MY Journal-phil13

not trading today...

as said above it is a USD holiday today, been watching the last couple of hours and MM's appear to be taking advantage of the low volumes to run stops/orders, will most likely be very unpredictable/random moves from what i have seen so far, no point creating myself a potential problem in a hard market like this today.

off to do some more of my never ending list, at least that will keep my wife happy and give me a bit of exercise....

having a short rest from my list...

here is how i could see the MM's doing the stop/order runs... and it continued..

this (or similar) was on a few usd pairs..

G/U trade..... checking out the lay of the land pre-news.. timing still not right just yet info that came back.

.. they sent eur long so gbp went short then hit the eur buyers hard - lucky I knew what they were probably doing so got out in the selling zone - then went with. My bias is long too but they may not agree with me.

Alex

Hi Alex

that is it my friend....

so long as our 'bias' does not override the reality of what IS happening, then there is no reason why we should not survive the situations we put ourselves in.

ADDED...
thinking something will often make us want to create that reality, we need to understand this and learn to separate the two parts of the brain that connect this sub-conscious re-action.

regards

Phil.

ADDED...

Hi Phil, interesting stuff you got there.

Edited: sorry I think I misread, you were demoing mm plus management strategy, but nonetheless, interesting stuff.

I also noticed the way you layered your trades makes it low frequency, which helps with the whipsaw.

Hi CookieMonsta

welcome and thanks for the interest.

no worries, i saw the deleted post, by the edit i see you understand what i am doing and how.

it stems from incorporating AOW into my MO, all that matters is the state (account), i trade my money, the market is the vehicle in which it travels only, how it travels is up to me and i have decided a 'best outcome' and 'by any means' strategy is the best way for me, as i have said many times on the TAF thread i have tested my account and myself to be able to handle 1000+ pip moves (though never it gets that far away anymore), my defence (as it should be for any state) is far greater than troops i use to fight the individual battles, for me a profit is a profit and losses should not be tolerated, where or how that 'profit set' is made up is irrelevant to me, i win when i bank a break even or above trade, not when i end a trade in any single pair.

it is too hard to show this spread over the many pairs i trade, so i have condensed that basic idea into trading demo pairs to try show what i do, being dyslexic i have trouble explaining myself that is why i use a lot of charts and pictures/videos.

regards

Phil.

The charts are really good, to be honest I prefer the way you present things.

There is something I am interested in showing you too, it's my own speculation though, it has been sitting in the back of my mind for a while. You know how fti once mentioned there are ways to make sure book does not lose money?
I was wondering if this mo is it, so the basic core is the dance, the ad-hoc strategy is using 3k to hedge and rotate momentum, and if cross still wrong, implement a special collar strategy in the form of 1.3x protection financed by 1.6x options premium, e.g. long 1x spot, long 1.3x put, short 1.6x call.
3 scenarios, if keeps dropping, the 1.3x call keeps helping us break even, if keeps ranging, basic rescue mo, if sudden counter impulse back up long, we can let the long accumulate profits till it hits the strikes of the short call, in that case, attack with 0.6 to fibo spiral out and lock in volatility and spot long money's and figure ways to box the position up since we are pretty much in profits, we can let it expire in the money. The key is that when in rescue mode, we use 0.3 exposed by our puts to carry out rescues without spiralling book to oblivion, and engineer slow strategy retreat while puts keep holding our profits ( rescue 2, then have 5 free, 5 rescue 3 then 8 free, 8 rescue 5 and all out and puts deep in the money). If it keeps going down, we can close sold call and roll it lower since, it's in our favour given by how options premium decay when price moves away from strike.

This was what I was figuring about the cycle strategy, that is if the strategy's cycle keeps going in a loop, it may be possible to balance the book without going into death battle.

I see that what you have there in principle is similar?

Essentially it's to deactivate markets sigma and volatility and turn it into our favour.

Hi CookieMonsta

spot on my friend, and... explained far better than i ever could..

regards

Phil.

Nice Phil, this is powerful stuff you have there. Would definitely be interested to see how you develop it further.

Can I ask what all this means?

Alex

Hi Alex

there are ways to stop the bleeding and wait for more favourable market conditions to recover/profit from, options (long sword) is another way of doing what i am showing..... but fti said long sword is not for retail. a combination of options and spot trades is the accepted (mainstream) method out there of hedging a trade for that purpose and other combinations to try to skew the market moves into an overall profit.

http://www.investopedia.com/walkthro...g-options.aspx

regards

Phil.

I am not familiar with the terminology Cookie is using - to stop the bleeding I can either cut and take hit for now or go the other way and offset gathered rations until comes in my favour - of course gathered rations could cancel out my loss if keeps going - of course you can offset other winning trades for recovery too - am I missing something?

Alex

Hi Alex

i only understand the basics of it myself and it has been many years since i played with options, it is what i am showing in my spot trading demo's but in a much more complex (to me anyway) way of doing it, you need to have very deep pockets to create a good income from the use of options, this is why fti said it is not for us.

maybe CookieMonsta could explain it in a better way to you.

regards

Phil.

Oh -thanks - I think I have enough on my hands to perfect what I am doing - I know I am developing real long term skills and it is hard work.

Thanks again my friend.

Alex

Hi Alex

no problem my friend..

do not worry you are not missing anything, i used to always feel that way when someone said things i was not familiar with... it holds us back so do not worry over it.

regards

Phil.

hi alex, well, do you remember when fti showed us regarding nick leeson's example of how he rescued book? it was short call short put against a long spot.

so what happens is that he is betting on volatility contraction, but by nature of his position, he dies twice as fast if price moves against him to the down side, which essentially is one of the worst moves around, its as good as martingaling down with no possibility of profits.

so i was thinking whats a better way to handle such a scenario, it was instead of betting only on volatility contraction, and try to pocket volatility and time premium, a better way is to simply collar it, firstly to stop bleeding and this buys you time as the market moves around violently, you are not subjected to the same volatility swings which the markets throw around, say for example, if you collar 1x put and 1x call 50pips wide, at most you lose this 50pips if things go real bad, if things turn for the better, you make 50pips. The death battle scenario is practically impossible, but now, you have bought yourself more time to figure out what to do with the position, without a guillotine on your head, except you have given up the chance to make alot of windfall profit, so you sealed your chance for death battle. this is the initial foundation.

extending the thought process further, suppose i want to use the premium to cover myself i can sell 1.6x call while buying 1x puts, which means im exposed, 0.6x uncovered calls. same strikes, 50pips away strikes put, 50pips away strikes calls, which means now, i have premium * 0.6 advantage in terms of volatility and time money, so while the market tanks, i need pips to break even. However, if price goes back up to the 50pips call strikes, my spot is already in the money, at 50pips, and with 0.6x uncovered, it can go another 83.3pips away from my call strike in order to show a first loss. but before that happens, i can spiral in and buy 0.6x spot which covers the call into a fully covered call while sitting on profits, and keep my average price at 0.38 percent from long spot position 1 to long spot position 2, basically, the attack mo spiral. the sold call was engineered to be specifically 1.6 in order to factor in how to maximize the units put in vs average price. from this point onwards its all about how to turn this position into a box spread to lock in profits and expire in the money.

next, suppose we want to do better, we say we want to rescue, how much can we increase the put side without paying a premium, i.e solution must be from 1.0 to 1.6 factor? also, we do not want to keep using options, but we want to use spot to keep employing rescue because spreads for options are about 10pips to 15pips, very costly. so, perhaps if we try 1.3 instead.

scenario 1, range bound or low volatility
now, we have bought 1.3x puts and sold 1.6x call, so 3 scenarios, if volatility is low and price keeps hovering at our spot's price, we can simply take the premium and close all, at expiry, or we can try to rescue with 0.3x troops and engineer slow retreat over afew small campaigns. essentially, we use 0.3 to rescue 0.2, fibo skew, at that point, we have 0.8 troops inside, puts still at 1.3x and we have 0.5 to mobilize again to rescue 0.3, then taking them out again, and keep doing that till we have rescued all or we can simply do it till we a no way to lose situation, close out the 0.3x premium, and let it ride, all the way, you have a free lottery ticket which is loss less.

scenario 2, strong up thrust, our position is long, which is technically a whipsaw
if instead price goes all the way up past our 50pip call strike, we buy 0.6 and are fully delta hedged, and we are now in the money, and have profits, but we have no way to profit more, so we look to box our position up, by writing synthetic spread to change it into a box spread, or approximate it.

scenario 3, a strong trend change, on the daily against us, risk tenure if very high, if uncovered, book is exposed to unnecessarily high risk.
in this case, if price keeps pushing against us, say 100, 200 or 300pips, we are automatically in the money, we can just close all and book the profits.
but if you are still game, you can keep doing rescue with 0.3 as per how we mentioned above in scenario 1, and the position till satisfied. so what happens is that you are essentially delta neutralizing your portfolio, but key is this, the dance allows you to squeeze even more profits from the delta neutralizing of the portfolio as price gyrates and swings up and down as you do your rescues. say if price goes down 100pips, you have whatever loss from spot + 50pips*0.3 from the puts plus whatever profits from the sold call, and when that happens, and you do the dance to rescue your spot exposure, you delta neutralize your portfolio, and whatever pips you again in your spot exposure, you lose in your puts. so you are sort of always profiting 1 hand and losing another, the key then becomes that your dance and legging into rescue and removing troopers is the source of profits.

all the while when this is happening, you are ensuring you do not get into the death battle scenario, hence, you have decorrelated the market's volatility and sigma with respect to your portfolio p&l.

below is the simulation of how the p&l looks like for the synthetic position

edit: the new screenshots should be the correct one, the previous one has wrong ratios

Hi Alex & Guys.
Hope you been well..

Alex you might find this helpful. http://www.investopedia.com/articles.../05/022305.asp

(note I do not endorse this person or channel, but I felt he explains it well and the channel have got some pretty neat stuff for risk management)

Like what Phil have mention, I also believe this may be the long sword that FTI is referring to. It is one of the many tools that big boys have at their disposal to manage their risk, and also, maximize their profits.

Rgds

Thanks will study later.

Alex

Hi Ray

good to see you around again, was wondering what happened to you.

regards

Phil.