Double Dip or Simple Fear ?
Investors and traders are a crazy bunch and they often do things which boggle the mind and the recent market turmoil is proof of that. Even yours truly issued a clear statement that he was going to be sitting on the sidelines for bit, since there was simply no way to trust the systems to cope with the extreme reactions displayed.
As an example… If the US had decided refused to raise the debt ceiling and chosen to default … the market could have appluaded the decision as the right one , and actually turned around and gone up.
Alternatively , all the pricing models which factor in the treasuries as the de-facto risk premia would have been effectively dealth a death blow… Markets could have tanked due to sheer panic by the institutions… Prior to the decision it was a toss up which way markets would go…
Post the decision, traders now had to deal with what the rating agencies will do … And the recent conflicting decisions by Moodys and the S&P rating agencies, have still not created the clarity of thought, traders love to have for seasoned decsion making
As I promised in the previous post, I will give more clarification on what to do next
The Market now seems to have spoken…Loud and Clear ….Listen UP ! We are in a BEAR market… for how long we dont know yet , but we are in a BEAR market now…please make no mistake of it.
With the S&P breaking below its 50 and 200 day moving averages, My advise to those who care to listen is to now look to go Short. Select short positions from stocks or sectors which were displaying a topping pattern and go short. Look closely at the chart above… See that Big Volume Spike…. its in the Billions… We need to see that Volume evenloy distributed and coming back into the markt before you even think of buying Stocks.(Read the Caveat Below).
CAVAET:
Sure many talking heads will come out now and talk of how things are really cheap and this is the time to get great deals… I agree. If you are able to do/have the following
- A team of research analysts who do a proper company valuation for you.
- Who can guarantee the books are not cooked. i.e We can actually trust the data produced in the financila statements… We dont want another Enron
- Stocks which are still shwoing strength in the Bear Market. i.e Stocks which are showing divergent behaviour from the general markets.
Failing these three conditions above, please stay safe … by playing on the short side.
Finally, Congratulations to our all our OWL subscribers who pocketed recent gains of over 300% on our May 29th recommendation. There will be two recommendations issued in August due to the vast amount of profit opportunities currently present in the Options Arena.
Stay Empowered.
Ty
Internal States and Internal Dialogues precede External Action
Hi there,
Here is a simple joke which highlights the power of the above, and why it is crucial that you actively monitor your internal dialogue.
A young man named Tom, had a tire puncture, in the middle of night and needed to change his tire. He flagged down car after car, but none stopped because it was really late and there was a massive downpour. So he locked up the car, and decided to start walking to try to find a house in the neighbourhood where he could borrow a car jack.
Whilst walking, all sorts of thoughts plagued him, ranging from “what if there is no house in sight? “ to “what if they don’t have a jack even if there is a house?” The more he walked, the more thoughts of dread filled him.
Every time positive thoughts tried to take over like “Don’t worry things will be fine, I am sure I will find a house “ He pushed them away with even more negative thoughts like “what if the owner of the house is really cruel and refuses me the jack? “,
That specific thought took hold, and he began to wonder how people could be so cruel to their fellow man. The further he thought about it, the more he “realised” how mean and selfish people could be.
He realised how many times no matter how he tried to get things done somebody somewhere always stopped him. He realised how unfortunate things had been for him, his whole life, and how hard he had always had to struggle for every single thing which had come his way.
Suddenly, he saw a light reflecting from a house in the distance and quickened his steps. But the closer he got, the more he “realised” how unlucky he was with people, things, situations etc. He however felt; BUT I am tough and I CAN SURVIVE. Always have, and I always will.
On getting up to the door. He rang the bell. A friendly looking middle aged man opened door, and just before he could say a single word, Tom slammed the door shut in the House Owners faces (Whilst remaining on the outside) and screamed above the rain .
YOU CAN KEEP YOUR BLOODY JACK!!!!
Turned around and decided to walk back and spend the night in his car!!!
This joke is actually a very powerful metaphor for the internal states a trader goes through. And consequently pulls the trigger at the most in-opportune of moments. When they should be in the trade, they stay out, and when they should be out, they stay in.
There is a very powerful way to control your internal state, dialogue and language. Being aware of the power it holds over your actions, is the first step of that process.
Stay Empowered,
Ty Canning
Debt Ceiling Raised … Now What ?
Hi there ,
News is now the key driver of these markets. Throw fundamentals out , technicals which rely on historical precendents will need to look as far back as the collapse of the Britsh Empire .. to fully undertsand how to exploint the current markets.
As for me … I am sitting on CASH until the mudy waters clear , and systems go back to performing with relevant historical data as they were programmed to do.
Stay Empowered,
Ty
Discipline : The Art of Its Cultivation
In my last post , I discussed the importance of Discipline to Trading. You can find that post here.
http://www.twoscrolls.com/blog/discipline-over-rated/
In this post , I intend to delve a little bit further into the idea of Discipline and how to begin the Art of its cultivation. Lets begin
When Discipline is discussed on a Trading Education website , the focus is usually on whether or not the Trader follows his system , had a system , cut his losses quickly, etc. However, this method of looking at the discipline problem is not likely to solve it at all , for traders who recognize this as an issue within themselves. The reason for this is, because it does not go to the heart of the actual matter , which is that of, the TRAIT OF DISCIPLINE ITSELF and its essence.
If you are asked if you are disciplined or not , chances are, that there are areas in your life where you might be/feel you are extremely disciplined. However, you may find yourself lacking discipline when it comes to other things. So this leads me to mention the seemingly obvious statement that “Discipline needs to be discussed with respect to a specific Objective”.
The problem with this statement however, is that True Discipline does not exist in isolation to an objective, but rather should be cultivated as a character trait , that spans all your actions , attitudes , beliefs , Words and mindsets.
As an example, it is virtually impossible to constantly fail to keep your promises to friends, family or colleagues, but yet keep the promises you make to yourself in the process of achieving any goal you set for yourself. The human mind simply does not work that way, but rather, it uses a series of historically enacted reference points in forming any new decisions it has to make.
From the point of view of these pre-established reference points , the mind proceeds to evaluate and decide.
Consider a set of data points in any field, which tend to cluster around an average, the human mind also tends to extrapolate an “Average Behaviour” , in order to trigger a response similar or as closely fit to the average it extrapolated, when it is confronted with an aspect of your life requiring the exercise of Discipline.
This is the base reason why smokers continue to smoke , coffee drinkers continue to drink coffee, successful traders continue to remain so, whilst failed traders tend to repeat the same actions over and over again.
This is also likely to be the same reason why you may not have realized the Trading and Investing Goals and Objectives you may have set for yourself. If you have been sitting on the sidelines, intending to invest someday , this has become your referential data points and the chances of you ever actually taking action are closer to nil than you think , while the end result of this is that you lose out on the opportunities present in the Markets daily.
There is usually a “MEAN CONFIGURATION OF BEHAVIORAL PATTERNS ” associated with different situations you are faced with. All of which are driven by the underlying Fight or Flight response prevalent in living things, all underpinned by the PAIN or PLEASURE principle. [ The Pain or Pleasure principle in essence, states that we gravitate towards actions which cause us pleasure , and away from those which cause us pain ]
Now understanding, that behaviors are driven at an underlying level by this PAIN/PLEASURE principle, cultivating Discipline within any area of your life must first have to do with identifying the predominant Behavior driver in that scenario. chance are that it would require discipline , if the underlying driver is Painful, and you will need to do a deepened association switch to cultivate discipline in that area.
In attempting to cultivate a blanket of discipline across all areas of your life, one of the essential pre-requisites must be a BRUTAL HONESTY with yourself.
You must adopt the mindset of getting RESULT and not tolerating EXCUSES. Be gentle with others , but extremely TOUGH ON YOURSELF.This is critical.
Keep your word or Do not give it at all even for the simplest things. And if you ABSOLUTELY have to break it after giving it, for whatever reason, ensure that you absolutely Hold yourself accountable to making it up and striving to ensure it does not happen again.
In the final post on Discipline, I am going to be delving further into implementation of the association switch mentioned above, and discussing specific actions you can take next, to reconfigure and reset “Mean Behavioral Patterns ” which do NOT serve you or move you powerfully towards your goals and objectives. So be on the lookout for this.
Stay empowered,
Ty.
NB : I highly value your comments.
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Discipline … Over rated ?
Everyone talks about the benefits and importance of discipline in all professions. And I am not going to deny that discipline plays a part in trading. After-all one needs discipline to follow a system. Discipline to even make a system, Discipline to directionally study markets. Discipline to pull the trigger and not fear losses , Discipline to exit with rules , Discipline to use stops, To Stay Out ; To Stay in, To Study Market Forces, lose, win or scratch … Regardless of what you do or say, you are not going to avoid this critical soft trading requirement.
So I guess I have to throw my voice into the fray and agree ; DISCIPLINE is one of the most important things to have as a Trader.
This leads us to a critical question… Is Discipline innate to some ? Are you born with it ? Or can it be developed ? Are there factors which lead to greater discipline which we can apply to ourselves, or are there environments in which we can immerse ourselves such that discipline seems to come naturally ?
In my opinion, there are a very small handful of people who are BORN Disciplined. The natural human tendency is to move towards pleasure and away from pain. And Discipline seems to require us to move towards “PAIN” in other words , forming discipline actually requires us moving in a direction contrary to what we may desire to actually do.
Several techniques exist for increasing discipline in individuals. Techniques such as repetition, force drills, reprogramming, etc. , but each of this methods really do not go in to the heart o the matter Which is the innate human FIGHT or FLIGHT response.
One other method is an association switch ( A technique employed in NLP ) which cause one to actually WANT TO DO what is required. This technique leads to powerful progress in any field to which it is directed. And Trading is no different.
In the next post , I will discuss the association switch and how you can begin to employ it to make change.
Stay Empowered,
Ty.
A Huge Success and a Special Thanks
Quick update on the Twoscrolls Vital Trading Elements event.
Firstly, a Special thanks to Sotaline ( The Event Coordinator ) for all the hard work she put into making this event, the Huge Success it was. In addition, I will like to thank the additional members of the team. ( Chilli, Alexis and Stefanie) for their own additional efforts as well.
Now on to the event Partners, Thomson Reuters ( Jeffrey and Kelly) and Saxo Bank ( Peter, Job and Jakob) . A Special thanks goes out to you too , for your contributions as well. Kelly , your session was great , Loved it. Job, you’re a Natural, Saxo should be proud of you!
Finally, on to the Stars of the Day, the participants themselves, the event would not have been possible without your attendance. So, once again , I would like to extend a “Special Thank you” for attending.
Next year , we hope to ensure the event is bigger and better, twice the size, with lots more goodies!
Keep your ears peeled.
Thanks and remember …
Stay Empowered.
Ty
Critical Divergence on Dax Update … First Crack appears
In my last post , I warned of critical divergence setting up on the Dax…Now I have seen the first sign , that the BEAR is about to emerge.
We are likely to have one final thrust to the upside on the DAX , before things start moving downwards. Some would like to play this short upside move, but I think that is like playing Russian roulette with your money. The Big trend is coming and it is going to be DOWN !
Check this Blog for more updates on this.
Bottom line … I am ignoring this recent upward trend because I believe it is a drift and NOT a sustainable trend. The Market is going to move downwards and do so aggressively… And Like a hunter stalks his prey … I am stalking this Bear. He is hiding somewhere in this recent upsurge , but I will not be fooled out of my hiding place. If you want to know when I go short follow this blog . I will post the trade live for all to see.
Critical Divergence setting up on the Dax
So Markets are rallying and denying every expectation of a pull back . Constantly hurting those who jump in too early .
The massive formation of a broadening top on the Dax, coupled with the daily momentum divergence requires that we should be looking for reasons to Short this market.
The 25 EMA cross of the 50 SMA would be my signal to go short. Wide stops are required here, as Volatility has also expanded.
Stay Empowered,
Ty.
NB: To find out how you can follow these moves in real time … Visit the event on
www.twoscrolls.com/vital-trading-elements to find out more…
What do I trade ? Part Two
Hi there ,
Lets dive right in. Like I said last time in the article found here , there are lots of possible instruments one can trade and this leads most beginners to be confused as to where to start and what to trade . In this post , I am going to give you a few pointers to consider when looking to learn how to trade an instrument.
There are a few questions you have to consider first and you can use this post as a simple checklist.
- Do you understand the product?
- Do you understand the Risks associated with that product?
- Are you financially able to trade the product?
- Are you set up to trade the product ?
These questions above are the general questions. Firstly, understanding the product has to do with; Knowing in detail what it is ( s they say the Devil is in the details) , Its parameters, its payment structure , eg With Shares , you generally make money in one of two ways, Capital Gains, or Dividend payments. Whilst some investors would be looking for capital gains through a host a methods such as buy and hold , value investing or scalping , others may require the dividends only , and the considerations one would think of would differ , based on what you are looking to gain from trading these shares. Eg . The Dividend Cover Ratio , which tells the investor how many times a Company would still be able to meet their dividend payment obligation , would be critically important to an investor seeking to make gains from dividends. On the other hand , those who want to trade options , may be more interested in exploiting recent Volatility in a Company , rather than looking for Dividends or Capital Gains. All of these go towards the question “Do you understand the Product you are trying to trade? ”
The second question, which deals with the risks you are faced with when trying to trade a product , is one that most investors love to shy away from. Regardless of all the risk disclosures which are put in place , investors and traders are frequently blinded by Greed and do not truly focus on risks. Eg . A dividend paying company may go go bankrupt, An option could decay drastically causing a loss to your Capital , A penny Stock may go to zero , A Government or Company may default on paying it Bond obligation as we saw with with the Russian Default Crisis, A Short CFD position , may EXPLODE significantly upward, causing a MASSIVE LOSS to your account. Something as simple as the wrong wording on an order type may leave you trapped in a position you mean to be out of.
Traders and investors are constantly faced with risks, you cannot avoid it. So we seek to understand it and tame it. That is what the focus of any good Course in Trading or investing should be about ….Risk Mitigation ! Sure Strategies are great but controlled risk is even better.
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The TwoScrolls Equity Trading Course found here , teaches a disciplined approach to trading and mitigating risks
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The third question is in line with the risk concern above . Are you able to trade this product ? Is it too volatile for your account . i.e Are the swings it often encompasses so large that whatever trade you do , you are bound to get your position fluctuate so hard against you , that you close the position. Alternatively is the contract is so large, you cannot even afford the margin ? ( A Good faith deposit required on some derivative products to prove you are able to meet any future obligations arising from being involved in that position)
Finally , are you set up to trade that product. Some products cannot be traded on certain accounts. For example , you cannot trade an Equity option on an account setup to trade Forex. Or you cannot trade margin-able products on a Cash only account . These are questions which all need to first be answered before one delves into the more technical questions on strategies , finding opportunities , data mining , correlations , etc
Hopefully , you can begin to understand why the question What should I trade is not something which on can answer right away , because the answer requires a lot of solid inputs before it can be of any use to somebody asking the question.
If you are interested in learning more about how to trade , in a strcutured manner , then you may want to visit this link
to begin a structured approach to trading . This course allows you to get these questions answered methodically , and provides the means by which you can build your confidence to begin your investing career
Stay empowered,
Ty Canning
What should I trade ?
The question above is one I often get from people who have never traded before, and they are often overwhelmed at the amount of information out there when they first start looking to trade. Before they realize it they are lost in the maze of Sites , product offerings , newsletters, adverts, seminars etc. The financial world is constantly spitting out more and more information making it really difficult for a beginner to gain the relevant amount of information, in the right dose, in order to begin a profitable climb of the financial ladder.
In this post , and over the course of the next few post , I will help you answer the question for yourself. However , the answer to the question “What should I trade” turns out not to be so easy after all. When you consider that there are all sorts of products which one can possibly trade. The small list below would serve as an example. There are Stocks , Bonds, Options, Futures , Commodities , Forex , ETF , just to name a few Then you also have the slightly more client friendly products like Turbos , Speeders , Sprinters, etc , all of which try to remove the complexity involved in trading options by eliminating a few of the Greeks (These are the aspects of Options trading which require a little bit more mathematical sophistication , and which causes several investors to lose their money trading in options.
In order that you might successfully , answer the question “what should I trade?” , it all boils down to a simple word , FOCUS.
In the Next post , I will discuss FOCUS and how it applies to this question, the answer might surprise you. But when you start applying it , your progress would be in leaps and bounds
Until then
Stay Empowered,
Ty.
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