Competition Conclusion

BarroMetrics Views: Competition Conclusion

The results of the competition are posted at the conclusion of this blog. Congratulations to the three winners!

But, the competition was more than helping Paul. Its main objective was to help you effect a more effective review process.

Recently, a well-known institution for whom I do some consulting conducted a survey to determine what factors contributed to consistent losing trades. It provided food for thought in that it revealed some lesser known factors leading to losses.

One of the less-known reasons was an ineffective review process.

An effective review process has: 

  1. A well-defined goal. 
  2. Identifies the essential steps to attain the goal. 
  3. Identifies the elements that contribute to success, and identifies what elements are within our control and which are not.
  4. Creates a plan to attain the goal.
  5. Executes the plan.
  6. Reviews the results of the execution.
  7. Changes actions that fail to lead to the goal seeks to improve actions that advance our goal. 

One of the key findings of the survey was successful traders, in their review process, focus on describing the behaviour, They may make a ‘judgment’ entry, but that is always supported by a behavioural comment. For example, Wolfie said: 

”Another lazy habit of his perhaps.’ 

This is a judgment. 

According to modern psychological theory, judgments are not very useful. They may make us experience negative feelings but do little to point the way to effective change. Much better would be to identify specific behaviour. Again taking a comment from Wolfie as an example: 

Although Paul put in extra efforts to wake up earlier hoping to get a better entry price, he did not follow through subsequently. His habit of waking up late and assumption of the market will “wait for him” caused him to lose the opportunity.” 

 Tomorrow, I’ll use the ideas above to critique Paul’s case.   

COMPETITION

Winners: I was looking for two main comments.

  1.  What behaviours (not judgments) contributed to Paul’s lack of success; and
  2. Whether these were or were not in his control. 

Quite a few mentioned (1); one mentioned (2).  I have to say I had a difficult choice to select only three. In the end, I chose:

  •  Sunny
  • Manish and
  • Eng

The email with the prize download link will be sent out once I complete this blog.

Thank you all for participating!

 

Competition So Far

BarroMetrics Views: Competition So Far

Thanks to all who have contributed. If you are planning to take part, do so quickly. I said I’d chose the three I liked best (i.e. came closest to my answer).

A couple of things:

  1. Read the facts I presented. For example, Paul failed to look at the 60-minutes in a timely fashion. Some have suggested he lacks discipline, perhaps and perhaps not (e.g. he may have had an emergency).  One suggested he was lazy – perhaps and perhaps not, (he got up at 4:00 am. Not too many lazy persons would do that), etc.
  2. To win the competition, you need to identify the Cardinal Sin. As traders, at some time in our career, we all commit this sin.

Some really good answers so far – I may have to increase the winner’s podium (G)

Oanda Trading Competition

BarroMetrice Views: Oanda Trading Competition

Today, I was going to review the S&P recommendation and in the process reply to a few emails. Instead, I’ll postpone that until tomorrow.

Today I want to speak about an interesting item that has hit my desk.

How would you like to exchange a bit of time, and effort but no financial investment for a chance of making SGD25,000.00 to SGD 10,000.00?

The attached flyer shows you how.

In essence, Oanda is holding a trading competition for its clients in SINGAPORE. 

You’ll be trading a demo account (‘pretend money’) and if you are chosen to be one of Singapore’s 3 top traders, you’ll win:

  • Top Trader: SGD 25k
  • Runner Up: SGD 15k
  • Top Young Trader (21 years to 30): SGD 10K. 

Also, there are weekly cash prices worth SGD 1,500.00 for the two most profitable weekly traders.

Note Oanda advises that: “All prizes are credited to live accounts. Can withdraw prizes only after end of Jan 2016 and must place at least 1 live trade”.

So why not join? Your only risk is time and effort. Your return is knowledge (amazing how much you learn when taking part in these events) and perhaps some cash!

ACT Final

BarroMetrics Views: ACT Final

As the final post in the series, I had planned to give an example of how ACT had changed my trading. Well, Friday’s trading provided such an opportunity, but not quite in the way I had in mind!

Friday saw a reversion to trading governed by the 3-Fs with the result that I lost 1.7% (largest loss of the year in one day!). Still, that’s better than blowing my account. Those of you who have heard me tell the story of that eventual night’s trading many, many years ago will know what I mean.

I have recorded a video about Friday’s trading. You can find it here:

 https://dl.dropboxusercontent.com/u/10422981/Blog%202015-10-01.mp4

ACT IV

BarroMetrics Views:  ACT IV

Ryan asked:

Two related questions

I) whilst in a trade how do you distinguish between new information and a FFF type emotion? Is it possible that the uncertainly and discomfort simply forces an FFF to be rationalised as new information?

II)The values and committed actions are also integral – could you explain further his you integrate these concepts as part of the application of ACT?

————-

I) There is no one-size fits all answer to this question. I can only share my experiences. 

My 3 Fs have peculiar characteristics:

  1. There is an overwhelming feeling that ‘I must act NOW’; 
  2. I less my sense of context because I focus only the timeframe I am watching. 

Let me explain. In my trading, I seek to take trades where:

  • the structure and zones of the higher timeframes 
  • line up with the structure and trigger of the lower timeframes.  

When my 3Fs come into play all I focus on is the entry timeframe – totally losing sight of the structure and zones of the higher timeframes.II) The science of goal achievement is as relevant to trading as in any other field. We need to set goals (Long-term, medium-term and short-term), plan our strategies to get to our goals, taken action, review the results and re-orientate i.e. change what is not working.

ACT suggests that is goals and actions are in line with our values, we take effortless action. To that, I would add, that by the conscious creation of value based habits, we attain our goals with less conscious effort.

ACT III

BarroMetrics Views: ACT III

I received an email stating that the coverage I gave ACT was superficial.

I agree. The blogs are intended as an introduction, In ACT, I provided a link for an in-depth introduction. And, you can always ‘Google’ Acceptance & Commitment Therapy (also Acceptance & Commitment Training) for books and courses on the subject. 

Today, I want to look at an example of ACT’s positive influence on my trading.

For many years now, I have sought to overcome the ‘ebb-flow’ volatility of my results. Periods of ‘flow’ (when I could do no wrong) were inevitably followed by periods of ‘ebb’ (when nothing I did was right). In the ‘ebb’ phase, I gave back too much. For example following a ‘flow’ period that ended in Jan 2014, I experienced a 15% drawdown that took the best part of nine months to recover.

My thinking was if I could reduce the drawdown, then I would not have to ‘chase my tail’ to recover the drawdown losses.  This year I may have found the solution. I say ‘may’ because the measuring period has been only nine months – too short to draw any firm conclusions. But, the signs are very positive.

So, what has made a difference? I’d love to say I found a brand new TA tool – that way it would be an easy fix for everyone. Unfortunately, the answer lies in my psyche.

As a trader of over 30 years, I ‘knew’ that ‘leaving money on the table’,  and ‘missing out’ are part and parcel of our profession. In the ‘flow’ phase, neither issue arises or if they do, arise rarely and are quickly forgotten because I am onto another ‘great’ trade. When the evitable ‘ebb’ stage occurred, both would occur with greater frequency. The way I initially responded was to reduce position size and hold onto to the position until stopped out.

The feelings I would experience – disappointment, regret – I would ‘force’ down by reminding myself of the nature of markets. And in that response lay the error.

ACT suggests that we allow ourselves to experience the feelings fully rather than suppress them. Opening ourselves to the feelings without fusion and judgment dissipates their effect. The ACT tools in the ‘acceptance process’ (Figure 1) were also used to experience and then dampen and remove the residuary, adverse effects of disappointment, etc. In doing so, I was open to the solution of exiting a trade if it did not behave in a manner I expected.

This did mean that on some trades I would miss out and leave money on the table –  trades that would have been profitable had I waited for the stop to be hit.

It also meant that:

* I had to prepare diligently for the likely scenarios that could occur after I took the trade, and

* It also meant that the only way I’d stay in a trade during ‘ebb’ stage would be if it were an expected, positive (or neutral) response.

But,  I can’t argue with the results. Since I adopted the approach, ‘ebb’ results are breakeven or a small loss. This means that when I move into ‘flow’ or ‘normal’, the profits don’t chase past losses.

I am curious to see if 2015 will prove to be a watershed year.  It would be amazing if it were, and will go to show that old horses can still learn new tricks.

act-hexagon-4.png

FIGURE 1

ACT II

BarroMetrics Views: ACT II

HK is on an August Moon Hols. Wishing all my HK readers a fab hols!

Figures 1 and 2 are different versions of the ACT Hexagon. Figure 1 provides a detailed description; Figure 2 shows the two processes.

Most of the ideas are self-explanatory – except perhaps ‘self as context’. ACT takes the view that we are composed of three selves:

  1. Self as concept. This is the idea that we have of ourselves – our self-concept. It comes from our beliefs, thoughts, memories, judgments and facts. It is also the self that houses the ‘ego’. It is the self with which we tend to ‘fuse’ e.g. taking a loss is not just a financial loss but a judgment of our self-worth. 
  2. Self as awareness. This is the process of observing without judgment i.e. with defusion.
  3. Self as context.  This is the ‘3rd-party’ observer. The one who views our actions and results with dispassion and without judgment (i.e. also with defusion).

Our job as traders is to work as far as is it possible for us to do so with the areas of awareness and context.

The two processes complement one another:

1)  The acceptance process leads us to view the results of our trading without ‘attaching meaning or judgment’ apart from the fact that we have lost money.

2) The commitment process leads us formulate goals and take action to attain them. It also leads us to focus on what market information is telling us rather than viewing market information from the perspective of what we would like the market to be telling us.

(more tomorrow)

act-hexagon-10.png

FIGURE 1

act-hexagon-4.png

FIGURE 2

All Well Now! BrightWin

BarroMetrics Views: All Well Now! BrightWin

At last I can say I have fully recovered from the spill I had (what felt like) an eternity ago. All of last week, I sat before my computer and nary a twinge in sight. Hopefully that’s the last long-term injury I’ll have for a while. Still when you are a septuagenarian injuries are part of the life.

The great thing is my trading has never been better. Because of the injury, I traded only my own account; so, I am hoping that the run in 2015 is because I have taken the trading to the next level rather than just being in the flow.

And, if I have moved the trading up a notch, I know where the kudos rest: with Acceptance Commitment Therapy – by far the best tool traders have to improve.

Speaking of ‘improvement’, my first Singaporean friend, put me onto BrightWin. BrightWin is a New Zealand broker with a couple of interesting innovations:

  1.  BrightWing will chart your equity curve based on your trading with it. What I call ‘an equity journal’ is an essential upkeep if we want to improve. Based on the 20-years of teaching experience, I formed the view that keeping a psych and equity journal things most unsuccessful traders are loath to do. Well now the broker will do it for you. No more excuses guys and gals!
  2. The other innovation is a twist to a wrinkle quite a few brokers are offering. BrightWin will post the chart of its best traders. You can elect to automatically place the same trades. However, unlike the rest, BrightWin monitors your equity so that you take the same percentage risk as the mentor. I thought this an excellent twist.

I had a look a BrightWin. It seems to be an ECN (i.e. it will charge you a brokerage fee);  its spreads are competitive; and it covers most FX pairs , some in indices, and some commodities (CFDs).

BrightWin also an interesting rebate structure. If you want to open an account with it (and receive some benefit for any referral), you can open an account at:

http://affiliate.brightwinsecurities.com/signup/Riovest.aspx?AI=1427

When you do that, you are placed  under my Jeff Tie’s group. This means if you have any questions, do drop him a line at:  Jeffery Tie <jefftie@gmail.com>.

Or if you are like me, who prefers to just open an account (i.e. no associate account), drop Jeff a line and he’ll tell you how to do that.

Ohh! Before I forget. I have two attachments:

  • One is Jeff’s equity curve since starting with BrightWin.  It shows the win rate, average P&L, best and worst returns on margin and Jeff’s max drawdown to date. It also shows the number following Jeff at the time of the snapshot (28).
  • The six steps you need to follow to start trading with BrightWin (assuming you want the rebate)

jeff-equity-curve.png

Jeff Tie’s Equity Curve

birghtwin.doc

6 Steps

FOMC 2015-09-17

BarroMetrics Views: FOMC 2015-09-17

A couple of essential matters before today’s comments.

Firstly, the series I was planning to write for the blog.

A big ‘thank you’ to those who commented, and expressed an interest. That said, the response has been distinctly underwhelming. So, I guess there is little interest in the topic. I’ll drop the series for the blog.

For those that did drop me a line…. I have decided to write the series anyway. It will help clarify my ideas on the subject. I’ll send you the pieces I write for myself as I complete each section.

Secondly,  on a totally different subject. Some of you in Singapore may remember my nephew, Kane Petersen – we did a seminar together some years back. Kane is a professional high-wire artist, one of the best in his field. Recently he did a walk in Melbourne that was covered by many of the news channels, including CNA (Singapore).

Here is a link to the walk…

http://www.9jumpin.com.au/show/today/videos/4487554317001/

Turning today’s blog.

FOCM decision day (2:00 pm EST; 2:00 am HK time, 09-18). I’d say one of the most highly anticipated decision’s in recent memory. Figure 1 shows the daily NZDUSD. You can see that for the past 9 trading days, the pair has drifted sideways. Most of the FX pairs show a similar pattern.

The S&P shows 13 trading days of sideways drift.

So, all eyes on the FOMC decision. My view is the FED will raise a 0.25% and will accompany the rise with a dovish statement. My strategy will be to rely on the Rob Hanna FOMC day ‘system’ . I had a quick squiz at Rob’s site. The system appears no longer to be for sale. Pity, I have found the approach to be very useful to enter a trade on FOMC day.

I plan to trade the NZDUSD – long for a day trade, short for a swing trade. Provided I am not too tired, I’ll post immediately after entry.

2015-09-17-nzdusd-daily.png

FIGURE 1 NZDUSD

New Series

BarroMetrics Views: New Series

First though, an apology – for some reason I ‘lost’ a week and thought last night was Sept 16 i.e. FOMC day  (Opps!). Of course that’s next week.

Today, I am writing to announce that I am beginning a mini-series on why traders fail and what we need to do to succeed. The series will probably occupy two of my weekly blogs. I am looking to restart a daily blog on Tuesday, Sept 15.

To succeed we need to attain:

  1. The knowledge (know what to do), and
  2. The skill (do what we know). 

Of those whom I have made who ‘failed’, did not even pass the first gate i.e., they failed to acquire the knowledge they need. In the series, I’ll not cover the content you need – you have info galore. What I will do is cover how to integrate that knowledge so that we can say we have ‘know’ the material. So, next week will be FOMC focused with space for the new series.