Identifying Market Swings - Medium and Long Term Trading

Money Market is not FX, Its called Currency Market.

http://en.wikipedia.org/wiki/Money_market
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Hi boyloverzone,

Which values do you use for 4h, daily and weekly ?

Razorjack thank a lot. i think you really gone but your share knowledge was more than enough espescially for me. no word except thank you .

and thank a lot again.

Yeah.. GREAT Stuff look forward to browsing

Hello everyone,

Just thought I would come back for just a short while to finish up some thoughts I've had regarding this thread.

I have to admit that it's bothered me to not finish what I started here, so here's the last of it. I won't do a questions and answers thing here, instead I will just throw everything out and let the pieces fall where they may.

Thinking like the Big Boys - Becoming an Apex Predator

I like this phrase, "Becoming an Apex Predator", somehow it sums up what I have learned and want to get across with this post.

When you really understand what the big players in the financial markets are up against, you will see that there are a lot of losers even there. Of course not as many on the retail side, but still alot. And when you learn, truly learn their weaknesses...... well let's just say that I've become a Big Game hunter, i.e. an Apex Predator, taking money even from the big players!

Ok, so looking at the big players, we never got to finish what their weaknesses are and how to take advantage of them:

1. Most work for a BUSINESS, i.e. reporting to a manager, stockholders, investors, etc etc
- Yes, most of the big players need to report to someone else pulling their strings

2. The Achilles' heel of most businesses is the desire for SHORT TERM PROFITABILITY or for a more familiar term: GREED
- The businesses and their shareholders want to see profits growing on a quarterly basis. Also due to tax purposes and yearly results, many big players need to liquidate positions at certain time periods even when it may not be the best time to liquidate large positions

3. The Big Players get paid bonuses based on the quarterly, semi-annual and/or annual results/profits they make.
-This puts pressure on them to profit even where they may be no moving market to profit off of in order to keep their jobs and/or receive bonuses.

4. Yes, just as with most retail traders, even the big players and their businesses fall prey to the emotions of FEAR and GREED.
- One of the things you learn about human psychology is that our behaviors are incredibly complex when looking at the individual. However when you look at how we behave in a herd, i.e. financial markets, you notice that the behavior of the herd is very simple and primitive. A lot of the big players move with the herd just like retail traders, just think of the many hedge funds and investment banks that got hit during the last economic downturn.

5. Having to load and unload large positions can take a long time thereby pushing prices against the trader

Instead of looking at things like trading systems and indicators, etc etc, future would be successful traders need to look at how they can use the above weaknesses to their advantage.

1. Be independent - do not look to others for guidance, advice, tips, indicators etc. Being independent means being free from the herd, i.e. the 95% losers, otherwise you will only be thinking like the herd and fall prey to the Apex Predators. Ironically this means stop posting and commenting on this forum about trading strategies, indicators and systems.

2. Think long term profitability - you want to stay in this game for a long time, don't try to make your entire fortune in one trade, build it over time. This means don't just look for a profitable system, it won't be profitable unless it fits your personality and lifestyle. Trading shouldn't be something that you do, but should be a natural extension of who you are. Think of also contingency plans of not only how to survive but to take advantage of market panics.

3. Never feel pressured to take a trade - only pull the trigger when your entry criteria are all met. For me that means waiting for prices to reach extreme levels or during moments of market panic or euphoria

4. Learn to recognize when markets are completely out of alignment under the influence of extreme levels fear and greed, then take advantage of it. Most people don't think rationally when under the influence of fear and greed, they'll sell valuable assets for a fraction of what they're worth or buy assets that are way overpriced

5. Learn how the markets really work, what influences trend changes, where the big trends will be etc etc, then learn to get in ahead of the big players so you can let them move the markets and make you money

Ok that's it, I'm done. I feel I've given more than my share and I've relieved my karma.

Feel free to ask questions, but please do not ask me to do any analysis, give tips on pairs to trade, etc, instead look at what I wrote above about being independent.

I'll post a few more ramblings over the next few days, but then I'll close my part in this thread

Razor:

Where have you been?

Hedge

Hey mate!

Just been living the dream!

How have you been?

I still have your contact info, I'll send you mine in a bit and we'll catch up!

Just me rambling....take it for what it's worth

Without trying to come off like boasting, I have reached a new paradigm. I no longer see myself as a trader. Instead I am an investor, a long term investor at that.

When I started this thread, the focus was on Medium and Long Term trading. My strength has always been to see trend changes before they happen, but one of my greatest weaknesses was not being able to hold on to a winning position throughout an entire long term trend. Well I realized that I was looking at it the wrong way and had to change how I was perceiving the markets. Strangely enough I went and started to invest in stocks and that helped me see how to fix this weakness. I can now hold on to positions indefinitely or at least until my conditions for investing change.

Matter of fact I've been holding on to short JPY positions for over a year now. I wrote in earlier posts about a shift in the carry trade funding currency from the USD to JPY when there are signs of the Fed ending the easing cycle. Well we couldn't have asked for a better opportunity with the new BoJ governor unleashing a massive amount of JPY on to the markets. This will not only devalue the JPY over the next 2 years but it means that the Fed will start to unwind QE and raise interest rates well ahead of the BoJ, possibly adding another 3-4 years to the uptrend.

I hope all of you remembered when I wrote about a massive opportunity shorting the JPY. On the other hand, it looks like I was wrong about the biggest trends being in the commodity dollars moving the most against the JPY, instead the biggest trends will be in the USD, GBP and EUR vs JPY. Of course this can also change over the course fo the next 2 years, but most of this is easy to see well before it happens so plenty of profits available for the taking!

I hope be riding these trends for the next 7 years!

There are actually even larger market shifts happening right now. The financial crisis with the very accommodating central bank monetary policies and politician follies have created some excellent once in a lifetime opportunities. Oddly enough the media, journalists and analysts are EXTREMELY quite about this.....food for thought about thinking independently.......just apply what I wrote in this thread and you should be able to spot these opportunities with a bit of effort.

I also tried to just live off of trading and nothing else. Even though this was possible, my investment style only requires working an hour a day and I just got bored to death....I realized that I need an office to go to, an intellectual challenge to conquer etc etc. So I started my own business that includes investing as well as a few other revenue streams.....

Running a business has also made me see how investing is a business in and of itself and must be treated as such. One of the interesting things about investing via a business is that instead of using a broker, I go through fully licensed banks. What a difference it is to have invest through a bank compared to a broker.

I now have a sales rep that I can yell at for fun and an account manager at my beckon call to kick in the ass when I get bored!

Hmm, I wonder if this is what it's like to be one of the big fish in the financial markets?

Yes, I have gone over to the dark side and become one of the big boys, but hopefully without all of the disadvantages I listed above!

Finally living the dream of financial independence. And yes, financial independence is all that it's cracked up to be!

Hehehe.... let's just say I'm enjoying life at the moment!

Great! It's been a long time.

Still on the yahoo.se address?

No, I'll write you in a minute with the new email

I just got asked whether I am now running a hedge fund. No I am not, I trade for a private business, my own company.

So still a small fish in the ocean and one of the smaller big boys but still crossed over to the dark side!

I was just thinking about the herd mentality and thinking independently. The gold panic that we saw starting from last Friday:

http://www.forexfactory.com/showthre...69#post4846069

In August 2011, I wrote:


This was something that was as clear as day when I wrote it and now with talk about the Fed ending the easing cycle, I am still dumbfounded that markets go into panic mode when these things unfold.

Just goes to show how strong the herd instincts truly are.

By the way, I think there will be another major shorting opportunity in a few years. I anticipate gold to continue to climb higher making a new record high but a much more wilder volatile ride than what we saw during the last 10 years. Remember there are some major players and holders of gold that need to unload massive positions that have been built up over years. Once that does, then it will make the last drop in gold look like.....well I think you can figure this one out!

Hi Razor, I was must wondering what kind of returns a fundamental trader like you has? is it based on weekly monthly or yearly?

Hi FranCisc0,

Over the last 5 years, my yearly returns have varied between 80% and 600% and my total return over 5 years is around 2100% with a maximum DD of 15% on initial balance.

As the account gets larger, I focus more on reducing DD and the returns get smaller.

Keep in mind that the returns are based on my semi-conservative investment strategy, not because I am a "fundamental trader". I'm sure there are both technical and fundamental traders that make higher returns than I do.

Hi Razorjack,

thanks for posting your thread, you got some pretty interesting ideas.

I was wondering, now that you are more an investor, do you still use technicals to identify entry points or just enter trades based on fundamental ideas and wait for the market to play it out? Or let's rephrase it: do you still have a "timing" element in your strategy and if yes, how do you approach this?

best regards

Hi Custos,

Yes, I have a timing element in my strategy and it's different for different assets.

As an example, for stocks, I wait until a stock or the industry has been in a downtrend and that the stock is worth much more than it's current price. I don't use technical indicators to "time" the trade, I just buy it if it's undervalued and there is future profit potential. Then I will either buy more if it continues down or I will just leave the position alone for a few months and look for other opportunities. For stock index futures/options, it's completely without charts, I just wait for extreme levels of market euphoria or panics.

For currencies, I do use indicators for timing but not the way most people here do. When my analysis tells me that a trend change is close, even though I may be right about the trend shift, I still suck at "timing" the entry and have a tendency to jump the gun a bit early. I solve this problem by building a position over time where I continue to add more and more through the turn.

I don't have one clear indicator that tells me exactly when to time and enter trend change, it's more about slowly building a position as my analysis is confirmed by the charts/indicators along with market sentiment, news, policy changes fundamentals etc

Then I will continue to use indicators even after loading my full initial position when the trend shifts into my direction, to add on/pyramid positions using unrealized profits. As well as when unloading the entire position at the end of a trend.

Hi Razorjack,

Makes complete sense to "build" the position over time. thanks for your reply.

Ok, some final ramblings before I call it quits.

I was browsing through the forums over the weekend and looking at what people write, complain about, struggle with etc etc.

There are some truly bizarre ideas about what trading is and how to make money from it. There are also so many misconceptions, it's nearly impossible to even know where to start.

Here are some of my observations:

1. Most misunderstand the concept up having an edge as a statistical edge that when applied over and over again will eventually lead to profitability. This also leads to a misunderstanding that the more this edge is applied the more money will be made, e.g. over trading on small time frames

2. There is an overwhelming consensus towards trading on a small scale, e.g. 20-50 pip stop losses, 50-100 pip TP levels, etc etc

3. So many count their wins/losses in pips/points like a game instead of percentages like a business

4. Most people have no understanding of what a trend is beyond the "higher highs-higher lows/lower highs-lower lows"

5. complete misunderstanding of money management beyond risk reward ratios

6. very little interest in learning what financial markets are, what it is made of, what the driving forces are, etc etc

7. Many have an absolute refusal to accept that they don't know what they are doing and resort to blaming brokers, screaming "forex = scam", etc etc

Based on the above, I draw the following conclusion:

Most people on this forum are more interested/addicted to gambling rather than learning about the business of profiting long term in financial markets. Clinging to delusions of fast easy money, addicted to the emotional roller coaster of euphoria and despair on a very short time scale, etc etc.

I'm sure this is not a major surprise.

But the interesting thing here is that when you really think about the human psychology and behaviors of most people, you start to see exactly what the financial markets truly are.

There is actually one more emotion besides fear and greed that fuel the driving force in the markets: HOPE

The majority cling to the idea that they need to find that one indicator, system, "holy grail", magic bullet, that will make them profitable. Losers on the site seek emotional comfort from knowing that they are not the only losers here or by ridiculing others. Without even realizing it, they congregate into the herd (unprofitable 95%) that I have mentioned before, making up the sheep waiting to be slaughtered.

When you think about it, why would anyone who is successful at trading/speculating/investing want to come on to this site and share their experience? They need losers on the other side of the trade to make their profits.

This also goes for the commercial members on this forum. Even within professional ranks, only a minority are profitable long term. So if you are successful at trading/investing, why in the world would you seek to make money off of retail traders, when there are so many banks/funds/large scale investors desperately looking for investors to make money for them?

In other words there is very little money to be made by helping/selling to retail traders. You would make a lot more simply by opening a hedge fund making a consistent 10-20% per year, you would have big players begging you to take their money!

Our need to be social is what truly contributes to the blind leading the blind with predators looking to pick off the hopeful, desperate and unsuspecting.

I personally have nothing against this or any other discussion forum, but in terms of trading/investing all it does is create, fuel and reinforce the very herd mentality that investors should be avoiding. I would advise anyone that is absolutely serious about making a living and/or becoming profitable long term, STOP being social, you will go much further by seeking information independently, this includes not taking my advice at face value either.

Ok, I am done ranting.

Hi RJ,

just read couple of pages at the front and at the end of your blog.

it appears we have similar style, although i maybe put more emphasys on future order flow. I am running mine strategy now into year 3. Yeah, taking large bets to jump to the sustainable bet size. 2 good winnersa is all i need. I do not know exact return but should be around 40% each year. Low drawdowns as well.

you about to close this thread ?

Nice to see you back.

Try to learn something from guy while everyone can before he goes into hibernation again. Quality poster like him are getting scarce on this forum.
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