Comey Circus

BarroMetrics Views: Comey Circus

It’s impossible to ignore the circus events posing as US politics. The problem is the ‘circus’ has the possibility of impacting market volatility.

Let’s see if we can take an objective view of the situation.

There is no doubt Trump has the authority to sack Comey UNLESS the sacking is for reasons of self-protection or self-aggrandisement. What do I mean by that? If it is subsequently established that a reasonable man could infer that the sacking was Trump’s attempt to block or hamper the FBI enquiry into possible Russian links with Trump’s staff, that would probably constitute grounds for impeachment.

Trump detractors argue:

  1. The dismal was due to the FBI’s investigation of the Russian connection, and not for the reasons stated in Roenstein’s memo recommending dismissal. (Figure 1)
  2. They point out that had the real reason been the handling of Clinton’s email server, the dismissal would have come once Trump became President.
  3. There are reports “A longtime friend who talked to the President over the weekend described him as “over Comey investigating the Russian meddling and not investigating enough the leaks from the White House”.

The fear is not the dismissal but that the replacement will kill the FBI investigation.

  • Trump supporters argue that:
  1. Trump acted within his constitutional powers
  2. His failure to sack Comey earlier was because having sacked Yates, Sessions need to be approved before a move could be made against Comey. The matter was further delayed when Sessions had to recuse himself from the investigation. It was only when Roenstein was appointed that Comey could be sacked.
  3. Comey brought the sacking upon himself through his poor performance at the Senate testimony on May 3. Moreover, he refused to preview his testimony with Trump.

If we bear down on the essentials, we are left with this picture:

  • The FBI is investigating the Trump team (and perhaps Trump if the evidence leads there)
  • To date, the FBO has not disclosed any evidence that the Trump was involved.
  • In an ongoing investigation, the FBI seldom reports on its findings, doing that only when it concludes.
  • It’s a convention that ‘justice must not only be done but must also be seen to be done’. Sacking the head of the FBI at a time when there is an investigation that may link you and your staff to a wrongdoing breaches that cannon.

All the rest is fluff and smoke. Trump did the wrong thing by sacking Comey at this time. Let’s see if he makes the next error – appoints a head who puts an end to the Russian investigation.

Roenstein memo

FIGURE 1

OCD Help

BarroMetrics Views: OCD Help

The Mastery blog hit a nerve with quite a number of you. I received emails along the lines in the attached doc (Posting it to this piece would have made the entry too long). Essentially, all were asking for help. I wondered how many readers were, are, suffering the same issues but did not write in.

(The author of the email suggested that he may be suffering from OCD given he had not learnt from his mistakes. Hence the title of this blog).

Here are some general words of advice.

Make sure you Method has an edge. Optimally, you will backtest the system (or setup), then forward test before you start trading it. This testing forms your first step to acquiring confidence in the Method. If you don’t know how to test, then find a service to do it for you. Drop me a line in the comments section if you need referrals.

After backtesting, test it on a micro account. The best asset class for this is CFDs. Unfortunately, they are not available in some jurisdictions, like the US and HK. I’m not sure if US residents are allowed to open overseas accounts. If you are, then I’d take that step. Just be careful, there are more than a few brokers that are less than legitimate. The best jurisdiction is Singapore – its Monetary Authority is the strictest I know of. Or you can go to Forex Peace Army and do your own due diligence. Most Forex brokers offer CFDs.

I emphasise, use the micro account size. Your objective is to get a feel for your method. Around 15 or so trades should do the trick. To give you an idea of the micro size: the S&P mini is USD 250.00 per point. The S&P CFD is USD $1.00 per point. Consequently, the CFD allows you to practise without being a danger to your wealth.

If you can’t or won’t use CFDs, then at least spend some time trading a simulated account using Deliberative Practice. The practice will acclimatise you to the way your trading rules react to market conditions.

Have Money rules: a way of calculating your position sizing, portfolio risk and when to add profits to your capital and when to subtract your losses. The Turtles ideas are a good starting point. I have attached some info here.

Finally, you need to manage your impulse trades. Having a Method in which you have confidence helps – immensely. Also, use Acceptance and Commitment Training (ACT). The Happiness Trap book is a great starting point. There are some free resources at the Happiness Trap website.

ACT Made Simple is a more complete introduction but is also more difficult to read. The Happiness Trap resource page also has some freebies for this book.

You could also Google ACT. But, be warned, much of the material is for practitioners, and I found the reading heavy going.

The 5 Money Management And Position Sizing Secrets Of The Turtle

Traders turtle rules

2017-04-28 email

Mastery

The current Mastery course is proving to be a gold mine of information.

Participation was only by invitation  – perhaps that accounts for the fact that the commitment to succeed is so high among the attendees. That’s not to say that the commitment is uniform – in any group, there will be those with a higher drive to succeed than the others. But, it is to say, that as a group, the commitment is higher than most.

Perhaps I should take a step back and outline the purpose of the course. Mastery assumes you have integrated the basic knowledge for trading success: you have a method with a positive expectancy, you keep your journals, you apply ACT so as to remain calm enough to allow your neocortex to manage the fight, flight or fear response, you execute your risk management and method rules with a high degree of consistency, etc., etc.

Mastery assumes you have integrated the basic knowledge for trading success:

  • you have a method with a positive expectancy,
  • you keep your journals,
  • you apply ACT so as to remain calm enough to allow your neocortex to manage the fight, flight or fear response,
  • you execute your risk management and method rules with a high degree of consistency, etc., etc.

Its objective is to move to the next level of discretionary rule-based trading: rather than see the chart as a series of individual patterns & processes; traders start to see the whole picture, they start to see what is important, in this instance, and what is not.

Think of the as a course designed to produce chess grandmasters. They scour the board and see the patterns that are developing rather than merely seeing individual tactics.

What I’ve found with my group is while they are competent in seeing trading as a single pattern e.g. they see a Spring Change in Trend Pattern, they aren’t quite there when it comes to seeing the whole picture e.g. why in this case, the pattern is likely to fail.

BUT, the fab thing is I am seeing such rapid improvement that it has made the endeavour well worthwhile. In the process, I’ve been taught what works and what doesn’t. The course has certainly put paid to the idea that you can become a master by attending a tw0-day or three-day seminar.

The course has certainly put paid to the idea that you can become a master by attending a tw0-day or three-day seminar. The attendance is but a start. After the seminar, you need to put in the work – first attain competence, and then to seek Mastery.

So where are you at? Beginner, Competent, Master? And what are you going to do to get to the next level?

LOOM – WARNING

A warning from my good friend, Joshua Fong:

“How’s it going?

Just a note of caution that it appears the app can read everything you type, including passwords etc, even when you are not recording. Just saying…”
I missed the warning when I looked at the software. My aplogies.
?

Presentations

BarroMetric Views: Presentations

My blog publication schedule may be disrupted March 22 to April 2.

I’ll be in Singapore for two presentations.

  1. On March 23, a presentation only for Oanda clients, the Elite Trader’s Club.
  2. On April 1, a public event – at UOB Kay Hian Auditorium, 8 Anthony Road:

“How to Leave the 90% Who Lose Money and Join the Winning 10%”!

At UOB, we’ll be looking to provide:

  • the knowledge needed to become successful and
  • the models needed to integrate that knowledge into a set of skills.

Also, there will also be some great giveaways:

  • Four high-quality books – among the best to help traders become better, and
  • A lucky draw for a mystery gift, one that has led to phenomenal improvement.

Needless to say, I expect the event to be highly successful. It’s certainly the case if our registrations are anything to go by. The auditorium holds 100, and we are more than half-full – we started the marketing just today!

If you’d like to attend, register at

http://www.barrometrics.com/ray-barros-trading-success-foundation

 

 

Learning from History?

BarroMetrics Views: Learning from History?

Is the mainstream press willing to learn from history? Judging from the Dutch and forecasts for the French elections, I don’t think so.

In the Dutch elections, the press was all agog about Wildes winning. Yet, in the polls, he was a long way behind; and if you surmised anything about Dutch electors, the probability of Wildes winning, on this occasion, was remote. After the result, the press proclaimed that sanity had been preserved and forecasted a similar result for the French.

Wait a minute guys and gals, didn’t Wildes’ party become the second largest party, netting 26 seats? I wouldn’t be writing off Le Pen on that outcome.

Turning to the French – first round April 23 and the second May 7.

The mainstream pundits are predicting a Le Pen-Macron win on April 23 and have all but written Le Pen off for the May 7 run-off (Google ‘who will win the French elections’ and you’ll see what I mean).

For the May 7 round, the Betfair Exchange has Macron odds-on to win at 20-21, with Le Pen at 13-5 (2.6-1).

The French polls remind me of Brexit and US elections all over again. The focus is off tangent. They seem to ignore the strong undercurrent of French sentiment against current French immigration policies. Le Pen is all for exiting the Schengen border-free zone while Macron is for keeping it. This is the most critical difference in their policies.

If Le Pen wins on April 23 and is at 2-1 or more for the May 7 elections, I’ll be tempted to have a friendly bet. At those prices, she is under the odds.

 

 

Overcoming Bias 2

BarroMetrics Views: Overcoming Bias 2

Yesterday we saw how I have acquired a bias for the short side in the GBPUSD. By the way, this is inevitable once we form a view of the side that is likely to produce a low-risk, high probability profitable trade.

At this point, I analyse the pair with of my Trader’s Timeframe lenses.

The first step is to list my observations, then categorise them as ‘bull, bear, or neutral’. Following that, I look to integrate the information and assess the probability that the downtrend is likely to continue or change.

Before I move on to the next item in the analysis stage, ‘zone’ (where will I take the trade), I consciously look for information against the bias. This step seeks to ensure I am not suppressing information or falling prey to the heuristics that have proven to be my Achilles’ heel: representativeness, anchoring, framing and confirmation.

Let’s look at the ideas in action. (My trader’s timeframe is the 18-day swing).

In the GBPUSD, I have assessed a downtrend that is likely to continue to in the higher timeframes. Figure 1 shows the 18-day (red line), and 13-week (black line) and 12-month (green line) daily equivalents. They swing lines show the trends: monthly, quarterly and yearly respectively.

At first glance, the 18-day downtrend seems intact. If that were the case, my strategy would be to go long in the sell zone around the current swing highs, or upon a break of the most recent swing low.

But, when I actively looked for ‘long’ info,  I saw:

  • Since 2/28/2017, as the pair moved South, its ATR dropped from around 130 to 90. In Market Profile terms, the pair ‘is not facilitating trade’. In short, we do not see the price action that would suggest downside continuation. Most likely, if the longer-term downtrend is to prove itself, we’d first need to see higher prices.
  • The structure since 09/06/2016 has formed what I call a ‘rejection high, rejection low, value area 313’ – a label for a ‘bell-curve forming’ process.
  •  In this pattern, the next high probability move is:
  1. acceptance above the Value Area high at 1.2774 (red TPL) for
  2. a move to the Primary Sell Zone (1.3434 to 1.3210) of
  3. the structure bounded by 1.3448 and 1.1644.
  • However, if instead of an upside breakout, we see acceptance below the rejection low at 1.1985, we’ll probably see a re-test of 1.1644 and even more likely, its breach.

So, by looking for ‘non-confirmatory’ clues, I  have changed my initial views of where to take trades and the likelihood of an 18-d trend change. (A rally to the PSZ at 1.3434 to 1.3210 would break previous 18-d swing highs and thus negate the 18-d downtrend).

The process may seem complicated. But, as with most habits, it’s only difficult at the beginning. Once internalised it becomes second-nature – though I still use a check-list to ensure I consciously cover all bases.

We’ll never totally eliminate the biases occasioned by our mind’s unconscious reasoning – nor would we want to because they serve an invaluable function. But, by being self-aware, we can reduce their adverse influences when their use would lead us astray.

So, over to you: what are you common biases?

(By the way: ECB rate decision announced tonight at 16:30 HK time – may stimulate an increase in the ranges [at least of the majors and European crosses])

FIGURE 1 GPUSD 18-day and higher swings

FIGURE 2 GBPUSD 18-day swing

 

 

Broker Selection

BarroMetrics Views: Broker Selection

One of the most important functions we have as traders is finding a broker that we can rely on and feel confident in: that we won’t lose our hard-earned if they close.

For retail traders, there are only two jurisdictions I like: Singapore and Switzerland.

  • Singapore because MAS has a sterling track record. In the collapse of MF Global (2011) and Refco (2005), not a single Singapore client lost money.
  • Switzerland because the Government guarantees deposits up to 100,000.00 CHF. The drawback in Switzerland is the only licensed broker I know of is Dukascopy. I’m told, by my students and friends, that small accounts experience unacceptable slippage on stop orders.

I am not commenting on London’s FCA registrations because I have no experience with them. In the US and Australia, clients of failing brokers have lost some or all of their deposits. It’s true that in these situations, the brokers had failed to place funds in segregated accounts, in breach of regulations (e.g. MF Global), but the net result is the clients lost money.

Here is a link to an excellent article by Forex Peace Army on the subject:

http://www.forexpeacearmy.com/community/threads/how-to-select-a-forex-broker.2333/

Broker Going Under?

BarroMetrics Views: Broker Going Under?

On Monday, Feb 6, the news came out that the CFTC had fined FXCM USD7M and barred the broker from continuing business in the US. The CFTC alleged that FXCM had defrauded its retail FX clients by advertising itself as a ‘No Dealing Desk’.  The has paid the fine and settled charges with the CFTC.

Yesterday Gain Capital announced it had bought FXCM’s US client base.

So what now for FXCM non-US clients?

Finance Magnates provided an excellent analysis of FXCM’s situation in “Analysis: Is Leucadia Willing to save FXCM Again? What’s clear from the article is if I were an FXCM client, I’d be moving my funds to another broker.

Sure Leucadia could come to the rescue or FXCM may find a buyer for its ex-US operations. The average daily volume generated by US clients of FXCM was reported to be around USD 2.4 billion – not exactly chicken feed. Its other operations should at least match that sum.

On the other, if I had money with FXCM why run the risk? Better to be safe than sorry. Cut and run would be my motto.