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Thursday, March 27, 2014

Sitting on the Fence

About a month into Bergamot Capital Management, I find myself with less capital and 'up the river without a paddle'. So following my wife's advise I stopped to look around.

My account isn't big, but it was suppose to be enough to produce about equal to my previous income. For that I had System 11 - a simple and robust approach to short term S&P 500 index trading. This system was well  thought out, thoroughly back-tested, paper traded, and then traded with leveraged ETF's. All good. Then I moved to ES futures, to get this thing making real money. For-awhile I was ahead, even though I traded it sporadically. Then about a month ago it pretty much stopped working. WTF? Upon reviewing recent trades I realized that I am badly over-trading. Usual remedy is to step out to larger time frame and avoid whipsaw, but it required larger stops... Too large, as it turned out. Combining Systems 10 and 11 seemed like a good idea, but was an unproven method, and backfired severely.

It is quite possible that System11 was based on that fucking pseudo-statistical TA mambo-jumbo nonsense. I see it alot around internets these days. Sound all fancy, with secret acronyms - TA gone mad! These squiggly-wiggly lines and exotic candle patterns on a chart suppose to tell a trader where to buy and sell, and it works every time, and there is a trade every day, and you just reverse if you are wrong, and you win more than you lose ... except when I do it. I guess I was suckered by some temporary irregularities into thinking I can game short term index movements. Lots of people do that, lots did it before them. No wonder all old posters and commenters are gone from most sites and forums I read. They all blown their accounts!

I took a day or two to poke around interwebs, and ask some people: "How come skillful and profitable stock trader is a complete sucker when it comes to index futures?" Nobody replied anything meaningful, but I read some stories very similar to mine. Especially this:
 Сегодня день меня уничтожил… Нет больше грааля, ничего больше нет… сливал как мог, за один день всю месячную прибыль, и дело не во мне, не в тильте, а в системе, которой больше нет, точнее она не работает. Видимо я просто попал в фазу рынка, где увидел какую то закономерность, но вот она и прошла.
Буду пытаться понять сам рынок, а не искать алгоритмы, которые сужают мое сознание до точки, и я просто напрсто перестаю думать. На данный момент имею 22 600р на счету и полностью чистый мозг.
Моя цель ПОЗИЦИОННЫЙ ТРЕЙДИНГ А НЕ ТУПОЙ СКАЛЬПИНГ! Значит, так, с завтрашнего дня буду выкладывать в блог каждый трейд и эквити счета.
Сейчас занимаюсь пониманием рынка)
Russian guy from SmartLab  http://smart-lab.ru/my/Viacheslav/blog/all/
Holly Shit, how come the guy I never knew, on the other side of the World, gone thru exactly the same experience I just did? I'll tell ya how... we are both Suckers... the only difference - I was suppose to know it already, based on Dow Paradox.(link)

According to my own real world experience - short term ES futures trading is a fool's errand.
After all, index was made exactly to avoid any necessity of short term trading, smooth out irregularities, reduce risk, etc. Instead they turned it into horse-n-pony show, because it benefits Scammers. Brokers make money, pumpers make fee's, advisers charge for 'forecast' - all happily paid for by willing Victims, who don't want to make things too complicated, but rather just trade this one thing (sarc). How can Technical Analysis (TA) be used to analyze past price and volume of index, when there are no buyers and sellers, but only Scammers and Victims... and Suckers blood to keep them going...

To make sure I am not a Victim, I stopped doing few things:
1) No more day-trading (final decision)
2) No more futures (unless its an overnight emergency hedge)
3) No watching news (I've been staying away from TV for-awhile. It did me good)
4) No more reading or posting on any trading blogs! NONE! I will not let somebody's nonsense to get into my mind again. I have been learning and studying, and reading so much about the market over past few years. I think I've learned everything there is to know. I even know stuff that is not written anywhere,... ever. In fact, I know so much - I can teach other people about this shit. But I will not.
5) I refuse to become a Scammer.

My biggest and most consistent gains came not from trading stock market, but from researching market of stocks. I am always looking for some kind of companies or industries that make sense, make money, have bright future, and (if I am lucky) carry discounted expectations. When forecasting error is realized and expectations are adjusted, then valuations of company undergo rapid repricing, allowing me to sell to a greater fool. Prudent speculator gets in early enough to accrue easy gains, before Scammers get a whiff of whats going on and crap all over a good thing. The biggest trick is to find and enter these stocks on time. Get in too early - too long ride; get in too late - stop too wide.

I have found, and invested, and traded, and made alot of money in stocks like that.
This is the only way I know of  How Not To Be a Sucker.
I got this thing licked


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