AGAINST THE WINDS OF DESTRUCTION

                                              A Forex Metaphor

I had planned on posting Friday afternoon; then Saturday, but the sickening stench of NFP Friday was still on my mind as the mindless dopes of FX tried to haplessly figure out the latest lies on the U.S. economy[“Up, no down, wait a minute… up I think .. crap, can’t this stuff (GBPJPY) behave?].

And if this wasn’t enough, I wake up this morning to see the twitter post of Pimco Grand Poohbah Bill Gross who says, “The age of getting rich quickly is over as is (most likely) “the age of getting rich slowly”. [Emphasis mine]

Really?

Well, I guess when the Fed stops giving you POMO money that pretty much guarantees profit, you would most likely come to the conclusion the world is ending; because now, after years of being handed free money, you actually have to earn it by having some kind of strategy in the marketplace. Good luck Bill.

Which brings me back to Forex; anybody but me notice the spreads [pick any pair] before, during and after the NFP were anywhere from 5 to 40 pips? And you can sit there and tell me this is something worth trading and getting involved in a few hours before the bars open in earnest in New York and Chicago? [“Ha ha ha ha”]

One thing market experience [perspective] hopefully teaches you are that some things never, ever change; there were back in the day, there is now, and there will always be times when your best efforts are to sit and watch others destroy their accounts.

I always give thanks when somebody who has [maybe] about 6 months experience tells me to “get in there” and mix it up; stop being some kind of wussee; show me some “guts” and take a shot; you can’t win if you don’t play, etc.

Well, while you are living in your parent’s basement because college was too hard for you, and since you’ve now discovered FX and think this is the easy “golden ticket” for you, the lesson will you will eventually learn [the hard way I’m sure] is that the discipline necessary for success will always be something that eludes you.

The headwinds from the FX markets will always challenge you; there are no “easy” trades, only the decision to participate with your algorithm.

Have a great day everyone.

-vegas

FUBAR TRADING REDUX

                    You & Mrs. Market; Can We Just All Get Along?

Not content with getting hit in the back of the head with a frying pan once, many of you aspiring traders came back for more on NFP Friday. How many lumps in the head can your account take before it is unconscious?

With yesterdays tone set, the insanity of the monthly BLS [Bureau of Lies & Statistics] report on Non-Farm Payrolls continues to make once-a-month-Friday markets more like a craps table than someplace to do business. The entire investment community knows this report is a complete fabrication and scam, and means absolutely nothing; yet they pretend the number is sooooooooo important that Western Civilization hangs in the balance. The fact is that “politicalization” has infected every branch of government; there is no truth, only spin; and as every single government apparatchik knows, nothing can be reported that makes President Chalky Goebbels look bad.

                      So, How Does This Work Out 9 Times In 10?

What we get after the spike action from Thursday and today is an intraday market that is basically adrift; nobody really wanting to do anything and a quite a few accounts that literally can’t because they got whacked pretty good.

The temptation is strong to jump in and participate. Imagine a gigantic pit where 400+ people are on top of each other, screaming, spitting, cursing; the electricity in the air is something I can only tell you about but can’t explain because the intensity is unexplainable; only those who have felt it and seen it know what I really mean.

Yet, I stand there in the amidst of this seemingly bored out of my mind; wondering which early train I’m going to catch to get out of there.

I’m not in there to make friends, impress 20 year-old clerks, pretend I’m a big shot, get my picture taken by the press, impress the folks in the gallery by jumping up and down, or do anything else that takes away from my only objective; make money. Some days you just have to man up and realize the algo can’t help you on that day and leave.

We have seen 2 days in as row where this has been the case, and sitting with my staff for some of this action would be worth an admission ticket in some university psychology departments. I can see and feel the angst among them, and it takes me back to my early days of trading, where missing anything drew a frown upon my face.

Here is the most ironic thing about trading; those that focus on winning suffer the biggest losses and those that focus on losing almost never do. Even after 30+ years of trading, the market has no idea who I am, and if I do something stupid [like ignore the algorithm] it will punish me as if I am a newbie tripling up on a losing trade. How do you think that’s going to work out?

The one thing you newer traders have to understand and have tattooed on the inside of your eyelids, is that discipline matters. If you don’t have it and can’t keep it, then it’s only a matter of time before the “pudding business” awaits your return.

I don’t have office buildings filled with math Ph.D’s and algorithm code that has 20 million lines. We can never compete with Vampire Squid and JPM; either in terms of market access or unlimited amounts of free Fed money. They got it and we don’t.

My algorithm doesn’t compete with them; it seeks to take advantage of their peculiar market situation when they shove the market one way or the other and create the volatility needed to do 2 very important things; 1) fleece the muppets, and 2) enrich themselves.  

Unfortunately for us this week, pretty much most of the range in price for the week happened in 3 five [5] minute candlesticks. Not much to do except be thankful the algorithm stresses NOT getting whacked as a priority. Believe me, there are plenty of accounts who wished they had taken a vacation this week instead of showing up to hand out money.

Have a great day everyone.

-vegas

MAKING THE IMPOSSIBLE POSSIBLE

                                       A Typical Trading Day

Trading any market carries no mathematical certainties; only implied probabilities. Every potential outcome is possible, until one happens and the rest collapse to zero. But in this chaos, are embedded patterns of human behavior that repeat with almost perfect mathematical certainty due to the eternal emotions of fear and greed.

We live in a multi dimensional universe, and trading is no different. Navigating this environment without a good money-making algo is like throwing a rock at the moon and expecting a hit; it ain’t gonna happen!

I’m close to finishing my Binary Options algorithm manual. There’s something here for everybody; no matter if you are a complete newbie or a veteran trader; no matter your level of risk tolerance, as the algo contains multiple levels of risk taking, from ultra conservative to wild-ass bat-excrement crazy cowboy; no matter how much [or little] capital you wish to start and build, as minimum bets start at $10 and go from there, and accounts can be opened with as little as a couple hundred bucks.

It is a sophisticated algorithm, yet easy to use with extremely simple rules. If you can read, write, and see a computer screen, you qualify [sorry Chalky voters, readin’,writin’, and clear thought are mandatory]. I have included pretty much all the markets you might be interested. They are the major currency pairs and their crosses, spot gold [XAUUSD], the major stock indices around the world [e.g., Dow30, FTSE 100, etc.], and crude oil.

Why all of these markets? To make sure you have a mix of available markets to choose your bets that are moving and volatile. Don’t be a one-trick pony.

Essentially, cutting through a detailed explanation, the algo identifies very short term time-frames where the market is expected to move either higher or lower [from a given point] with an approximate 80% chance of success during that time period. Obviously, we bet in that direction. A few minutes later we are either a winner or a loser of that bet when the option expires.

Imagine playing blackjack in Las Vegas where every hand the dealer has a “6” showing and your two cards add up to eleven. Double down, flip the cards, and voila! …… winner, winner, chicken dinner most of the time. You would quit your job and move near the casino to play in this environment, and you know it. The algorithm is better than this.

Pick from the list of financial markets I stated above; pick the time of day and/or night you want to trade; be patient and keep your discipline while watching 2, 3, 4, or however many markets at the same time; when you get the signal, make the bet. All from the comfort of wherever you want to be.

The key here is discipline. The whole world can have the algo and it isn’t going to impact anything because 99% of you will stray from the fold from lack of discipline. If I could only invent a pill that could suspend brain activity while trading, I’d be the richest guy in the world.

Have a good day everyone.

-vegas

TGIF

                                            What A Week

 It’s been a long time since I couldn’t wait for a week to be over. Mind numbing boredom followed by frenetic trading; rinse and then repeat. And where are we really? A couple of bucks away from last Friday’s close.

Because my hand still hurts like the dickens, I’m gonna make today’s message short and sweet. Every fiber of my being wanted to buy the dip down at 1705 -1706. I mean, I wanted to enslave the family for a loan that’s how bad I wanted to be long.

The algorithm was in “sell mode” most of the day, and every tick down I felt was a classic Friday trap being set by dealers.

DID I BUY?

NO.

WHY NOT?

BECAUSE I NEVER EVER FADE THE ALGORITM. NOT NOW. NOT TODAY. NOT NEXT WEEK. NOT EVER.

It doesn’t matter how much I could have made in this instance; what matters is that I maintained my discipline.

So, while gold was all over the place today with a $30 / oz. daily range, I didn’t trade today. I never got short when the algorithm was in “sell mode” because I couldn’t get in at a price where my stop loss was acceptable. When the algorithm switched to “buy mode”, prices rallied so fast off the lows, we had the same problem with stop levels. I do not enter a trade so I can put in a stop that is $7 - $10 away from my entry price. Sorry, I don’t play that game just so I can say I traded.

If you walk away from today’s post with the idea in your head that my discipline cost me money, please think again. Discipline creates wealth.

Have a great weekend everyone.

-vegas

A Serious Moment

I gave a seminar last night on “The Vegas BFSG Algorithm” to a group of new traders. I want to spend today’s post discussing a serious issue that always arises in trading. I’m going to dispense with the usual humor that accompanies pretty much all of my posts, and stay on issue as I drive home a point to those of you that want to make money.

It makes no difference to me where you are coming from or what you have done in the past. The question is, and always will be, can you follow the algorithm and NOT THE MARKET.

One of the reasons I like the MT4 trading platform is the ability to scroll back and look at past signals. With about 15,000 bars in the usual history, you can go back a long way to see what the algorithm has done. In summary, you’re going to get many OMG moments when you see what it has done.

This is the discipline part of trading where you have to put aside your feelings about the market and look at it from a technical and/or mathematical standpoint. Remember, whatever you are thinking about the market, it only exists in your brain, not in the market. This is where many people go wrong and lose big amounts of money.

There is no doubt after you have spent several hours with me that you are going to walk away with at least one very big impression: you must first alleviate risk, and then and only then, look at the market for gain. We can’t get rid of risk entirely when we trade, but we can put a lot of the risk behind us when we enter a trade correctly.

The discipline you need to make money is a direct result of entering trades correctly and being in a position to profit from that. When you enter with a bad price, or when momentum is against you, you have to place your stops far away from where you ordinarily would place them, and this results in wider and bigger losses.

Discipline is the key to making money. If you follow the algorithm, and trade during the busiest market hours [ Midnight – 1:30 PM Chicago time], you will make money.

I’m going to present to you the following numbers in the hope you will study and think about them seriously.

If you started trading at HotForex with USD $ 300, and made $ 1.50 / oz. on average each day [yeah, a buck fifty – a measly buck fifty per ounce – not $5 / oz .– or $10 / oz.] and maintained leverage throughout your trading of 10:1, in 2 years and 5 months your account balance would be approximately USD $ 1,300,000 !!

Yes, you read this right. The miracle of leverage, maintaining constant gains, and avoiding debilitating losses. Given the fact that in the last 2 weeks the algorithm made $ 86 and $ 49 per ounce, respectively, for the week, making $ 1.50 / oz per day seems downright measly.

So, my question is do you remember June of 2009? Because if you do, between then and now you would be up about a mil three. How many of you have that kind of money right now? No?

My message to this group of traders last night was this: 1) follow the algorithm, NOT THE MARKET, and 2) start small and build NOW! Not next week, or next month, but NOW! Anybody can do this, whether you are a student, grandmother, businessman, whatever [Note: Please exempt doctors and lawyers, because as a group they seem to exhibit the God complex and have problems following directions.].

You don’t have any valid excuses, except of course you are happy with your current money status. I’m guessing NOT!

Today's Action & Wrap Up

We got 2 sell signals today, the first producing a loss of about $ 3 / oz, and the second producing a gain of about $ 4 / oz. Since they are so close to each other in producing a wash, I'm going to assume the day was a scratch. Meaning, of course, the net was $ 0. Really nothing of significance.

The algorithm is in sell mode, so we missed the rally today from the overnight lows. Any time the market exhibits this kind of V-shaped rebound, we will miss it. Why? Because I am more concerned about losses than gains. Given the right side of the market, a chimp could make money. So, I deliberately constructed the algorithm to first prevent losses, and then go for gains. Again, an opportunity cost, not a real loss; there's a big, big difference.

Have a good day everyone,

-vegas