Optimus Trading Group VideoIntro and Hello
By matt | April 18, 2008
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Avoiding Greed
By matt | April 15, 2008
Looking back at all the recession, depression and other economic catastrophes and as much as people like to believe in economic cycles, I personally believe that the current severe economic downturn started just like all other bubbles - as a result of speculation. It has nothing to do with economic cycles.
Can we avoid cycles like these? Not likely. Can we eliminate greed? Not likely No Fed has the power to do that no matter who s at the helm.
A few hundred years ago it was tulips; then came the stock market crash of 1929 and the not-so-distant stock market crash of 1987; in 2001 it was the internet bubble and today, it s the collapse of Bear Stern s due to speculation in mortgage backed securities. Yes, it was and is pure speculation. In today s scenario, the players are very much the same as in the past. It was the speculation that someone earning $40K in annual income could by some miracle - carry a $500k mortgage Bear Sterns called it High Grade Structured Credit Strategies Enhanced Leveraged Fund . I have to say, that when I read how they named the fund Enhanced.. , I had to laugh at how ingenious marketers can be. If it s Enhanced , it has to be better than the rest?
And the good part is that it was all legal. Executives who caused a complete and colossal economic catastrophe walked away with sick money while the Fed had to interfere to avert a potentially disastrous financial catastrophe with worldwide repercussions. Take for example, Angelo R. Mozilo who received nearly 57 million in compensation in 2007. http://www.forbes.com/static/pvp2005/LIR7G33.html
From Ben Stein s article from NYT on April 6: I am not sure where this has come from-Maybe from media that glamorizes wealth and high-end consumption, maybe from poor moral training. But one thing is clear: Current law does not give shareholders or regulators any tools to rein in executive greed. There is simply no cause of action for pay package that, however obscene, are approved by the board and disclosed to shareholders. Congress could. So could Securities and Exchange Commission
They will try to sell you on the fact that they had no clue, but they knew the risk all along. I know they fully aware of the situation because you and I and every 10th grader saw the writing on the wall. I saw real estate prices go through the stratosphere (just like all the previous bubbles), I saw the speculation and met many speculators - and how people leveraged their home equity to purchase depreciating assets (like cars and curtains) and go on vacation with borrowed money. Did someone bother to tell these people that they were using money from unrealized gains?
Did any banker or mortgage broker ever look up the term Fiduciary Duty ? As defined by Wikipedia: they must not put their personal interests before the duty, and must not profit from their position as a fiduciary, unless the principal consents. The fiduciary relationship is highlighted by good faith, loyalty and trust, and the word itself originally comes from the Latin fides, meaning faith, and fiducia .
Can we avoid being dragged into the next speculative wave and eventual bubble? Of course we can. All we have to do is ask the question: is there any material value in this investment? Value could be not only from material worth, but rather from the perspectives of integrity.
For example, you could ask, is there a value (integrity) in all the small mortgage companies popping out everywhere and giving money to everyone? Is there a value (economical sense) in houses appreciating 30% to 50% in one year? How much more appreciation is left in this asset?
The real problem stems from the fact that our nation has come to rely on debt to generate profits. We no longer produce anything of real value. The largest industries like automakers (GM, Ford and Chrysler) and aircraft (Boeing) were leaders on the world s economic stage. Technology, innovation and quality were key to their growth. Today s leaders are no longer in the US. Our competitive edge has dwindled to make way for credit card companies and bankers continually offering us one more way to borrow more.
It takes nerves of steel and patience not to be dragged into the herd mentality. It means sitting there and doing nothing for years while your investment savvy neighbor tells you how he made 300% last year in the latest craze. The herd starts that way .avoid it like a plague. Let s not forget, value also means quality. If you associate with quality people, quality products, quality friends, your economical life could be great.
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Free Hugs Campaign
By matt | April 8, 2008
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The Latest Commodity Correction
By matt | March 24, 2008
By Jake Bernstein www.trade-futures.com
When commodity prices were in the doldrums of bear markets and there were few “experts” who were willing to express bullish expectations, I told you that big bull markets were coming. All along I advised patience. And your patience was handsomely rewarded if you remained long. When a virtual army of bulls appeared on the scene, all touting the virtues of commodity trading my radar began to tell me that problems were on the horizon. In short, I concluded that commodities were likely to plunge before they went higher again. Simply stated, the newcomers had to get stopped out before the market was purged and ready to rally again. And so, combined with my knowledge of cycles, timing, divergence and several other indicators, I warned you clearly and concisely several times, beginning with my March 1st 2008 Webinar that a collapse was coming in commodity prices. Prices fell sharply the next few days in many of the markets. Then I warned again in my Webinar for Genesis on 18 March 2008 that a severe decline was coming. The very next day prices plunged across a broad front with a number of markets going limit down. Are the declines over? Is this the commodity crash I warned about? Is this the volatility I warned about? Are more rallies coming? Here are my current thoughts on the above (all subject to change depending on the behavior of my indicators).
Is this the “crash” I warned about? No! This was just a rehearsal – a bull market reaction – a correction that has been long overdue. It’s likely that this reaction was just the thing the markets needed in order to stop out those who came to the party too late. I warned you that traders who were new to the game and who used small stop losses would get wiped out. Expect more of the same.
Is this the volatility I warned about?: No! This is just a harbinger – reality check – a warning of what may well make the current volatility look small by comparison? And as I have said before (even though some have taken issue with my conclusion), we have electronic trading to thank for part of this. The others who deserve a note of thanks are hedge funds, sovereign wealth funds, and the army of bullish “experts” who have been promoting the commodity bull market in the media. Yes, there is much more volatility to come.
Are more rallies coming?: I think so. Why? Because bull markets don’t die easily. Global demand for commodities in developing countries and in the hot industrial economies such as China isn’t about to end abruptly. Even though demand may slow, shortages will continue and this will bolster commodity prices. In addition I don’t rule out the power of hedge funds and other speculators to keep prices up. And so I do expect another round of higher prices and this where short term timing will come into play.
What else can we expect?: I have stated on many occasions that there are several markets which have yet to be swept up and away by the bull fever. These are the meats and lumber. I still have my sights set on these as the next candidates of the bull market hunters.
Final word of warning: I try very hard not to listen to the business news such as CNBC, Bloomberg, etc.
Believe me I do not do so out of disrespect for the job the media are trying to do. I do so because I can’t take the chance of having my own ideas and thinking polluted by the constant parade of experts who express an opinion and then leave only to come back months later without any continuity or follow up. All too often they tell us what they expect without giving any idea of risk, stop loss or precise follow up. Such opinions are worthless. Every morning I can get this type of information waiting in line at Starbucks or from taxi drivers. As an example, just in the last few weeks I happened to see at least six experts on gold recommending longs when it crossed the $1000 mark. As I write this report gold has dropped to as low as $935.
What happened to those who took the advice and bought gold at $1015? Most likely they have been stopped out or scared out. A few months from now, if and when gold rallies back over the $1000 mark the experts who recommended it may be back on CBNC again telling people that the forecast was right. In the meantime all but those with the deepest of deep pockets have been stopped out.
My advice: DON’T TAKE ANY ADVICE FROM ANYONE, myself included UNLESS THESE RECOMMENDATIONS INCLUDE THE SETUP, TRIGGER AND FOLLOW THROUGH! As volatility continues to grow you will see more and more media hype, more ads touting commodities and more schemes designed to separate you from your money.
Be more careful than ever before. I have advised you that the big losers in this commodity bubble above and beyond the consumer will be some major hedge funds, some sovereign wealth funds and the small trader. Some things never change.
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How to spot a recession without being an economist
By matt | March 10, 2008
There is a current debate on TV whether we are in a recession or a slowdown. Well, here is my top eight list of how to spot a recession without being an economist or an analyst:
1) When you go to a restaurant and return a week later and there’s a “for lease” sign in the window…we’re in a recession
2) When you see “home for sale” signs on every intersection for extended periods, foreclosure rates climbing, mortgage companies going belly up because customers can’t make their minimum monthly payment…. We’re in a recession
3) When you decide to hold back on some purchases and convince yourself you don’t really need it….we’re in a recession
4) When commodities like Oil and Gold Make new highs and the stock market can’t find a bottom…we’re in an infla/cession (new term… maybe Bernanke will borrow this one)
5) When the banks start to hold back on new loans (the lifeblood of their business)….we’re in recession.
6) When the unemployment rate grows each time the Bureau of Labor Statistics releases its figures…we’re in recession
7) When the US Dollar gets the nickname of US Peso, we’re in a recession
If you’re feeling uneasy right now….we’re in recession
Is there a true and complete disconnect between the government’s definition and what the average consumer defines as a recession? YES.
Bernanke is waiting for an official definition of a recession: well here it is Mr. Bernanke: a slowdown in the growth of the GDP for a period of 2 consecutive quarters.
When he was asked last year whether we are heading towards a recession, his reply was: “Our forecast is for moderate, but positive, growth going forward….. “Economists are extremely bad at predicting turning points, and we don’t pretend to be any better” “We have not calculated the probability of recession, and I wouldn’t want to offer that today.”
So all the foreclosures, rising consumer debt, the rising cost of energy and food…under which economic definition does that belong? If the definition is different for economists and consumers, how do you fight one? I KNOW…you give back $1200 in tax credits for the year…that should really solve everything….
Oh well….Maybe I should ask the same guy that says global warming is just a phase…it will correct by itself.
Ok seriously…I know it must be hard to be the head of the FED, and there has to be guidelines. But I truly believe, that by the time they figure it all out….this cycle will almost be over. It’s the nature of things. By the end of the 3rd Q of 2008, the cycle could start turning around for many consumers and home owners.
No worries, I am not looking to become Barnanke’s assistant…being a commodity broker is enough for me.
Sincerely,
Matt Zimberg
President
Optimus Trading Group
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Trader’s Dilemma
By matt | March 7, 2008
By: Jurgens Bauer
I fear that the cotton market is broken…
The cynic in me wants to say, “I’ve fallen and can’t get up,” in regard to the current cotton market. And while that failed attempt at humor may seem crass, it also is a statement contains elements of truth. The present cotton market doesn’t seem to be able to serve the role which it has dutifully performed for almost 140 years now. Price discovery isn’t supposed to be found off the screen and available only to those lucky enough to have secured a position in the option ring. And how about using the market to offset price risk associated with ownership of the underlying contract? Has it anything at all to do with the current cash market for cotton?
I’m sorry, but until things settle down I cannot legitimately and in good faith promote customers to transact business in cotton options when quotes are routinely 200 points wide. It has become a crap shoot and the dice are in the hands of one high roller after another, hell the entire table is oozing with them, each eager for their turn to roll. All of the positions on the table are held by speculative money, big speculative money. Trading this entire week has been so wild and wooly it’s akin to what you read in novels about the wild, wild, west back in the 1870’s. It is gambling. I’d rather suggest that you wait until things cool and prices trade on the screen. This transitional futures market, (synthetics) means the price has disappeared from that screen.
Regular readers of my comments will know that I have been speaking of the issue of big fund investment in our market for over a year now. Well, the forces of fear and greed have taken over from risk transfer. And from what I understand, there’s not much actual cotton business getting done. And that’s a problem in my book. When a market has little if any reason to move about as violently as it has and moves simply in reaction to size and the current order flow, and it doesn’t seem to give a damn whatsoever about fundamentals, then it’s broken. From what I gather, it happened in wheat, now it’s happened in cotton, what markets are next?
There is no fundamental reason for the price to be one day at $1.07 and two days later at $0.80. Explain that one. I cannot.
So, until things get sorted out and calmed down, the sideshow they used to call cotton is destined for a bunch of “whales” (I think that’s a term for high rollers) and sharks. In fact, I thought I saw a couple of great whites swim by the ring today.
My primary business has been executing customer orders in options. That’s what I get paid for. I am not a trader, although I may take small positions from time to time, it has always been my job, as I see it is to duly represent my customer’s request to buy and sell options in the soft market (agricultural products) on the ICE. That is my principle business, has been for years. The more orders I execute, the more I revenue my firm receives. But for $3.00 a contract somehow doesn’t seem worth it. The risk is far too great with quotes 200 points wide, (or $1,000.00 between bid and offer), then something is terribly wrong. One mistake and you’re out of business.
No, I’m not quitting, I’m just suggesting that things are out of control temporarily and that prudence suggests at such times maybe its worth taking a step back and re-evaluating. Look if you wish to trade, I will work hard for you, and get you the best possible fill. I’m certainly not in any position to turn business away, but please try and understand the risks involved in this present market that seems out of control.
Anyway, here are the Synthetic settlements for cotton. No, you won’t see these on any screen, or in the newspaper. However, they do exist on your statements, especially if have any cotton positions on. These settlements are different than what you see on the charts too, as synthetic trades are not picked up for charting purposes. (Doesn’t that make it seem more like you are trading blind?) These are the prices that traded on the close, or post close and are derived from a weighted average as each selling broker must fill out and submit a trading slip of any and all contracts he transacted on the close.
K-8270, N-8480, V- 8720, Z-8910, H-9140
I had originally thought that we would experience some stability in prices today. Boy was I ever wrong. I’m concerned about the long term effects on the traditional market participants. As I stated here yesterday, “These markets are getting further away from reality and seem more like a video game is being played.”
Look for another wave of margin calls and that may serve to again thin the trading ranks, not the number of contracts, but the number of participants. Then again increased margins have frequently be used to help tone things down, by persuading traders to reduce their positions. Limits will remain at 400 points for now.
I look for continued volatility, with further testing of the downside. Volatility may taper off a little bit on a down move as it did today, but then heat up swiftly again should the highs come back into play. As for now, let’s see where it holds, then watch for a move back up. Remember $1.17 is still around lurking on the charts. We are apt to see more volatility, with frequent more limit moves.
The Information and opinions contained herein comes from sources believed to be reliable, but certainly not guaranteed as to accuracy or completeness. No responsibility is assumed with respect to any statement, nor with respect to any expression of opinion herein contained. All views are the opinions of the author at the time of writing and are subject to change without notice. No statement should be construed as an offer to buy or sell a commodity. This publication is for information purposes only
©2008 Jurgens Bauer & Associates all rights reserved.
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What Really Affects the Mortgage Rates??
By matt | January 30, 2008
By Doug Campbell
Email: dcampbell AT tlg.bz
So the Federal Reserve cut rates again.
Many of the mortgage applicants are a bit confused as they are expecting a lower interest rate as the Fed is cutting the rates. Others who have been waiting to refinance are puzzled as to why mortgage rates have not moved lower during recent 5 Fed rate cuts. In fact mortgage rates are now higher than they were before the Fed began cutting rates back in January 07. This is difficult to explain to many consumers who have watched a 2.5% reduction by the Fed with no benefit in mortgage rates.
Is a Fed rate cut really good news for mortgage rates? The facts may be surprising. The Fed can only control the Discount Rate and the Fed Funds Rate. This is very different from mortgage rates. A mortgage rate can be in effect for 30-years, a rate that is set by the Fed can change from one day to another.
Another common mistake is in thinking that 30-year Treasury bonds or 10-year Treasury notes are directly pegged to mortgage rates. Those are government securities that are backed by the full faith and credit of the U.S. government and have no direct effect on mortgage rates.
So what are mortgage rates based on?
As it turns out the answer is mortgage-backed bonds known as Mortgage Backed Securities (MBS). Bonds issued by Fannie Mae and Freddie Mac (MBS) and the trading performance of those bonds will determine the direction of mortgage rates. Finding the catalyst that causes mortgage bonds to move will give you the keys to finding out what makes mortgage rates rise or fall.
We know that inflation will always be a negative for any long-term bond because it eats away at the future returns. Since the bond will pay a set amount over a long period of time, that amount will be less valuable if inflation is high.
Over the past several years, one catalyst that seems to be working in the opposite direction of MBS prices is the NASDAQ and broader stock market.
As bond prices rise, interest rates fall. As bond prices fall, interest rates rise. The consistency of this behavior is astounding.
As the NASDAQ moves higher, bond prices move lower causing interest rates to rise. As the NASDAQ declines, mortgage bonds benefit, causing mortgage rates to fall. Additionally, and unlike common opinion, Fed rate cuts have had virtually no direct effect on mortgage rates. Moreover, it appears that since Fed rate cuts act to stimulate the NASDAQ, they have a negative effect on mortgage rates.
The bottom line is that it appears mortgage rates will get better if the NASDAQ sells off and will get worse if the NASDAQ rallies. So it is not necessarily what the Fed does that affects mortgage rates, it's how the NASDAQ and broader stock market interprets the Fed's action that will ultimately influence the direction of mortgage rates.
This is because money managers and mutual fund companies typically keep funds in either stocks or bonds with very little in cash. If stocks are in favor, money is pulled from bonds, causing bond prices to drop and interest rates to rise. When stocks are being sold off, the money is then parked into bonds, which improves bond prices and causes interest rates to decline.
Predicting the future is tough, so nothing is written in stone. Keep an eye on the NASDAQ, and keep in mind that the best rates may be behind us. But, mortgage rates are still low and could have some quick dips so make the most of them while they last.
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Jake Bernstein - Why Traders Break the Rules
By matt | January 29, 2008
Periodically, we like to post articles by industry veterans like Jake Bernstein, which could contribute to improve the trading discipline of our clients and readers. During volatile times like this, this could help us navigate our way through the markets.
An Article by Jake Bernstein
Why Traders Break the Rules
www.trade-futures.com
In my nearly 40 years of trading, writing, researching the markets and observing the behavior of other traders I have come to understand many things about what causes traders and investors to behave (and misbehave) in certain ways. At first blush it would appear that if a trader correctly and completely learns the rules of successful trading then the rules would be relatively simple to follow. But in reality there is a vast chasm of difference between what is ideal and what actually occurs in the life of a trader. There are many reasons for this. In fact, I could write an entire book on this subject and still have more to say about it. Here, however, in very condensed form, as some of my thoughts on the matter. They are presented in the hope that you may gain some insight into your own behavior as a trader. If you’ve made breaking the rules a habit, then read what follows – it could save your life as a trader.
When rules are Unclear: One of the major reasons that traders break rules is that many times rules are not clearly specified. Some trading systems or analytical methods are intentionally vague or subject to varying interpretations. What is especially frustrating about such methodologies is that they change their interpretations with the aid of 20/20 hindsight. Hence, a trader attempting to learn the rules may not learn anything from their errors. Lesson #1 about following the rules of successful trading is that THE RULES MUST BE OBJECTIVE or as TOTALLY MECHANICAL and CLEARLY DEFINED as possible. One way to know well in advance that you are headed for trouble is if you are taught rules that are not really rules but rather suggestions, guidelines or analytical techniques. While lack of clarity if the stock and trade of those who sell methods and market theories, it is not what you want UNLESS you have managed to become an excellent intuitive trader or UNLESS you are able to expand on the theory and create a systematic approach from its tenets.
Lack of Confidence: Perhaps one of the most frequent causes of rule breaking is lack of confidence. By lack of confidence I mean the failure to believe in the system one is using as well as the failure to believe in one’s self. Lack of confidence is a normal human response to a variety of factors. In my estimation, lack of confidence is a learned behavior. In other words, through a variety of life experiences we develop lack of confidence that may ultimately haunt us for the rest of our lives unless we take measures to thwart its destructive effects. In traders a lack of self confidence can develop after exposure to losing systems. It only takes a few losses to undermine one’s confidence as a trader. Once self confidence is gone, doubt takes over. And doubt causes a trader to break the rules of his or her system. An effective “cure” for lack of self confidence is to thoroughly familiarize yourself with a system in all of its phases. Understand its worst case scenarios as well as its best case potential. All too often traders are blind-sided by the historical results of a system and therefore pay too little attention to its downside. When the drawdown eventually comes, the trader is devastated and lack of confidence follows. This eventually (sooner rather than later) causes the trader to abandon the system, to alter it, or to “make a few little changes”. In so doing the system is no longer a system but a tool for losses and self-destruction.
Over-Confidence can also result in rule breaking. By falling into what some traders have so aptly named the “King-Kong” syndrome, you will begin to feel as if you can do no wrong. This type of behavior typically comes after a lengthy or highly profitable winning streak. The trader begins to feel as if he or she cando no wrong – as if they have the Midas touch. As a result, they are prone to break the rules since their attitude leads them to believe that everything they touch will turn into gold. Such behaviors can be seen in all walks of life – not only in the markets. Again, the best way to minimize this problem is to have a thorough working knowledge of your system. In knowing that your system has had performance limits, you will remain well grounded, thereby minimizing the possibility of over-confidence.
Information Overload: I consider this one of the most serious threats to the self discipline and self confidence of a trader. We are often too quick and too willing to give credence to the opinions of other traders and market analysts. We believe that their work is better than ours; that they know more; that they are well-connected; that they are more experienced; more astute, wealthier, etc. the more opinions we assess, the more confused we become. There will always be many explanations of the same event. The voice of what we believe to be authority can often persuade us to break the rules. Adolph Hitler brainwashed an entire nation to break the rules. Some of the most absurd ideas are “sold” to the public as fact. The more information we have the more confused we get. The more confused we get, the more tempted we are to break the rules. The cure? Close out ALL information other than what you need for your systematic trading approach.
(c) Copyright 2007 Jake Bernstein
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Ever heard of Jerome Kerviel? Bernanke would probably like to meet him.
By matt | January 28, 2008
I had never heard of him either…..until last week. He was the trader who single-handedly caused a world of chaos on Martin Luther king day here in the US. That same day, I stopped by the office early that morning, just to catch up with some office work and as soon as I walked in, I saw the DOW Futures down 500 points. Ok, So I am aware of the ongoing crisis, but typically the US leads all the other international markets. Namely, they see what is going on in the US and then they follow whatever direction our markets are heading for. So to see the markets down 500 points on a holiday was beyond me…..I was wondering what in the world happened.
Back to Jerome; he was a trader at Societe Generale, which is one of the biggest banks in France and considered a player on the world scene.. Jerome Kerviel had a huge position in the DAX ( the German stock index) and by the time he liquidated all his positions, it resulted in a net loss of $7.2 Billion. Other news followed: he may not have worked alone; he tapped into other trader’s computers, etc…..This is a 31 yr old trader, by the way, who built up a position worth 73 billion dollars. Those types of traders are known as : rogue traders” who pretty much do whatever they want with the blessings of the financial institution. They have access to virtually unlimited funds. To be fair to the institutions they typically have a limit on the number of lots they can trade; obviously, Jerome found a way around that “hoping that the markets would turn back in his favor..
After reading about him, I had a few fundamental questions that really bother me still. The first is, how can one individual, in a matter of a few days collapse all major world indices and take under one of the largest banks in the world? Where are the banks alert systems? Where are the risk parameters permissible per trader? Maybe he had an excellent track record and the bank’s directors just gave him carte blanche? The other question is, imagine for a moment that he got lucky and that Societe Generale showed a profit of $7 billion. Would we know about it? Are there individual traders that can cause this kind of volatility and affect our portfolios to such extremes even for one day? You’ve surely heard about all the hedge funds that blow up, but what about the ones that are successful and affect us adversely?
Lastly, did Bernanke drop rates ¾ of a point because of that incident? I am not saying that we did not need the break, but did he panic like most of us? Was he scratching his head too? Well, I guess even the head of the Fed is human and reacts to his emotions (and a little political pressure). Nevertheless, it would be a shame if he reacted; he certainly did not take the bull by the horns that day; instead the tail wagged the dog.
I don’t know the answers but I thought maybe somebody would like to address them, so investors (and brokers too) can finally take a day off and relax with the rest of the country. That would be nice.
Best Regards,
Matt Zimberg
President
Optimus Trading Group
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And then the market fell….
By matt | January 16, 2008
Let me tell you, it’s not pretty sitting in front of the quote machine, these days.
I have been wanting to write this blog for quite some time, because like every other investor I am clinging to the sense of hope as I am looking for a bit of positive news.
On the equities side, financial companies are slammed daily with severe losses due to their sub-prime exposure. The bottom line is that many homeowners can’t pay their mortgage, so essentially not only are they facing the reality of potentially losing the biggest investment of their life (and if may add, their cash cow for the last few years) but they will not be so “quick” to pull the trigger when it comes to spending their “hard earned” dollars on frivolous things. Of course, I don’t need to remind everyone that this is a “consumer driven” economy?! If that’s the way to ensure “growth”, then let’s try and put some more “borrowed” cash into our beloved consumers to postpone the inevitable failure of this house of cards.
Are we in a full blown recession?, I don’t know! Looking at TV these days, does not help either. You have an economist who is a contrarian and another one who states facts, so go figure….BUT, the reality is that there is going to be another wave of mortgage holders whose rates are going to be reset and companies taking a huge hit because of irresponsible mortgage brokers, who sold unfit mortgage products to customers who really did not understand the burdens of an ARM mortgage.
I truly do not want to be the bearer of bad news, nor do I believe that during these days one should be glued to the TV. What’s the point?
I really want you to understand how this highly volatile environment affects trading and trading decisions:
1) Systems that are based on long term trends will rarely perform well during “choppy” periods.
2) Stops losses will get triggered on either side whether long or short
3) Technical indicators will mislead
4) There are many abrupt reversal throughout the day; case in point, as I am writing this article the Euro went from high of 1.4853 to a low of 1.4587 and is currently trading at 1.4669. It takes a strong heart to weather these types of swings.
The bottom line is this: Every trader needs to wait until things resume to normal and be patient enough to catch the next trend in a given market. The bottom line is that a market needs to trend, and not only trend, but trend steadily and slowly.
It might not be easy looking at your trading results these days, but let me tell you, it’s not easy on us either. Keep in mind a few other things:
1) Seasonals, mechanical trading programs, directional based trading, or volatility trading have a difficult time through these periods
2) ALL systematic programs will go through drawdowns during periods of turbulence such as the present
3) The majority of discretionary traders tend to freeze and stay away from the markets until the picture gets clearer and brighter.
In conclusion I would like to say that times like these are an inherent part of life. They test and make us stronger (hopefully) to weather future storms. And I mean this not only as a trader but as a member of the human race. Everyone of us has strengths and weaknesses; let’s capitalize on our strengths and better ourselves and re-evaluate what has worked and what has not in the past. Happiness, health and abundance are our birthright; we just have to claim them ours.
Matt Zimberg
President
Optimus Trading Group
Topics: Commodities General | No Comments »
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