ETMA_The Evolution

THE COMPONENTS OF A COMPLETE TRADING SYSTEM
MARCH 31, 2015 IGOR MARINKOVIC

The Turtle Experiment

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By the early 1980s, Richard Dennis was widely recognized in the trading world as an overwhelming success. He had turned an initial stake of less than $5,000 into more than $100 million. He and his partner, William Eckhardt, had frequent discussions about their success. Dennis believed anyone could be taught to trade the futures markets, while Eckhardt countered that Dennis had a special gift that allowed him to profit from trading.
The experiment was set up by Dennis to finally settle this debate. Dennis would find a group of people to teach his rules to, and then have them trade with real money. Dennis believed so strongly in his ideas that he would actually give the traders his own money to trade. The training would last for two weeks and could be repeated over and over. He called his students turtles after recalling turtle farms he had visited in Singapore and deciding that he could grow traders as quickly and efficiently as farm-grown turtles.

A Complete Trading System

A complete trading system covers each of the decisions required for successful trading:

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1. Markets What to buy or sell
2. Position Sizing How much to buy or sell
3. Entries When to buy or sell
4. Stops When to get out of a losing position
5. Exits When to get out of a winning position
6. Tactics How to buy or sell

Markets What to buy or sell

The first decision is what to buy and sell, or essentially, what markets to trade. If you trade too few markets you greatly reduce your chances of getting aboard a trend. At the same time, you dont want to trade markets that have too low a trading volume, or that dont trend well.

Position Sizing How much to buy or sell

The decision about how much to buy or sell is absolutely fundamental, and yet is often glossed over or handled improperly by most traders. How much to buy or sell affects both diversification and money management. Diversification is an attempt to spread risk across many instruments, and to increase the opportunity for profit by increasing the opportunities for catching successful trades. Proper diversification requires making similar, if not identical bets on many different instruments. Money management is really about controlling risk by not betting so much that you run out of money before the good trends come.How much to buy or sell is the single most important aspect of trading. Most beginning traders risk far too much on each trade, and greatly increase their chances of going bust, even if they have an otherwise valid trading style.

Entries When to buy or sell

The decision of when to buy or sell is often called the entry decision. Automated systems generate entry signals which define the exact price and market conditions to enter the market, whether by buying or selling.

Stops When to get out of a losing position

Traders who do not cut their losses will not be successful in the long term. The most important thing about cutting your losses is to predefine the point where you will get out before you enter a position.

Exits When to get out of a winning position

Many trading systems that are sold as complete trading systems do not specifically address the exit of winning positions. Yet the question of when to get out of a winning position is crucial to the profitability of the system. Any trading system that does not address the exit of winning positions is not a Complete Trading System.

Tactics How to buy or sell

Once a signal has been generated, tactical considerations regarding the mechanics of execution become important. This is especially true for larger accounts, where the entry and exit of positions can result in significant adverse price movement, or market impact.

This is The Turtles system in a Nutshell.

I Just wanna wish everybody a Good Friday.

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Good day sir, I jt wanna tks for everything and after all you still bring God the great FIRST. Compliments of the season to u and ur family do have a nice celebration. may God continue to bless u. Best. Jnr

J., thank you very much and may this holy season bring peace, love and lot of happiness to you and your family.
For me buddy its very simple and my priorities in life are well defined and clear as a summer sky .

These are :
1 - God.
2 - Family.
3 - Business.
Exactly in that order.

Best,
B.R.

He has risen, Happy Easter to all.

10 Things Traders Must Quantify
November 25, 2014 Courtesy of Steve Burns NEW TRADER U


Subjective: Based on or influenced by personal feelings, tastes, or opinions. Proceeding from or taking place in a persons mind rather than the external world.
Subjective traders are intertwined with their trades. They generally enter out of greed and exit based on fear. They believe in their opinions more than the actual price action. They base trades off how they feel about a particular market. A subjective trade idea comes out of the imagination of the trader, from their own beliefs, opinions, and what they think should happen. Many times, reality is not even cross-checked as a reference. It is the subjective traders who see what they want to see instead of what is really going on. Their compass is their emotions, and they often have conflicting goals.

Objective: (Of a person or their judgment) not influenced by personal feelings or opinions in considering and representing facts. Having actual existence or reality.
Objective traders have a quantified method, a system, rules, and principles they trade by. They know where they will get in a trade based on facts, and where they will get out based on price action. Objective traders have a written trading plan to guide them. The guides of the objective trader are historical price action, charts, probabilities, risk management, and their edge. They react to what is happening in quantifiable terms that can be measured. They go with the flow of price action, not the flow of internal emotions.

1. What exactly is your entry signal going to be? What technical indicators will trigger you to enter a trade?
2. What will the perceived edge for your entries be based on? Will you quantify your entries edge with back testing of through trading principles?
3. Will you wait for an initial move in the direction of your trade entry or will you enter based on a technical indicator trigger?
4. How will you trade in different market environments and trends? Will you have better odds of success buying dips in bull markets and shorting strength in down trends?
5. What is the risk/reward ratio for the trade you want to take? How much are you willing to risk if the trade is a loser? How much could you make if you are right? Is it worth it?
6. What are the probabilities that this entry will be a winning trade based on past historical price data and charts? With the winning percentage in mind how big do the winners have to be and how small do you have to keep the losers for the trading system to be profitable?
7. Where should your stop loss be? At what price level will your entry be wrong and signal you to exit the trade with a loss?
8. How big of a position size should you take based on your stop level and total capital you are willing to risk on this one trade?
9. Is your position size small enough to enable you to hold the trade without emotions effecting your ability to follow your trading plan?
10. When you open this trade in addition to your other positions, how much of your total trading capital is now exposed to loss if all trades went against you at the same time?

Don't succumb to the emotions of a trade, and don't attach your ego to it. Be the trader that witnesses the trade from an emotional distance with curiosity. If you can find that space between yourself and the trade, you will become more accurate and more profitable. When you can approach the results of your trades with equanimity, then you are at the next level.

This was shared a while ago via Twitter. Courtesy Of Tradeciety - Rolf

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What you can control vs. What you can't control. As a trader, you are not a victim but in full control!

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The USD, Rate hiking, Yes, No, Yes, No, playing YoYo.

Losers average losers.
-Paul Tudor Jones-

I will add also Winners average winners.

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"Get out when you can, not when you have to."
- Jesse Livermore -

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The Three-Step Process For a Trader or Investor
Apr 9th, 2015 | With the Courtesy of Bruce Bower

When investing or trading, we obviously all want to be a success. We get in to the markets because we want to make money, to have a good retirement, and want to feel successful in what were doing. Thats certainly a possibility.

As we have discussed numerous times, trading and investing are peak performance activities. They require us to make to make difficult risk/reward decisions under pressure. They push us to our mental limit. We can learn a lot from other peak performers about how to push ourselves and reach the next level.
But theres one key difference. In our field, theres no gameplan. There is no real instructional manual. There is no well-trodden path to success. Theres no Little Leagues and no farm system. If you want to make it, youll have to succeed on your own.

Wouldnt it be nice to have a gameplan? A roadmap for success? A way of thinking about the markets that would put you on the path to success? It may not grant you the instant capability to make millions of dollars a year, but it wont hurt. It could even get you on your way.

My new book is designed to do just that. It is a holistic look at investing and trading of any style. The recommendations and lessons are designed to be broadly applicable to anybody, at any stage. Its more about instilling some basic principles and best practices that anyone can use. I am trying to help you build your own game plan and approach.

The model that I use to describe trading and investing is three-step:

1. Plan the Trade
2. Trade The Plan
3. Review/Tweak

Overall, we should be thinking very carefully about crafting the right plan in advance. Then we make sure that we carry out the plan to the best of our potential and capabilities. Lastly, we look over how we did, both overall and compared to our plan, and we come up with the relevant tweaks.

If this three-part plan sounds somewhat familiar, thats because it should. It draws on the research about peak performance and the development in expertise in many fields. Peak performers prepare for their practice and main events diligently, always having a plan. They choose several specific goals and train hard to get there, or they have a game plan for the big event. Then comes the practice or the big game, where they give it their all and try to stick to their plan, in order to get the most out of their preparation. By planning well, they can stay rooted in the face of stressful or unexpected conditions. Lastly, they diligently review their performance and then think of the many areas where they could improve. They are obsessive about improving their performance in every way possible, never settling.

What does it mean, practically speaking for your own investing and trading? How do you put this three-part model into effect and make it happen? Lets drill down into each step and see whats required, how it works, etc.

Plan the Trade

If you fail to plan, you are planning to fail Benjamin Franklin
A plan is your strategy, your gameplan for the markets. It is designed to give you a workable plan of action, so that you know what you will be doing. It also should give you a strong filter, so that you can block out the many things that dont matter and avoid doing stupid or distracting things. Your goal is to have a solid checklist for how you think about and research the markets; for exactly when you put on and take off individual positions; and managing risk overall.

The most basic part of the plan is knowing which markets you will be in. You should define or clarify which markets you will be trading or investing in. Are you in commodity futures or all kinds of futures? Are you investing in corporate bonds? Trading forex intraday? You should define it in advance, because youll want to restrict your focus to these markets and to make sure that youre getting the most out of it. You will find it helpful to specialize in and focus on the markets that you know.
Not only should you know the markets that youll be in, you should have a clear idea of your edgewhat you can to do make money and why it works. If you are a long-term investor in stocks, then you know that a Warren Buffet-style approach relies on buying good businesses at a discount to intrinsic value. If you trade futures using technical analysis, then you are taking advantage of short-term supply/demand dynamics. If you are a macro investor, then you are putting on positions when the macro variables get too far out of line with the underlying fundamentals.

You should have a good idea for a style and strategy if you draw upon your own experiences. If you are a complete beginner, then read my post How to Start Trading Without A Methodology, and rememberits okay to copy someone elses strategy! The more difficult part will be implementing it correctly, because that will come down to psychology.

As discussed in one of Seven Lessons posts, your plan should be a checklist. This means a methodical, step-by-detailed-step plan of how you take all of the information in the world and condense and filter it down into something useful and actionable. It should guide you along the way as you see what needs to happen before you put on a position or take one off. You can also use it as a way to determine your overall conviction level in a trade or the right position sizing. You want to have a system to get from A to Z, and have it transcribed. Mohnish Pabrai, the famous value investor,has a checklist with dozens of items on the list. He uses this list to both to determine what to invest in and also to decide position sizing. He credits the introduction of a checklist with giving him more intellectual rigor in his investing and with creating a significant improvement in his results.

One of the last reasons why were so deliberate about how we get into a position is because we use the same criteria to judge when we get out. For instance, your investment process could have three main criteria for buying a stock. Once those three criteria are no longer valid, either because of the stocks price performance or because you got some of your analysis wrong, then you close the position.

KEEPING A JOURNAL OF TRADES AND WRITING ABOUT THEM.

Keeping a journal of trades and writing about them forced me to define, examine, and analyze my trading paradigm and algorithm like never before. I had to systematically think through what it is I do in my trading operations and why. I had to carefully recall the steps I took to reach my current approach to trading. I reaffirmed myself in many of my trading practices. In some areas, however, I now believe I have the opportunity to make my trading plan more efficient and effective.

Peter Brandt

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Good and Profitable Trading is Boring, i tend to agree a Zillion percent.

Getting inspired by the Greats.

Paul Tudor Jones

Paul Tudor Jones, chief executive officer of Tudor Investment Corp., and his wife Sonia Jones attend the Robin Hood Foundation gala in New York, U.S., on Monday, May 9, 2011. Wall Streets largest single-evening fundraising event had Lady Gaga onstage and took in $47.4 million at its annual New York dinner.
Paul Tudor Jones Macro and Stock Views

1. Commodities Will Be in a Bear Market Until At Least 2020
2. By 2030, the USA will reach Greece Debt Levels
3. China is in gigantic credit bubble
4. Japanese bonds are also in bubble but who knows when it will burst
5. Long USDJPY, as Japan needs inflation and must devalue the yen

as of October 2014 / These Views Are Taken From Public Sources and Are Edited by OctaFinance Staff
Paul Tudor Jones is one of the most successful traders of the 20th century. In his trading career, Jones focused on trading any asset class.
He is the founder of Tudor Investment Corporation-an asset management company and hedge fund. In 2014, Forbes magazine estimated his net worth to be approximately US$4.3 billion. The magazine also ranked him as the 108th richest American and 345th richest man in the world. He is also the founder of the successful Robin Hood Foundation.

Early Beginnings

Paul Tudor Jones was born in Memphis, Tennessee on September 28, 1954. As a young man, he attended an all-boys elementary school- Presbyterian Day School, before attending Memphis University School for high school.
He then joined University of Virginia, acquiring an undergraduate degree in economics in 1976. That same year he also won the colleges welterweight boxing championship. During his time at University of Virginia, Jones was the president of the Sigma Alpha Epsilon fraternity.
Paul Jones married Australian-born, New York-based yoga entrepreneur Sonia Klein in 1988. Today they have four children Caroline, Dorothy, Chrissy and Jack.

Professional Career

Paul Jones started from early beginnings. He was a clerk on trading floors at E.F & Co Hutton in 1976, before becoming a broker for the same company. In 1980, he decided to branch out and start his own business. He did well for about two and half years before he decided to go back to school and get more knowledge about the business.

Although he applied and was accepted, Jones decided against it at last minute knowing too well that there was nothing he will learn in business school that he did not know already.

Instead he accepted a suggestion from his cousin, William Dunavant, Jr., whose Dunavant Enterprises is one of the largest cotton merchants in the world, to go down to New Orleans to work with commodity broker Eli Tullis. Jones did just that and was hired and mentored by Eli Tullis in trading cotton futures at the New York Cotton Exchange.

Jones says he learnt a lot from Tullis including the important lesson that in he needed a backbone to deal with the emotional ups and downs if he was to succeed in the trading industry.

Accomplishments

As of June 1, 2007 Paul Jones firm Tudor group was estimated to be managing $17.7 billion in assets. Their broad and diverse investment strategies include global macro trading, fundamental equity investing in the U.S. and Europe, emerging markets, venture capital, commodities, event-driven strategies, and technical trading systems.

Jones, with his colleague Hunt Taylor, was instrumental in the creation of FINEX, the financial futures division of the New York Board of Trade, and in the development of the U.S. dollar index futures contract that trades there. He also served as chairman of the New York Cotton Exchange from August 1992 through June 1995.
Previously Paul Jones served as a director of the Futures Industry Association. He was instrumental in creation and development of an education-arm for the associationwhich has since been renamed as the Institute for Financial Markets based in Washington D.C. Jones advocated and was behind the design and implementation of the First ethics training course for future exchanges. This became the standard for all futures exchanges in the United States.
In 1987 Jones predicted the Black Monday! This turned out to be one of his earliest and major successes as his money was tripled due to his strategy to leverage even large short positions in trading. The Tudor Investment Corporation investment strategies include discretionary global macro, quantitative equity market neutral, quantitative global macro and growth equity discretionary equity long/short.

Tudor Investment Corporation

In 1980, Jones decided to go solo again and founded the Tudor Investment Corporation. Today this company is one of the leading asset management firms in the United States with its headquarters in Greenwich, Connecticut.
Tudor Investment Corporation is one of the companies under the umbrella of The Tudor Group. The firm is involved in active trading, research and investing in assets such as currencies, commodities classes, equities and related derivative for an international clientele.

Investment Strategy

His famous trading styles reported by Market Wizards magazine and the press are quoted below;
Jones considers himself a premier market opportunist. When he develops a strategy, he pursues it from a very-low-risk standpoint until it proves him wrong or until he decides to take a different approach.
The best money is made at the market turns. It may have missed a lot of meat in the middle, but catches a lot of tops and bottoms.
Jones spends much of his day making himself happy and relaxed.
It is better to get out of a losing position, always play defense not offense.
Jones decreases his trading size when he is doing poorly and increases when trades pick up.
Jones uses mental stops. If it hits that number, he is out no matter what.
He monitors the whole portfolio equity (risk) in real-time.
He prioritizes prices over fundamentals.
He doesnt care for past mistakes, instead strategizes on what he s gong to do next.
Dont be a hero. Dont have an ego. Always question yourself and your ability.

Philanthropy

Paul Jones founded the Robin Hood Foundation- a philanthropic organization supported by hedge fund operators that contributes to charities around the world. He also the first all-boys charter boys in the US The Excellence charter school located in the BedfordStuyvesant neighborhood of Brooklyn, New York. In addition, he also founded and chaired the Bedford Stuyvesant I Have a Dream Foundation, which sponsors local students in colleges.
Paul Jones owns Grumeti Reserves in Tanzanias Western Serengeti. He was praised by the African Great Lakes countrys Parliament for not permitting wildlife hunting in his reserve. The Sasaskwa, a hotel in the reserve was in 2011 and 2012 named the #1 hotel in the world by Travel & Leisure Magazine.
He has been looking to upscale Africa and its neighborhoods by working with London architectural firm Hart Howerton to develop large scale regional plans for sustainable use of land in Tanzania by local communities. He has also set up a trust for Pamushana a private reserve in 300 miles near Harare on the Zimbabwe Mozambique border.

He is known for making huge donations to his alma mater, the University of Virginia. He donated $35 million to the construction of a new basketball arena, named the John Paul Jones Arena, in honor of his father who had also attended the University of Virginia. In April 2012, Jones and his wife contributed $12 million towards the creation of a new Contemplative Sciences Center at the University of Virginia.
At the 2014 Forbes 400 Philanthropy Summit, Paul Jones was invited to moderate the education panel which brought prominent labor leaders and reformers in education .Among those present at the forum were U.S. Secretary of Education Arne Duncan, American Federation of Teachers President Randi Weingarten, New York Governor Andrew Cuomo and Washington, D.C. Schools Chancellor Kaya Henderson.
The team brainstormed on ideas of how to improve schools in the United States. Also on the table was a discussion on how to generate $225 trillion to U.S. GDP over the next 80 years. Forbes Magazines December 2014 Philanthropy issue features all these discussions and detailed contribution by participants.
Paul Tudor Jones is a former chairman of the National Fish and Wildlife Foundation-a wildlife protection fund and has in the past chaired the Everglades Foundation.

Political Links

Paul Jones considers himself as politically independent. He has donated money to numerous Democratic and Republican candidates over the years. In 2012 he donated $200,000 to Mitt Romneys election campaign. During the 2008 Presidential Election, Jones was responsible for hoisting a 500-person fundraiser at his Greenwich home the now sitting US Barrack Obama. He has also donated to John McCain and Rudy Giulianis presidential campaigns.

THE FOUNDATION OF TECHNICAL ANALYSIS
MARCH 20, 2015 Review by IGOR MARINKOVIC

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In his great book “The Art & Science of Technical Analysis: Market Structure, Price Action & Trading Strategies” Adam H. Grimes put down the foundation of technical analysis. This book, written for both the self-directed and institutional trader, explores the tools and techniques of discretionary trading—the art of trading. Not just a collection of trading patterns and ideas, this is a book that looks deeply into the art of technical analysis, and gives traders the tools and techniques they need to profit in today’s competitive marketplace.
The Foundation of Technical Analysis:
First Principles

1. Markets are highly random and are very, very close to being efficient.
2. It is impossible to make money trading without an edge.
3. Every edge we have is driven by an imbalance of buying and selling pressure.
4. The job of traders is to identify those points of imbalance and to restrict their activities in the markets to those times.
5. There are two competing forces at work in the market: mean reversion and range expansion.
6. These two forces express themselves in the market through the alternation of trends and trading ranges.

The Four Trades

1. Traders usually view market action through charts, which are useful tools, but are only tools.
2. Trades broadly fall into with-trend and countertrend trades. These two categories require significantly different mind-sets and approaches to trade management.
3. There are only four technical trades. Some trades are blends of more than one trade, or an application of one trade to a structure in another time frame, but these are just refinements. At their root, all technical trades fall into one of these categories:
4. Trend continuation.
5. Trend termination.
6. Support and resistance holding.
7. Support and resistance failing.
8. Each of these trades is more appropriate at one phase of the market cycle than another. If you apply the wrong trade to current market conditions, you will lose.

Market Structure and Price Action

1. Market structure refers to the pattern of relative highs and lows and the momentum behind the moves that created that pattern. Market structure is a more or less static element.
2. Price action refers to the actual movements of price within market structure. Price action is dynamic and ephemeral and must sometimes be inferred from market structure.
3. There are three critical areas of market structure to consider: trends, trading ranges, and the interfaces between the two.

Trends and Retracements

1.  Trends move in a series of with-trend impulse moves separated by retracements.
2. Retracements often contain lower time frame trends that run counter to the trading time frame trend.
3. Trends that run counter to the higher time frame trends tend to reverse.
4. Complex consolidations in trends are a reflection of the lower time frame trend structure and are common.

Trend Terminations into Trading Ranges or Reversals

1. Trend terminations are usually set up by momentum divergences, and are confirmed by market structure. Do not attempt trend termination trades without clear evidence of a change of character.
2. Trends may terminate either into trading ranges or into trend reversals.
3. Trends end in one of two ways: by rolling over as the trend loses momentum, or in parabolic climaxes.

Trading Ranges

1. Trading ranges are defined by support and resistance zones, which may or may not be clean, exact levels.
2. Classic accumulation/distribution patterns are recognizable at the extremes of ranges.
3. Violation of support and resistance does not necessarily invalidate the trading range. It is possible that the range has simply expanded or moved to a new level.
4. Trading ranges serve a structural function in the higher time frame; higher time frame market structure can give a bias to the direction of the break from a trading range. In the absence of contradictory information, assume that any trading range is a continuation pattern.

Breakouts

1. Breakouts from trading ranges are volatile and are driven by disagreement over price.
2. The first pullback after a breakout is critical for assessing the strength of the nascent trend.
3. Breakout failures are far more common than successful breakouts.

Thanks for the heads up on that book Bass. My head was nodding off my shoulders as I stepped through each of the points. It looks like a purchase is in order :-)

U R Welcome my Friend, hope everything including ur trading is fine.

Best,
B.R.

It's very quiet on the trend front for my portfolio Bass. It is one of those months where it actually pays to keep away to avoid over-trading. How is your watchlist going. Anything of interest? :-)

Business as Usual Bro, oh and i was stop out of several CHF pairs this Afternoon GMT+2 @ the NY open, most of them were in a nice unrealized profits too.
These are my open trades today.

Nice B

They will keep the Mrs B happy.