Merry Christmas!

Muhammad Ali

Inside of a ring or out, ain't nothing wrong with going down. It's staying down that's wrong. - Muhammad Ali

On Knowledge - Immersion

The only way of full knowledge lies in the act of love: this act transcends thought, it transcends words. It is the daring plunge into the experience of union. - Erich Fromm

(image from Clandestine-Wishes)

Don't Be Confined By "Verbal" or "Academic" Knowledge

"We need to respect the fact that it is possible to know without knowing why we know and accept that - sometimes - we're better off that way."

- Malcolm Gladwell (h/t Jules)

Starting Hands for Solid No Limit Play

There is obviously some variability in hand choice depending on the opponents you are playing. For instance, against tight strong players, I would be hesitant to go all-in with anything other than a pair of Aces. That's a strong starting hand. If you're risking a reasonably small amount of money relative to your bankroll, then going all in with KK, QQ, JJ, and AK should be fine. Again, it depends on your opponents and how much you are willing to risk. Personally, I love players who are willing to go all-in with Ax, KK, QQ, JJ, especially when I have AA. It allows me to double up more often than not.

Anyway, here are the hands for solid no limit play:

1) AA - Yes, all by itself. A special hand that I try to play in whatever way will likely get me an all-in taker, or at least a heads up situation. If you're in early position, I would normally limp in unless I think I can get someone to take a bite. If I get bet into pre-flop, I always raise and hope for a re-raise.

2) KK, QQ, JJ - all strong, but I would be careful not to overvalue them against tight opponents. Against players spewing chips, go all-in. In any case, make sure to raise if you have a lot of biting/limping.

3) AK - "big slick." Rock this one when you can. I like going all-in against weaker opponents. But the hand is a bit overrated, in my opinion. Drop it if there's a lot of raising post-flop without a hit.

4) Face-10+ - I will call reasonable bets pre-flop with a face card and anything ten or up. Suited is an added plus. I'll pay around 3-5x the big blind.

5) Face-9 - I will do my best to limp in with this, even if it is suited (suited does not add that much value, and I would be wary if you do not have the suited ace in hand or on board). Don't pay more than 2-3x the big blind for this.

6) 99 and 1010 - Play these like (4) or (5).

7) Other pairs - If there are a lot of people in the pot, I may pay 3x the big blind. If I am first or if there are only a few, I try to limp.

8) Anything else - I probably wouldn't play much else. Save your money.

Losing Weight: An Analogy

I know how to lose weight. It's hard; it likely doesn't taste good; and, it isn't fun. But I know how to do it. Whether or not I do it depends on discipline. The same goes for trading and poker. I know what I have to do, but it isn't fun. It's mostly sitting, waiting, taking only optimal setups. I know how to do it, but will I?

Hittin' Switches In My Black Six-Fo'

A little patience, taking the good bet even when it doesn't end in a gain, maintaining composure. Profit.

A graph and some more soon.

A real gangsta-a** n***** plays his cards right But real gangsta-a** n***** don't flex nuts 'cause real gangsta-a** n***** know they got em Yeah. I drive around in my "drop-top benz" "hittin' switches in my black six-fo'." It's the life of a high roller. Haha. /sigh.

Chinese Proverb

Fish see the bait, but not the hook; men see the profit, but not the peril.

Self-Improvement

I love Fear and Greed Trader. After looking through his articles (once again), I found this gem.

If you are having trouble achieving your trading goals, take time out to examine the real causes of your problems. Working towards improvement will take a dedicated approach on your part. Identification of the problems are the first step. Attacking the problems one at a time is the first part of the solution. Doing the right thing at the right time based on the information you have should be your goal.

Edit: Added a few books to my Recommended Reading list. Nothing much, but still trying to slowly expand the titles.

Jobs

I don't have much time at the moment! Unexpected work I need to do, so no more poker playing or cash-trading for awhile (might do a little paper trading if I can easily find a good program). Here's an interesting chart, though:

December 2nd

My life is a little messy at the moment. Anyway, here's the current poker chart (bankroll is at $15.77) and a thanks to Long&Wrong for encouraging me to play no-limit. I am mixing the two and it works out pretty well.

More soon, hopefully.

Longer Update

This evening I had some time and got into some poker. I did very well minimizing tilt and maximizing profit while playing two tables. I held onto my strategy even while getting dealt terrible cards and getting bad beats and river beats, which made me proud. Midway through, I pulled myself up and went on to make some "big" bucks (up to $12.57).

Right now I want to continue playing on the $.02/.04 limit tables with $.30 average pot sizes or larger. When I get up to $20, then I'll take a step up in limits. I've broken the rule before and it rarely goes well (at least not for any extended period of time): You need to play the games that your bankroll can handle!

As for the dip in the chart, I played some poker last week on a shoddy internet connection. I kept getting kicked off with a good hand or with money in the pot (which normally got lost, whether or not I was ahead at the time). I couldn't take the stress and wasn't thinking well enough to log off when I should have. Finding myself on tilt, I took an easy ~$1 hit before I kicked myself off.

The more I work on strategy and emotion the better I will do as I progress up through the limits. Also, working on strategy and emotion in a poker environment transfers, albeit nowhere near perfectly, to a market environment. And seeing that I want to run an FXCM account on this site as well, I think I will have two interesting strategies to develop side by side.

Take care, and remember: Play/Trade well, and the money will follow.

Back

Just a short update because I am so busy. Here is an updated graph of my online poker bankroll (now at $10.91). You'll see a dip in the graph (which has a good lesson behind it); more on that later.

Plus, because of my interest in the poker bankroll, I think I am going to start something similar in the forex realm. With $25 I can open an account at FXCM. We'll see how that pans out.

More later.

Thanksgiving Hiatus

This week is going to be much busier than I thought it would be. More than likely, I will not make any posts until next week.


2BVC23PFDBGN

Comic Relief

Timothy Sykes' Pennystocking Leaves Metaphorical Bad Taste In Mouth

Be careful--if you want to use these videos for educational purposes, the author recommends you don't. If you use the video as he suggests, for entertainment purposes, you will be greatly disappointed. Despite reviews on the internet, I think you will be disappointed with Pennystocking by Timothy Sykes no matter how you use it.

Before getting into the content (poor, albeit what he does include is largely commoditized by the internet--blogs, chart sites, informational/educational sites; all mostly free), I want to get into the price and a concept I think many beginners--assuming you want to succeed--should learn: beware the "guru" who tries to sell you his knowledge as he will be a draw on your account. Ask yourself how much of your account goes towards "overhead," which includes newsletters, books, educational/motivational dvds, software, websites, computer setups, etc. The higher the percentage, the greater the percentage you will have to make back in order to break even. When similar material is available free (or relatively inexpensive) on the internet--often of similar or better quality--you have to ask yourself, "What am I paying for?"

You are paying for Timothy Sykes name and the publicity he picked up from his (luck) trading during the dot com boom. The $300 or $400 price on the DVD could not possibly be going towards the meager tidbits of information he gained during his more successful (i.e. lucky) days of trading. Even he says, at the end of DVD 2 of Pennystocking:

"A lot of newsletter writers and DVDs they want to inform you, but they don't want you to be completely smart, because you would have no need for their products. [...] I don't have much to offer. You better get smarter than me, because I have nothing else."

I am guessing his eventual $500,000 loss and his hefty gains in the psuedo-education industry are not enough to persuade people against this purchase; perhaps his inclusion of a "Mainstream Publishing" section in his video will make you question the video's point. Also, a section on learning from his mistakes? Not quite as useful as a guide on how to profit in the marketplace (his guide boils down to a certain pattern that tends to appear, at least successful, in bull markets).

As I stated before, $300+ is a lot to make on a video that can be found (albeit without Timothy Sykes and with slightly different--arguably better--content) for FREE, or a fraction of the cost, online. The information presented in his video is a near-commodity covered up by "proprietary" lingo like: supernova, stairstepper and other garbage that has previously been named! He'll show you tons of charts, but without much more than a continuous babbling of fairly useless information and bad jokes. If you're a beginner, perhaps you will glean something from this. But, as said previously, you can get the same content in a book or from youtube for a fraction of the cost (and from someone less egotistical and self-promoting).

Back to overhead: If you have a $4,000 account you will be spending the equivalent of 10% on this DVD! And, if you are anything like the average rookie, you will need to purchase other services. Timothy Sykes even highly recommends learning "advanced" technical analysis, which he does not show you in this video. Is he going to present that information to you for free? Or at another hefty price? (It's the later, folks).

Perhaps the convenience is all worth it. Even if it is sub-standard information given by a sub-par trader (and just because you turned $12k into $1.2m during a BULL MARKET, does not mean you are a good teacher!) who tells you he partied the night before recording, you get it all in one place. I see it as a large (in)convience cost, but would not even recommend using it as a primary source if borrowed from a friend or purchased used for $29.99 (a more reasonable, if not still inflated, price). It just isn't that good.

Here are some wonderful quotes directly from the mouth of Timothy Sykes:

"Take advantage of everything." (Yes, especially those desperate for wealth).

A moment of self-clarity that seems to go over Timothy Syke's head: "I was like, 'Wow! I'm a freaking genius.' Little did I know, I was just in the right place at the right time."

"This is not a complete guide, just to push you in the right direction." - Yes, a $397 push.

(Disclosure: I have no vested interest in Timothy Syke's or any of his products. Furthermore, I have only watched his Pennystocking DVD, which as of today goes for $397, and have not used any of Timothy Sykes' other products, although I have read the first 80 pages or so of his book, An American Hedge Fund. I believe I have stayed within the law presenting the information above, but if I have not, please give me the heads up. I am but a small site. Then again, I'm guessing any publicity is probably good publicity for Timothy Syke's and his mini-empire).

Icarus, But With Redemption

(Note: I got a copy of Tim Sykes' Pennystocking DVD and am in the process of taking notes for a review/criticism while finishing the DVD. More market and trading articles will also get posted as I hope to have my futures account setup after Thanksgiving. I'm going to keep the poker posts to a minimum--maybe once or twice a week--,although I will continue to update the chart to the right. I have a small position in USDJPY, but am reconsidering as its continues to gradually fall amongst a dollar struggling to find support.)

My bankroll has made it to $9.91, which looks great on a daily line graph. However, I want to mention something that would only show up on a candlestick or an interday chart.

Yesterday, I jumped onto my account and saw four good tables. I thought I could make some serious cash in no time by playing all four at once, without warm-up. Unfortunately, I realized too late (and my ego held on after I intellectually discovered my flaw) that I could not handle the same mental player profiling (aside: while your cards to affect the game, you must also play with your opponents' psychology).

After twenty minutes I had already made too many mistakes, including playing a queen high thinking I had a straight. Garbage on my part, which I only exacerbated by refusing to acknowledge the problem. Instead, I allowed my frustration to take over and turn to anger and further disrupt my game. By the end of the first hour or so I was down to 7.00; which eventually dipped somewhat lower before I managed to close two of the tables and work my way back up.


Lesson is twofold: if you want to make money, don't overwhelm yourself; and, if you want to build a bankroll, you're going to have to "grind" it out. Boring rules, but rules that must be followed to reduce risk.

(PS: I love this painting of Icarus falling into the ocean. He is not giving much attention--he's near the boat to the bottom right. I know it's pretty common in language art texts, but I still enjoy the perspective change.)

Why Not To Be An Online Poker Player; Or, I'm Just Going To Steal From Solfest Because Everyone Does It

I wondered why Long&Wrong said Solfest disliked poker yesterday (I do have to keep my audience of five people happy), so I decided to do some research. While searching Solfest's site for articles on poker, blogger directed me to this beautiful article which seemed to have nothing to do with poker. Then I came to the last couple of lines (bold/italic modification by me):

YOU MUST PRESERVE CAPITAL.

In my opinion that is the first and last thing all traders must think about. Not charts, not set ups, not what will I do with all my profit.

Capital preservation. It's not sexy, it's not fun, it's not exciting, and it has rules, rules that must be followed or you’re fired. In other words it's everything that you hated about your other job.

If you want a fun, exciting, and sexy job try on line poker.

If you want to be a trader/risk manager shave your head bald, insult all your friends until they leave, stop bathing, wear polyester, and sniff constantly

It's an amazing article that will mislead tons of newbies into the poker scene (thank you Solfest)! I'm happy.

But, really, a well done article on why your reasons for being a trader are likely fundamentally flawed.

Patterns, Numerology and Statistics Through Pi, the Movie

(Click on the pic to go to the video over at youtube; it won't let me embed it)

Sol: "It can't be easily summed up with math. There is no simple [out]."

Max: "But as a Go game progresses, the possibilities become smaller and smaller. The board does take on order. Soon, all the moves are predictable."

Sol: "So, so?"

Max: "So maybe, even though we are not sophisticated enough to be aware of it, there is a pattern, an order, underlying every Go game. Maybe that pattern is like the pattern in the stock market..."

There's more in the clip relating to patterns and the division between "numerology" and "science," all of which one can apply to the stock market. Actually--Max, the protagonist in the movie, eventually finds a way to predict market prices (and, even more amusing, to speak with God). It is an enjoyable, entertaining movie, not to be confused with actual reality. But it does have its own artistic and "philosophic" merits.

Poker +$0.74

I took a little time (~30mins) to play poker today and happened to get into a good game. Within several hands I upped my $.80 buyin to over $1. I had some fluctuations in between that point and leaving the table, but I managed my emotions and played my luck well. As I said before, when I play a single table I listen to music and read in order to keep my mind from becoming impatient and bored. At the moment I am going through Timothy Syke's An American Hedge Fund. So far, very interesting. After placing in the WSOP, starting a hedge fund is my second goal in life =P Haha.

Starting Hands for Short Handed Limit Texas Hold'em

These are the starting hands I consider playing in short handed (i.e. 6-player) limit Texas Hold'em. I would not recommend using this list for full table games (i.e. 10-player); those games require tighter playing.

1) Below are the hands that I always play (and consider raising) no matter what:

• AA, AK, KK, QQ, JJ
  

2) Hands I most always play and likely raise:

• 99, 1010, A9+, K9+, Q9+, J9+
  

3) Hands I play more conservatively:

• Other pairs, 910s, A2+
  

Most other hands I throw away, and if I have to pay too much to play hands in section 3, I fold them as well. I don't like playing suited connectors unless I get a good deal (lots of players in the pot and a cheap, if not a limping, entry). Small pairs normally are not worth it when there is a ton of betting. You have about a 10% chance to hit a set on the flop, and that does not necessarily mean you will win if you go to the river. I prefer not to risk it.

Among the factors I consider when debating a raise are:

• Strength of hand
  
  
  
  • you want to put as much money as you can get on the top holdings without scaring away too many bettors
    
  
  
• Number of other players in the hand
  
  
  
  • the more players in the hand, the more likely you are to lose; if you can scare some out, that's better for your bottom line in the long run.
  
  
• Reraising can often give you a look into what the other person has.
  
  
  
  • People tend to reraise a reraise if they have a high pair or AJ+. Other than that, people tend to merely call a reraise. It doesn't always work, and I often use this as a way to throw off my opponent if they are an easy read. But at the low tables, people play much more simply. And those who have an AA are rarely going to call a reraise unless they fear scaring people away.
    

All of the above starting hands are guidelines I use to play the game. Sometimes I break my rules depending on how others are structuring their play. Deviating too far from the above (e.g. raising 27offsuit or always raising/calling preflop) will tend to hurt you in the long run. Maybe you can get away with it, but I find that playing tight and aggressive works out best, and most professionals and good players agree. Bluffing with shit will only work so many times. If you do it too frequently, you're going to get called and busted. Let other people do that--it's how you'll make money.

Poker +$1.13

I played some poker this evening for a little over an hour. I struggled for the first half hour to get back up to break even after several losses. Then I managed to get some good action on some sweet hands. My anger is my main problem; you can't let emotion control you in this game (just like in trading). If you let your anger dictate your play instead of your reason, you're going to end up betting much too frequently and right into other players' good hands. Luckily I got my emotions under control and managed a good +$1.13 evening. At these stakes, that is not bad at all (note: I played at three different tables, but only had two open at any given time...Monday evening is normally not the most attractive time to play).

(edit: changed the chart's dates. I had it starting on Saturday rather than Friday of last week. That has been fixed.)

Poker Experiment

On Friday I got curious. I wanted to know how far someone could go playing online poker, starting with a $5 balance. In the right hand column further down the page, you'll see a line chart (like the one directly to the right). I played a little on Saturday and Sunday and pulled the account up to its current standing of $6.15, which makes me laugh inside--such risky stakes!

Because I think it will be fun for others to follow along, I'll try to keep it updated. I don't play every day, and when I do play I don't always close the day out in the green (note: besides statistical deviations, drawdowns, subpar playing, etc, I can let my anger get the best of me).

In order for this experiment to have any chance of success, I currently play only on the $.02/.04 limit tables. The buyin is $.80, which, if I were doing bankroll management correctly, should make my starting amount at least $8.00. But, because these tables tend to be playgrounds for the bored and, at most, battlegrounds for rookies, I can get away with the underfunding of my bankroll.

What I look for are loose games, which are easily identifiable by large "average pot sizes" and a high "percentage who see the flop." If you have people willing to raise with shit, and you can keep from playing that same shit (takes some discipline), then you have an edge. That's the best thing to have when playing poker, trading stocks, or doing much of anything in life.

I can play up to four tables at a time; I prefer playing six player (i.e. short handed) tables, because I find it easier to figure out my opponents faster. But, because of these preferences, and the attributes I search for in the paragraph above, I do not always find four tables I can play at once. On Friday and Saturday, there tend to be more games, and I may get four good tables. But, during the week I am happy with about two. If I play one, I read, listen to music, or watch a movie as well. This is because my brain quickly becomes restless and I end up playing like a donkey.

In any case, this should be fun. Let me know if you (or a blogger you follow) keeps track of a poker bankroll. I'm interested in following a few outside of my own. In addition to the above information, I will also keep some of the more interesting rounds/hands for public analysis, where you can criticize my idiocy and I can boast (mostly the former, as it tends to be more prevalent).

(DISCLAIMER): Be careful when playing poker. Most sites charge at least a 5% rake, meaning the game is "negative-sum". If you have no edge over the other players, you will not make any money in the long run. Your edge also must be able to make up for the rake. All in all, if you're not doing this for fun, you better have a good plan for winning. Most people lose. So, please don't open a big account because you see me doubling my micro account (and should it ever get any bigger, please do not fund a poker account thinking you can do what I can--I play and study the game a lot more than average). YOU WILL MOST LIKELY LOSE MONEY OVERTIME IF NOT AFTER YOUR FIRST FEW HANDS/HOURS!

ENJOY!

Site Updates

(UPDATE: dil.icio.us bookmarks now have their own side panel to the right.)

It's hard to see, but I added a del.icio.us (I like it spelled out that way better than the new "delicious.com" garbage) bookmarks to the side panel below "Sources." I'm going to add another bar further to the right for a little more space. But, for the moment, this will have to do. I'll use it to keep track of and share the articles that I am currently reading around the interwebs.

I am also surprised at the number of interesting, useful, and high quality financial and trading sites I come across (all of those linked in this sentence do not include those to the right). Along with reading and personal writing, I have spent this weekend with my brother (who came to visit me) and exploring the areas of the internet devoted to trading. There's more than enough out there for any interested trader to develop his or her talents for a relatively inexpensive amount.

More posted soon.

A Little Humor To End The Week

Over at Infectious Greed, Kedrosky clears up the misunderstanding of his esoteric Yo -yos in Merekats model by merely pricing Gold in Gold. Really--things always work out well when you keep them simple and sweet.

Check out this correlation (h/t Ritholtz) developed by Overthinking It. If we want to get rock & roll back on its feet and kill the electronica/R&B/rap scenes, we're going to have to allow extensive offshore and Alaskan drilling. It's in the numbers, folks.

And, XKCD says get your voice heard. Just make sure you know a little something about the topic.

Recommended Reading

This is a preliminary list of books that I feel are important to the developing trader. (What self-respecting blog hasn't suggested at least a couple revelatory books?).

Last updated: December 7, 2009 (I know this list is insufficient. I have more books. I'm just feelings as though my comment creativity is faltering at the moment =))

Trading:

Japanese Candlestick Charting Techniques by Steve Nison - Candlestick charting is one of the most used (and successfully used) forms of charting by traders. Nison is an authority on the subject.

Point & Figure Charting by Thomas Dorsey - Gave me more than enough reason to use point and figure charts. One of the seminal books on the technique.

Liar's Poker by Michael Lewis - See what happened in the bond markets of the 1980's. Lewis presents the scene in a humorous and engaging style.

Reminiscences of a Stock Operator by Edwin Lefèvre - The quintessential story of a trader fighting his way to riches.


Economics:

Irrational Exuberance by Robert J. Shiller - One of my favorite books on the psychology underlying the tech crash and the subsequent housing boom (and eventual crash).

The Long Tail by Chris Anderson - Explains how business has changed with the advent of the internet.

Poker:

Phil Gordon's Little Green Book by Phil Gordon - An excellent guide for anyone looking to improve their No-Limit Texas Hold'em game.

The Mathematics of Poker by Bill Chen and Jerrod Ankenman - A book that strives to increase quantitative/statistical knowledge for the game of poker.

The Tao of Poker by Larry W. Phillips - Learn to go with the flow of the game by applying the principles of Taoism to your poker game. As with many of the deeper poker books, much of the insight can be applied to the financial markets.

Middle Limit Holdem Poker by Bob Ciaffone and Jim Brier - Most poker books focus on no limit, which is why I like this book. It centers on limit Texas Hold'em and comes with tons of examples/explanations.

Philosophy:

Tao Te Ching by Lao Tzu - The Taoist text.

Beyond Good and Evil by Friedrich Nietzsche - I enjoy me some Nietzsche every now and then.

Be Like Bamboo

Ancient Chinese mythology relates the charming tale of the flexible bamboo and the defiant oak. During the Monsoon season strong winds assaulted these plants. The stubborn oak was broken in half, but the resilient bamboo bending to a superior force survived to stand straight when the winds changed. While thoughtful people can easily see many applications of this moral, the one concerning us here is the maxim of not fighting the ticker tape.

- James Dines

I'm a sucker for books. Today I picked up a used book from the 90's called Intermarket Analysis and Investing: Integrating Economic, Fundamental, and Technical Trends. So far, I'm enjoying it immensely.

The above quote begins a chapter on trend analysis. I liked it particularly because the moral fits a trade I made earlier this morning in the EURUSD. If I had acknowledged the "ticker tape," my trade would have broken even. Nah, the numbers can't be right! Oh well, as long as I do not remain in denial about the trade, I learn something. Furthermore, I did much better than I would have when I first started trading. Looking at improvement tends to be a good way to view things.

Brian Tracy's Seven Rules to Success

Last night a friend and I were talking about achieving success. She is doing missionary work throughout the United States and has taken many courses on success and various related subjects; she hopes to become a youth leader. Because of this, and the fact that I respect and appreciate her advice, I thought I would share her book suggestion: Maximum Success by Brian Tracy.

While scouring the internet for a copy After driving to the book store to pick up a copy, I found an inspiring (and interesting) motivational speech on YouTube given by Brian Tracy. If you fast forward to ~2:15 in the video below you will get his Seven Rules To Success. I would also recommend the story he tells and the speech he gives in the first three videos. His adventure crossing the Sahara Desert as a young man is humorous, encouraging and insightful.


(Rules begin at ~2:15)

Part 1
Part 2
Part 3

Brian Tracy's Seven Rules To Success:

1. Take Action.
2. Always forward, never backward.
3. The only time you have is NOW.
4. Fly with the eagles.
5. Obstacles and difficulties come not to obstruct, but to instruct.
6. Be clear on your goals. Keep your mind open.
7. No one does it alone.

Fundamentals and Technicals Work Together

I started my journey trading stocks. Eventually I coupled them with options, and shortly after that, I added forex and futures to the mix. I cannot tell you how helpful it is to have a practical understanding of and experience within the various financial markets. For instance, Austin P's article today discusses a likely explanation for some of the U.S. stock market's moves. He does this by combining an understanding of the forex markets with his understanding of the equities markets. A snippet that gets at the heart of his article:

Stock markets in general and index futures in particular are serving as quasi-FX markets counter to the USD wiggles. USD goes one way, euro – yen – oil – gold – stocks go opposite. All day, every day.

I was inaugurated into the trading world through the sect of technical analysis. I love technical analysis, but my mind is far to inquisitive to be happy with mere charts. I wanted to understand what is happening behind the candlesticks, bars, lines, etc. Whether this is necessary in general for successful trading does not really matter, because, for me, it is. I use technical analysis to determine entries, exits, and short term "momentum" trades. And I use fundamentals (well, weak fundamentals) to determine underlying investor psychology and possible long term developments that may negate the strength of my technical analysis (I like to think of fundamentals as being a gravity from which technicals experience a pull).

I had started this article merely to discuss the effects of the weakening dollar on our stock market, but I diverged. However, I would still like to post a chart from Bespoke Investment Group (I had some other graphs, but can't find them at the moment):


Not such a hot rally if you factor in dollar depreciation.

Poker Analogy (1st of however many): Playing Every Hand is for the Fish

I read it all the time on trading blogs. Blog-traders say something along the lines of I am going to set aside this amount of time to trade and will try to make (insert some arbitrary number) of trades and strive for (insert another arbitrary number) in profit.

Even though I did something along these lines when I first began trading (with limited success), the more I trade, the more I realize that you cannot force yourself to take a certain number of trades every day, and you have no way in knowing exactly how much you will make in a day.

In poker you should never say, "I am going to play 1 in 3 hands," or "20 hands every hour" or anything along those lines. If you get dealt a 2/7 offsuit four times in a row, on the fourth time I would fold just as I did the first three times. Letting ideals and shoulds get in the way will end up ruining your game, forcing you to play hands that, overtime, will drain your bankroll. The same goes with trading--albeit, it is sometimes harder to tell whether you have been dealt crap. But, in time, you should definitely know when to "fold" and should never, ever let "goals" focused on uncontrollable events get in the way of solid trading or poker playing.

Do not fight it when you get crap after crap after crap. Statistically, it will happen--so don't play it! You do not want to be down half a stack (or 10, 20, 50+%) when a good trade (or pocket aces) comes along.

In the long run, it is those who are able to sit back and wait for the good setups who get paid off. Playing every hand is for the fish.

Texas Hold'em Investing

Check out Texas Hold'em Investing. While I will still write something about the connection between poker and investing, I strongly suggest checking out that site (and their free online book) in the mean time.

PS: Interesting article on the man behind Susquehanna International and his connection to poker and horse racing. A definite read for anyone interested in how rational thought can lead to (large) profit.

POST SOMETHING GODDAMNIT (and its equivalent in the trading world)

I've been writing and writing, and I am not satisfied with any of it! So, I figured I would just jump in and post something. Not always the best way to get started, but I do find it tends to help. I often find myself doing something similar when trading. If I sense myself striving for that "perfect" beginning trade, I know that I need to make an adequate number of calculations and jump in. My trades are never going to be perfect, because even if I had all the time and information in the world, I believe that at the bottom of it there are probabilities--not certainties. Because of that, my perfect trade is not always a profitable trade, but rather a trade that nets me cash more than it loses me cash; and, since I have limited time, a trade that gives me a significantly larger chance of netting a profit than taking a loss.

As for articles, I have yet to fully understand that predicament.

PS: Made a couple of open and close 10-20pip trades in CADUSD, EURUSD, and AUDUSD. Also, took a nibble of some USDJPY. Looking to fund a futures account so I can get back into trading the ES and NQ (among other things), but haven't gotten around to it quite yet.

Lame Update; Interesting Links

Just for transparency's sake, all positions spoken of over the past few days have been closed with profit. I am making a few scalps here and there to test the waters. Hopefully this will help develop my sense of where we are headed over the next couple of days; sometimes this helps, sometimes I just find myself waiting for a revelation. In any case, there seems to be a lot of action in the markets. Also, remember to be careful with the likely volume surge around the FOMC rate decision.

As for the site, I am working on several articles, my favorite (at least conceptually) compares poker and trading. I am profitable and relatively knowledgeable at both, so I hope I can add some insight.

Insightful outside posts:
- Dr. Brett on expectations/fantasy,
- Australia hikes interest rates,
- gold is rising,
- solfest links some amazing video of Buffett, and
- beware the "Jokers".

A Couple Points of View

Made some money off a long on EUR/JPY (100pips) and a short of AUD/USD (~20pips). Still with the EURUSD and USDJPY trades. Not sure what I'm going to do yet.

Stewie has a post pointing out a likely rally forming. I wouldn't discount that info one bit. Over at Jesse's are some charts and commentary emphasizing areas of interest (to those who want the odds in their favor)--I am also wondering if this rally, from the March lows, could continue to steadily increase like the one in our recent past. Still, he points out several areas of concern.

Over at Ben Bittrolff's, Bittrolff outlines four conditions of the current market that place stress on its upward movement. And contrary to Bittrolff, Carl Futia sees the market rallying soon.

I am standing back and watching things for a little more information; but, find myself leaning towards the short side, albeit, with care as I believe there is still plenty of rallying power.

EURUSD Charts

I wish I knew exactly what was going to happen with the EURUSD pair (wouldn't we all?), but such certainties are rarely, if at all, guaranteed in this world; and, if they are, they tend not to yield much of a return.

Looking at the EURUSD chart to the left, you can see the ambiguity of the situation. There is no perfect way to draw the lines, and depending on slight variations, the dollar could be heading towards greater strength or greater weakness.


Moving onto the UUP, things appear to be somewhat more conclusive, although we are still talking probabilities. When you have a downward wedge pattern like the one FINVIZ has so kindly highlighted with support and resistance lines, markets tend to move upward once the end of the wedge is reached.

That would be my bet, and I have seen such reversals take place before. I would even go so far as saying that the volume (at least in the UUP) more or less strengthens such an outlook.

Sometimes You Just Cannot Win

There's nothing I could have done to get three of the same colored gems in a row. Sometimes you just cannot win. Don't stress about it; keep going, keep pushing. Such things are statistically unlikely, meaning, if you managed a god awful score this time, your next try will typically come out better (read up on reversion to the mean).

Yen vs Euro

Yesterday, I posted some charts that I thought might push the dollar either further up, or further down. I had my beliefs (strengthening), but allowed things to come together on their own.

I put a short on the EURUSD pair and a long on the USDJPY pair. The first succeeded, the latter, no. I am trying to figure out what allowed the JPY currency to maintain greater strength than the EUR. It looks like their was an interest rate decision by Japan's central bank yesterday, plus a handful of economic releases. I truly do not know what contributes most to investors' analysis of the economic strength of a currency.

I still think that the USDJPY will hold its recent low and move upward. I'll continue watching the charts for technical entries/exits.

NYSE Bullish Percent Index

I like looking at this index. Once it goes below 70%, there tends to be some type of correction. Before putting any money on a short, I would watch the dollar. The stronger it gets, the weaker the S&P500 gets (at least right now) and vice versa. I'm guessing that if the dollar continues to strengthen after all of the volume in the UUP yesterday (check out the charts below), we will upward resistance in the US Markets.

If that happens, some people will get jitters and move their money out, perhaps into cash or treasuries or something "safe". I don't know how much of a reaction this will all cause (or if we have experienced most of it already), but that is my current mental framework of the market.

The Dollar, October 30, 2009

What is happening to the dollar? Look at that volume, both on the daily and weekly.

Will it rebound? or are we set for further weakness?