1/12th of the year is now done

spring06section5_cartoon.jpg2009816720January is done. That’s one twelfth of 2015 now gone.

So I thought this would be a good time to see how the year was going so far.

I posted this at the end of December, on what I was looking to do for the year ahead. So let’s have a look, shall we?

1. Physical. The running continues, and I’m happy to be back at it. I’m going to join a 10k clinic in February, and I’m looking forward to running with a group again. I’m still “crossfitting”(?) and while it’s brutally painful each and every time, it’s definitely a work-out. It’s an hour of pain…and hopefully some gain. Flossing, check. Sleeping, check. Nutrition – meh, it’s a work in progress, but overall, I’m doing well. Haven’t contracted scurvy yet, so I’ll count that as a win.

2. Mental. The 10 daily ideas practice continues, well, daily. It helps to have people around me who are on the same page – and I have some very bright friends that challenge me to keep pace. I’m also reading, writing, and playing guitar (fun!)  regularly. I even learned how to juggle – that was a ‘holy crap!’ moment.

herman2

3. Spiritual. I’m practicing this side of my life daily, and content with the progress I’m making. Still not speaking to God, but that’s OK. There’s more to being spiritual than going to church on Sundays.

4. Emotional. I’ve made some wonderful friends, and continue to do so. I’ve been kinder to myself, and I found The Trauma of Everyday Life helpful in that regard. I reviewed the book here. The purging one item a day experiment is now over, and I think was swimmingly successful. The result is a less cluttered home, and a less cluttered mind.

If de-cluttering your own environment is something you’ve thought about, I’d certainly encourage you to take those first steps. I found the one item a day approach quite manageable. We do tend to accumulate “stuff” and so much of it is rarely, or never, used. Why hang on to that frustration? Let it go. Make room in your life for something more positive and productive.

oscar-wilde-quotes-quotations-Nowadays-people-know-the-price-of-everything-and-the-value-of-nothing

 

 

 

 

Anatomy of a Trade $CEMP $DENN

On Sunday, December 7th, I posted a trade I was going to be entering on Monday, December 8th. Here’s that post:

CEMP 1Unfortunately, as sometimes happens, the stock gapped up at the open and never looked back. There were a number of factors that went into my wanting to take this trade. Those included the rising 50 period SMA, the flagging formation near the all-time highs, the weekly close that was slightly higher than the previous week, to name just a few. All totaled, the trend was indicating up. And I don’t argue with the trend.

CEMP 2

There are two ways of looking at this.

1. I can be angry and bitter, and let it affect my future trades. I might even decide that I shouldn’t use limit orders anymore, as per my rules, and just enter market orders.

2. I can choose to look at the move as confirmation of the validity of my process, and recognize this as one trade out of hundreds.

I’d rather choose #2. Would I like to be in the trade right now? Of course. But I’m not. I have taken hundreds of trades, and will take hundreds more.

Knowing that my process works, gives me the confidence to take each of those trades.

Moves like this happen. I recently posted a similar set-up for $DENN, and it gapped up as well. That’s OK. There have been many great rides that I did catch, and there will always be another. Next!

DENN 1Again, a flag formation at 15 year highs, and close to all-time highs. Among other indicators, the trend is clearly up, for now.

 

DENN 2

 

 

 

How to have a 200k account in one month

 

Start with $100 million. Apparently that’s the secret.

Canarsie Hedge Fund, which in the king of all ironies, was formed by a former head of risk at MS, went tits up in three weeks. I suspect even the most strung-out of all the strung-out heroin addicts could have stretched nine figures longer than a single month. I mean, you really have to focus to lose that kind of cash, that quickly. Assuming you only have Monday to Friday to work with, and get the week-ends off for your troubles, that’s about $5 million a day.

“I’m working late again, honey. We’re only down $2,450,000 so far. Off to trade 3M BIBOR interest rate futures on the TFEX. That should get it done!”

For those that missed this train-wreck of a news story, here’s one of the reports. At this point, there’s about $200,000 left in capital.

In his words, he acted “overzealously” in a futile attempt to achieve higher returns. I’m not sure that’s an accurate word. When I hear someone say they were overzealous, I think about a lonely 40 something that takes in one stray cat, which leads to two, which leads to seventeen. Or the mechanic that’s changing your oil decides to change out the transmission fluid while he’s in there, because it had the consistency of rancid butter. Sure, a phone call would have been nice first, but what’s done is done. I’m not out of pocket $100,000,000.

While financial wreckage like this is blood-sport entertaining for us mere mortals, it does demonstrate just how important risk management is. We could chalk this incident up as an outlier, and nothing more. But whether it’s this poor sap, or it’s Nick Leeson, or the 2007 CDO debacle, or it’s me, or it’s you – managing risk matters. It’s all that matters, actually.

Because that contrite phrase is right: you can’t win if you don’t bet, but you can’t bet if you lose all your chips.

My number one objective is: Don’t. Lose. Money.

It isn’t: Make Money.

It’s: Don’t. Lose. Money.

Losses happen. Lots of my trades don’t work out. But I ensure that when I do take losses, they’re small, and controlled. I take losses quickly, and while they are still small, so I don’t hurt my accounts. I do this because I know if I can control my losses, the gains follow. I never, ever take a large loss on a trade. Ever. And neither should you.

 

The Trend vs a Pattern

The trend is pretty easy to spot – either the squiggly lines are moving in an upward direction, or they’re not. Either they’re moving in an downward direction, or they’re not.

Trading patterns take a little more work. That’s not to say they can’t be useful – I love flags, pennants, and long basing patterns. But ultimately, they’re an educated guess. I also try and use them in conjunction with the prevailing trend, not as a method of guessing when a trending may change.

A trader I quite like and respect recently posted a wedge formation on the $GREK daily chart. This is essentially what it was:

GREK 1The point he was conveying here was that it has now broken out of that pattern, and looks to be going higher.

He may very well be correct. I have (wait for it…wait for it…) absolutely no idea. It is possible though, that it may still go lower. And all we need to do is look at the same chart a little more closely, to see why:

GREK 2As we can see, this break-out pattern isn’t the first.

What I do see, is a stock that is going from the top left of my screen, to the bottom right. That direction, is down. Some may think it looks “cheap” here at $13, when just seven months ago it was trading at nearly double that.  I would suggest, given the trend, could we really be surprised if it goes to $10? Or $5? Or $1?

I wouldn’t buy this stock here with your money, let alone mine. I would however, happily buy it, if it showed a change in direction that was meaningful.

 

10 gifts that went above and beyond

At 46, I’ve had a pretty good life to this point. I was raised in a good home where I felt safe. I’ve traveled enough to appreciate what I have in this bountiful corner of the globe. I’ve loved – and been loved – more times than is probably my fair share. If we’re just counting serious relationships, then there have been four, in fact – let’s call them #1, #2, #3, and #4.  And hopefully, there’s someone else in my future. We’ll have to wait and see. But if there isn’t, I’m more than content with what’s come my way so far.

But to this point, whether the occasion was a birthday, Christmas, or simply ‘just because’, I’ve received some truly memorable gifts. I thought I’d share my top 10 with you. And so, in no particular order (seriously, I couldn’t prioritize these if I tried. Well, OK, number 1 really is probably #1):

1. George. For those that don’t know me personally, George was my best friend, and sidekick for nearly 14 years. He was also a domestic long-haired cat. Not to rehash this post, he passed away from a valiant battle with cancer in 2009. A girlfriend (#2) I had been living with, brought him home as a surprise for me. I walked in the front door one Summer afternoon just in time to see a fuzzy black and white fur-ball bolt across the hardwood, slide into the wood fireplace, and emerge as a kitten covered in soot. The girlfriend was clearly on her last nerve, and uttered an exhausted, “surprise?”. The girlfriend didn’t last – perhaps she found us both too exhausting – but George and I were instant buddies from that day forward. Best. Gift. EVER. Thank you, Kimanda.

2. My Maria Sweater. Well, that’s what I call it, anyway. She was my first serious relationship (#1). We were both barely into our twenties, and new to Life. We lived together, which turned out to be a HUGE mistake. Well, moreso for her apparently, as she bolted after three years. In retrospect, it was the right call to make. Many years later, she and I rekindled a friendship, and joked about what an atrocious couple we were together. I’m all about having a plan and stability…she’s currently teaching English in Prague, or the UAE, I think. Anyway. Early into our relationship, she painstakingly knit me a sweater. There’s even a reason for the color, but that, I’m keeping to myself. It was a thoughtful, and terribly labor-intensive gesture, and while I no longer wear it, I’ll never part with it. Thank you.

IMG_5057

That label on the inside says, “Made for you with love”. Pretty cool.

3. George Picture.This was a gift from my ex-wife (#3) in 2010.  Despite the one year anniversary of George’s passing landing squarely in the middle of our divorce, she graciously, and thoughtfully, gave this to me anyway. It means a great deal to me, and now sits prominently in my office, next to his little urn. Thank you.

IMG_50554. An egg poacher. This was a Christmas gift from a girlfriend’s mom (#4). If you knew my love of eggs and bacon on week-end mornings, you’d understand. I love this thing. A simple and thoughtful gift that gets a LOT of use. Thank you.

5.1st edition of Fifth Business. This was a half-birthday gift in 2008 from Tara (#3). Aside from not expecting a half-birthday celebration, I certainly wasn’t expecting such a touching gift. Fifth Business, by Robertson Davies, is my all-time favorite book. For her to even come up with this idea, let alone track down a copy of a first edition, was humbling. One of those things I’ll never, ever part with. Thank you.

IMG_50586. Half-birthday party bash. Staying with the half-birthday celebration theme: In 1994, my girlfriend at the time (#2), surprised the hell out of me on a Saturday in June. I arrived home from a bike ride, and as I pulled up to our house, she greeted me, and told me to come around the back for a sec. As I walked into the backyard, there were banners, balloons…and a dozens of people. She had not only organized this, but painstakingly tracked down long lost friends – many of whom had traveled a considerable distance for this. And yes, there were presents – on top of that, she had bought me a pair of high end Sidi cycling shoes. I still have them, actually. They’re just shoes, and yet they’re not. I won’t be parting with those, either. Thank you.

7. Star Wars action figure set. It was 1977, and I was 9. My parents and I were in an RV resort in Palm Desert for Christmas, which had become a tradition. That year, Santa brought me a Star Wars action set, with a fighter that shot little “laser” projectiles, and a couple action figures. I was over the moon with glee – Santa listened! A week later, on our return trip to Canada, our Airstream travel trailer caught fire and burned to the ground just a few miles over the US/Canada border…with my Christmas present inside. Some sort of electrical short, apparently. Damn. Still, Thank you.

8. Lululemon jacket. From #4, this was an impromptu gift. It had apparently been abandoned at the yoga studio. As luck would have it, it was exactly my size, and in new condition, so she rescued it for me. I love it, and wear it all the time. And, it’s a design that Lulu has since stopped producing, so I’m mindful to not be as careless with it as the last owner! Thank you.

9. The Book of George. As you may have gathered, George was pretty important to me. This was a meticulously put together Christmas 2010 gift from #3 that left me completely speechless. Still there are no words. Thank you.

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She created this on a Mac, and Apple put it together. At the time, it was a unique service. Very cool.

10. Not telling. I’m not publicly sharing this one, but Thank you, Maria (#1).

Certainty

 

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The older I get, the more I realize how truly little is certain in life. They say death, and taxes. That’s probably not far off. I would add Time to that as well. Space/time continuums aside, Time, and the passing of it, is a pretty sure thing. But that’s likely where the list ends. everything else is a crap-shoot.

Frequently I’ll come across posts that say, “XYZ is going to $x”. Sometimes they’re even bold enough to say, “XYZ is going to $x, by Friday/next month/3 months from now.”

Really?

It’s an absurd statement, and at best you could call it an excited utterance. At worst, it’s egotistic chest-thumping. Sometimes there’s a reason, vaguely disguised as proof, as to why the prophesy will come true – maybe clinical trial results are in the offing, maybe the public just isn’t yet aware that this is the cure for cancer, or maybe the drill results are “a sure thing” (that phrase alone sends a shiver down my spine). Each time I see one of these statements, I wonder, “if they’re so certain of their prediction, why then would they not put every single dollar they had at their disposal into the trade?” If you were 100% certain of anything, then there must be a 0.00% chance that you will be wrong. So by logical extension, it would only make sense to bet everything down to the shirt on your back, no?

I have yet to hear someone say, “This is going to $<insert future certain price here>, buy <insert date here>,  so I am selling everything I own, and putting every available cent I have, into this trade.”

Sometimes they label these gaseous comments as “discussion”. A discussion though, by definition, is a set of comments, or arguments, to explore solutions. It can also be an informal debate. Their steadfast proclamation is neither.

Personally, I actually expect the majority of my trades to fail. I have no idea which ones will be the big winners, so I treat them all equally, and let them prove themselves individually.

So the next time you’re considering putting on a trade that’s based on someone else’s inflated confidence, first ask them if they’re going all in. Let me know what they say.

 

 

Simple. Not Easy.

 

Trading isn’t easy.

Your job is to make it simple, but don’t confuse simple for easy. Two vastly different things.

simple

[ sim-puh l ]
 
adjective, simpler, simplest.
1. easy to understand, deal with, use, etc.: “a simple matter; simple tools”
2. not elaborate or artificial; plain: a simple style.”
3. not complicated: a simple design.”
.

easy

[ ee-zee ]
 
adjective, easier, easiest.
1. not hard or difficult; requiring no great labor or effort: a book that is easy to read; an easy victory.”
2. free from pain, discomfort, worry, or care: He led an easy life.”
 .

Your trading needs to be simple so that you can abide by it. It needs to have structure, and a sound base. If it doesn’t, you won’t believe in it, and you won’t follow it. And I wouldn’t follow it, either. Coming up with that plan, and then following it, is NOT easy. It’s fucking hard, actually.

Don’t make trading more complicated than it needs to be.

Pull up a chart, in your timeframe, of a stock you’re thinking of buying. Connect the dots, and draw a line. Yep, just like a child would.

If your line goes from the top left of your screen, to the bottom right, is that stock currently going down?

It’s a yes or no question.

Yes, but I’m trying to profit from what it’s going to do,” you say.

I got news for you. Nobody knows what it’s going to do. Not a single person. And unless you have a “future price” indicator on your trading platform (that would be so money), you don’t either. If fighting the prevailing winds works for you, then obviously continue, and keep on banking coin. I’m a firm believer in doing more of what works, and less of what doesn’t. If however, you’re frustrated by your lack of trading success, and you are routinely trading against the tide, then perhaps it’s time to reassess.

To be clear, this does not mean that you should just arbitrarily buy something in an uptrend, or short something in a downtrend.

Pop quiz. Two questions:

going down eg

going up eg