Info!! Trading Notes; Calendar Week Of January 25, 2016

Friday, Jan 29th

*  Easy to driblet dead burned out sitting inwards forepart of screens all twenty-four hours in addition to trying to rest disciplined.  Here is an of import antidote to burnout.

*  I've been offline for a pair of days, swamped amongst coaching run amongst traders.  Whenever that happens, it's a sure sign that markets are tricky in addition to people are having problem making money.  We had a existent run a risk off start out to the year, amongst oil, stocks, in addition to emerging markets lower in addition to firmness inwards the U.S.A. of America dollar.  Late in conclusion calendar week nosotros saw a abrupt rebound in addition to these posts talked almost having set inwards a momentum depression for this marketplace position cycle.  Evidence was also suggesting that this cycle was non similar ones nosotros had seen inwards 2014 in addition to 2015, amongst far to a greater extent than persistence of weakness inwards stocks.  This calendar week nosotros get got mostly continued the bounce, but inwards a highly choppy fashion, making it hard to brand coin from either the bull or deport side.  Hence the recent frustration of traders.

*  Influenza A virus subtype H5N1 momentum depression implies the possibility that farther cost lows could remain ahead, albeit amongst breadth divergences.  That is what nosotros saw inwards the merchandise next May, 2010; August, 2011; in addition to sure enough January, 2008.  Thus far, this has been a depression Sharpe ratio bounce; non the variety of resumption of uptrend that nosotros saw following, say, the October, 2014 low.  That uneven bounce increases the likelihood inwards my estimation of those retests of lows.

*  Which brings us to today's trade.  With the motility to negative rates inwards Japan, nosotros saw a abrupt rally inwards stocks, followed past times a abrupt dip, followed past times to a greater extent than rangy behaviour inwards the ES futures.  Oil has rallied significantly from its lows; VIX has remained higher upwards 20.  I'm concerned that we're having problem making fresh highs inwards ES inwards pre-market merchandise fifty-fifty amongst the Nihon easing in addition to crude strength.  That has me looking to sell forcefulness every bit long every bit nosotros tin remain below the shipping BOJ highs.

*  Note that at that topographic point is a difference betwixt a retest of lows in addition to the start out of a fresh deport marketplace position leg.  When nosotros had extended bottoming processes inwards May, 2010; August, 2011; in addition to fifty-fifty that January, 2008 period, at that topographic point was a two-way merchandise in addition to rallies interspersing the declines.  My leaning volition live on to get got profits opportunistically on brusk trades in addition to non necessarily assume a resumption of a high Sharpe downtrend.

Tuesday, Jan 26th

*  After failing several times to rest higher upwards the 1900 level, nosotros saw a selloff inwards the ES contract that featured numerous real negative NYSE TICK readings.  The inability of buyers to driblet dead the upticks much higher upwards +500 for whatever sustained menstruum was a clear indication that nosotros had set inwards a plow over in addition to that sellers were inwards control.  Prices continued to weaken during Asian hours in addition to right away get got rebounded inwards premarket, amongst a bounce inwards oil.  All of this is consistent amongst a marketplace position that has made a momentum depression in addition to is early on inwards a bottoming process.  Note that such a procedure took months inwards early on 2008, mid-year 2010, in addition to autumn 2011, amongst multiple rallies in addition to pullbacks.  This two-way activity tin live on frustrating for bulls in addition to bears alike in addition to highlights the importance of non assuming that moves volition extend.

*  Note the meaning weakness inwards KRE, the ETF for regional banks.  Some of those banks get got exposure to energy-related loans, which could live on inwards risk if crude prices proceed weak.  That's a dynamic I am watching closely.  I'm also watching the big banks (XLF) to meet how global economical weakness, peculiarly amid emerging marketplace position countries, mightiness deport upon loans in addition to marketplace position exposures.

*  Note that nosotros proceed to live on significantly oversold on most breadth measures.  I aspect farther working off of this oversold grade inwards the adjacent pair of weeks.  My cycle stair out has turned up, but is non at levels that get got corresponded to intermediate-term highs.  As noted before, we've made a lower depression inwards that cycle measure, which opens my thinking that what we're seeing is to a greater extent than than the kinds of corrections that nosotros experienced inwards 2014 in addition to 2015.

Monday, Jan 25th

*  Fri saw a continuation of the rebound from momentum lows, amongst breadth finally touching short-term overbought levels.  Over 80% of SPX shares unopen higher upwards their three in addition to 5-day moving averages; that's the start out fourth dimension we've seen that since Dec 24th.  (Data from Index Indicators).  The rally took the keen bulk of stocks off their lows.  Across all exchanges, nosotros had 139 monthly highs against 208 lows.  Compare that amongst 44 monthly highs in addition to 3250 lows simply 2 days previous.  (Data from Barchart).

*  One sign of continued forcefulness on Fri was that meaning negative readings inwards the uptick/downtick stair out (NYSE TICK) could non halt us from making higher cost lows in addition to higher cost highs.  I volition live on watching for that dynamic inwards early on trading today.  Influenza A virus subtype H5N1 driblet below the Fri afternoon in addition to overnight lows would probable interruption that designing in addition to betoken fresh selling interest.

*  I volition also live on watching this calendar week to meet if the bearish marketplace position themes (weak oil; weak emerging marketplace position shares; potent dollar versus EM in addition to commodity currencies) reassert themselves.  I'm also watching to meet if nosotros tin impress fresh cost highs for this rebound amongst continued potent breadth.

*  Influenza A virus subtype H5N1 overnice sentiment of the market's cyclical behaviour is provided past times the reveal of NYSE shares giving purchase vs. sell signals for the Parabolic-SAR measure.  That cumulative full has tracked marketplace position cycles good over the past times 2 years.  (Data from Stock Charts).  As y'all tin meet from the nautical chart below, we've bounced, but are non all the same close levels that get got corresponded to intermediate-term cycle tops.

Info!! On The Thursday Radar

* Testing the Lows - Stocks are in 1 lawsuit once again moving lower, equally nosotros interruption below the closing lows of a dyad of weeks ago. The advance-decline work for NYSE mutual stocks has broken to novel lows, exactly the reveal of stocks registering fresh lows has remained below its storey of ii weeks ago. Specifically, nosotros had 414 NYSE mutual stocks brand fresh 52-week lows on Midweek according to more views from Abnormal Returns. Recession, credit problems, in addition to marketplace spend upwards haven't run their degree in addition to a host of other worthwhile perspectives from Charles Kirk. I proceed to ship major themes in addition to marketplace indicators daily more views from Abnormal Returns. Recession, credit problems, in addition to marketplace spend upwards haven't run their degree in addition to a host of other Nice marketplace study from Quantifiable Edges finds something interesting: reduced volatility is non e'er bearish.

* Getting Ready for Halloween - Financial Ninja more views from Abnormal Returns. Recession, credit problems, in addition to marketplace spend upwards haven't run their degree in addition to a host of other shows scary Fed charts that convey gotten scarier.

* Moral of the Story - When the fiscal crisis outset actually starting hitting markets hard, I looked in addition to looked in 1 lawsuit again at the implications of fiscal rescue for inflation in addition to the U.S. of America dollar. I looked into buying gilded equally 1 agency of playing the theme; I looked at ways of expressing dollar weakness versus other currencies. Each fourth dimension I looked, the obvious trades looked horrible to me; they expressed *such* a consensus idea. Small investors were hoarding gilded coins in addition to bloggers were screaming almost the terrible inflationary consequences of bailouts. Well, perhaps these trades volition eventually pan out, exactly I would convey gotten smoked past times next my gut. Joe Granville used to say, "If it's obvious, it's manifestly wrong." Gold is agency off its highs in addition to the U.S. of America dollar continues to rally higher, peculiarly versus euro; deflation in addition to flights to security are the operative themes for now. It actually pays to know what other people are thinking, peculiarly when they're thinking similarly in addition to volition convey to bail out of ideas that don't come upwards to fruition.
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Info!! Positive Psychology Together With Trading Psychology: Bloomberg Radio Interview Amongst Brett Steenbarger

I bring to say, inwards the many years inwards which I've participated inwards interviews, I've never encountered 1 equally detailed in addition to well-prepared equally Barry Ritholtz's recent interview of me on Bloomberg Radio.  He sent me questions inwards advance, updated those questions earlier the interview, in addition to and then came upwards amongst additional questions during the interview that revealed his prior thinking on the topics.  Barry's podcast series, Masters inwards Business, has give-up the ghost an impressive trunk of work, including interviews amongst such authors equally Michael Lewis, Daniel Kahneman, in addition to Philip Tetlock.  

One of the major themes of the recent interview was the purpose in addition to importance of positive psychology for the dependent plain of trading psychology.  Positive psychology grew out of the early on run of Abraham Maslow in addition to the subsequent enquiry of Martin Seligman in addition to others.  It is the written report of human strengths in addition to competencies, equally opposed to the written report of psychological disorders.  An fantabulous curated listing of positive psychology readings can hold upwards institute here.

In a functioning plain such equally trading in addition to investing inwards fiscal markets, it is the leveraging of these positive attributes that distinguishes success.  Solution-focused run turns traditional counseling, therapy, in addition to coaching on its caput past times intensively studying our successes--and in addition to then edifice upon those.  The Trading Psychology 2.0 that I depict inwards my recent majority is a sentiment of trading functioning that highlights such strengths equally adaptability, creativity, in addition to the continual development of best practices into best processes.  Those topics were barely mentioned inwards trading books when I showtime began working amongst participants inwards fiscal markets around 2 decades ago. 

If you lot bring goals in addition to a vision for yourself, the best agency to give those is to discovery the ways inwards which you lot are already moving toward those ideals inwards around ways, at around times.  There are patterns connecting your smaller successes that tin give-up the ghost the framework for larger successes.  We are already the people nosotros wishing to become, exactly oftentimes alone occasionally in addition to inconsistently.  It is our moments of best functioning that gibe the telephone commutation to the achievement of our greatest dreams.

Thanks 1 time again to Barry in addition to the Bloomberg squad for the chance to commutation ideas.  The podcast serial is an invaluable resources for traders in addition to investors.

The Bloomberg Radio Interview

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Info!! Making The Close Of Your Internal Dialogue

A recent post suggested that our trading success is highly theme upon our mightiness to leverage our information processing strengths.  One of our most basic modes of processing information is our internal dialogue:  the self-talk that nosotros engage inwards throughout our waking hours.  It turns out that the character of our internal dialogue is a critical chemical component of our information processing.  It's exclusively rarely, however, that nosotros travel on improving our self-talk.

Now, on the surface, it makes footling sense that nosotros verbalize amongst ourselves.  Why write ourselves memos in addition to calendar reminders?  Why review plans inwards our heads or comment to ourselves, "Good job!" or "What were you lot thinking?"  How is it that nosotros interact amongst ourselves equally nosotros would interact amongst others?

The response is that nosotros receive at to the lowest degree 2 information processing systems.  One is a fast, reactive organization that helps us respond to situations inwards existent time; the other is a slower, deliberate organization that enables us to regard larger pictures in addition to conception for those.  Both are necessary for dealing amongst the existent world.  We desire to travel able to conception a strategy for a football game game, but nosotros desire to react apace to changing weather condition on the field.  Coordinating our 2 "brains" is a cardinal chemical component inwards surgery success.

Imagine beingness inwards a self-driving vehicle.  It reacts to obstacles in addition to traffic changes faster than nosotros could.  There's exclusively 1 problem.  It doesn't know where to go.  We stimulate got to programme the goal information.  We stimulate got to align the fast, reactive manner amongst a bigger picture.  When nosotros verbalize to ourselves, nosotros programme our GPS; our slower, deliberate, rational hear communicates amongst our quicker, reactive, pattern-recognizing mind.

Trading journals are a shape of internal dialogue.  Our overt self-talk during the trading days is a shape of internal dialogue.  Step dorsum for a instant in addition to intend most you lot verbalize to yourself during the trading day.  How good are you lot programming your GPS?

A cardinal slice of progress for many traders is turning their pre-market grooming into active, effective internal dialogue.  That is a major factor inwards transforming practiced intentions into concrete, actionable plans.  Imagine planning for the twenty-four hours past times reviewing recent marketplace behavior, dominant marketplace themes, tidings events: out of those you lot generate a persuasion that you lot volition merchandise if you lot regard it playing out.

That is good in addition to good, but at 1 time imagine going an extra pace in addition to generating *multiple* scenarios in addition to laying out plans for each.  Then, equally you lot walk through the novel day, you lot update each scenario in addition to flexibly motion to the ones that are displaying higher odds of playing out.  That gives you lot to a greater extent than ways to win.

But at 1 time accept it a farther pace in addition to imagine non only writing out the multiple scenarios, but actively talking them aloud amongst a peer trader, responding to feedback most the scenarios, in addition to listening to your subsequent dialogue.  Still further, imagine taking your scenarios in addition to actively *talking to yourself aloud* most those, proverb to yourself, "Brett, if you lot regard X occur, you lot request to travel doing Y.  If you lot regard Influenza A virus subtype H5N1 occur, you lot request to shift your thinking to B...etc".  Imagine talking to yourself amongst existent feeling most those plans, the agency a motorbus on the sidelines would verbalize to you.  

We retain information ameliorate when nosotros run across it multiple times.  We retain information ameliorate when nosotros run across it inwards multiple, dissimilar ways.  We intend it, write it, verbalize over it, verbalize it to ourselves amongst feeling--all of these care the programming of our GPS.  

The speed in addition to character of self-talk is something I regard amid successful traders:  they are real practiced at programming themselves in addition to apace changing their programs.  This is something I'll travel discussing inwards exceptional during Wednesday's costless webinar.

Further Reading:

Changing Self-Talk By Talking to Ourselves

Home Page in addition to Index

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Info!! Growing Your Blueprint Recognition Equally A Trader

A concept key to trading is that of designing in addition to designing recognition.  Different approaches to trading frame patterns differently, but all focus upon relationships that are deemed to hold out meaningful.  After all, whatever detail configuration alongside marketplace elements tin flame occur in addition to reoccur through random happenstance.  It is when patterns occur for understandable reasons that nosotros honour them meaningful.  We may or may non hold out able to predict when that designing volition occur next, but that is non necessary for successful trading.  If nosotros buy the farm really sensitive to meaningful patterns in addition to their myriad expressions, nosotros tin flame position their occurrence equally they unfold.  Influenza A virus subtype H5N1 psychologist, for instance, powerfulness non hold out able to predict when a patient volition adjacent sense a depressive episode, but tin flame buy the farm highly attuned to occasions inward which depression is starting to laid upwardly in.  Similarly, when couples brand progress inward their counseling, they tin flame recognize patterns to their arguments in addition to circumvent those past times doing something to a greater extent than constructive.

Many active traders expect at a really limited release of markets--often, exclusively those that they are trading or thinking of trading--and in addition to then they immature lady of import patterns that occur *among* markets.  These intermarket relationships oftentimes reverberate macroeconomic factors that are driving the participation of large marketplace players.  Recognizing when those relationships are waxing in addition to waning tin flame supply of import clues equally to whether detail marketplace moves are probable to continue.

I've been reading a large--and excellent--book from John Netto called The Global Macro Edge.  It touches upon a release of worthwhile ideas, including the importance of viewing functioning (one's ain in addition to those of markets) inward risk-adjusted terms.  One thought I especially liked was the ongoing tracking of correlations inward the cost movements alongside markets equally a means of identifying marketplace regimes in addition to shifts inward those regimes.  The same concept is valuable inward tracking correlations of moves alongside equity sectors.  When nosotros encounter dramatic changes inward correlations, those patterns tin flame alarm us to the emergence of of import themes that are driving marketplace action.  For example, subsequently the recent election, nosotros saw dramatic co-movement alongside equity sectors (industrials in addition to financials versus higher yielding sectors) in addition to markets (US dollar, rates, developed markets versus emerging ones).  New flows were coming into markets, in addition to the patterns of correlations alerted us to the drivers of those flows.  

Let's combine 2 of Netto's ideas in addition to imagine a province of affairs inward which your dashboard is tracking the risk-adjusted returns of dissimilar markets (a means of tracking character of tendency behavior) *and* the correlations alongside markets.  The combination would state you lot when shifting correlations are manifesting themselves equally growing trends.  That would hold out sweetness for trend-following macro traders.  It would likewise supply useful alerts equally to when markets are becoming choppy in addition to less patterned.  After all, it's the designing of patterns that ultimately defines the chance laid upwardly for traders.

Further Reading:  The Greatest Mistake Losing Traders Make
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Info!! Coaching Hedge Fund Portfolio Managers: Bursting The Myths Of Trading Psychology

In my recent post, I passed along four things that I lead maintain learned from serving equally a trading rider vehicle for hedge fund portfolio managers. This post takes a dissimilar perspective, identifying several trading psychology "truths" that I lead maintain had to unlearn equally a trial of working alongside experienced professionals. Here are a few myths I've had to dump along the way:

1) Success is Largely a Function of Psychology - Simply non true. The portfolio director mostly has a kernel strategy that is implemented inwards dissimilar markets and/or across dissimilar instruments. This agency juggling large amounts of data over fourth dimension in addition to viewing markets multidimensionally for opportunity, extracting themes from the relative movements of national markets in addition to property classes. Success is a business office of information, creative thinking alongside that information, a deep agreement of what moves markets, in addition to sense alongside dissimilar marketplace seat conditions. Only when those are introduce does psychology matter.

2) Influenza A virus subtype H5N1 Good Trader Is One Who Makes Large Returns - Those who brand large returns alongside large risks are tomorrow's casualties. In the hedge fund world, y'all lose investors if y'all cannot rein inwards risk. It's the mightiness to generate consistent, pregnant risk-adjusted returns--not exactly large absolute returns--that matters inwards the long run. Successful portfolio managers don't exactly await at daily profitability. They actively evaluate the correlations amidst their positions, their levels of risk, in addition to their shifting horizons of risk/reward.

3) Execution Is a Huge Part of Success - When y'all lead maintain hundreds of millions of dollars or to a greater extent than to invest, y'all don't exactly click a mouse in addition to displace into a full-sized position. You scale into positions over fourth dimension then equally to non disrupt markets in addition to then equally to obtain expert prices. Similarly, y'all can't exactly conk many positions all straightaway when y'all lead maintain large portfolios, especially when some of your positions are inwards markets that lead maintain express liquidity. This is where the administration component subdivision of portfolio administration becomes crucial.

4) Opportunity is Limited - There are enough of markets to invest inwards if y'all lead maintain fifteen i 1000 1000 dollars. It is to a greater extent than challenging to notice opportunities for fifteen billion dollars. Firms are inwards a constant race to notice novel markets, novel spheres of opportunity. This lies behind the evolution of the latest quantitative trading models in addition to the evolution of frontier investment opportunities. For a daytrader, markets are e'er moving in addition to there's e'er a merchandise unopen to the corner. Not then inwards the larger Blue Planet of coin management. Much of the long-term success of large hedge funds hinges on their mightiness to force the chance envelope in addition to cultivate novel sources of edge.

I sometimes have shipping service from traders yell for me how they tin interruption into the hedge fund world. Success at portfolio administration is non exactly a larger version of success at trading private markets directionally. It's a dissimilar game, alongside a dissimilar idea process. Not many traders acquire that and, sadly, neither create many would-be coaches.

RELATED POSTS:

Three Myths of Trading Psychology

Resilience in addition to Success
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Info!! Inventiveness Is The Novel Discipline

One of the key themes of my novel book is the importance of inventiveness inwards generating trading ideas amongst an edge.  What I telephone telephone Trading Psychology 2.0 emphasizes flexible adaptation to changing markets, non stiff adherence to static trading methods.  From this perspective, inventiveness is the novel discipline:  pitiable dependent area shows upwards non solely inwards emotional decision-making, but inwards consensus thinking.

You know that maxim "Garbage In, Garbage Out"?  Poor character inputs volition Pb to faulty outputs fifty-fifty if y'all employ the best of programming.  In trading nosotros powerfulness state "Consensus In, Consensus Out".  If y'all hold off at the same things every bit everyone else, you'll pretty much air current upwards thinking--and trading--like everyone else.  That's non a proficient recipe for superior risk-adjusted returns.

To lift our creativity, our dependent area needs to live on an improvement inwards our data diet.  We demand to accept inwards fresh information, improve information, too data organized inwards novel too useful ways.  I've long enjoyed the Finviz website every bit a beginning of novel perspective.  If y'all click on the heatmap above, you'll come across major ETFs too the relative majority of their trading yesterday.  Light bluish indicates much to a higher house average volume; nighttime indicates significantly below average volume.  At a unmarried glance, nosotros tin come across where coin was flowing.  That's non a bad starting dot for identifying rotational markets too sector/asset cast based marketplace themes.

How conduct maintain the SPX stocks behaved on recent net days?  This heatmap gives a useful view, a quick visual accept on whether the marketplace is help to live on pleased or disappointed amongst companionship performance.  That's non a bad starting dot for thinking most long/short themes.

Want a visual on the relative functioning of diverse commodities?  Or how most a visual on the relative forcefulness of diverse currencies?  Looking across property classes, y'all tin get to divulge emerging global themes.

But non all inventiveness comes from visualization.  Here is a good curated summary of breaking word too weblog posts that tin feed the head.

A swell destination for 2015's trading is to enrich your capacity for marketplace insight.  If y'all hold off at what others are not, y'all get to inquire questions they don't ask.  And that tin Pb to fresh answers.

Further Reading:  The Sobering Odds of Daytrading Success
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Info!! Pre-Opening Briefing: Watching Security In Addition To Increment Themes

Here nosotros tin encounter the recent gain merchandise inwards the ES contract; nosotros are probing the lower terminate of that gain prior to today's open. Note how weakness inwards stocks has been accompanied past times firmness inwards the U.S. of A. dollar, a dip inwards 10-year Treasury rates, in addition to weakness inwards such commodities equally oil. As marketplace put reckon prices inwards economical forcefulness in addition to reflation, stocks tend to benefit; equally reckon veers toward concerns over economical weakness, stocks tend to fall.

I'll hold upwards watching these themes closely; the intermarket relationships aren't perfectly correlated, exactly they produce furnish a window into the thinking of coin managers. Buying the dollar in addition to buying Treasuries is business office of a relative security trade; buying commodities in addition to emerging markets is business office of a global increment trade.

I'll likewise hold upwards tracking book on whatever early on morning time weakness to handicap the odds of staying inside the recent trading gain vs. breaking out to the downside. Updates via Twitter (follow here) volition assistance rail themes in addition to intraday sentiment.
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Info!! Thinking Most Morn Marketplace Action: Framing Trading Ideas

Let's cause got a await at Twitter comments thence far this AM. Note how observation of a wing inward the bull ointment began amongst an observation of NQ weakness earlier the open; opened upwardly minded watching of how nosotros traded some the opened upwardly cost (and 7/30 high price); in addition to and so observation of weakness inside 10 minutes of the open.

8:17 AM CT - I'll endure watching NQ this AM; it's off its overnite in addition to 7/30 highs. Financial stks laid upwardly to opened upwardly abt 2% up. Watching those too

8:37 AM CT - Watching how nosotros merchandise rel to 994.25 ES opened upwardly price; USD weak; TICK strong; 1793 to a greater extent than advancers than declines.

8:39 AM CT - 17 stks upwardly from open, 23 dn; mixed opened upwardly so far despite pos opening gap. XLP, XLV weak; XLB, XLE rel strong.

8:41 AM CT - Note that mkt opened upwardly is also nigh that 7/30 high; if nosotros can't remain higher upwardly open, that also way we're bk into ii twenty-four hours range. ;-)

8:49 AM CT - Seeing some unwinding of intermarket themes: USD strengthening, gold, fossil oil seeing some selling; most sectors dn fm open

8:51 AM CT - Note that inability to remain higher upwardly ii twenty-four hours trading hit targets pin degree every bit cost target.

8:55 AM CT - IWM showing rel weakness from open; 12 stks upwardly from open, 28 dn; mixed TICK distribution

9 AM CT - Significant buying outburst on ix AM CT news; watching to encounter if nosotros tin dismiss larn in addition to remain higher upwardly the early on AM highs.

9:02 AM CT - Once in ane lawsuit to a greater extent than that 994 degree proving crucial; Russell, NQ off highs; mkt having difficulty sustaining rally.

9:05 AM CT - Note renewed dollar weakness providing bid to stocks, gold, in addition to oil; nosotros look to endure trading off USD; moving to novel highs

9:07 AM CT - Marginal novel high inward ES non confirmed yesteryear other indexes; eighteen stks upwardly from open, 22 dn.

Given all the above, how would y'all endure trading now? What would y'all endure thinking well-nigh to frame a merchandise idea?

What I'm trying to illustrate is both a way of thinking well-nigh cost activity in addition to a way to supply an extra laid upwardly of eyes for traders every bit they're trading.
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Info!! Thinking In Addition To Linking On A Saturday Morning

* Why dividends matter; what hedge funds actually provide; as well as other of import marketplace themes from Abnormal Returns;

* My open alphabetic quality to Edenbridge;

* Which banks are inwards trouble; questioning the marketplace bottom; as well as other of import marketplace themes from Abnormal Returns;

* My stocks inwards play each morning;

* other of import marketplace themes from Abnormal Returns;

* My a driblet next a bounce from Quantifiable Edges;

* Jeff Miller links other of import marketplace themes from Abnormal Returns;

* My an interesting trading strategy;

* Nice to endure other of import marketplace themes from Abnormal Returns;

* My

Info!! Eve Briefing For August 17Th

* MARKET THEMES FROM MONDAY - H5N1 steep drib inwards overnight stock index futures carried over to sustained selling pressure level during the day, taking stocks to multi-day lows. Defensive themes dominated amid the sectors; nosotros besides saw commodity weakness, a drib inwards 10-year Treasury rates, in addition to forcefulness inwards the U.S.A. dollar. In short, in that location was wide net turn a profit taking amid jeopardy assets, alongside notable weakness amid the emerging markets. We saw almost 226 stocks brand fresh 20-day highs, against 1022 lows; exclusively 47% of SPX stocks are similar a shot trading to a higher house their 20-day moving averages. That is the weakest degree since the early on July lows. We convey moved from what I before described equally extended topping to actual short-term marketplace correction.

* OVERSEAS/OVERNIGHT NUMBERS: 3:30 AM CT - UK, CPI; 4:00 AM CT - Germany, ZEW survey of economical conditions.

* EARNINGS: HPQ, HD, TGT, TJX

* WORTH READING:

-- Ten first-class rules for sports psychology in addition to trading;

-- Outlooks for recovery; led past times upper-case missive of the alphabet spending, non consumer spending;

-- Interesting thoughts on vertical thinking amid quant blogs;

-- Problems alongside valuation of UNG and other practiced reads;

-- America's banks looking similar Japan's and to a greater extent than insightful links.
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Info!! Tracking Marketplace Themes Inwards Existent Time

the context that helps active traders frame their ideas. Note roughly of the themes from today's market:

1) Price describe across the wide market, alongside advancing stocks outnumbering decliners past times virtually 1800 issues equally I write;

2) Lack of intraday selling sentiment, alongside no NYSE TICK values below -800 equally I write;

3) Strong commodities together with weak U.S. of A. dollar, inward the wake of positive economical intelligence out of China.

The topic of economical strength--in the U.S. of A. equally good equally emerging markets-- is going to endure ane worth watching early on inward 2010.

Meanwhile, equally I'm watching the marketplace since posting the nautical chart above, I'm besides noticing a novel daily depression inward TICK. The NQ futures are barely positive on the day, together with we're seeing notable relative weakness amid Consumer Discretionary shares. It's the existent fourth dimension updating of marketplace information that tells us when themes are continuing to concur sway, together with when they're losing traction.

More:

Thinking inward Themes

Sentiment together with Cumulative TICK

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Info!! A Solution-Focused Approach To Overcoming Trading Frustration

My first postal service inwards this series explained why frustration is possibly the most destructive forcefulness affecting active traders. The instant postal service outlined cognitive strategies for preventing as well as overcoming trading frustration. This terminal postal service volition explicate a solution-focused approach for dealing alongside the frustrations that tin generate overtrading, missed opportunities, as well as impulsive decision-making.

Whereas cognitive techniques for dealing alongside trading problems focus on changing negative patterns of thinking nigh ourselves as well as markets, solution-focused approaches stimulate from the premise that--at times--we are already enacting the positive patterns ("solutions") that nosotros desire. Instead of focusing on what we're doing incorrect as well as trying to forestall ourselves from doing it (which solely keeps us problem-focused), nosotros instead arts and crafts solution patterns out of our best trading.

There was a menstruum inwards which I institute myself trading every bit good much as well as losing coin needlessly. I recognized that I was inwards a frustrated state when I was putting the trades on. In the dorsum of my mind, I sensed that they were pitiful trades from their inception.

I also recognized that in that location were times inwards which I traded inwards a rattling harmonious state of mind. I had clarity nigh what I was doing as well as it felt every bit though the marketplace position was coming to me. I wasn't trying to brand things happen.

From the solution-focused advantage point, I began to dissect those harmonious periods. The visit was that, if I could figure out what I was doing correct at those times, I could plough those "best practices" into routines--and ultimately into habit patterns.

One of the clearest conclusions that emerged from this analysis was that, during my harmonious trading, I had an explicit "top-down" perspective on the markets. I focused clearly on what was happening at larger fourth dimension frames as well as aligned myself alongside the market's broader construction (trending/non-trending) as well as themes. During my frustrated trading, I worked from "bottoms-up", looking for short-term setups regardless of the market's broader picture.

Little wonder that I would boot the bucket run over on those bottoms-up trades, catching the side past times side ticks, but missing the side past times side points. My frustration stemmed, non but from my losses, but also from my feelings nigh what I was doing. At to a greater extent than or less level, I was frustrated alongside myself for non trading the means I know how to trade. In short-circuiting my decision-making process, I felt that I was losing a business office of myself, my integrity.

From the solution-focused frame, I institute in this postal service as well as its links, every bit good every bit Chapter Four of The Daily Trading Coach.
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Info!! Parallel Processing Inwards Trading: Finding Meaningful Patterns

In yesterday's post, I described a procedure of reading inward parallel:  reading many books at a fourth dimension too gaining insight into a topic past times juxtaposing the views of many authors.  Parallel thinking is key to designing recognition:  inward simultaneously processing multiple events, nosotros are able to discern meaningful patterns connecting those events.

Take a expect at Rob Smith from T3 describing his 8 concealment trading station layout.  There are many charts on each screen, grouped past times sector, stock type, etc.  He therefore tin refresh all the screens instantly to persuasion many other stock groups based upon screening criteria.  Each stock tin last viewed across multiple fourth dimension frames.  As Rob points out, he monitors all of these screens throughout the twenty-four lx minutes menses to larn a feel for when opportunities are "lining up".  Then Rob volition dice "around the horn", looking at every stock inward the SPX to discover emerging trends or moves out of the ordinary.

What is noteworthy inward the video is that Rob is processing much to a greater extent than information much to a greater extent than speedily than the average trader.  He is reading the marketplace much similar I am reading books:  finding themes past times processing multiple sources inward parallel.  Instead of examining ane stock inward detail, consulting myriad indicators too nautical chart perspectives, Rob considers many stocks too finds patterns that cutting across them. 

If you lot jump over to SMB, you'll notice that their traders are utilizing tools that filter stocks based on liquidity too majority too therefore rails promising candidates tick past times tick to discover odd majority or gild stream patterns.  The applied scientific discipline acts equally an extension of the traders' parallel processing, reducing an impossibly large array of intraday information across stocks to a manageable universe of "in play" opportunities. 

Serial processing is mutual alongside investors:  excavation deeply into exceptional discipline areas to brand it at unique analyses that dice trading opportunities.  An illustration would last scouring the wording of Fed statements too speeches of Fed officials to discern shifts inward policy.  Parallel processing is less nearly deep analysis too to a greater extent than nearly rapid synthesis.  It is to a greater extent than mutual alongside high speed traders:  finding patterns inward marketplace activeness that give away shifts inward provide too demand.

Most of us receive thinking styles that are our unique blend of parallel too series processing.  An of import origin of failure for traders is attempting to adopt trading styles that produce non brand optimal role of our cognitive strengths.  An of import origin of failure for trading firms is failing to assess cognitive strengths equally constituent of the hiring process.  The myth continues that trading success is a constituent of personality, piece testify strongly suggests that personality tin hit lilliputian inward markets if the correct encephalon wiring isn't inward place. 

Emotions are a work inward trading entirely insofar equally they may nudge us from our cognitive strengths.  When trading becomes challenging, higher frequency traders should force themselves to expect at to a greater extent than things too feed their designing recognition; lower frequency investors should force themselves to recall to a greater extent than deeply nearly what they're doing too why.  Bad things hap when active daytraders reply to challenge past times slowing their thinking too when investors dice to a greater extent than speedy.

But of course, nosotros don't ask heed nearly whatsoever of that from would-be trading mentors too coaches.  They tell us to "trade our plan".  

Whatever.

Oil was weak most the twenty-four lx minutes menses on Friday.  High yield bonds underperformed stocks too therefore saw decent selling belatedly inward the session, equally sell programs took stocks off their highs.  That was a slice of designing recognition from yesterday's trading.  When all that began to unfold, my long ES seat came off the table.  Not all patterns are meaningful, exactly that was a motion painting we've seen earlier too I wasn't inward the mood to replay.  If you're entirely looking at the nautical chart of what you're trading, it's tough to meet those intermarket patterns inward existent time.  Markets are ever talking to each other; it tin last rattling helpful to bring together their conversation. 

Further Reading:  Data Rich, Information Poor
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Info!! The Trading Process: Stance Generation Together With The Scientific Mindset

PREVIOUS POSTS IN THIS SERIES ON TRADING METHODS:

1) Identifying Market Context

2) Identifying Key Price Levels as well as Targets

3) Identifying Day Structure

How does a trader brand the transition from agreement a electrical flow marketplace (the 3 elements enumerated above) to genuinely formulating a trading idea? That is the topic of this post.

In a word, the trading thought must integrate the information we've gained from an appreciation of marketplace context (whether markets are trending/bracketing on longer fourth dimension frame; intermarket themes that ask maintain been operative; relevant word events as well as economical reports); fundamental toll levels (support/resistance; average trading prices; target prices); as well as solar daytime construction (whether the electrical flow solar daytime appears to move inwards breakout/trending/range mode).

As an intraday trader, I laid about the procedure of generating ideas past times formulating hypotheses equally the marketplace is trading. Many times, the hypothesis volition kickoff past times assuming that whatever has been happening at the larger fourth dimension frame--what I am identifying inwards the marketplace context--will bear frontwards to the electrical flow trading day.

Thus, on average, if I come across we've been trending higher, I volition hypothesize that forcefulness volition bear over to the electrical flow trading session. At this point, the hypothesis is solely that: an educated hunch, non a trading idea.

As the marketplace is trading, that hypothesis may gain or lose support. For instance, if I come across that, amongst each bout of selling, the marketplace holds higher upward its volume-weighted average toll (VWAP), the thought of continuing the tendency higher gains support. Conversely, if nosotros brand buying efforts as well as book wanes as well as nosotros cannot accept out prior highs, my hypothesis loses support.

If I'm thinking similar a scientist, my real-time marketplace observations are helping me to refine my hypothesis. Perhaps the stock marketplace is non moving much inwards pre-opening trade, simply I notice correlated markets (U.S. dollar, commodities) moving inwards a agency that would move supportive of higher stock prices. That mightiness non solely assist back upward my hypothesis of continuing the marketplace trend, simply mightiness likewise render clues equally to which stock sectors could most apply goodness from such a move.

Similarly, I mightiness come across emerging marketplace stocks leading a displace higher as well as conclude that such speculative persuasion could bear over to the to a greater extent than speculative areas of U.S. stock performance. Or I mightiness come across overseas markets degree off on unfavorable economical word as well as moderate my expectations for U.S. stocks on the open.

The indicate is that hypotheses are ever-evolving. New marketplace information is helping us gain or lose confidence inwards our ideas.

Once I ask maintain high confidence inwards direction (i.e., the most recent marketplace activity is confirming my prior hypothesis), I as well as thence purpose my agreement of toll levels as well as solar daytime construction to brand the hypothesis to a greater extent than specific.

For example, if we're trending higher as well as I come across signs of firmness inwards the marketplace prior to the open, I mightiness hypothesize that nosotros volition concur higher upward the overnight depression inwards Globex futures trading as well as merchandise higher upward yesterday's high price. Alternatively, I mightiness ask maintain lost confidence inwards the thought of continuing the tendency higher due to tepid overnight activity as well as failing intermarket themes as well as hypothesize that nosotros volition concur below the overnight high inwards Globex futures trading as well as merchandise dorsum to the electrical flow day's VWAP or the prior day's pin toll level.

When I refine my hypotheses, I ever brand reference to fundamental toll levels as well as my ideas virtually direction must ever move grounded inwards what I'm seeing inwards the most recent marketplace behavior. If I'm hypothesizing a tendency or breakout day, I'm looking for prices higher or lower to follow the most recent toll action. If I'm hypothesizing a hit or imitation breakout session, I'm looking lower or higher for prices to contrary the most recent toll action.

If you lot were to sentry me trading, you lot would come across me jumping from enshroud to screen, nautical chart to chart, constantly updating measures of persuasion (NYSE TICK, Market Delta); volume; correlated indexes, sectors, as well as asset classes; as well as conduct around toll levels. Cognitively, I'm continuously weaving a narrative virtually what I'm seeing: assembling the emerging marketplace information into a story trouble that makes feel to me. The hypotheses flow from this story line.

Many times, I abide by the information to move contradictory as well as mixed as well as no convincing story trouble emerges. At such times, I apply non act. Only when the information autumn into a designing as well as the designing fits into my agreement of context as well as solar daytime construction volition I entertain a hypothesis as well as elaborate it amongst toll level/target specifics.

As nosotros volition come across inwards afterward posts inwards the series, this narrative procedure of hypothesis generation continues through the solar daytime and, indeed, throughout the menstruation of asset positions. It tin ship away likewise occur at fourth dimension frames wider than intraday, equally inwards the instance when nosotros come across stocks failing to sustain forcefulness early on inwards the calendar week as well as hypothesize that nosotros volition merchandise dorsum to final week's pin level.

Once nosotros empathize thought generation equally a sort of scientific process, nosotros tin ship away amend appreciate the business office of psychological factors inwards trading. Influenza A virus subtype H5N1 proficient mindset volition non pose valuable hypotheses inwards the caput of a scientist, simply the incorrect mindset tin ship away interfere amongst generating as well as refining worthwhile hypotheses. Most emotional disruptions of trading involve some sort of short-circuiting of designing recognition as well as reasoning processes.

More:

The Scientific Mindset inwards Trading

Framing Trades Scientifically

The Scientific Mistakes of Traders

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Info!! Thinking Inwards Themes

In my recent post, I emphasized the importance of confirmations betwixt movements of an index (such every bit the S&P 500 Index futures, above) together with the movements of cistron sectors (such every bit the S&P 500 Index fiscal stocks, XLF, below). As yous tin run across from the charts, the fiscal stocks (like the consumer staples, healthcare, together with utilities sectors) did non confirm the 13:00 PM CT depression inward the ES contract. That led to a abrupt reversal soon thereafter, every bit selling describe per unit of measurement area could non sustain a wide marketplace position decline.

But there's to a greater extent than or less other mode of thinking almost this pattern. We know from the tidings (and Trading past times Intermarket Themes
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Info!! Morning Time Briefing For August 18Th: Bounce Inwards Opportunity Assets

evening weblog briefing for international numbers that are scheduled), permit me to give cheers readers for their recent, generous support. Yesterday eclipsed all previous records for daily traffic on the blog, as well as it was clear that the involvement was sparked past times the continuing development of the weblog every bit a determination back upward tool for traders. With briefings inwards the morning, midday, as well as even as well as trader as well as marketplace position psychology commentary between, the finish is to expand traders' vision as well as thereby aid traders aid themselves.

We tin run across from the nautical chart of the S&P 500 Index futures (ES) above, that we've bounced overnight from yesterday's lows on the heels of a favorable ZEW study inwards Germany. (This is i argue it's then of import for traders to know international reports due out each day). If you lot bring a hold off at the Demand/Supply numbers for Mon This post volition aid you lot empathize how I translate short-term momentum from this indicator; note from this post that it is non odd to larn a short-term bounce later on a really weak momentum twenty-four hours (though, every bit you'll non from the post, the bullish border diminishes thereafter).

I remain focused on those lows from 8/12, because--as long every bit nosotros remain below them--we are sustaining a downside breakout as well as accepting value at lower cost levels. That is what nosotros run across inwards short-term downtrends. H5N1 sustained motion dorsum inwards a higher house those 8/12 lows begins to brand yesterday's downdraft hold off similar a trap for bears as well as would receive got me thinking most a short-term rally dorsum into the prior multi-day range.

All of the jeopardy themes that sold off yesterday are bouncing then far this morning: crude as well as aureate are higher, 10-year Treasury involvement rates receive got bounced, as well as the euro is upward versus the the U.S.A. dollar. In pre-opening trade, we're seeing significantly to a greater extent than book transacted at the offering cost than the bid inwards the ES futures, suggesting underlying buying interest.

I volition endure updating during the twenty-four hours via Twitter as well as the weblog to run across if nosotros tin sustain this bounce as well as to run across if those intermarket themes maintain to sustain a buying of jeopardy assets.
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Info!! Heart As Well As Somebody Ideas Inwards Trading Psychology: Changing Our Occupation Patterns Amongst Brief Therapy Methods

Previous Posts inwards This Series:

Trading equally a Performance Activity

Introduction to Trading Psychology

One of the primal themes running through the blog, equally good equally my books on trading psychology, is that changes inwards our behavior, thought, as well as emotion tin survive effected yesteryear relatively brief, targeted modify methods.

All of our behavior--from our ways of thinking to our typical modes of responding to situations--is patterned. The amount of our patterns is what gives us our personalities. Many of our patterns start out equally coping responses to challenges that nosotros confront early on inwards life. For instance, if I detect myself repeatedly wound yesteryear others, I may larn to hold a high score of privacy as well as guardedness. Keeping to myself, I can't acquire hurt.

Such patterns may survive adaptive for the situations that nosotros are in, exactly they transcend away maladaptive 1 time nosotros acquire inwards unlike environments. Thus, the withdrawal that worked when growing upwards directly becomes a liability inwards forming new, romantic relationships. By then, however, the blueprint has been overlearned; it has been internalized equally share of the self. As a result, I tin detect myself repeating patterns that convey unwanted consequences. Worse still, I tin survive unaware that I'm repeating those patterns.

The procedure of changing our patterns of thought, behavior, as well as feeling begins alongside becoming aware of our repetitive patterns as well as the consequences of those patterns. While such awareness volition not, inwards itself, modify us, it is a necessary step: 1 time nosotros clearly recognize what we're doing, why we're doing it, as well as how it is pain us, nosotros tin pace dorsum as well as endeavour to create things differently. If I run across that I am hiding behind a wall of guardedness inwards relationships because of previous problems inwards relationships--and if I clearly perceive how that is belongings me dorsum from cultivating new, meaningful relationships--then I tin try, lilliputian yesteryear little, to accept downwardly that wall. Many times, that breaking of the wall (the changing of our patterns) starts inwards the human relationship alongside a therapist.

When employment patterns create non overwhelm a person's life as well as forestall them from surgery inwards the world--and particularly when those problems receive got been relatively recent as well as situational, non chronic as well as pervasive--it is commonly the representative that short-term, highly active as well as focused approaches to modify tin survive effective inwards generating as well as sustaining change. These approaches autumn nether the category of brief therapy. Illustrations of how people tin modify employment patterns through such short-term approaches tin survive flora inwards my this ship service as well as its links on therapy for the mentally well. See besides this ship service on coaching traders inwards existent time.
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Info!! Perspectives In Addition To Themes For Tuesday Morning

Bill Rempel offers to a greater extent than or less valuable elaborations to my recent trading psychology post yesteryear pointing to the strengths of developing as well as trading systems. Readers know that I am a discretionary trader, but I tin vouch for the successes of those who prepare as well as tweak systems that suit to changing marketplace conditions. Bill's indicate regarding the value of trading multiple systems that perform nether varying regimes is excellent.

* It's Not Just Markets That Follow Seasonal Patterns - Thanks too to a reader for pointing me to the inquiry of physician Richard Wiseman as well as this rattling interesting study of how personality patterns--including the perception of beingness lucky!--are related to the seasons of one's birth. Given the human relationship betwixt seasonality as well as mood, including the phenomenon of seasonal affective disorder, the findings aren't then far-fetched.

* Scenario Planning equally a Guide to Action - Ray Barros continues to offering fantabulous guidance for traders, including this perspective on scenario planning. See too his scenario creation for discretionary traders.

* Valuable Perspectives - Trader Mike's recent links highlight discussions of stop-losses as well as algorithmic trading. From Abnormal Returns, we larn to a greater extent than or less rattling interesting views, including a hold off at commodities as well as bond yields as well as how seasons impact the VIX.

* Can Positive Thinking Be Irresponsible? - Thanks to a reader for bringing this inquiry report to my attention, highlighting how people edit their memories of yesteryear outcomes to justify continued gambling. It's much harder to engage inward such distortion when you're tracking your trades as well as P/L inward a mag (which may hold upwardly i argue traders don't keep journals).

* Comprehensive Psychiatry Textbook - Just received my re-create of the mammoth 5th edition of the Textbook of Psychiatry from American Psychiatric Publishing, the publishing arm of the American Psychiatric Association. With over 1700 pages, the mass features chapters from recognized experts on topics ranging from psychiatric disorders to treatments as well as the needs of particular populations. My chapter deals alongside brief therapies, including the approaches to short-term operate that I utilise alongside traders.
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