my space first, and I always have been the one to keep my comments on my own blog. Did I ever make a comment on your blog?? Did I even mention that YOU were the one who sent the email and wrote that post?? Did you not come in here looking for a fight????

WHY CAN'T YOU JUST LEAVE ME ALONE??????????????????????????????????!!!!!!!!!!!!!!!!!!!!!!

I quote one of your fans who wrote:

"I guess it's easier for those cowards to wait for some Mozilo-tanned asshat broker to sucker them into buying the next IPO than it is to think for themselves.
Anyone who has traded for more than a day knows that your blog represents the truth about trying to "trade for a living". It's the f***ing hardest thing anyone can ever attempt."

I don't suppose you have the guts to tell him that you were attempting to do exactly that: suckered me into thinking YOUR WAY, coz yours represents the TRUTH about trading for a living.

And he's damn right that trading for a living is the fucking hardest thing anyone can ever attempt! So, was that what motivated you to keep tabs on me all this while - to make sure I'm having a hard time, and when things didn't seem to turn out the way you expected you just can't rest until you see me fall hard the way you did in your first year trading your own money (I feel sorry for you that 18 years of trading other people's money in the bank didn't teach you a thing!!)??

You are a classic.

Since you want justice, I'll give you the satisfaction. I'm posting both your post and YOUR readers' comments to save avid blog readers from having to hop around blogs.

Your post that sickens me to death (what sickens me the most is that you keep saying that you're merely using your blog to share your knowledge and wisdom and what nots, and not a word on how you have actually crossed the boundary, hopped out of your blog and came into mine, meddled with my trading for whatever reason I really do not have the slightest desire to find out EVER, and the claim that my picture on blog catalog was what drew you to my blog when I first started trading and blogging one year ago; that screams: like the majority of your fellow Singaporean chauvinistic men, you didn't think I was going to make it and you weren't interested in my trading, you were basically just checking out a chick!! You are nothing but a hypocritical drama queen - the calmer you are, the more it tells me your objective has been achieved and you're simply relishing this - my OUTBURST. And I don't care that this is exactly what you want to see, like I said, I don't care if the people I don't care about get or not get what they want, if I want to rant, I will rant!! You can be the cool, calm, righteous victim who continues to believe in his own lie about who he really is. I will be ME! Uncool and vulgar and all, but at least I don't have to hide behind a suffocating mask! AND REALLY, WHAT IS IT ABOUT MY TRADING THAT MAKES YOU THINK I NEED HELP????? THE ONLY TIME I DID HORRIBLY WAS BECAUSE YOU, THE EXPERIENCED GURU, MADE ME DOUBT MYSELF AND I FELL INTO A SLUMP I THOUGHT I WILL NEVER PULL MYSELF OUT FROM EVER AGAIN!!!!!!!!!!!!!!!!):

Going Private

Below are some very negative comments in response to my post on 5 Fatal Flaws of Trading :=

• "It's utter crap - that one should start out aiming for such a MEDIOCRE performance as simply NOT losing your capital."
• "I do NOT buy intimidation, scare tactics, empty philosophical gobbledygook, "well-intentioned" advice by old timers to make you fall back in line."
• "Yes, F***K them!! Just had to choose the period that I'm doing things right to give "well-intent" warning about fatal flaws, and never a word of encourage EVER (not that I expected it!). But it's my fault that I'm affected. I can't help but be irritated by CONCERNED old timers and vipers.I really HATE false teachers!!!"
• "We have our own beliefs and theories surrounding the topic in question - I didn't force mine on you, and I didn't like it that you forced yours on me, as if having someone to believe what you believe would somehow make what you believe a biblical truth."
• "To hell with people who cannot bear to see others NOT going through the same mess they've been through when they first started out."
• ".. I smell an insecure inferior *bleeping* asshole from a mile away. People who have desperate need for attention. People who need to impose their ideas on others so they can be praised for it. Eww!"
• "Well,giving advice or telling people what to do in blogsphere...is really some sort of ...egotistical masturbation act..."
• "So stop throwing your "fatal flaw" advice in my face!"

Needless to say, I am disappointed to the extreme at this, coming from people who I thought I was trying to help. I do not feel either the need or inclination to reply in my own defence. What I do feel is a weariness that I do not deserve, for sharing my ideas out here in the blogosphere.

I started this blog in Jan08, initially to share what I thought to be relevant to T4L with friends and anyone else who might be interested. Along the way, it has somehow evolved into a trading journal of sorts. I have always been completely open with my ideas, methods, trades, motives. My intentions were always pure - to share my passion in trading with others less experienced and hopefully to inspire them to pursue T4L with some success. For me, the reward has always been a sense of satisfaction in sharing with others some of the joy of that trading has brought me.

By and large, I think my objectives for this blog has been achieved and I have imparted much of what I know about T4L here. Thus, after much contemplation, I have decided to call it a day on public blogging. I have started a new personal blog, purely for imposing trading discipline on myself, and for my eyes only.

This is my penultimate post here. I do not like bad endings so I am working on one last happy post to say farewell to those of you readers who have enjoyed the journey with me. Thank you.

Anonymous said...

I'm really sadden to hear that you have made this decision. I'm a young one started out and enjoyed your commentary and advice. your blog is oneof the 2 i look at daily after starting with over 20 I hope you reconsider. If not, all the best.

BH

P.S you're advice of tide, wave ripple has affected my trading greatly!!

8/7/09 10:39

Anonymous said...

Sorry to hear that you have received such venomous and undeserved comments. People can be such a**holes!

Have enjoyed your blog and learnt a lot - good luck with your trading. Will miss your blog..

8/7/09 10:50

Anonymous said...

Thank you for a great, productive read. Sorry it had to end this way.

8/7/09 11:08

akikana said...

I have been T4L since November last year and in the initial euphoria of information gathering your blog was one I stumbled across. Through the passing of time I have let most of these information sources lapse save perhaps 4 blogs, of which yours was one. Sorry that this entry has forced me to write - that's more my problem than yours!

Your writing was always balanced, sensible and worth the time of reading ALL the entries. T4L is not easy and realistic goals are tantamount to being successful (both at a trade level and macro level). So many cliches are thrown around regarding trading and most are true. If you are true to yourself, have a plan, have extreme patience and are not greedy, then a living can be made - eventually. A strategy with an edge is important but having a sound and strong mind is much more so.

It took me four months to become confident that my strategy worked and six months to actually learn the discipline to trade it. I will be profitable this year which is hard to believe given the start I had.

Your struggles, successes and knowlegable input through this blog have helped me and for that I shall always be grateful. I am on track for an enjoyable career which will always challenge and stimulate. I wish you every success in your future efforts and endevours...and if you're ever in Tokyo give me a holla, some sushi and sake would be small change compared to the value of information you have provided me!

8/7/09 11:18

ryan said...

This is so sad. Your blog is the first 3 blogs I visit every trading morning and as a reader and fan your blog has been very useful and balanced.I want you to know that you have done great service to me and to many readers. Remember, only eyes that can see value appreciate value. So, please ignore those unkind words that those idiots/clowns/as*hole have uttered. I hope I can read more of your blog. But incase you wanna make it private, I just wanna say a big 'Thank You'.

Ryan.

8/7/09 11:36

Mark said...

Wow - very sorry to read the negative response you have received.

I guess it's easier for those cowards to wait for some Mozilo-tanned asshat broker to sucker them into buying the next IPO than it is to think for themselves.

Anyone who has traded for more than a day knows that your blog represents the truth about trying to "trade for a living". It's the f***ing hardest thing anyone can ever attempt.

As another reader has posted, I hope you will reconsider your decision. Maybe a trial period with comments turned off?

Keep fighting the good fight.

Mark
Vancouver BC

--

8/7/09 12:04

Anonymous said...

I think you are making a big mistake ... I know you are.

If you are truly a trader, then you'll know that walking away from a bad trade is just part and parcel of the game.

Your quitting this blog is as good as saying that you're done with trading ... all because of one bad trade.

What is this going to do for your psychology? Get back in the saddle. Continue this blog and move on. Get on with the next trade.

You privatize this blog and you might as well stop trading altogether. If you make your trades only known to yourself, you will never improve.

You started this blog to put yourself on the line. Continue to do so. All you have to do now is to keep your nose in your blog and not bother with what others say in theirs.

I will send you my email if you want to talk. You will know who I am.

8/7/09 12:21

Anonymous said...

taichi seal, i don't think you should stop writing this blog just because of their comments. you mentioned that you started this blog to share your knowledge and eperiences with the young ones, and i am one of those who have benefited from this.
I am sure that for every asshole that writes those nasty comment, there are 10 others who appreciate what you are doing and are learning a lot from you. By not continuing your blog, you are depriving us of some really important knowledge and a valuable source of education. please reconsider this!! i need you!!

8/7/09 12:40

Anonymous said...

MB,
No good deed goes unpunished.
Is this person Judas to your Jesus?

Yet, under the fell clutch of circumstance,
You have winced and cried aloud.

Your huckleberry of those dark days;
Invictus, you should rediscover.
yba

8/7/09 12:54

Anonymous said...

If you can keep your head when all about you
Are losing theirs and blaming it on you;
If you can trust yourself when all men doubt you,
If you can meet with triumph and disaster
And treat those two imposters just the same;

Then we will have the privilege of reading your musings and insights again.

8/7/09 13:21

RMD said...

I can understand where you're coming from, and I, for one, will miss you.

I can understand your reaction. In fact, I wonder if high quality "volunteer" (i.e., non-commercial) blogging will persist into the future because it is largely a thankless task.

A while ago, I questioned your decision not to use fundamentals. Your response still sticks with me, as I think about it frequently, and use it to reflect on my trading.

So, you have planted some seeds. You may not see them bloom, but I thank you.

8/7/09 16:06

Anonymous said...

Sad to see you go. I am so surprised at the venomous response to your link. Everyone is entitled to their opinion, thats what diversity is all about. No One is forcing you to read this blog. Don't let the vocal minority drown out the silent majority! Despite trading professionally at various major institutions for the last 16 years, I have always appreciated your honest views on this blog and I have learnt alot from it. I respect your decision to take this private. Thanks for sharing the last 2 years with us. It has been a good journey.

8/7/09 16:26

MrBigHit said...

Pleeeeeeeeeeeeeeeeeeeeeeease, don't stop writing, it's highly informative, and it had motivated to start my own trading blog, whilst also giving me the courage to become a more disciplined trader.

I feel that the shutting down of your blog is exactly what your critics are aiming for - a anarchistic victory for them but a great public loss to you and the not so obvious readers that probably should constantly remind you of what a good job you're doing for the trading community.

It is still your choice to leave us, but isolation from your work is perhaps the final straw before a man could go insane - please keep in touch with the newbie traders like myself!

8/7/09 16:26

Taichiseal said...

Guys guys .. I am still here, trading as always. And I have given you my best secret for success in post #1072 = Strive for trading excellence so you can make the truly important people in your life happy. Lets celebrate. Don't be sad please.

8/7/09 16:36

TD said...

Very said to hear you're going to close the blog. Was reading it daily and had learned a lot from your posts. Hope to hear from you again - maybe later.
Thomas

8/7/09 18:56

canuckinvestor said...

Sorry to hear you deciding to stop -- I enjoyed your blog. I should note to the other commenters that these comments that Taichiseal quoted are all from a single blogger in her own personal blog, and not a slew of "anonymous cowards".

9/7/09 00:33

Officially Angry For The First Time In 6 Months

I won't be posting my trades until I can get the face of the people that have pissed me off and hindered my progress out of my fucking mind.

It took me a very long time to get my confidence back and to start trading MY way again. So I sure as hell do not appreciate being derailed AGAIN, and I definitely do not appreciate receiving their emails!!

To hell with people who cannot bear to see others NOT going through the same mess they've been through when they first started out.

I trade with a decent amount of sensibility. I am NOT a gambler. I have no sophisticated risk management method, but it's simple and effective enough to keep me from wiping out my account EVER. I have a method that has worked for me so far. I don't think of getting 200% returns - 100% yes - which is totally reasonable and achievable for DAYTRADERS! I don't rest enough and spent almost all my waking hours studying the market and the instruments I trade!

So stop throwing your "fatal flaw" advice in my face!

Yes, I am emotional. And I always will be. But I will still continue to trade.

BITE ME!!!

Trades 7/3 (Fri) Wrap Up & Lonely Trader's Interview

This hasn't been the easy week that I thought it would be, so I'm treading carefully. There was just one good entry for me after the first 2 trades today. I didn't take it. I've used up my physical and mental energy for the week, and was afraid that if I did take that trade, I wouldn't have what it takes to see it through.

Someone sent me a link today on the 5 fatal flaws of trading coz he thought/ thinks I'd find it relevant to my trading.

I'm not going to post the link - there's so much written on what traders SHOULDN'T be doing, and what kind of people SHOULDN'T be trading, one can easily find the material by googling.

I'm bringing up the issue because I'm feeling indignant.

I believe in positive reinforcement, positive thinking, positive attitude, good karma, and HARD WORK.

I do NOT buy intimidation, scare tactics, empty philosophical gobbledygook, "well-intentioned" advice by old timers to make you fall back in line.

Above all, I do not buy the "fact" that 90% of all new traders fail because they have aimed for more than ZERO percent return.

It's utter crap - that one should start out aiming for such a MEDIOCRE performance as simply NOT losing your capital.

Whatever works for or happens to one trader does not necessarily apply to another.

We walk our own unique journey.

I appreciate all the help I've received, and I thank folks like Cory, Jack W, Leon, Lonely, Lord Tedders, Solfest, and many others, with all my heart. You always encourage, motivate, and inspire, and thoughts of you always put a smile on my face.

For those who are concerned that I'm at risk of blowing up my account - don't be. Your concern is baseless. I am NOT you. I will get what I want, whenever I want it. Just watch me.

On a lighter note, another of my favorite things - The Lonely Trader - was interviewed by Tim Bouquin! Check out his blog (don't skip the comment section!!) for details and the link to his interview (a gem!!).

Reply To Comments

Thank you, DT, Ryan, MVW, Cory and Sandy.

I woke up an hour ago, and the first thing I did was turn on my big monitor (I don't shut down my computer until it crashes LOL!) to look at my chart. And I saw what I expected to see. Price hitting 923.50. It went way beyond actually, to hit 928. It was the kind of action I had waited for for an entire week. And what did I do just before that monstrous candle appeared? I closed my last position (at the candle that I had indicated with a huge black arrow in my chart above).

I don't know if you recall that I wrote in my notes sometime last week, on one of my charts, that at around 345pm, when you see either a bear or bull trap, you can prepare to see bear/bull runs for at least 2 long legs.

In the chart above, you can see that sellers realized they were trapped at the candle before the one that I had exited. Price had gone 1 tick below the low of the bull candle at 335pm after luring sellers in with a "short" setup (the bullish 335pm candle had a high that's higher than the candle before and after it, and a low that's lower than them - a text book Outside-Inside-Outside signal for shorting coz the 2nd Outside bar is a bearish candle).

When price had gone 1 tick below, stop orders to sell were picked up, and sellers are now in an open position. What happened next was not what they would have expected - price closed right where their entry bar had opened. With just 30 mins to market close (and we know most don't want to be in position after 330pm), many would immediately send limt/stop orders to get out. The collective actions of sellers would send price soaring north until everyone who wants out is out, and of course along the way, some buyers would jump in and chase price up, sending price higher in matters of minutes.

The best entry for a scalper, would be the bar that I covered. The candle before it was the signal. That was the candle that surprised both sellers (who are now trapped in a losing position) and buyers (who are NOT in position and hope they are), who would then react in the candle that followed. At 15 to 30 mins before market close, you can expect price to just go in the direction of those who are scrambling for the exit. The profit taking point? When you see the first bearish candle (for a bear run).

When I closed my position and logged out of the AT platform, D chided me for giving up (strange, really, given that he's always the one that tells me to take it easy). I had to tell him I wasn't giving up, that I know that price would hit 923.50, but that there was no point in holding that trade for that profit target of 923 and capturing the day-end score coz the results were from a mixture of scalps and swings. What I wanted to capture was the statistics for swings and the figures for yesterday were invalid. I do want to beat myself up for messing up the very day that would have given me the stats that would validate whatever hypothesis I had on the strategy I was testing out.

Murphy's always just a click away.

What I had learned in few days' of experimenting with the holding method was that there is indeed an ideal hard stop that i can use even in scalps. And that is precious. The reason that I had wanted to give up scalping is coz my risk-to-reward ratio is just horrendous. I've never believed in 2R, 3R or 4R. But 1 for 1 - that seems appropriate. Or 8 ticks stop for 6 ticks profit - that's still very acceptable, to me. Many times, I was able to find entries with 3 tick risk and 3 to 6 ticks immediate profit (if I take it). Very short window to take profit before price does its usual - comes back to bite you.

So what I've decided to do is that I'll resume live trading doing what I'm used to doing, while continuing to paper trade the holding strategy. I probably can't do both at the same time, so D will help me to execute the paper trades on his computer (and in the process helping him to appreciate the benefit of WAITING for setups).

I'm NOT giving up. No way. I don't know what I would do if I don't trade. I'll probably be out causing trouble like I always do when I feel bored (I have the shortest attention span among the people I know) and aimless.

Thanks, again, guys, for the very thoughtful notes. I was surprised to see 5 comments when I logged on to my blog to do an AAR for yesterday. And I thought I hadn't really slept for that many hours! LOL!

Cory, those are black mambas. "Black" does not describe the color coz there are no "black" mambas - only green, metallic and brown and I think there's another color. I absolutely love them. They are very very nice to touch - their skin is smoother than mine LOL! Without their fangs, they are lovely creatures. They don't attack when they sense threat - they get away. And they are FAST! But once they are cornered, they retaliate and they are extremely accurate with their strikes. One dose of their venom can kill up to 15 adults. I love their eyes. Just stunningly captivating beautiful jewels.

Now that I'm feeling upbeat again, I shall wane off ice-cream (Sandy, are you psychic?!). I've had more ice-cream in a week than I've had in a year! LOL!

Sierra! & Brooks!

I'm proud of myself.

I installed the new version of Sierra (the last time I used it was like a year ago??), paid for the service, set it up to connect to my broker's data feed, played with the setting and learned how to use it all in 60 minutes.

Greatest achievement in 2009.

D has officially outlived his usefulness.

MUAHAHAHAHAHA!!!!!

Thanks, Solfest, for telling me about Sierra last year :-)

And thanks, Leon, for convincing me to give Sierra another shot. I just didn't know how to use it the last time (ok, I didn't make an effort to, coz I had resigned to the fact that computers were just not my department) and was too proud to ask D.

I have to say, I really like Sierra :-)

Oh, my precious book arrived. So I'll be hibernating with Brooks for a while.

I'm happy!!!

The Lonely Trader's Latest Post on PRICE ACTION

I'm not writing, but I'm still reading.

A great post by Lonely. Astounding piece.

Got me thinking:

What, exactly, is PRICE ACTION???

Reply to Cory & Michael

Michael,
If you really want to learn about how to apply Fib in a more practical way, check out Trader-X's blog. He uses Fib for both entry and exit. Very simple setup, but easier to apply on stocks, coz there're so many stocks with their own trends and patterns. For futures, those that fall under the same category have more or less the same charts. For instance, on a specific day, the 7th candle (on market open) of all the index futures will be an inside bar, or a hammer, and then the 14th will be stopped by the support/ resistance of the 7th candle, etc etc, or all will hit a full fib target (for ES, mostly 138.2 and 211.8 and TF is mostly 161.8 and 261.8 etc, depending on the seed you choose...) at around the same time.

Still, I strongly recommend that you take a look at Trader-X's charts. It's very enlightening to see how simple trading can actually be.

Cory:
Yes, I like Fib. I don't use it for its intended purpose that often - most use the levels to exit their trades. I use it to see how strong price is trending and coz I use both upward and downward fib once I get a swing high and low, I tend to use it to see which direction price is likely to test next. I used to use the Fib retracement levels for entries when I was trading TF. Not anymore. TF is no longer the TF I knew. It retraces whenever ES retraces. It used to have a character. Now it's just an ES follower. But it's good to trade coz of its tick value. LOL!

Reply to Lord Tedders & Emini Player

In reference to my post on ES Trades 3/24,

Emini Player asked:
How tight/wide are your stops?
How much paper profit did you have before the trade turned against you?

and

Lord Tedders commented:
Jules,

You seriously think that a mechanical system will be good for you? I guarantee it won't take the stress away. I've walked down that road many times. It might work for some, but it won't help us "emotional" traders control our emotions.

I think your last sentence is truth, not sarcasm.

Best of luck finding your seed.

Emini Player:
The stop for my first trade was 2 points. It was based on the first candle that closed above my 25ema. Price went in my direction for 1.7 points before changing direction. I should have gotten out at 1.7, but I didn't coz I had overridden my system and gone in before it gave a signal. I was right in my direction, it's just that I got in too early, and obeyed one part of the system. Had I stuck to the entry signal, I wouldn't have been stopped out, coz the signal came AFTER price went up above the ema. Totally my fault here. I should have just taken 1.7, and counted myself lucky.

For the 2nd trade, my stop was the same - a close above the ema. But price was already trading very far away from ema when I entered. It was near the close of the market, TF was rather crazy with candles turning readily from bullish to bearish and vice-versa. I had 1 point before trade turned the other way - I was looking at a 4 point paper loss. I got out after the loss came down to 1.3 points, although TF has never closed above the ema before trade went back in my direction again.

In between the 1st and the 2nd, I actually had a winning trade - 1 point. This one went immediately in my direction. I took the 1 point - totally didn't wait for my system to give an exit signal.

I saw where my problem was after getting 3 hours of very good sleep :-)


LT:
To be perfectly honest, I think a mechanical system is good for me only if I let it take over completely. I have to trust it enough to get in and out based solely on its signal. But you know me, I can't let some signals take over my trading for me.

So what happened was that I obeyed an aspect of it, and override the others. No, it totally didn't take the stress away. I felt like throwing up everytime I saw a move that I would have otherwise taken a scalp on, and had to let it go coz my system says "NO".

For Mar 24's session, I actually ignored my system once, and went in before it gave a signal. Trade went 1.7 points in my direction immediately. I was too surprised to act, and let the trade go against me, and I ended up having to get out at a loss coz my exit signal was triggered (which was meant to be a stop signal - best part was that it wasn't supposed to be a stop signal, given that there was no ENTRY signal to start with. It was absolutely imbecilic - ME, I was the dumb ass!)

I think ther's a possibility that I MIGHT never trust any system enough to let it work for me. Mine is a very, very simple one that uses candle stick pattern, MAs and Bollinger band. And Fib of course. And I'm looking at just 1 chart (ie. 1 timeframe, coz I have the higher timeframe's MA on the same chart, allowing me to know its trend at all times). I think part of the reason that I don't trust it is that I was the one that came up with the way to deploy it. I just kind of put together all the things that I've used before that I haven't thrown out in disgust, tweaked the parameters in accordance to the prevailing market volatility, and used it in a way that I haven't seen any one using.

I'm a broken record, but I'm still going to say it - my mind's constantly in a jumble, and I keep getting caught in a situation where I trust the "Me" in real time, and not the "Me" a second ago.

I've resorted to recording my thoughts as I trade. So I've been talking to my pc a lot. But I don't play back at all now, coz I always find the person I'm hearing super ODD, so NOT me.

No wonder my doctor has been persuading me to get a brain scan (I have very painful headaches)....

Reply To Comments

The good thing about not having to plan for pre-market trades is that I have plenty of time to read and write. LOL!

Am responding to Emini Player, JE and Cory's comments here.

EP:
I do track my winning vs losing trades. But I do that only on a half-yearly basis. For 2008, the review can be found on one of the links on the left.

Regarding the way that professionals play -

I agree that their way is much easier on the heart. Michael (the pioneer in basic trading courses here) trades this way, and teases me all the time about my scurrying in and out of the market :-) But Michael is financed by pure trading profits. His psychological barrier is not even a tenth of mine. I am financed mostly by my own savings (although it's not an emergency fund or money that I need to put food on the table), and it hurts A LOT when it's taken from me. I can't stand it when I get stopped out. It's slow bleeding, but I can still die from it.

Most importantly, I'm just NOT the type that can sit still and wait for price to hit target. I am very hyper, and I'm a control freak. Getting in and out is not half as stressful as sitting and waiting to be stopped out or for target to be hit. It drives me nuts. I don't think I'll ever trade that way. Yes, my current profit is small, but the dollar amount per day is not what I'm focusing on. I'm counting points and tracking consistency. Once I get both right, I'm trading more contracts. Am still working on the stops still. Before I read your comment, I was thinking about setting a 6-tick fixed stop and entering only when the setup is right for such a stop. That's for now. In the long run, I'm still much more comfortable with a mental stop that takes into account the prevailing market volatility. But that will come only after I've learned how to handle the emotional bit.

Thanks so much for telling me about your broker. I will ask D. He handles my account and everything related to form filling. I just trade. LOL! So you have mentors? Good for you! I've never had one, and wonder what it's like to have someone kick my ass.

JE:
Thanks for your note. It's so kind!! Warms my heart :-) So sorry about what you went through. Good that you've recovered (you have, I gather) and are trading again (I'm assuming you are, since you're watching the market). I've heard too many sob stories from traders who are doing well now, and am convinced that it will take years and years of practice to master the art of trading. Ray Barros' is legendary. On the other hand, I know also those who hadn't been burnt ever, in their decades of trading. Michael Woo, a well-known trading coach here, and someone I really look up to and love chatting with, is a rare breed. He's traded for more than 20 years. When I teased him that he has no sob stories to tell (here, sob stories SELL!), he protested and said he lost money on gold when he first started out. I asked him how big the damage was, he replied that it was HUGE. Then I asked if it wiped out his account, he replied that it was nowhere near that. My conclusion to that is that he indeed has NIL sob story to tell. LOL!! I don't know how many out there are as brilliant as him. I believe that most have gone through rough rides in their trading journey. Except for those with really great mentors, and the mentees are NOT doctors or lawyers by training LOL!

Thank you for liking my writing. I tend to communicate better with animals, so it's really comforting whenever I come across a human that actually understands my gibberish :-)

Cory:
Gosh, you are good! I'm going to be using that list as my beacon and roadmap. I'm serious.
Do you have a blog, Cory? Think I asked that once months back. Are you a member on EliteTrader forum? We seem to have a lot in common as far as trading goes. Would really love to read about your experiences if you're sharing them via your blog or a forum.

Phantom Of The Pits (1)

Phantom Of The Pits was asked:

After more than three decades of trading, why haven't you written a book sooner?

Phantom's response:

I have, but they have all seemed to become outdated because knowledge is quicker in coming than in writing. I always wanted to have it exact. I have made mistakes, and to give my mistakes to others seemed to be admitting I was wrong often.

It has taken years to understand that being wrong is what trading is all about.

About Fighting The Trend

Trader Tao wrote:

I am a new trader, I agree that today is that kinda trendy day. buy and hold till the end. Don't quite understand why you fight with the trend and short it?

I read you blog recently, you are a great scalper to me, pls show me some tricks. I happen to use ToS platform too, if you bring up a chart of $UVOL-$DVOL, you will see the retracement never made a real reveral on net volume.

I haven't gone long, Trader Tao, coz I had missed the window that offers good setups for a long entry. I started looking at my charts only 3 hours before the US session began. I could have gone in after ES broke out of 692 of course, but I was wary of overhead resistance at 695, and a few more above it all the way to 723. When the pole of a bull flag was formed by 10am EST on the 3min, and 2 strong bullish candles were also seen on the 10min, I could have gone in long, but by then, I was already looking out for a short setup. PLUS I was even more wary of those resistances.

Like I said, I'm primarily bearish. I did acknowledge that it was going to be difficult to go in short after realizing that ES has been trending up quite nicely for half a day prior to market open. But that didn't change the fact that ES is still not on an uptrend. I don't want to simply react to what was happening, especially when I didn't know where it was going. I could pick a level that I think it's going to be stopped in its track, and put in a short entry there, and if it doesn't stop, so be it.

I wouldn't chase a move like yesterday without the proper setup. I had used stops in my shorts precisely coz I was prepared for ES to continue to go up to test resistance. In a nutshell, I was looking out for short setups only and passing up other opportunities. One has to stick with one's plans and rules. So I stuck to mine, and missed the run up. I'm fine with that. What happens next is to reassess the market and apply the same rules and plan to trade it.

Yes, I am much better at scalping than any other mode of trading. But it's been very tiring following the tape, and I can't do it continuously. When I get really drained, shit happens. I am looking for a calmer way to trade - cool is always good in trading. Adrenaline causes blow ups. I want to keep a cool head and a healthy heart to FEEL what the market's doing. Following the tape and scalping doesn't allow me to see the bigger picture. Above all, it doesn't allow me to put in a stop (no time!!). I'll still scalp from time to time, especially during the quieter hours. But my focus now is on the learning process, and not so much on making money. I will still take scalp profits whenever I see fit of course. But I'll avoid scalping as a method.

I don't have any tricks for scalping. I read charts and I read the tape, just like most scalpers do. How I go about doing it I've done a little explaining on my recent entries.

I don't look at up and down volume. If there's a follow through on a move, the price patterns will tell. I don't need to be able to predict accurately what's going to happen next to trade. In anycase, I can make all the right prediction and NOT make money, and I can make the wrong predictions and still make money. I was clearly going against trend yesterday, but like I mentioned yesterday, I could have taken the 3 point scalp profits a few times had I chosen to take them. Or I could have been right, and went long after I get a confirmation, and sat through a 5 - 7 point retracement each time. I mean, the flag pole was formed in the first 30min of the trading session and that was it. The rest of the run was unimpressive at best.

Things tend to look so obvious on hindsight. But I'm not one who looks back and regret not having taken a trade, or ran too early. The only thing I absolutely dislike, is not having traded my plan and respected my rules. Coz that tells me I'm still a lousy trader, and I still have a very long way to go.

Sorry for the long response. Just need to set the record straight that I'm never out to fight trends. If I were indeed fighting anything, it was D. He came home telling me repeatedly that Citi has made money, and I kept saying that I heard him, and that I actually KNEW about Citi's news, and I kept selling LOL!

Contest Winners & The Lonely Trader's Musing

Thank you all, for responding to my post calling for views on where market's likely to be heading.

Regret that I am only given 2 books to award participants. I would have really liked to give them to all who have taken part.

I'm giving the 1st book to Eddie as a form of encouragement. Hope he continues to blog, and that in due course, will be able to see that the market is better treated as a teacher and a friend.

The 2nd book I'm giving to The Lonely Trader. He has done the impossible thing of confusing me even further on the first read of his "mini-book" (quoting Eddie). If I can't understand something, it has gotta be good. :-)

Below is his musing (in blue), which I have read over and over, and enjoyed it more each time I went over it. It contains a multitude of issues he could only briefly touch on (I believe he would have written 500 pages if only he had the time), and serves as a starting point for anyone who's interested in exploring further those topics being discussed.

I like what he stated in his opening - that "What we think depends on our time horizons and our objectives". I personally couldn't have agreed more. Time/investment horizon and objectives are factors that have always underpinned the framing of my arguments on such topics as whether daytrading, swing trading, or longer term investing is THE way to work our money. To me, each is a good timeframe, depending on one's needs and the resources at his/her disposal (time, energy, CAPITAL) - with the latter constraining the person to a specific investment horizon.

So, here goes The Lonely Trader's write-up that won him the book "Hedge Fund Trading Secrets Revealed" by Robert Dorfman:

I have to make my characteristic caveats here. What we think depends on our time horizons and our objectives. There is also the meta-question of where we choose to get our information. I don’t try to get too cute about it, preferring to get a broad view from mainstream media, bank research, and market commentary from a diverse range of folks in the know (excluding all speculators!). I think a lot of people go wrong in not caring enough about where they get their information.

My views are an amalgamation of what I have read – opinions, research and analysis, etc. – from other sources. Very little of the substance of my opinions is from original analysis. (And by analysis, I don’t mean the simple stuff the so-called blogosphere “experts” do every day. We can do most of that for ourselves. I’m talking about deep analysis here – the kind very smart people get paid a lot of money for.) So, very few of my opinions are original. Forgive me for any plagiarism, please. This will read like a confused rehash of what everyone else is saying, but I want the free book so here goes.

I have changed my mind since October/November when I said I was a long term buyer above 7500. The title of that post was “Rothschild would be a buyer here.” I was a bit too enthusiastic…. I don’t believe there will be the kind of turnaround everyone is hoping for in the latter half of 2009. There may be a brief respite, but that’s about it. In terms of the Dow, the odds are very good that the November 2008 low will crack – and very convincingly. Oil and gold will remain under pressure. Gold will not get much further above its highs of 2008 in the medium term, even with risk aversion increasing. I think the most popular position is and will be leaving everything in USD through much of 2009. On the macroeconomic front, I think deflation is not over. All the dollar-printing going on will not be inflationary – yet. Nobody will be spending any of that money. Inventories will collect dust, or be sold off at fire-sale prices. It won’t be enough to cover the bills. Factories and offices will close. Labor will stand pat on its unrealistic demands. Prices will fall across the board. Housing prices still have a lot more room to fall, and this won’t stop until well after 2009. I think that when this whole thing hits bottom, the peak to trough decline will exceed 10%. Real unemployment, not the crap that BLS puts out, will exceed 15% before the end of 2010. This will be what most thinking people – and most working people for that matter – call a depression.

Globally, I think 2009 will be growth-negative. Even if the IMF is right about 0.5%, in real terms I think this is a big net-negative. I think we have only seen roughly a third of the write downs from banks. In the US specifically, it is possible we could see a nationalized banking system. More banks will fail. Big banks. (Some are already insolvent.) States like California already are insolvent, and could be bankrupt before 2010. The US government will face a credit downgrade soon. Treasury flows will dry up as foreign buyers of US debt are forced to support their own collapsing economies. There will be defaults in Euroland – Spain, Italy and Greece are the top three contenders in the MSM, but who knows how many more will succumb to debt spirals. One or more could declare bankruptcy and abandon the monetary regime this year. This doesn’t mean I think the monetary union will dissolve, but as the larger economies of France, Germany and the Scandinavias build proverbial firewalls around their financial systems, weaker countries will be left to burn. Admittedly I’ve gone back and forth on the fate of the euro. I still think dissolution for the common currency is possible, but I wouldn’t bet money on it. (And I’m not, as you know.) The UK is already in serious trouble. At the beginning of 2008, insuring $10K in debt for five years cost $8. It now costs about $135. By comparison, the same debt in the US, which started out at roughly the same price in 2008, costs about $75 today. By the end of the year, EURUSD could be at parity, or close to it. GBPUSD could be at parity as well. (If you live in London now, try to get the hell out of there by 2010. Get your money out of there now.) In Asia, the picture is no better. Exports have all but ground to a halt. China needs to maintain a growth rate of 8%, according to its leaders, just to keep everyone happy. China has a very long and unhappy history with grumpy rural poor. I think its economy will be lucky to hit 5% and this will likely push rural poor from grumpy to froggy. China may have to “get military on their @$$es.” Demographics in China are fascinating – and under the circumstances, frightening in their contradictions and disparities. Unprecedented debt-financed overcapacity isn’t helping. I’m sure most of us already have an idea of what is at stake for those unfortunate people. There will be sovereign defaults in “Other Asia”. (My term.) Corporate default risk has been flagged for more than a year by rating agencies, particularly in shipping, property and technology. In an area not particularly known for transparency and robust institutions, the first big default will come as a surprise to the market. The result will probably be a cascade of panic. The general problem in Asia will only grow worse and it will be understated until a major dislocation occurs. Responses will be ineffectual. Protectionism in China and Japan, a typical reaction when they perceive any threat to their market shares and revenue streams, will only sink them further into the hole. India isn’t immune either. For many of the same reasons. And the fact that Asia’s financial systems are relatively insulated from the credit crisis is of marginal benefit when global contagion is peaking – not financial contagion, but the most basic kind of economic contagion among interdependent economies.

I could go on and on, but I’m starting to get depressed. Trading wise, stay very short term unless you can scale your bets to keep risk low. Long term, keep bet sizes miniscule. When things start to get crazy again, even those miniscule bets will start to look too big if the instrument rolls over on the trade. As far as specific ideas, my favorites are puts on Alt-A, Prime and commercial real estate. (Shorting any underlying instruments will probably seem too risky.) If you are long gold, hedge your position. There is something very fishy about gold right now. Unless $900 holds, I expect a deeper correction soon before heading higher. Same with Silver. Copper will depend on China – and demand looks like it will pick up a bit. But I don’t think the move will be sustained. While I think it is reasonable to be long oil, don’t hold your breath for a return to $100 and beyond anytime soon. Commodities will be unpredictable. Demand shouldn’t pick up too much for most, but even if it does don’t expect prices to spike. (Recall China’s recent announcement of a doubling of soybean imports – the underlying price actually fell afterward.) I hear of commodities going both ways, with talk about breakouts and inflation and all that. I think we’re a long way from the kind of inflation many pundits are expecting.

Currencies will continue to present opportunities for speculators with money to burn. Stay away from illiquid currencies unless you have a specific methodology that is suited to trading them. Stay away from pure yield plays until some semblance of "order" returns to the markets. As far as the majors go, there are some opportunites shaping up. Be careful on the crosses. Be careful with the CAD. Shorting GBP rallies might be an idea I can get behind. Shorting the yen as well, especially in relation to the USD. AUD should be supported well by gold for the time being. Look for relative strength to improve over the short term. I’m still betting on the EURUSD and the NZDJPY, but you know my bet sizes and time horizons are unique – and uniquely suited to large adverse movements. So those trades don’t really reflect my fundamental views.

These themes should remain with us well into 2010, barring some kind of unforeseen dislocation, like a major war. (Another topic for another time.) I’ve only touched on Japan because I’m still building my case, but it will figure prominently in our woes to come. (Or, if we’re lucky, merely “whoas”.) I’m sure I’ve missed some important points and I’ve probably contradicted myself somewhere, but there it is.