OY! ANOTHER DAY OF FED PIE HOLES

“Sadly, your country died a long time ago Tom.”

Well, it seems I was off a day; today a whole gaggle of FED Pie Holes take to various podiums all over the fruited plain in the afternoon, no doubt to get another freebie chicken dinner, and totally reassure us all as to the need to raise interest rates into a lackluster, sagging economy and just how much “everything is F-ing AWESOME baby”!

So once again, the entire financial world is on hold as everybody gets to “hurry up & wait” for the soothing words of ChairSatan Yellen & and various other members of the Keystone Cops that no doubt will comfort all of us in thinking that they know what they’re doing; if anybody can stay awake deciphering this pile of steaming BS without needing psychological counseling afterwards, a 6 digit gig at a wall street brokerage house awaits.

Once again, except for gold, where it appears Asian traders got the email that U.S. rates are rising, the dollar is rallying, and that holding their favorite pet yellow rock might not be such a good idea right now from $20+ higher, they just didn’t want to wait any longer and simply sold last night; everywhere else it’s … crickets!

European capital flows and European trading having simply vanished this week … get ready for more of this to come as it looks like the financial elites of Europe are in “Full Metal Jacket” panic at the thought of Gert Wilders being PM of the Netherlands … an amazing coincidence that the Fed meets to raise rates [“we’ve all been told this now, so it’s a “done deal” right?”] at the same time the Netherlands have their election; and if Gert wins [he’s ahead in the polls for what it’s worth] you can kiss the Euro goodbye at the same time rates are raised in the U.S. … “Wonderful timing Fed, simply wonderful”! I can only assume that if Gert wins, the Russians are behind it; after all, what sane person wants “borders, language, & culture” when you can have unchecked refugee immigration and E.U. Apparatchiks telling you how big your toilet seats can and must be? “And if Gert wins, do I really have to tell you how much momentum that would give the French, who just a few weeks later have their elections, to maybe elect Le Pen, and if that happens what happens to EURUSD and the financial makeup of Europe”?

So, hang onto your hats, because as quiet as it is now … going forward into next week and after, things are likely to go to DEFCON 1 on the financial “trade-O-meter” … where gold goes I haven’t a clue … however, USDJPY is a different story, and the action here will see a dramatic increase in daily HVALUES, daily ranges, Asian & European trading, and most importantly intraday volatility. Things are about to “heat up”.

Ok, here at the NY open, after watching paint dry for 5 hours, USDJPY has a 28 PIP HVALUE … no comment necessary as I’m thinkin’ you know what I’m thinking”! … again, no action cuz everybody’s waiting and wondering … PMI due out at 11 NY time, but quite frankly until Yellen & Fischer start speaking “in tongues” to the anointed Fed watchers whose job it is to tell big money what they mean, most likely “hands will be placed under butts” and not punch order tickets.

And gold here at the NY open? Well, after the Asian traders decided “no mas”, and Mrs. Wantanabe made the liquidation phone call at or near the Asian close, it’s been … “crickets”. And really, since that time, gold has been in its familiar “let’s screw everybody” mode with shots up, shots down, back up, back down, in a $2 range with dealers handing out 60 cent off the market fills to all comers; “thank you, come again”! However, just let me remind you of what usually happens when Asia sells gold off … “that’s right, New York at some point puts in a good rally that makes them all look like chumps at the poker table. If it wasn’t for Asia, I’m wondering if the New York bullion banks could survive”.

I think today would be a good time for some definitions and historical perspective for Newbies to the website and those who’ve been readers/clients for a short while. First, the definition of HVALUE [high value] & LVALUE [low value]; HVALUE = THE HIGHER OF 2 VALUES; either 1) [Days OPEN – Days LOW] or [Days HIGH – Days OPEN]. And, therefore the LVALUE = THE LOWER OF THESE 2 VALUES.

Second is the “Profit Ratio”; Profit Ratio [PR] = HVALUE / LVALUE. What this ratio represents is how theoretically profitable a market is, represented by a number, in moving in a trend direction for a day so that we can capture profits; the higher the number, the better the market for algorithm purposes because it is trending [up/down] and giving us good trading signals we can take advantage of and make money in that [up/down] direction for that day.

So, to put all of this into perspective, I can compare markets across asset classes, and using the PR, I can tell which markets are good to trade, and which ones to avoid; over the years and decades, USDJPY has the highest PR of any market, with an approximate long term average of 4.3. In addition to that, the historical data for USDJPY says that approximately 78% - 80% of all trading days have an LVALUE of less than 40 PIPS. This is the reason for our first algorithm rule of “no trading” until the HVALUE = 40 PIPS or greater. What this means is that since we know the HVALUE = 40 +, if the market reverses course and puts in a reversal day, that HVALUE will then become the new LVALUE, and that only happens roughly 20% of the time; why get caught up in figuring out which way it’s going to go when the probabilities so clearly tell you? This is why PR’s are so important, because the higher the number the truer the trend for the day. So, if you were a time traveler and came back to today and only told me that tomorrow USDJPY is going to have a PR ratio of 7.2, I would make a fortune trading this market tomorrow. Likewise, you tell me it’s going to be 1.4, and I’ll stay in bed. And when we get this type of normal trending PR day in the version 3 volatility algorithm, the PAMM/MAM is going to be doing very well.

And as I have stated before, the data is clear; when the HVALUE for the day in USDJPY is less than 40 PIPS, historically the PR = approximately 1.6; when the HVALUE for the day in USDJPY = +40 PIPS, the historical PR = approximately 4.3. Now, you tell me why you would want to do anything on days when the HVALUE is less than 40 PIPS? Most often times, these days will cluster and they come bunched together around Holidays and important trading events like central bank meetings, etc.

Ok, taking a look at the calendar, we got a gaggle of loose lips Fed speakers today, Fed meeting and elections in Europe in 2 weeks that will change the entire continent if they go a certain way; we also got Trump and all that comes with his Presidency, and a stock market that has no clue what gravity looks like; “what could possibly go wrong here”? Is it any wonder “big money” [especially after getting burned so badly a couple of days ago] doesn’t really want to make a “statement” here and start taking large positions and moving USDJPY?

Having said all of this, of course there will be exceptions to the rule, and you can find days sprinkled over the course of 4 decades of USDJPY trading where fading the rules would have put some good money in your pocket; what you need to know is that you most definitely need these days to offset the complete and utter destruction you’ve experienced in trading in all the other days to just have an account left to trade; not a very good trade off in my humble opinion.

When I meet people, or when they email me looking for some trading answers, and ask me about my most “memorable” trading days of “killing” the market, or about the crash of ’87, or anything else related to making money, while interesting I guess, it misses the point; the days I’m most proud of, and the days I recall the easiest are the days in which I actually lost some money trading [small amounts, never large]. Everybody knows, every dog has his day; all traders know there’s a bullet out there in a gun aimed at their head, and the question is, is it my day to be in the “crosshairs” of the trading Gods? Not if, but when that day comes, how you gonna handle it and what are you going to do about it; can you handle the truth and stare into “the abyss” and figure out what the problem is or was?

Having a career as a professional trader is about failing successfully; surviving the “learning curve” to be able to treat failure as vital information worth more than money. So the question becomes, did I fail because I did “stupid poo poo” or is there a problem with my trading model and/or approach to the market? More often than not “stupid poo poo” wins in a landslide.

What you learn very quickly in this business [cuz if you don’t you won’t be around very long], is to make failure cheap and inexpensive relative to the information about the failure; it doesn’t do you much good to wipe out an account and then look back and say after you’ve returned to the “Pudding Business”, “gee, if I hadn’t lost that 20K on that Tuesday I think I could still be there doing it”, cuz you ain’t there anymore and there isn’t a free 20K laying around under the seat cushions in your couch to get it back.

When I first started trading the PAMM about 9 days ago, in a metaphorical sense, that “abyss” was tapping me on the shoulder while I was staring at losses that shouldn’t have been there; my probability model says it shouldn’t have happened and that it was a “fluke” of extreme “not gonna happen in 100 years of trading”  kind of thing. And I’m sitting there and thinking [correctly], “no, it isn’t tail risk hitting, the model is faulty and needs to be scrapped, fixed, or changed to reflect profit reality”. And it dawned on me pretty quickly what the problem was, cuz the failed trades pointed it out to me in spades; I mean, the math was literally screaming at me! The few hundred bucks it cost is meaningless; the information gained is priceless. Now, don’t anybody get the wrong idea here; back in the day when I had $15 million in a trading account, and I literally would lose a $1.98 on the day, I wasn’t exactly pleasant to be around until the next day. I would spend some time analyzing what went wrong [usually “stupid poo poo”], and once in a while I would have to make a minor algorithm fix. I frickin’ hate losing; but I put it into perspective as a necessary evil that has to be confronted in order for there to be a gain. Without the potential of the former, there can’t be the latter; the universe doesn’t give you something for nothing, and if I have to have a loss I want it to give me back many times over valuable information that is far greater than the few bucks I donated for continuing education in trading.

So, for you Newbie traders and veterans alike, understand that going through your career trading, and I’m assuming you want it to be longer than a Johnny Depp relationship, your first priority in trading your model or algorithm has to be to avoid losses of any significance to your account’s capital; losses are inevitable, but they have to be relatively cheap and inexpensive. Learn from losses, and come to the correct solution if necessary, realizing most of the time you are at fault, but have the moral courage to “look into the mirror” and admit failure of your model and then fix the problem if that’s the issue. Now, you can set your sights on profits!

I spend the vast majority of my trading day analyzing where the “land mines” are out on the trading battlefield; what’s important and what isn’t; where are the spikes most likely to come if they come and I’m in a position; where are the stops to help me and where are they located that could hurt me, etc. All of this is about risk avoidance; avoid losing money of any significance, and it doesn’t take very long to “escape to success”.

All of this taken together can be highlighted into today’s USDJPY trading; an HVALUE = 34, LVALUE = 28, & a PR = approximately 1.2 as I write; maybe Fed Pie Holes can wake the market up, but I doubt it. When I go into a day, my goal isn’t to make 120 trades for a PIP; this is suicide, cuz some of those you’ll get caught up in spikes and take 15 – 20 PIP losses. As you will see when I post the new manual on Sunday night for the version 3 volatility algorithm, there is no need for a scalping algorithm cuz that can be incorporated into the signals of the version 3.

What I want to do, and what makes sense from a trading perspective is to assume the least risk possible while capturing a decent sized move in the market; if the market forces me to scalp, so be it, but that’s not my primary objective. What eventually tells us by the end of the day [Europe & U.S.] if it was a good trading day is the PR, the higher the better, and generally speaking the lower the worse the trading conditions for making money. Looking at today’s PR=1.2 and you really don’t need to know anything else about today other than it was/is crap, full of dips, spikes, stop hunts, and most likely a ton of scratch trades. Thanks, I’ll stay put and watch the carnage.

Low PR’s don’t automatically mean you lost money, just that opportunity for extended moves weren’t there if the HVALUE was below 40. On huge reversal days, where the HVALUE could be 150 PIPS and the LVALUE COULD BE 100 PIPS, the PR would be somewhat misleading, but this happens in USDJPY < 1% of all trading days. So, it’s a very good indicator of daily money making opportunity.

Ok, Fed Watchers got Yellen’s prepared comments at 1 P.M. New York time, and after throwing some chicken bones against a wall somewhere for guidance [aka “research”], some saw a special “horse & squirrel formation” from the displaced bones and went gaga about buying, while other “research” department USDJPY experts saw the dreaded “one legged dragon” version from the mess and decided to sell. FX dealers, quick to please everyone, took it up to new highs for the day to fill the longs, and then in 3 minutes filled the sells 40 PIPS lower as well. “I just love it when everybody can get their wishes fulfilled at the same time”!

Well, it’s officially 3 P.M. in New York, and looking at the stat sheets, unless somebody does something really stupid [quite possible] going into the close, we’re gonna end up with a 39.7 HVALUE for the day, along with an LVALUE = 28.2, for a PR = approximately 1.41.

In any event no matter what they do, this is now the time to “pull the plug” on USDJPY today with no trades; with 2 hours to the close, there’s nothing here but trouble. Once again, the volatility algorithm rules save me from a day of pure heartburn … and if you traded gold today by chance, you have my condolences in advance of knowing anything that you did.

There are some major lessons from today everyone should be cognizant; 1) I don’t violate algorithm rules, 2) when it’s time “to sit”, I sit, and when it’s time “to trade”, I’ll trade, but I don’t ever gamble, and 3) the only inmate here at Traderzoo that “wins” in the long run is “Patient Bear” below.

  

Patient Bear is patient, and sits and waits for his honey; he has discipline and doesn’t like it when markets get messed up, but understands that’s part of the process and realizes to get his honey and “escape to success”, following algorithm rules is the only way. Tomorrow is another day; opportunity is infinite, capital is finite.

  

End of week PAMM spreadsheet directly below.

  

The dog loves me again today, the beach beckons, and it’s a Chamber of Commerce day down here in Paradise, so what’s not to like about I’m so outta here? I’m sooooooo outta here … new manual Sunday night … until Monday mi amigos!

Have a great weekend everybody!

-vegas

OUR ‘TURNKEY FOREX’  PAMM/MAM  IS NOW OPEN AND OPERATIONAL; SEE “PAMM/MAM MANAGED MONEY PROGRAM” IN “DOWNLOAD LINKS” SECTION IN RIGHT HAND COLUMN FOR DETAILS [VIEW ONLINE AND/OR DOWNLOAD] AND START YOUR JOURNEY FROM WHERE YOU ARE AT TO “ESCAPE TO SUCCESS”!

 

A BROKEN CLOCK IS RIGHT TWICE A DAY

“Is this your algorithm Larry? … Is it?... OK, time for Plan B!”

I used to see this all the time when I stood in a trading pit … and really, the “trap” had been set for you long before you opened your pie hole and got in a trade … “what do you do when there is no ‘Plan B”? … and furthering the problem and making it worse, all the while you’re not even conscious of it, all of your wrong answers yield a positive result, thus reinforcing and almost guaranteeing future stupid poo poo from you! … “Ahhh ha, now that’s how you get out of trouble”! … only it isn’t; it just makes the next disaster more probable. You looked up and read the clock, and just because it said 9 O’clock, and it happened to be 9 O’clock, doesn’t mean you’ve figured out how to tell time because you tapped into the cosmic waves coming from the mothership orbiting Jupiter.

When you start from a “top down” approach, tackling the broadest, hardest, most complicated philosophical trading issues first, and then narrowing from there until you eventually get to actually coding something, the journey is going to be difficult, frustrating, and time consuming. Insight isn’t linear in scope; it can’t be planned, and only comes from watching markets work. In other words, you don’t simply ask, “universe, find me something that works so I don’t have to work for a living”. That’s like asking for a perpetual motion machine that outputs energy without any energy put in; sorry, doesn’t exist.

Directly below is a 3D rendering of a probability wave function density map of a hydrogen atom. Since I’m all powerful, for my metaphorical illustrative purposes, your entire trading life is on this map; I’ve blind folded you, and at my whim I pick you up when I want and I place you on a spot in this world. You have no idea on this map where you are at; not a clue, but since I’m a benevolent God I have let you see the map so you know what’s “out there”.

 

“Who’s up for hiking around the top”?

As you can clearly discern, your trading life has got some “points” on it that are going to be a problem for you if I place you directly on top of one of the peaks; one wrong step, and you’re gone. On the other hand, most of the time I place you on terrain that is easily handled; you might even come to the conclusion that those peaks never really exist because you never experience them! “Man, this is a breeze … what risk? … been here 5 months trading and it’s all Jacks & Aces … I have truly found the ‘Holy Grail’ of trading”! And then one day …

The point of this intellectual exercise is to get you to focus not on the money or what it can do for you, but on the trade and what the “terrain” is telling you. In fact, whether you accept it or not, you live in this world I’ve presented; the wise ones recognize the need for an appropriate “battle plan” [aka algorithm] to deal with the terrain; something they can rely on to navigate the cliffs and walls and help them survive and eventually prosper. The naïve will simply drive their car forward by looking in the rear view mirror.

It is so vitally important for you to understand why the algorithm works like it does, but to also know under what conditions it fails; if you don’t know the latter, how are you going to put in place measures to defeat it when you got no clue what it is you’re trying to defeat? As I have said before and my mentor Bert tattooed on the inside of my eyelids many years ago, “Choose the form of your destruction! … and then go beat the hell out of it!!” We know from a strict mathematical logic proof from Kurt Gödel in 1931 [Incompleteness Theorem] that every axiomatic mathematical system has at least one limitation [flaw] that either can’t be proven or logically presents contradictions in the system. So, for example, in basic arithmetic can you divide by zero? Why not? [ “Cuz” really isn’t an answer now is it?]

My algorithm “destruction” form takes the shape of the least probable event in trading; that of volatile markets slowing down to a crawl and exhibiting low volatility. The upgrade to version 2 of the algorithm and the introduction of the Scalper’s Algorithm, and then combining the two, has resulted in eliminating a lot of the “chop” from a slower gold market; the likelihood of the price vector fields being at odds with each other [meaning of course, having different slopes] during market slow periods is very high, and that helps keep me out of trouble.

There is one other aspect to the signals that needs to be mentioned, and that is finding the markets “sweet spot”; i.e. that point of entry that has the highest probability of success of being in a winning position quickly. By introducing a “degree of freedom” into the system [3 or 3+ M1’s contra trend], the system is more responsive in identifying potential trades; if the contra trend correction is too deep [either on the upside or downside], the SDEV [standard deviation] price vector field will flatten out or turn thus negating the trade.

Think of it this way: the algorithm is like Major League Baseball’s best home run hitter; he goes to the plate looking for that fastball he can hit a country mile. He knows the pitcher is going to give him a steady dose of curve balls & sliders, and that he has to “fight off” these pitches and get the pitcher into a 2-0 or 3-1 count to maybe get the fastball. Now, not every time he gets the fastball is it going to be a home run; could be a single, double, or he could even hit into a double play to end the inning. Point is though, he got his pitch because he was … [Hint: Patient Bear.]

“Thank you Mr. Market … now, gimme all your honey”!

Turning to today’s gold market … “Oy, there must be a lot of baby crickets getting made overnight, cuz they sure ain’t trading!" … an hour before the open and I’m starin’ at an HVALUE of $4.70 … don’t worry though, something will be escalating quickly soon enough [CPI & retail sales at 9:30 and ChairSatan Yellen in Congress again at 11 sure to get somebody to panic]… still, I’m worried about Mrs. Wantanabe; her and her friends usual MO [modus operandi] is absent. A brief respite while the checks clear? … or … a change in their trading habits? … “Just cuz, I’m going with Plan A”.

Sure enough, reports at 9:30 lit the fuse … first trade directly below.

No bounce off the lower exhaustion line says, “Get the hell out N.O.W.”, and was a scratch trade thanks to tight spread conditions and a meaningless RT commission.

Directly below, here are my other trades in succession, all of which were either insignificant gains [couple pennies per OZ.] or scratches.

The bounce off the lows generated some short signals, and generally speaking, the HVALUE and daily range at this point are moderate and aren’t of concern at about $12; what is worrisome, though, when you are short and the market has recovered some is time, specifically the time when it is just sitting there doing nothing but consolidating minute after minute. Point is, it ain’t breaking, and what you must remember when trading gold [especially gold] is that shorts always panic first. “He who panics first, gets to panic again later”!

First we had the down panic; now we get the up panic. Buy signal for the next trade directly below.

Not liking this trade up here at these levels; too far too fast, and so I’m treating this as a scalp and putting some profits on the board; market needs to consolidate some and shake some people out.

From the action in the marketplace I’ve seen since gold once again crossed $1200, backed down to 1180, shot up to the 1240 level and has now backed off some, I would characterize the trading action as bullish; USDJPY has put in a monster USD rally from the 111’s to just now a few PIPS short of 115, and gold is only off about $16 from the recent highs? True to its form, gold ignores bad news [like Fed rate hikes] in a bull market, and ignores bullish news in a bear market; and what we are seeing now is totally bullish action considering bullion dealers tried and failed to kill this stuff this morning and there weren’t enough massive sell stops below 1218 to save them. Now we’re back in the mid to high 1220’s; is there enough juice to put in a significant reversal day and get price back up in the 1230’s to challenge the highs again?

Another buy signal, another scalp directly below.

I liquidated this on the way up: until the market shows me it can make new highs and plow higher today, after the waterfall down earlier, I’m very hesitant to hang on and treat gains as “free trades”. Probability wise, it is very difficult for gold throughout its history to make significant reversals in price of over $10 per OZ.; for all trading days, it’s on the order of approximately 0.20% probability of occurring on any given day. In other words, hanging on and betting it’s gonna happen is a losing proposition; 6 trades, daily goal finally accomplished, I’m done.

One of the great “fingerprint” patterns gold exhibits, and has for years, is the “double bottom” or “double top” on the M1 for either the continuation of a move or a setup for failure. Today’s bottom didn’t really have that, cuz when it moved off the low it just kept going up; although not rare, it isn’t a common occurrence either to see this type of “V” bottom. More often than not, gold will put in a double top or double bottom failure before reversing; this plays into the algorithm’s hand in that, if in fact the short term trend is going to change, it gives us an opportunity to get out near the top/bottom. Having said this, of course, there will be many times gold will exhibit and show “failure” one minute [and then I get out], and then go bananas in my profit direction the next; it happens, deal with it and move on. This “game” is only about winning at the end of the day, and you can’t dwell on water under the bridge.

I’m ready for the beach … where’s the dog? [sshhh: sleeping!] … “hmmm, I think he’s dreamin’ cuz he’s got that smile on his face.”

“Ok, nowwwwwwww I know why he’s smiling”! I’m so outta here … beach beckons … “c’mon, let’s go find that red car” … until tomorrow…

Have a great day everybody!

-vegas

OUR ‘TURNKEY FOREX’  PAMM/MAM  IS NOW OPEN; SEE “PAMM/MAM MANAGED MONEY PROGRAM” IN “DOWNLOAD LINKS” SECTION IN RIGHT HAND COLUMN FOR DETAILS [VIEW ONLINE AND/OR DOWNLOAD].

 

 
  

CRITICAL THINKING IN TRADING

ASKING THE IMPORTANT QUESTION: “How many holes need filling in your trader head?”

I had the best of intentions of linking up the October DOW30 data to the website last night, but for one small problem; when I got back from the beach yesterday, showered, ate dinner and fired up my laptop, what do I see but about 15 emails in my inbox covering every subject imaginable. From the time I turned on the machine to when I finished replying to all of them with a personal response, it was time for my beauty rest [“and you know how important that is, right?”] So, I’ll get the data up and linked tonight.

The main reasons damn near all of what you see [and sadly, for some of you, have paid for] about trading “systems”, trading “methods”, or trading “algorithms” is complete junk are a combination of the following; 1) they are not thought out from a “top down” philosophical or logical line of reasoning to get to dealing with a very specific finite set of priorities in trading, 2) they are put together using “back fitted” historical data under the best of trading conditions [like straight up/down] to give the least “regression mean” to losses while favoring profits, thereby insuring at the first hint of increased intraday volatility you will lose money, 3) no mention or thought is given to the limitations of the method, when it will turn sour, or what to do when it happens; and believe me it will happen, 4) priorities are intentionally set to maximize profit and pay no attention [or very little] to risk tolerance or the size of losses when they occur; you therefore could have 10 winning trades in a row and the 11^th trade shows your account down 20%+, and last but certainly not least 5) who is it exactly that is the author of the code and what are his/her “street creds” in trading that should make me want to investigate my time and do the necessary research to see if it’s “legit”; and by extension of this do I have to send a shipload of money off somewhere to get even the janitor in the building they are supposedly in to talk to me and answer some questions I might have?

Well, unless you find yourself in “Willy Wonka’s Chocolate Factory”, I can pretty much assure you money is going to flow from you to them before anybody will even say “Hi”; and what happens after you send them money? Can you get it back when you find it’s all bullshit based on Soybeans back testing when there was a drought and prices sky rocketed? “Sure, and I can get you Super Bowl tickets on the 50 yard line 5 rows up totally cheap; sound good?”

So, what I have done is pretty much eliminate the money equation; and that should have your brain cells working overtime to critically evaluate and eventually asking the all important question, “well, if there isn’t any money involved, then if his algorithm is bullshit and doesn’t work, why would he go to the trouble of ‘putting it out there’ cuz there isn’t anything for him to gain but people who think he’s full of shit; it doesn’t make sense.” AND MY RESPOSNE: “What took you so long?”

Right now, I have “affiliate” programs with 2 brokerage houses; 1) ASSETS FX [Finland], and 2) LMFX. ASSETS FX is now only for NON U.S. Citizens, and LMFX is open to anybody. Both have the very best conditions for spot gold [traded in 1 Oz. increments] that you will find; I have a suspicion that they both use the same liquidity provider bank because their quotes during the day [bid/offer] are right in line with each other almost to the penny after round turn commissions are factored in at ASSETS FX. Currently ASSETS FX has the better DOW30 CFD by a very slight margin, but for American clients that can’t have accounts there any more, LMFX is about as good as it gets for trading.

At both houses, when you open a live trading account through the website and my link, you become an “affiliate” account of mine; what that means is simple. 1) You get better service if there’s a problem with your account cuz both houses know I will be on their ass like “white on rice” if something isn’t taken care of like it should be; both have felt my wrath before, and both know I carry some weight in the trading community and don’t want the negative publicity criticism from me attracts to them, and 2) as everybody should know, both the brokerage house and the LP make their money off of the spread in any market; while we pay “retail”, they offset our positions in their books “wholesale” and pocket the difference. The most common practice is for them to split the spread 50/50, but it doesn’t have to be this and in some instances there could be other factors at work as well that determine what the final split actually is.

When you trade and the brokerage house gets their “cut”, they kickback to me part of their spread profit for bringing your account to the brokerage house; it isn’t much but it adds up. My affiliate clients do not have any spread that is different than anybody else; whether you are an affiliate or not makes no difference to your “net” cost of trading.  What I’m getting from the brokerage house is simply part of their cut.

Now, the way I look at this is as follows; it’s a net win for everybody involved. The brokerage house gets increased business, the client [you] pays nothing for the algorithm and has no expense whatsoever, and Yours Truly pockets a little coin for his efforts. In essence, the brokerage house is paying your algorithm fees. If everything is bullshit, then I get no clients and if I have clients they will eventually lose money and go away, so I end with nothing for my efforts; why would I want that?

Turning to gold today … ahhhh, the Chuckleheads traders in Asia just couldn’t help themselves could they? … had to rally it by about $8 back up to yesterday’s high so the dealers & bullion banks could stuff it down their throats … “seriously, do you traders over there ever look at your P/L and wonder WTF is going on? Cuz from where I’m sittin’, I’m amazed any of you have any money left from the ‘pounding’ you take practically every night I’m asleep. And, oh boy, the open today is going to do exactly what I wrote about yesterday; sell stop heaven for the commercials!”

From earlier in the day, a lower exhaustion move in late Asia that had the algorithm make for a very nice buy signal; the selloff and subsequent trade directly below.

Half an hour into this today, and all I see is some light short covering from the big drop overnight in late Asia and European sessions.  But what has me worried is that Asia went sharply lower; and you all know what that eventually means for New York [Hint: up from the lows].The daily calculated white horizontal line is $4-$5 above the market from where it stands right now, meaning we need a waterfall of some kind [hopefully a lower exhaustion move] to get long; we should get another selloff here once some shorts cover, but with an already $21 range, I’m wondering what’s left to the downside to get that to happen? Again, remember Asia and what happened and what I have always said.

And as I write, we just got an upper exhaustion move @ RM=1; this should be the “last gasp” of final short covering. The chart directly below.

EXIT QUESTION: How good was the algorithm in “nailing” this high? “Still wanna talk to me about ‘randomness’?”

Oh wait … you want more “randomness”? How about the second move to the upper exhaustion lines? Oh, and what a surprise … it touches the exhaustion lines and then … what? … anybody got an educated guess out there? Directly below the second up exhaustion move of the day.

“Hey Mr. Market, how ‘bout showin’ a little love out here for us traders waitin’ for an exhaustion line hit LOWER! Gooooooood, it’s like I’m asking for the F-ing world here or what?” [Patient Bear is patiently sitting and waiting … show patience & discipline grasshoppers!]

So, 2 and a half hours into this clusterfuck and gold is reverse correlating almost to the tick with the SP500 and DOW30; both indices have been down 9 days in a row, and with the ever idiotic “most important evahhhhhh!” NFP report tomorrow morning from the Bureau of Unicorns & Fairy Tales, I’m just a tad surprised we didn’t see an early short covering rally in both which would have sent gold lower [maybe] into the lower exhaustion lines for us to buy.

We could still get stocks to rally late in the day, but I doubt seriously gold is going to “tapioca” itself into the lower exhaustion lines; just not enough players that late in the day to want to trade to give it that “oomph” that we need for exhaustion. And, trader thoughts will start to converge on the NFP report and markets morph into “position squaring” which is almost always a bucket of slop up and down with no clear trend to speak of and/or take advantage. It looks to me like a wasted day in gold.

Newbies may want to know so I will address this point; when the price is below the daily calculated white horizontal line, the only way we get long is through a waterfall drop in price. We don’t get long on a plum line slope change when plum is under yellow; why not? Simple answer: the probabilities aren’t high enough to justify a trade with above average profit expectations. But remember this; the primary goal of the algorithm is to keep your trader ass out of trouble. After it does this, then you can go for profits in a long trade with probabilistic scenarios that are definitely in your favor; in other words, I trade when I’m the casino, not the customer.

Sometimes, like today, the market goes counter to all of this, and the lower probabilities prevail; it happens, so what? Opportunity is infinite, capital is finite!

Oh, but looky here; the market has crossed the white horizontal line on the upside, and then subsequently backed off, and when the plum slope line changed, we got the day’s first buy signal. Again, like yesterday, I’m not thrilled about getting long up here, but when the algorithm says “buy”, I click the damn button. Below, the day’s first [probably only] trade.

I have no intention of getting “stuck” up here, so once I’m up over a buck in this thing, my fingers become very quick looking for the “close position” button; if it wants to continue to climb minute-after-minute without pause, be my guest. But once the previous M1 closed, and the current M1 on this chart went immediately red, I liquidated; I’ll take the approximate $1.50 and rejoice, because an hour or so ago I didn’t think we would be up here for a trade, and it was looking and feeling like a nothing day. At least it keeps the dog in bacon. [To the Mrs., this is a “rounding error”.]

Once this trade is over, I can feel things slowing down; the M1 candlesticks are getting smaller in range, and prices are more “disjointed” from one bid/offer quote to the next one; “folks, we’ve just moved into the ‘position squaring’ for tomorrow’s NFP stupidity part of our show today. Please have fun in getting whatever position you want to get 15 cents outside the bid/offer before it goes against you 60 cents in a heartbeat.” Thanks, but no thanks … I’m done today … Mr. Market, do whatever the hell you want.

It’s cloudy and rainy here today [wait … what?], and so the dog and I will be watching “Too Cute” on Animal Planet that comes on about 3-ish … he keeps looking out the window and sees it drizzling rain, then at me as if to say, “hey boss, WTF is this shit I’m lookin’ at outside? No beach? Aw man … life just ain’t fair!” But, when I grab that T-bone steak bone I got last night from the steakhouse, and give it to him while we’re watching puppies frolicking around on TV, he’ll be in heaven. Until tomorrow … I’m outta here.

Have a great day everybody!

-vegas

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