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Wednesday, October 12, 2016

COLLECTIVE BEHAVIOR & TRADING

“Who says math has to be boring?”
I’m going to be dealing today with 3 critical areas you all need to know and understand; 1) “groupthink”, 2) the algorithm and specifically the exhaustion lines, and 3) “balance”. Search the web, go to the bookstore, shop online, and/or get hustled into a trading seminar; it isn’t going to make any difference because what you read today you will find nowhere else. I’m actually trying to help people “escape to success” and become financially independent via trading versus those who simply want to occupy a place in your wallet right alongside your credit card.
Your potential success does not in any way detract from my trading; if you “make it”, that doesn’t mean I have to trade less volume, make less money, or scramble to find how I’m going to get the “slice” of the market you just took for yourself, and by default in the logic of this, away from me.

I get asked all the time, “Umm, -vegas man … hey, this stuff you got and teach is worth a fortune … how come you give it away … I mean, you could sell it and make millions … you know traders would pay it … so what’s the deal dude?” And my answer to this is always fourfold; 1) I’m not interested in your money, I got my own, 2) I don’t want any barriers between people who truly are sincere about making trading a career and are starting on a “shoestring” budget and would have to struggle just to pay me what I don’t need or want, 3) I don’t have to worry about people trying to “scam me”, by taking my ideas and reselling them somewhere else when everybody knows I have a website and give it away, and last but certainly not least 4) the entire trading universe can see algorithm results at any given moment in time and prevents spammers from trolling me by saying my algorithm or trading ideas are full of shit. Well, if they are, “let’s just check the tape, shall we? Give me the date and time you claim you lost a fortune, and not just me, but thousands of other traders can check the same thing and know in an instant that you 1) didn’t follow the rules, or 2) when it comes to ‘full of shit’, you are king.” In a “nutshell, it’s freedom for me to teach without having money complicate the equation, and by default also strips away the nutjobs whose only purpose in life is to bitch about something.
Now, don’t get me wrong; I’m no “saint” sitting here [although, the dog hasn’t been polled]. Sure, it’s kind of a “karma” thing, but in my life my mentor Bert, back when I was a dumb ass college graduate who knew everything but in reality didn’t know Mr. Jack Shit, took me under his mighty wings when he didn’t have to and spent thousands of hours really teaching me the trading business, that you have to thank. I’m just a “link in a chain”, that both stretches back as well as [I hope] goes forward with others.



The more trading changes, the more it stays the same. In other words, it doesn’t matter what decade or century you look at; of course, technology makes markets more accessible and easier to navigate than in the past, but advances in technology have nothing to do with “groupthink” and how it has affected traders throughout trading history. Over the decades and centuries collective trader behavior has always remained the same; the public still “buys the high”, “sells the low”, tries to “reason with” the market [pick ‘em] to “behave” [please?], and ultimately gives up when the money runs dry; only the names change through the ages.
The first questions I always ask new traders are, “why are you here, what’s the REAL purpose? Does your wife/husband need a babysitter? Are you looking for action? Or are you here for the money?” And most importantly, “seriously, can you follow fucking directions?” Because, right out of the gate, your first “enemy” is “groupthink”. “OMG, it’s going higher, I have to buy it!!” 90 seconds later; “WTF, I think I’M GOING TO BE SICK cuz I think I bought the high of the move; why did I do this?” SHORT ANSWER: “you’re a Newbie and you let your emotions suck you in because you thought it was ‘easy money’.”
We are “traders”, not analysts; we need a battle plan that makes markets our own personal ATM on a daily basis and “brings home the bacon”.


“Go ahead genius, explain to her why there are no trading profits for the month.”
I spent over a year and a half developing my original floor trading algorithms decades ago; today those algos don’t work so well because they are too slow. Back in the Spring, I developed the “volatility” algorithms from those originals and they perform spectacularly in today’s HFT world.
The exhaustion lines are a critical element of success for trading using the algorithm; “I will simply say, they are the very best indicators in REAL TIME you will ever see in capturing ‘tops & bottoms’". And while greed has your emotions running at full throttle when a market is going straight up and you’re long, and part of you says this will last forever why get out, when price hits the exhaustion lines it’s time to put emotions aside and book the trade.
Trust me Newbies, it’s not as easy as it sounds. Once you let a few of these “moments” slip through your fingers, and you want to hit yourself for being a dumb ass, you’ll come around and learn to “trust” the exhaustion lines for liquidation. I know because I have walked in your shoes; it took me a full 3 months when I was on the trading floor in Chicago many years ago to “trust” the exhaustion lines and the algorithm. I got so tired of seeing the algo make consistent money while my “thinking” repeatedly got me into trouble and/or made me scramble to eke out a living; I was ready to give up. It literally came down to a day when I said to myself, “if you can’t follow it, get the fuck out … Micky D’s is hiring dumb ass.” On that day I made over $1,000, something that up until then I had never done before; the rest is history.
I will point out absurdity by being absurd; you can’t go out drinking and partying, all night every night days on end, and expect to bring your “A” game to trading; sooner or later this “unbalance” will be your downfall and you’ll be back in the Pudding Business.
Likewise, you can’t be a “computer jockey” sitting in front of a computer screen 20+ hours a day without turning into some kind of Zombie; you have to prioritize your life and get into some kind of balance. That means 1) a life outside of trading, 2) proper rest & sleep, and most importantly 3) when it comes time to trade, telling the rest of the world to “leave me the fuck alone, I’m making money!” I can’t over emphasize #3 enough.
Well, somebody must have emailed the Chuckleheads in Asia last night, because there was no “buying spree” to speak of in gold; maybe Mrs. Wantanabe has to wait for her husband’s check to clear before she [loses] trades again. Now, remembering what I said yesterday about the only way gold can rally, and what do you suppose we see today?
“The dog is nodding his head, that yes, I’m a frickin’ genius. On the other hand, my sample of ‘one’ for this poll is eating a Beggin’ Strip, so maybe he’ll agree to anything? Nahhh, just a coincidence.” No need to recap the highlights; for those of you that need a refresher on yesterday, simply scroll back, take some notes and take a look at action today from the New York open. “Time travel sure makes trading easy doesn’t it?” The ‘nitty gritty’ details directly below.
And just to show you I’m not perfect [“here’s another Beggin’ Strip … now vote again.”], I missed the exhaustion line by about 3-4 minutes and had to settle for a profit of about $3 instead of $4 … “I can deal with it.”
Now, I have no idea where this shit goes from here today after this early move. From where I sit, though, after seeing the damage gold has suffered over the last couple of weeks, it’s going to take one hell of a bond market, stock market, and finally FX rally to get gold to go up and expand the daily range from where it is now around $10 to above $15+ on the upside of things. Quite frankly, I don’t see it for the very simple reason that the $3 trillion in risk-parity funds can’t possibly be finished with their selling to readjust everything from “alpha to gamma” with what has happened over all markets [not just gold] in the last month. So, with that scenario in mind, I don’t see risk/reward as being in my favor going forward today after this profitable first trade; it’s too early for the daily charts to “turn around”, and if you want gold to go higher, the technical damage has to be “worked off” before prior day’s highs can be taken out and the shorts scramble. So far, the serious well funded shorts from higher prices have no reason to get really worried and “pay up” to cover.
For you Newbies out there, you should realize everything that is math related in the algorithm is visual on the MT4; you don’t have to do squat except follow directions and watch your computer screen for signals; “yea, it’s that fucking easy.” And so, going back to what I said earlier in the post, “can you follow easy fucking directions? Yes? Good, then you booked a profit just like me and got no worries. No? Taking a quick look at the charts as I write, you got a problem cuz we sold at or near the high [so far] and now ‘hope’ gets to be installed into your trading strategy $4 - $5 bucks lower and you find yourself in a very compromising situation.”
“Master, I voted 3 fucking times in ‘you are a genius poll’; can we go to the beach now for cryin’ out loud?” It’s hard to argue with his logic; the dog and I are soooooooo out the door even though it’s a little early. I think before we hit the beach, we’ll stop off at the island Pet Smart, cuz the nurfball is getting a little skanky, and he always loves the attention when the girls in the store fawn all over him & stuff him with treats. As for me, I’ll be lucky if somebody there says “hi” to me, cuz when he’s around I’m invisible; he’s got a great life and that’s enough for me to be happy as his BFF. Until tomorrow amigos
Have a great day everybody!
-vegas
OPEN A DEMO AND/OR LIVE ACCOUNT AT THE LMFX LINK IN THE “DOWNLOAD LINKS” SECTION OF THE WEBSITE TITLED “OPEN TRADING ACCOUNT – DO IT NOW!”
 

 


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