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Position Trading - F it, lets start a thread

  • #21
  • Edited 12:23pm Nov 3, 2015 12:03pm | Edited 12:23pm
Quoting tashkent
i am not sure what makes you believe that it is correct to use the word "mispricing" in regards to define market behaviour. i also do not understand what people mean by "fake" when they refer to a specific movement. then the question is what is "real"? what is the "correct pricing"? how do you calculate the correct price? actually the word "price" itself is misleading and inappropriate to use as synonym of "exchange rate".
I don't know what a fake price is. I don't know what a correct price is either.

A business is worth the sum of all the discounted cash it produces over its life time - some stocks are relatively easy-ish to price. You can never know the exact price, and you don't need to, but you can predict a reasonable range. Most people would say that a business that has assets of 1billion$ but is selling at 100 million$ is mispriced - would you not? If you can buy a business worth 1billion$ for 100million$, you can make $900 million by selling its assets at market value.

Currencies are not easy to value, some believe you can use a weighted exchange rate - I'm not sure. I personally believe that exchange rates are more relative valuation, influenced very strongly by central bank manipulation I.e. will the dollar gain or lose against the euro. The BOJ increased the monetary supply by 30-40% a year since 2012, the yen with its low rates also funded of a very large carry trade. Here you don't know where price will end up at, but you have two very strong reasons to believe that the yen would devalue. That devaluation didn't take place in an instant, it was mispriced compared to the future price. Some believed the yen would be considerably lower in a few years. They were right, does it not seem obvious in hindsight that would be the case? Much harder to make that call real time, hindsight is 20/20 - but some people made that exact call and made a lot of money.

I'm not sure where this discussion is going. Not really one for semantics.
  • #22
  • Nov 3, 2015 1:19pm Nov 3, 2015 1:19pm
Quoting verv
{quote} I don't know what a fake price is. I don't know what a correct price is either. A business is worth the sum of all the discounted cash it produces over its life time - some stocks are relatively easy-ish to price. You can never know the exact price, and you don't need to, but you can predict a reasonable range. Most people would say that a business that has assets of 1billion$ but is selling at 100 million$ is mispriced - would you not? If you can buy a business worth 1billion$ for 100million$, you can make $900 million by selling its assets...
this is off topic, we are talking about the "mispricing" in forex market (i still do not understand "mispricing" of what?), so let's move on.

Quoting verv
{quote}Currencies are not easy to value, some believe you can use a weighted exchange rate - I'm not sure. I personally believe that exchange rates are more relative valuation, influenced very strongly by central bank manipulation I.e. will the dollar gain or lose against the euro. The BOJ increased the monetary supply by 30-40% a year since 2012, the yen with its low rates also funded of a very large carry trade. Here you don't know where price will end up at, but you have two very strong reasons to believe that the yen would devalue. That devaluation...
there are so many things that i just can't make sense of from what you have stated in your last posts. probably i am not yet ready for such discussions so please excuse me.
As Above, So Below
  • #23
  • Edited 3:33pm Nov 3, 2015 3:01pm | Edited 3:33pm
Quoting tashkent
...It never hurts to keep an eye on long term fundamental changes and economical/financial cycles but if somebody asks me if they are tradeable, my answers is neutral......
They are definitely tradeable in my opinion. I would even argue that following the momentum of such cycles, on the same timeframe as they are unfolding, is one of the biggest edges a trader could incorporate into his trading - it's certainly the biggest edge I'm aware of, and it is the cornerstone of my trading.

You guys are right about TRD too - the guy is pretending to be Joel Rensink (TheRealThing) but he's not Joel.
si hoc legere scis nimium eruditionis habes
  • #24
  • Nov 3, 2015 3:26pm Nov 3, 2015 3:26pm
Quoting verv
... Forming a bias using fundamental data only means that you believe there exists a mispricing today compared to at some point in the future. One single data point usually is not sufficient to form a bias, though it sometimes is, which is why many of those who consider themselves fundamentally orientated call their bias a thesis. Having a fundamental view that there is a mispricing really doesn't mean you can predict when that mispricing resolves....
True. I don't really try to trade what I perceive to be mispricings in the present price - I don't know if such market inefficiencies exist and if they do, accurately finding and trading them is far beyond my abilities. I simply follow longer term trends in the data - if a country's GDP growth is steadily shrinking, unemployment is trending higher etc., I know those things will put a downward drag on future news releases. I also know that in that economic environment a central bank might turn dovish, but it will almost never turn hawkish. So sometime in the future, that currency should be worth less than it is worth now, and consistently shorting it until the economic environment changes should tilt the odds in my favour.
si hoc legere scis nimium eruditionis habes
  • #25
  • Nov 4, 2015 9:05am Nov 4, 2015 9:05am
Quoting tashkent
{quote} this is off topic, we are talking about the "mispricing" in forex market (i still do not understand "mispricing" of what?), so let's move on. {quote} there are so many things that i just can't make sense of from what you have stated in your last posts. probably i am not yet ready for such discussions so please excuse me.
There is no right way to trade, plenty of wrong ways though

It is hard for me to explain what I mean by mispricing, I think you come at this from the perspective that whatever the price is right now is correct - I wouldn't disagree with that btw.

My point is where price might be in a years time? - and is there a difference between projected price and todays price. If there you have the basis of a move in price.

Mispricing is probably a poor turn of phrase, but I can't think of a better way to describe what I mean - sorry.

Quoting numbnuts
{quote} True. I don't really try to trade what I perceive to be mispricings in the present price - I don't know if such market inefficiencies exist and if they do, accurately finding and trading them is far beyond my abilities. I simply follow longer term trends in the data - if a country's GDP growth is steadily shrinking, unemployment is trending higher etc., I know those things will put a downward drag on future news releases. I also know that in that economic environment a central bank might turn dovish, but it will almost never turn hawkish....
Are you probing the market with positions, or do you have a particular technical set up?

Having read your previous posts, I would say that we trade in broadly a similar way.

I presume therefore that perhaps you have been struggling to get positions to survive as well this past couple of months?
  • #26
  • Nov 4, 2015 10:20am Nov 4, 2015 10:20am
Quoting verv
{quote} There is no right way to trade, plenty of wrong ways though It is hard for me to explain what I mean by mispricing, I think you come at this from the perspective that whatever the price is right now is correct - I wouldn't disagree with that btw. My point is where price might be in a years time? - and is there a difference between projected price and todays price. If there you have the basis of a move in price. Mispricing is probably a poor turn of phrase, but I can't think of a better way to describe what I mean - sorry. {quote}...
here you can check the long term forecast for JPY http://www.japanmacroadvisors.com/pu...iry%20date.pdf
As Above, So Below
  • #27
  • Edited 6:13pm Nov 4, 2015 3:24pm | Edited 6:13pm
Quoting tashkent
{quote} here you can check the long term forecast for JPY http://www.japanmacroadvisors.com/pu...iry%20date.pdf
thanks. Interesting stuff, I think the abenomics is increasingly becoming infeasible.

Euro usd divergence again back in spotlight. Trying for shorts again.

ecb expected to do more easing in December, fed talking about a 0.25% hike
  • #28
  • Nov 4, 2015 3:36pm Nov 4, 2015 3:36pm
http://pensionpartners.com/blog/?p=1705

summary of sp-500
  • #29
  • Nov 5, 2015 12:42am Nov 5, 2015 12:42am
hi verv,

planning to short EUR/USD......after coming down all the way from 1.64 over the years, do you think there is a lot of life left going down even further?
I know you`re looking for a home-run and not looking for 500 pips, so how much lower you reckon it will go?

for my money I would be patient and looking to go long once the Europeans sort out their economies.
even a whiff of progress would make the price go up substantially I reckon.
  • #30
  • Nov 5, 2015 3:35am Nov 5, 2015 3:35am
Quoting verv
.... I presume therefore that perhaps you have been struggling to get positions to survive as well this past couple of months?
yeah, at times. This year has been kind of tricky for fundamental trading, the last 6 months I seem to be always positioning myself for a move which never really comes. I have squeezed out a profit over that period but only about half of what I would have liked. I have a couple of nice trades open now though with some decent profit locked in ... when I open a trade I cut risk very fast and I try to leave winning trades open for a long time, so I only need a couple of good trades to compensate for a long flat period.

If you can push through extended drawdown periods of 6 months or more, and keep trading without losing faith or making changes to your strategy, that's a key hallmark of a good trader IMO. Successful traders will need to push through several extended drawdowns over the course of their career .... the people in these forums all know this, they all read it or hear it somewhere, and they say to themselves "oh yeah, I'm sure I could ride out a long drawdown when I have a profitable system" ..... but in reality very few of them will actually have the stones to follow through with it when the time comes.
si hoc legere scis nimium eruditionis habes
  • #31
  • Edited 11:23am Nov 5, 2015 4:20am | Edited 11:23am
Quoting yonnie
hi verv, planning to short EUR/USD......after coming down all the way from 1.64 over the years, do you think there is a lot of life left going down even further? I know you`re looking for a home-run and not looking for 500 pips, so how much lower you reckon it will go? for my money I would be patient and looking to go long once the Europeans sort out their economies. even a whiff of progress would make the price go up substantially I reckon.
Hello yonnie, I really don't know - short answer.

Stan Druckenmiller gave an interview recently, he is still holding and looking to add to his short. He also said (maybe April this year) that if you compare the relative strengths of the USD vs Euro now at an exchange rate of 1.1000, vs the relative strengths of the USD vs Euro 15 years ago when it traded at 0.85-0.95 range (and when was doing well economically), he said it wasn't out of line to think the Euro could drop to those lows again, if not lower.

I wouldn't say I was looking for a home run, 500 pips would be the minimum (maybe that is a home run lol), but I would have my stop at break even to keep me protected. I think so long as the obvious divergence exists, and accelerates, as it seems to be doing now, then we may have a reason to expect lower prices. Until that changes short only trades for me. I haven't shorted Euro in a while, but last week or two I have been looking again.

I think some European stocks look attractive as well, compared to American ones anyway in terms of price, Robert Schiller does too. Trouble is you have exchange rate risk, and a macro situation that muddies the water. I don't like the affect that easy monetary policy is having on stock prices in general, this has sort of forced me to be a value investor - I like to know how much I can lose . Are there any companies that you like the look of? I sort of contradicted myself in the space of a paragraph there.
  • #32
  • Nov 5, 2015 4:27am Nov 5, 2015 4:27am
Quoting numbnuts
{quote} yeah, at times. This year has been kind of tricky for fundamental trading, the last 6 months I seem to be always positioning myself for a move which never really comes. I have squeezed out a profit over that period but only about half of what I would have liked. I have a couple of nice trades open now though with some decent profit locked in ... when I open a trade I cut risk very fast and I try to leave winning trades open for a long time, so I only need a couple of good trades to compensate for a long flat period. If you can push through...
Pretty good going that you have managed to come out ahead. I am in a little bit of drawdown, mostly because I didn't take enough of the table when all the traffic was one way on my positions.

I think the bold is interesting, most people and myself included at one time, would just try and change strategies. I think we have to be flexible in the markets we trade, if there is nothing on and you keep trying to force your strategy is normally bad.

Which is why I like to have some fundamental view, if there isn't a strong reason to enter fundamentally on an instrument you understand the chances of it trending imo are higher.
  • #33
  • Nov 5, 2015 11:35am Nov 5, 2015 11:35am
Quoting yonnie
hi verv, planning to short EUR/USD......after coming down all the way from 1.64
typo: price should be 1.604

sorry, I don't trade stocks as I have plenty of other instruments to choose from.
I rather trade the indices like the Nasdaq100. I like my life easy......
it trends up for 5-9 years and busts in 1-2 years and start all over again.
what instrument would have long trends like that and so gentle and predictable?
you figure out how to trade this gentle giant and you can make very good money.
  • #34
  • Edited 6:54pm Nov 5, 2015 5:59pm | Edited 6:54pm
Quoting yonnie
{quote} typo: price should be 1.604 sorry, I don't trade stocks as I have plenty of other instruments to choose from. I rather trade the indices like the Nasdaq100. I like my life easy...... it trends up for 5-9 years and busts in 1-2 years and start all over again. what instrument would have long trends like that and so gentle and predictable? you figure out how to trade this gentle giant and you can make very good money.
Hi yonnie,

I only invest in stocks, not trading them either, though toying with the idea of running options in the future as trades. I'm spread too thin at the moment to trade them.

I'm looking to do exactly as you say in the near future and trade the indices and only strong moving markets. There is really no need to try and trade forex in the absence of strong moves IMO.

I have a sell signal for the main US indices, this signal was given middle of June/July. So no longs for me on the indices currently.

Trading the indices like you saids seems a lot less complicated.
  • #35
  • Edited 5:32pm Nov 8, 2015 5:19pm | Edited 5:32pm
Strong policy divergence between usd and the euro and gbp last week. Policies are moving in a different direction.

FED hike in December is now very likely, BOE putting off rate hike till late 2016 as uk news has been a bit weaker lately, ECB probably going to be implementing more qe in December.

Expect this could be the start of another leg down, hoping these moves last into the new year at least.

I will be prodding the market to try and establish some positions, weary of the recent lows, though those lows don't appear to be strong.

Anyone seeing this too?
  • #36
  • Edited 4:22pm Nov 14, 2015 3:27pm | Edited 4:22pm
Rough week, the endless chop took out some positions, and I prematurely closed some longer positions to cover some costs - my mistake, too short sighted. No real damage to my account, more to my ego.

When you aren't in the best of form (grumpy all week lol) it is better to not trade at all, because sloppy trading makes it even worse, and that perpetuates the grumpiness cycle lol.


Going forward, next couple of months I have 2 markets I am looking to short. The EURUSD and SP-500 (may choose a weeker index like the russell 200 though ). I have strong reasons for doing so on both, my analysis suggests significantly lower prices is more likely than significantly higher prices, the risk reward is skewed lower for sure. Problem with the stock indices is it is very hard to short, so many vested interests want indices higher.

Longer term, I think the USDJPY is a market which I am looking to short, but Abeonomics needs to end first I reckon, could be mitigating factors though that bring USDJPY into play though.

I said in my last post I would be looking to short GBPUSD, I have changed my mind this week after the PA, there are better options out there.

Question for the longer term guys - how do you exit trades? Fixed R number, fundamentally driven exit, sentiment or technical?
  • #37
  • Nov 21, 2015 10:36am Nov 21, 2015 10:36am
I'm confused by the Euro.

The rate hike in December is almost a dead cert, 75% of traders expect a 0.25% hike.

More QE by the ECB is almost a dead cert, and Draghi again said it was happening this December.

And yet Euro is not making new lows. That is strange to me. It suggests there are buyers.
  • #38
  • Nov 22, 2015 1:25am Nov 22, 2015 1:25am
Quoting verv
The rate hike in December is almost a dead cert, 75% of traders expect a 0.25% hike. More QE by the ECB is almost a dead cert, and Draghi again said it was happening this December.
verv,

Good analysis IMHO.

My 2c FWIW:

Providing there is no change to FOMC and ECB policy, I see EURUSD continuing to drift lower over the next 2-3 months. However, as we both know, price never moves in a straight line, due to profit taking, some counter trend trading, and other more obscure sentiment-based reasons. Rallies are good, as they offer opportunities to sell at a 'better' price.

General:

Medium term, I see USD and GBP as strong; EUR, CHF and NZD as weak. (I like to pair strong against weak).

USD is stronger than GBP, especially after BOE recently made noises about possibly deferring rate hikes to late-2016/2017

EUR is potentially weakest; further behind-the-scenes intervention likely by SNB to further weaken CHF to preserve stability with EUR; NZD is the least weak of the three, it may appreciate somewhat once RBNZ's rate cut program is complete.

AUD is temporarily strong following upbeat RBA comments and strong job numbers, but I expect this strength to fade, especially if Stevens' speech this week is more dovish than expected. Longer term I see it as neutral to weak, especially if China's economy continues to slow.

(Personally I am cautious about trading JPY due to possibility of sudden safe haven flows, and also CAD due to fluctuations in oil prices).

Of course parts of the above analysis may require adjustment, depending on the extent that monetary policy changes. As we both know, FA is a dynamic process.

TA based view of sentiment shown in attached screenshot(s).

FWIW,
David
Attached Image(s) (click to enlarge)
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Click to Enlarge Name: PPI 128.png Size: 30 KB
  • #39
  • Nov 22, 2015 1:48am Nov 22, 2015 1:48am
Quoting verv
I'm confused by the Euro. The rate hike in December is almost a dead cert, 75% of traders expect a 0.25% hike. More QE by the ECB is almost a dead cert, and Draghi again said it was happening this December. And yet Euro is not making new lows. That is strange to me. It suggests there are buyers.

"Dead certain" ... Well theres your problem. Month end EURGBP flows should be a good time to shake oit these dead certain assumptees and find some much needed liquidity for a further potential fall. Also they were pricing in the ECB easing well before the announcement

Attached Image (click to enlarge)
Click to Enlarge Name: image.png Size: 61 KB
Time hides Nothing
  • #40
  • Nov 22, 2015 3:54am Nov 22, 2015 3:54am
Quoting hanover
My 2c FWIW:
Hanovers overall approach to trading and fundamentals is almost identical to mine (although I put more emphasis on economic indicators than him)..... list the currencies you are fundamentally bullish on, list the ones you are fundamentally bearish on, put them together and only trade those pairs. Every trade I take is based on a belief that currency A is fundamentally strong and currency B is fundamentally weak.


Quote
Medium term, I see USD and GBP as strong; EUR, CHF and NZD as weak

I see USD and GBP as strong, EUR, NZD, CAD and JPY as weak.


Quote
USD is stronger than GBP, especially after BOE recently made noises about possibly deferring rate hikes

I agree .. but UK is showing some serious weaknesses in GDP growth, economic sentiment and business confidence, so I have stopped trading it for now. I think in the longer term UK is still strong, so if the economy recovers from this pullback there could be good buying opportunities ....


Quote
EUR is potentially weakest; further behind-the-scenes intervention likely by SNB to further weaken CHF

Agreed, EUR is probably weakest, or at least the most reliably weak (if that makes sense). I don't touch CHF, I haven't for a long time ..... it doesn't seem to move in line with fundamentals the way other currencies do, I don't think this kind of analysis really provides a long term edge with CHF.


Quote
NZD is the least weak of the three, it may appreciate somewhat once RBNZ's rate cut program is complete.

NZ's weakness isn't just due to RBNZ policy, or even the dairy price rout - I think it is also due in part to a correction in NZ's "rockstar economy" performance. GDP growth has plummeted from 3.5 to 2.4 and unemployment is climbing, so I'm very bearish - but if the correction comes to an end, and RBNZ finishes its easing cycle around the same time, NZ could continue its big surge of the last three years. This could also go a long way when it turns.


Quote
AUD is temporarily strong following upbeat RBA comments and strong job numbers, but I expect this strength to fade, especially if Stevens' speech this week is more dovish than expected. Longer term I see it as neutral to weak, especially if China's economy continues to slow.

I agree - I'm not currently trading AUD due to the divergence between longer and shorter term biases (trying to time fundamental moves is a mugs game IMO). Strong employment numbers in AU and upbeat CB sentiment seems to be an anomaly in that economy right now - GDP growth is falling fast and wage growth is historically very low, so if Stevens moves more dovish, or if jobs data starts weakening, again it's a good spot to get short.


Quote
Personally I am cautious about trading JPY due to possibility of sudden safe haven flows,

This is something I have thought long and hard about, but unexpected moves can go both ways .... and when they go in the direction of the economic trend, they tend to have more energy and follow through. I also trust my TA and risk management to keep me out of trouble if a move goes against me, but keep me in if it goes in my favour. I'm still shorting JPY .... cautiously, because it has already moved a long, long way .... because QQE can still be expanded if necessary and the main thing BOJ keeps harping on about - inflation - is still moving further and further away from their target (especially when you look at Producer Prices, the leading indicator of inflation).


Quote
and also CAD due to fluctuations in oil prices

I've avoided trading CAD recently for this reason, but I've just now added it to the bearish list. I feel that enough indicators - GDP Growth, Unemployment, Inflation, Business Confidence, Retail Sales (ie all the major ones I follow every week) as well as their accompanying leading indicators - are all pointing in the same direction, meaning no chance of BOC turning hawkish, provide enough of a directional bias to trade in spite of the risk of oil price fluctuations.


just my 2c
si hoc legere scis nimium eruditionis habes
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