3 Essential Qualities for Success

BarroMetrics Views: 3 Essential Qualities for Success

I was reading a blog my Michael Hyatt about three qualities effective leaders have (What Ike’s Secret D-Day Letter…). And, I thought,

‘Yep, that’s also true for traders’!

Eisenhower wrote a secret letter ahead of the Normandy invasion – in case the invasion failed. In it he takes full responsibility for the ‘failure’: ‘The troops, the air, and the Navy did all that Bravery and devotion to duty could do. If any blame or fault attaches to the attempt it is mine alone.’

From that letter, traders can integrate three critical lessons:

  1. He practised ‘extreme ownership’. This phrase recently has come into vogue (just Google it and you’ll see what I mean). But, it has been around for aeons. Dad taught it to us, and I’m a septuagenarian!

Dad called ‘accountability’ – take total responsibility for actions within your control. As traders, we decide when to enter and when to exit. Trade-by-trade, matters will occur beyond our control; but, in the long run, we will be profitable if:

  • our plan has an edge,
  • we execute consistently and
  • we practise appropriate position sizing

2. He addressed the downside: Eisenhower succeeded not by ignoring the challenges he was facing but by meeting them head-on.

Mechanical traders do this by understanding the stats of their system:

  • the expectancy return,
  • the average dollar win & loss,
  • the theoretical consecutive loss probability,
  • the average ROI, etc.

Discretionary rule-based traders face the challenge this way: by understanding, not only the structures they are trading, but also the principles underlying the structures.  For example, in the Wyckoff model, we are taught the ‘buying climax’. The trader needs to know not only the pattern but also the conditions giving rise to the pattern.

3. He used contingent thinking: expect the best, prepare for the worst.  I use the ‘if-then’ approach. I adapted this from the goal-achievement material (see How to use if-then planning to achieve any goal). When coaching, I find getting traders to integrate this thinking one of the most difficult skills to teach. The question I seek to answer:

‘What do you have to see to tell you that your (trading) scenario is wrong? 

And then use the ‘if-then’ formula to generate action if that scenario comes about.  The answer often allows me to exit early, ahead of the stop-loss being hit.

If you think about it, you’ll see that the initial stop loss is a form of an ‘if-then’ statement. For the discretionary trader, exiting before a stop loss gets hit is a big plus – if done for the right reasons.

The problem is the student-trader is afraid to look into the question. Why? Because after asking that question, he encounters the fear: ‘what happens if I exit early and miss a humongous profit!??’ 

He doesn’t seem to ask: ‘how much will I save by exiting early rather than being stopped out?’ 

And he fails to look into the stats, to see if early exit costs or saves him money.

My question for you: how many of the three qualities does your trading exhibit?

 

Apologies!

Hi Gals and Guys

Deepest apologies. By now those who registered for the July 5 event, would have received our advice  –  I totally messed up!

I assumed July 5 was a work day in the US. In fact, it’s the last day of the July 4 holiday. As a result, we should see very quiet trading. The live-trading is a core port of the July presentation. Rather than be certain of having to skip it, I decided to postpone.

I realise that some you will not be able to attend. Of course, we will refund the S$20.00. On the other hand, if you wanted the video and all the bonuses, we can:

  • For those in Singapore, swap you to the live-stream. You’ll receive the video and all the goodies.
  • For those ex-Singapore, you’ll receive the video as well as the extras.

I’ll let you decide – just drop us a line.

The new date is July 12. I hope to see you there.


BTW, if you are an Aussie reader, drop me a line at

ramonbarros@tradingsuccess.com

and I’ll send you a piece on Aussie real estate prices. The piece makes for an interesting read.

Please write to the address above and not to the blog or support.

 

Recession Warning Tools

BarroMetrics Views: Recession Warning Tools

First off, thank you! Thanks to all those who took a moment to drop me a ‘get well’ note. It was very kind of you. My back is much better – still tender but at least the excruciating pain is gone. At least, I can sit! The anti-inflammatory pills, pain killers and ointment did their job.

Turning to today……..

…….. I’d like to look at:

  • Two tools that have served as advance warning signals of a recession to come; and
  • A new confirming tool.

The first is the St Louis FED, Adjusted Monetary Base.  The AMB shows the amount deposited by US banks in the Federal Reserve. At the moment, the FED is paying close to commercial rates. As a result, banks prefer to leave their funds with the FED rather than lending to Main Street – hence the lack of inflation. Once the AMB starts to trend down, we’ll be seeing money flowing into the economy. That will cause inflation to rise – based on FED history, faster than it will anticipate. It will then have to play catch-up with dramatic rate rises or face hyperinflation. Their catch-up leads to a recession.

Figure 1 shows the AMB. The signal I’m looking for is a breakdown that is followed by a strongly trending bear market. The bear trend will signal the release of funds to Main Street. As I said, that’s when we’ll see inflation rise and probably rise dramatically. There’s usually a 3 to 6-month lead time from the time the ABM figures to the time inflation is signalled by the CPI.

The next tool is the yield curve. In normal times, the longer-term maturities have a higher rate than the shorter ones. If the yield curve flattens and then inverts (long-term rates dip below short-term), we have a warning of a recession. I have attached a short piece by the FED that explains the indicator. (Figure 2)

Yesterday, FT ran an article suggesting the yield spread was sending an amber warning of a recession. Frankly, I think they are way ahead of themselves.

According to the FED, one of the most successful predictive yield models is the spread between the 3-month bills and 10-month notes. Figure 3 shows the spread. Yes, the spread is narrowing – the 10-year notes are ‘flat to down’, and the 3-month bills are ‘rising’. But, the current spread between the two is only 1.17 (St Louis Fed Reserve).

According to Attachment 2, with this spread, the probability of the yield curve correctly predicting a recession is less than 10%. That said, like the AMB, it’s an indicator I check regularly.

The final tool: one I was recently introduced to by Port Phillip Publishing. It’s the Baker Hughes Rigg Count of US oil and gas rigs.  Figure 4 is a chart of the BHRC with the recessions marked. Port Phillip says:

We have marked the years of US recessions…..We pay particular attention to the amount of time that has passed since the end of the last US recession — eight years. And the fact that the recessions seem to begin as the rig count is on the rise, rather than when it’s falling.”

My analysis of a chart of the BHRC and recession dates:

  1. This indicator lags the recession starts, and
  2. It serves as an excellent confirmation tool.

That said, oil prices are down 18% in 2017 and oil rigs are on the rise. The chart may be saying ‘get ready’.

So why am looking at recession indicators? Usually, the stock market tops before a recession. But within the current context (given the exuberance of the US stock market) we may well see a recession before the stock market tops.

FIGURE 1 Adjusted Monetary Base

(Chart through courtesy of  St Louis Fed Reserve)

2017-06-28 Yield Curve Predictor of Recessions FED

Attachment 2: FED explaining of Yield Curve

FIGURE 3 10-Year Notes cf 3-month Bills

(Chart through courtesy of  Quandl)

Figure 4 Baker Hughes Rigg Count

(Chart through courtesy of Bloomberg)

 

No Blog

June 28, 2017

Sorry, Guys and Gals…..

Yesterday, I slipped and either tore, or severely strained, some back muscles – making sitting and walking very painful. If the muscles are only strained, I’ll be back in a couple of days; if they have been torn, well…..who knows?

Hopefully, they are only strained.

Image Credits: nordic outbreak

Consequences Protectionism: Trade War – Black Swan? (2)

BarroMetrics Views: Consequences Protectionism

The image heading this blog fairly well sets out the general consequences, costs go up, supply goes down, and as a result, prices go up.

But, in the current context, there are two very consequences:

  1. Possible mini-trade war with US allies.
  2. A trade war with China

The tariffs would not be aimed specifically at China. As such, they would hit Canada, Germany, South Korea, Turkey and Mexico more than China. Undoubtedly, they would react in kind.

Also, the EU trade commissioner, Cecilia Malmstrom, has warned that the EU would have to respond.

If Trump does impose tariffs that affect China, can you see it not responding? I can’t. So, add China to the list above.

A world trade war, at this delicate juncture, could send stock markets tumbling at a rate that no amount of QE would halt.

Let’s see what happens.

Image credits: action institute

An Event For Your Trading Improvement!

BarroMetrics Views: An Event For Your Trading Improvement!

Tomorrow, I’ll conclude “Trade War – Black Swan?“. I was going to do it today, but we have been inundated with questions about July 5. I’ll answer those questions now.

The objective on July 5 to leave the participants with a trading process that will improve their results. We’re looking to achieve this by:

  • providing the needed ideas and theory. The ideas that have served me when managing the private-partnership hedge fund (1990 to 2010) and my own trading.
  • illustrating the ideas with real-time trading at the presentation; and
  • providing the tools to apply the ideas.

The ideas will cover the “3 Biggest Mistakes Traders Make” and how to avoid them. Without giving the presentation away, I think it’s safe to say that at least one is not normally associated with trading. Yet, the failure to address this issue just about guarantees failure.

We’ll be trading the markets live. On this blog, I posted about the system we’ll be using. It’s ideal for the presentation: short-term with an amazing expectancy return. And no, I won’t be presenting its rules.  I will be using it to show the process all successful traders (in one form or another) for their trades. It’s also a process few, if any, losing traders apply.

The psychology for using the system is a simple one: attendees will follow the success process if they associate it with a profitable trade. The research shows we retain 75% of what we practice and only 5% of what we hear.

The tools we’re giving away?

  1. The equity spreadsheet I use to use before I adopted Edgewonk. Indeed, I am still using it because it provides data that Edgewonk does not. We’ll be sending the spreadsheet out before the event.
  2. A trading system using end-of-day data. The reason for this timeframe is I expect most attendees to have full-time jobs. I believe it’s not possible to apply consistently system rules that utilise intra-day data. Only July 8, the system rules will be sent to all registrants together with a ‘how to apply’ video.
  3. A template for a psych journal will be demonstrated at the event.

Here are the registration links:

Live-stream for those who can’t attend the event:

 http://www.barrometrics.com/avoid-3-biggest-mistakes-traders-make-july-2017-livestream

There is an SGD 20.00 (about USD 14.00-15.00) fee for the live-stream.

For those attending in Singapore:

http://www.barrometrics.com/avoid-3-biggest-mistakes-traders-make-july-2017

There is a refundable (on attendance) SGD 20.00 fee for Singapore attendees.

If you are planning to attend: Please register before Tuesday, June 27, to avoid disappointment. We have a live-stream limit of 50 (to ensure

*** Please register before Tuesday, June 27, to avoid disappointment. We have a live-stream limit of 50 (to ensure

We have a live-stream limit of 50 (to ensure quality of projection) and a 100-limit on attendance. We are almost at 50 for the live-stream and over half full for the attendance.

On Tuesday, our joint venture partner Oanda will be inviting their clients, so we expect to be fully booked shortly after that.

Looking forward to catching up with all registrants on July 5!

Image credits: alamy stock photos

Trade War – Black Swan?

BarroMetrics Views: Trade War – Black Swan?

Firstly: we have the numbers for the live-stream! I’ll be sending out the registration link on Monday to all wrote in. Thank you. It will be a fab event. Even without Oanda (our joint venture partner), who will only start their marketing on Tuesday, we are half full for the session in Singapore.

We are already half full; and next week Oanda (our joint venture partner), who will start their marketing on Tuesday. So have a rosy picture for July 5.

Turning to day’s piece…….

As we near one of my possible cycle high dates, I was wondering what event might trigger a sell-off in the markets.

I spotted a possible issue today.

First the context:

For years, the Chinese-US been head-butting about unfair, Chinese steel exporting, practices. The US claims the Chinese are dumping cheap steel onto the world markets. It has been partially successful in stemming entry into the US by filing anti-dumping cases that have resulted in high tariffs. But, it also appears that cheap Chinese steel is circumventing US efforts by using third countries to export to the US.

The Trump Solution

Next week, the word is Trump will use a 1962 law to protect US steel interest:

He’ll declare that the threat to the steel industry constitutes ‘a threat to national security’.

Trump will be using a law passed in 1962 which gave US presidents broad powers to limit imports in the interests of national security. Most importantly, he can do this without Congress. Thus, Trump would achieve his most cherished dream: doing whatever he wants without Congressional oversight.

The word is we’ll see:

  1. A system of quotas and tariffs. Firstly, the steel imports from a country would be frozen at current levels. Then, any imports above these levels would be subject to punitive tariffs; and/or
  2. A broad set of tariffs on all steel imports.

The Consequence

Will have to wait till Monday.

Macro-ops “Playing the Player” 2

BarroMetrics Views: Macro-ops “Playing the Player” 2

Firstly, thanks for the emails and comment regarding the negative expectancy of the backtesting results. The feedback shows someone is reading my blogs! I sometimes wonder.

Apologies for the error when writing up the results. I reversed the Avg@Win and Avg$Loss numbers. The correct numbers are:

  • Avg$Win: 823.00
  • Avg$Loss 360.00

Update on registrations: 5. So, unless we see a pickup, it’s unlikely we’ll proceed (we need 25 more). Thanks to those who have signed up. If you are planning to join, please drop me a line indicating your interest: ramonbarros@tradingsuccess.com

Turning to today’s blog……

Thanks to those who wrote in asking how to apply ‘play the player’.

Frankly, it’s not a question I felt qualified to answer. Luckily, yesterday, Alex replied to that very query. So, I have attached his reply below. In his article, he made an offer to provide a checklist.

If you’d like a copy, I do have a request: please send your requests to the ‘blog comment section’ and not to my email. Thanks, I’d appreciate the cooperation.

By the way, if you like Alex’s pieces, please write to him at alex@micro-ops.com to see how to get onto his subscription list.

2017-06-22 Macro-ops Playing the Player_2

Macro-ops “Playing the Player”

BarroMetrics Views: Macro-ops “Playing the Player”

First, an apology, I forgot to attach the results of the trading method included as a giveaway on July 5. Here it is.

NB: I goofed in the copying the results; I transposed the avg$win and avg$loss. The correct numbers are avg$W: 823, avg$loss 360.

Backtesting

An update: So far we have five expressions of interest for the live streaming. We need 30 to proceed. 

Turning today’s offering……..

Here’s a summary of an interesting investing/trading approach from Macro-ops; it’s a variation on the contrarian sentiment method view. I have also attached the whole article for you.

Here’s a summary of an interesting investing/trading approach from Macro-ops. It’s a variation on the contrarian sentiment method. Also, I have attached the whole article for you.

SUMMARY:

  • Markets are the result of an aggregation of various individuals’ beliefs. The average of these beliefs sets market prices.
  • To play the player, all we need to do is sniff out the most dominant, consensus beliefs and exploit them.
  • This process involves 3 steps
  1.  Identify the dominant beliefs driving markets 
  2. Determine alternative future scenarios that would impact these beliefs and subsequent asset pricing.
  3. Wait for indications to see which scenario is playing out by using price action
  • Reading the financial news is a great way to get a sense of how other players are thinking which informs you of the dominant market belief.
  • To play the player, ask what if the consensus market belief is wrong and then wait to see how the price action and fundamentals unfold

To save you asking, I’m not sure how you can get on their free newsletter as it no longer seems to be available from the site. You can try writing to:

alex@macro-ops.com.

macrops

Image credits: Macro-ops

July 5 – Update

BarroMetrics Views: July 5 – Update

I was hoping to have the URL landing page up on the blog today. But, gremlins struck. While waiting for the solution, I thought it best to see if you there is enough interest from you to run the streaming. We need at least 30 to cover live streaming costs.

Program:

Our objective is to provide a content-rich presentation that will allow attendees to kick start their profitability.

To this end, I’ll be providing live FX trading to illustrate the ideas presented. You’re asked to join in the process because we remember 75% of what we do and only 5% of what we hear.

The content will cover the ‘3 Mistakes Losing Traders Make and what you do to avoid them and join the 10% who win’. 

Here is what you’ll come away with after attending:

  1. A video of the event.
  2. A process for analysing and reviewing your trades.
  3. An equity journal (spreadsheet with macros): to provide the stats you need to improve your trading. Googling for ‘download trading equity journals‘, I found prices ranged from USD 120.00 to USD 200.00
  4. A trading plan (backtesting results attached)
  5. A template for your psych journal.

In short, everything you need to your trading profitable.  An attendee described it as a mini-trading course.

It’s important to understand that the event is a partnership: we provide the information, you provide the action – no action from you, means no benefits.

Details:

  • Date: Wednesday, July 5
  • Time: 19:00 to 22:00 (Singapore) (Australia 21:00 to 00:00) (7:00 to 10 EST) (12:00 to 15:00 UK).
  • Location: Live streaming via the net.

 

There is an SGD registration fee of $20 (about US $14)

If you’d like to attend, on or before Monday, 26 June 21:00, please drop a line to:

Ray Barros Trading Group <support@tradingsuccess.com>

——————-

Image credits: www.linkedin.com/pulse/video-streaming-methodology-reema-majumdar