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Position Trading - F it, lets start a thread

  • #41
  • Nov 22, 2015 11:50am Nov 22, 2015 11:50am
Quoting numbnuts
{quote} Hanovers overall approach to trading and fundamentals is almost identical to mine (although I put more emphasis on economic indicators than him).....
Many thanks NN for the insightful post. I've only been studying FA for a little more than 12 months, albeit with the help of a couple of experienced mentors. Having said that, I'm a fairly independent thinker, and my ideas are largely my own take on their analysis, given what I've seen and experienced myself during that time.

I was especially interested in your comments on GBP, JPY, CAD -- thse have given me potentially different angles to ponder. Like you, I see USD > GBP, hence for me it becomes a question of whether to buy GBP/weak in addition to USD/weak for the sake of some diversification -- albeit while attempting to the timing right -- or to simply trade the one pair offering what seems like the best probability, i.e. single strongest against single weakest. Of course that dilemma represents a general principle, USD > GBP is merely a current example. Same thing applies to individual setups, should I spread my risk across all of them, or merely take the one(s) that I see as having the greatest probability of success? I think some of it comes down to whether maximizing return, or smoothness of income, is the priority.

I believe a big part of FA-based decision making is anticipation, i.e. being able to act on relevant data before the 'herd' does, and/or before the data gets 'priced in'. Hence to whatever extent economic indicators -- especially those that are being focused on by CBs (frequently inflation and employment) -- can point toward future policy decisions (including rate hikes/cuts; QE; hawkish/dovish comment; etc), then even while the immediate effect of a data announcement itself might be all too rapidly 'priced in', its potential downstream effects might not be -- if that makes sense. In that sense there can be a kind of domino effect created by a bullish or bearish confluence of indicators (as in your example with CAD), creating a price trend which can be fuelled even further as technical traders seek to exploit the move.

Thanks again,
David
  • #42
  • Nov 22, 2015 3:24pm Nov 22, 2015 3:24pm
Really nice thread verv!
Talking trade in a professional manner.
Breath of fresh air guys, truly. Keep it up!
SK
  • #43
  • Nov 22, 2015 10:50pm Nov 22, 2015 10:50pm
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.
Also forgot to mention, there's massive Options barriers at 1.6 holding things up too.. If you were a big boy, would you fight that at such a bad price or use it to get a better one?
Time hides Nothing
  • #44
  • Edited 4:51am Nov 23, 2015 4:41am | Edited 4:51am
Numbnuts, Hanover;

I agree with you both, I see Euro lower, I also see pound lower too. Pairing weak with the strong too.

Problem with the Euro is that the news is out, the divergence is going to be bigger than ever and yet the Euro is still above its lows for the year.

I agree I wouldn't look to be going longs right now, but I am curious as to why this hasn't happened yet.

Couple of weeks ago I was attempting to build fresh shorts but none of the positions have lasted - partially my fault, as I was covering my losses by taking of other positions.

Generally speaking I think I am looking at the same thing as you guys.



CindyXXXX,

How do we know there are many options here, other than it just being a handle? I'm sure there are barriers here, but I would think not more so than at 1.07. I don't see why 1.06 would be protected.

It could very well be that though. Chopping everyone out before the move lower.
  • #45
  • Edited 5:18am Nov 23, 2015 4:45am | Edited 5:18am
I sometimes write notes on ideas months in advance. One of which at the turn of last year was short 2year treasury prices (long yield in otherwords). I will post up a chart why later - though it should be self evident if you scroll out to the weekly chart for those who can trade the CFD or futures.

One thing I cannot figure out though, and if anyone has the answer please speak up , is why are the 2year treasury futures priced at 109 - it doesn't make sense to me and I can't find why they should be priced there.

Until I figure that out, I'm not even going to bother trading it.
  • #46
  • Nov 23, 2015 5:44am Nov 23, 2015 5:44am
Quoting verv
why are the 2year treasury futures priced at 109 - it doesn't make sense to me and I can't find why they should be priced there. Until I figure that out, I'm not even going to bother trading it.
Where did you expect pricing to be verv?
If you can elaborate further, i may be able to offer some comments.

It has been a 'funky' ride though due to rate traders not really thinking the Fed will be able to do much in terms of normalizing.
The Fed just keeps pushing back.
BOE seem to be doing this too...pushing back.
You can see this by the deep 'cutbacks' in yield at times as they bid prices.
Most institutions seem to be hinting at December and currently its priced in around 70%.
Attached Image (click to enlarge)
Click to Enlarge Name: US2y yield.png Size: 63 KB

Attached Image (click to enlarge)
Click to Enlarge Name: Fed.png Size: 32 KB

http://www.cmegroup.com/trading/inte...n-to-fomc.html
  • #47
  • Nov 23, 2015 6:01am Nov 23, 2015 6:01am
Quoting skfx
{quote} Where did you expect pricing to be verv? If you can elaborate further, i may be able to offer some comments. {image}
Hi Skfx,

I think I have solved the price divergence issue.

Here is the weekly chart I can trade

Attached Image (click to enlarge)
Click to Enlarge Name: Untitled.png Size: 233 KB


And it is based on the underlying index here: http://stockcharts.com/h-sc/ui

It now makes sense to me because they are priced roughly the same.

I think perhaps I was looking at the wrong price charts, there are many bond price charts. Yours looks like the yield rather than the price.

Cheers - you actually pointed me in the right direction in a round about way , realised I must have had the wrong chart up.



Still some confusion because a doubling of the yield as has happened in the past few months would suggest that the underlying price of the bond should drop 50%... so something alludes me still, the confusion is probably to do with the structure of the index.

The idea of mine is long yield, or short price in other words. The cost of being short is quite expensive though, you need a large position which puts me off. If the yield is already 0.95 on the two years notes I might already be too late to the party
  • #48
  • Nov 23, 2015 6:12am Nov 23, 2015 6:12am
Quoting verv
{quote} Cheers - you actually pointed me in the right direction in a round about way , realised I must have had the wrong chart up. Still some confusion because a doubling of the yield as has happened in the past few months would suggest that the underlying price of the bond should drop 50%... so something alludes me still, the confusion is probably to do with the structure of the index. The idea of mine is long yield, or short price in other words. The cost of being short is quite expensive though, you need a large position which puts me off....
No worries verv!

Attached is the 2y futures Dec15 contract
Current price is 109.00 even
Attached Image (click to enlarge)
Click to Enlarge Name: 4verv.png Size: 47 KB

Some extra info on treasury futures
Attached File(s)
File Type: pdf understanding-treasury-futures.pdf   496 KB | 1,246 downloads
  • #49
  • Edited 1:55pm Nov 23, 2015 6:26am | Edited 1:55pm
Quoting verv
{quote} The idea of mine is long yield, or short price in other words. The cost of being short is quite expensive though, you need a large position which puts me off. If the yield is already 0.95 on the two years notes I might already be too late to the party
Sometimes if you feel this way verv, you can work across exchange.
If you don't want to take risk in the outright, you could spread say US2y-DE2y
So in the current environment long the spread. Or you are expecting the US 2y to gain over the German equivalent, spread widening.
You'll have to get the DV01's to weight the trade correctly. You want to be playing the spread in a pure form and not unevenly weighted.
In this case it's a bit tricky because you are playing USD and EUR.
If you were for example trading treasuries only and trading changes on the US curve then it is a little easier. It's all USD.
Volatility can also come into play.
Timing again is key.

Essentially though, you are approaching the trade a little as you would trading spot FX.
FX and rates are like twin brothers.
Hope this helps.
rgds
Stephen
  • #50
  • Nov 23, 2015 6:55am Nov 23, 2015 6:55am
Quoting skfx
{quote} Sometimes if you feel this way verv, you can work across exchange. If you don't want to take risk in the outright, you could spread say US2y-DE2y So in the current environment long the spread. Or you are expecting the US 2y to gain over the German equivalent, spreading widening. You'll have to get the DV01's to weight the trade correctly. You want to be playing the spread in a pure form and not unevenly weighted. In this case it's a bit tricky because you are playing USD and EUR. If you were for example trading treasuries only and trading...
Thanks Stephen, lots of useful information in there.

Will need to have a think about playing the spread, I'm not 100% sure on how I would play the DE2yr

Edit - lots of good info in those other posts I just seen too. The rate traders at the CME have been pretty good at predicting the Feds actions. The CME tool has nailed it each and every time since March.
  • #51
  • Edited 8:28am Nov 23, 2015 8:11am | Edited 8:28am
Quoting verv
. CindyXXXX, How do we know there are many options here, other than it just being a handle? I'm sure there are barriers here, but I would think not more so than at 1.07. I don't see why 1.06 would be protected. It could very well be that though. Chopping everyone out before the move lower.
I just read it on the wires. I don't know sh*t

Attached Image (click to enlarge)
Click to Enlarge Name: EURUSDH1.png Size: 23 KB
Time hides Nothing
  • #52
  • Nov 23, 2015 1:58pm Nov 23, 2015 1:58pm
Quoting verv
{quote} Thanks Stephen, lots of useful information in there. Will need to have a think about playing the spread, I'm not 100% sure on how I would play the DE2yr Edit - lots of good info in those other posts I just seen too. The rate traders at the CME have been pretty good at predicting the Feds actions. The CME tool has nailed it each and every time since March.
You're welcome verv!
You're doing well matey so keep it up.
Absolutely! I also keep my eye not only on what the CB's are doing and saying, but also the rate and FX traders and what they are pricing.

Take care.
rgds
Stephen
  • #53
  • Edited 1:59am Nov 24, 2015 1:38am | Edited 1:59am
Quoting hanover
... Having said that, I'm a fairly independent thinker, and my ideas are largely my own take on their analysis, ...
IMO, only the most fiercely independent of minds will survive and navigate the rivers of bullshit flowing through this place, everything else will eventually get washed back into the sea.

There are a handful of analysts I have huge respect for, and I almost always concur with them on some level, but in the end you have be making your own calls. This is why:

Quote
I think some of it comes down to whether maximizing return, or smoothness of income, is the priority.

Right. Every trader has different goals, strategies and targets - your analysis needs to take them into account, that's why an effective trader can't just take the word of a more experienced analyst. You said that currently you are avoiding trading JPY, while I am looking to sell it - but only because it suits the technical part of my strategy and my long term goals. If I was trading an accumulative/millipede type strategy, or buying and holding with very wide stops, I might come to a very different conclusion about trading the yen.


Quote
.... then even while the immediate effect of a data announcement itself might be all too rapidly 'priced in', its potential downstream effects might not be .....

True. If you see retail sales, manufacturing numbers/business confidence etc. pointing higher, that's a good indication that jobs are being created - three weeks later when the employment figures come in high, everyone complains they couldn't make profit because the data was already 'priced in' - maybe they should have been paying attention three weeks ago. That's the whole reason I analyze economic indicators the way I do - I am trying to trade in the direction of downstream moves as they are being priced in, or at least be facing the right way when the next surprise comes in.
si hoc legere scis nimium eruditionis habes
  • #54
  • Nov 24, 2015 2:16am Nov 24, 2015 2:16am
Quoting numbnuts
{quote} IMO, only the most fiercely independent of minds will survive and navigate the rivers of bullshit flowing through this place, everything else will eventually get washed back into the sea. There are a handful of analysts I have huge respect for, and I almost always concur with them on some level, but in the end you have be making your own calls. This is why: {quote} Right. Every trader has different goals, strategies and targets - your analysis needs to take them into account, that's why an effective trader can't just take the word of a more...
Good posts NN. Great to see you've stuck with your philosophy after all this time. keep killing
Time hides Nothing
  • #55
  • Nov 24, 2015 5:15am Nov 24, 2015 5:15am
Quoting CindyXXXX
{quote} Good posts NN. Great to see you've stuck with your philosophy after all this time. keep killing
Yes lots of bombs dropped by some of the best on this forum.

Good to see.
  • #56
  • Nov 24, 2015 8:09am Nov 24, 2015 8:09am
Quoting verv
{quote} Yes lots of bombs dropped by some of the best on this forum. Good to see.
Tsh
Time hides Nothing
  • #57
  • Nov 24, 2015 5:35pm Nov 24, 2015 5:35pm
I take longer term position trades as well as short term trades. Both trading styles are rooted in structural analysis, combining the best of FA and TA. Since the discussion here is on position trading, here is another view on relative strength and weakness going forward. I noticed some discussion about which currencies are considered strong and which are weak/not strong. Here is a day chart of the E/$ where I will try to add to this discussion. Most of the dollar advance/strength was realized by mid-March this year, with some pullback from that point and then some dollar strength since the market started believing the Fed would act to raise interest rates, first in October, and then eventually December. However, IMHO, the market reaction to a rate hike is far from certain, especially those who believe a rate hike will result in more dollar strength. Actually, IMHO, very little of the move in the E/$ is $ related, and is primarily due to E weakness. While I remain short the E/$ in my long term trading accounts, I have moved my stop tight now as we approach the December fed meeting. There is an emerging line of thinking that a rate hike, while initially causing a spike down in the E/$, will quickly result in a much weaker US economy and could quickly (say, within 6 month) result in a deep recession in the US. The idea has to do with equilibrium short real interest rates, and some have come to believe, that this rate is now negative in the US, and perhaps in much of the developed world. Again, IMHO, the thing that is keeping the E/$ from breaching its low of the year is this very development. Not that anyone is actually aware of the number or is trying to achieve it in some manner. This rate manifests itself in a complicated and convoluted set of circumstances, and we are actually seeing it manifest itself in a number of markets. But, you don't need to know any of this to see the problem in the chart, and that is a reluctance to test the lows, and in fact, the big stall that has taken place since March. So, if and when rates start to move higher, they will do so in a very long and halting manner, in an effort to test where the equilibrium rate is. If it is a positive number, I'd expect the E/$ to continue towards parity and beyond, but if it is negative, we could easily see the E/$ at or above 1.25 early next year. Just my structural analysis of this pair.
Attached Image (click to enlarge)
Click to Enlarge Name: eur.gif Size: 29 KB
  • #58
  • Nov 24, 2015 6:13pm Nov 24, 2015 6:13pm
This reaction has been common across most USD crosses, not just EUR/USD. Significant decline until around Sep where there has been a bit of relief/breather. Perhaps creating a little space for the impending decision? I don't know, try not to over analyse the fundamentals any more - god that has helped me.

As far as sentiment goes, the more something is known the less of an impact it will have on the markets. Would LOVE to see the reaction if no rate increase took place, especially if its completely unexpected....
Luck is where preparation meets opportunity.......
  • #59
  • Nov 25, 2015 2:58pm Nov 25, 2015 2:58pm
it never is a good idea to over analyze, but it's also a bad idea to not understand what the charts are saying (not saying anyone has said that). I am commenting on the discussion on strong vrs weak currencies. In the example above, the notion of weak Euro and strong dollar is in question, and in position accounts, it might be time to tighten stops, lighten up on shorts, etc. It is not a time to go long in position accounts on the E$, but structure is screaming "caution". IMHO.
  • #60
  • Nov 26, 2015 2:18am Nov 26, 2015 2:18am
Quoting GEfx
it never is a good idea to over analyze, but it's also a bad idea to not understand what the charts are saying (not saying anyone has said that). I am commenting on the discussion on strong vrs weak currencies. In the example above, the notion of weak Euro and strong dollar is in question, and in position accounts, it might be time to tighten stops, lighten up on shorts, etc. It is not a time to go long in position accounts on the E$, but structure is screaming "caution". IMHO.
Yeah for sure.
Luck is where preparation meets opportunity.......
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