Monday, April 17, 2006

Traders Helping Traders Big Weekend Edition

Happy Easter (and Freilich Pesach) to all! I spent most of Friday evening and yesterday doing tax returns … ours, Father in Law's and Tassha's. Tassha is our oldest granddaughter, now 20 … yikes! … and I taught her how to do her own so hopefully that'll be off my "to do" list next year. I wish they'd space these things out a little better. Property taxes we're due last week as well. So this week turned into a 5 figure out flow. Yes, it does sting!

We are going to our daughter's house for Easter dinner. Just us and the grand kids. It's time for me to lament the "good old days" as we old timers are want to do. Not that many years ago Easter was a holiday that gathered the whole clan together. It was not unusual in our family to have 30-40 people get together. Now, it seems everyone is so busy and the priorities have changed. While I understand it to a degree I don't like it much. Families don't gather and communicate like they once did. I miss it and feel we, especially the children, are the worse for it.

Let me gingerly step off the soapbox. Ah, that's better.

We had a nice week. No drama and a nice contribution to the profit ledger. I get to feeling a bit boring now and then. Our strategies and methods continue to perform at a very high level and in a very predictable way. Being as excitable by jolts of adrenaline as the next person I frequently feel the lack of it in our trading.

For so many years we were all exposed to the excitement of trading, the unpredictability. The feeling one gets when you make a nice trade was a real emotional spike as were some of the losses we used to take. You got used to those, they were something special. They weren't always pleasant but they were always special. With that aspect ingrained in all of us traders … it was kind of like a badge of honor to make a homerun trade or take a hit … it sometimes is difficult to refrain from putting "it" out there, to take a real chance, to push those chips to the middle of the table.

It is a further psychological temptation the markets throw at us to see what we're made of. It can all be undine so quickly in this business. We must have the confidence and the character to persevere and not succumb to the siren song that induces us to take shots on a whim or cast caution to the wind for the sake of the adrenaline rush. This is a business and not a plaything. You must respect the power of these markets and all the attendant tricks at play to separate you from your common sense.

If you miss this aspect in your trading you must go elsewhere to find it. I use poker to satisfy that side of my personality. Boring in my trading is a good thing … it means what I'm doing is working and working well. If this creeps in on you, you must not allow it. Find an alternative outlet for the playful side. It has no beneficial purpose.

All right gang, let's go look at what the charts have in store for us for the coming week.

Just a reminder … check those FND's and LTD's every Monday … here's a good place to bookmark to do that …


The Bonds closed out the week on a very weak note. This was due mostly to lack of participation on Thursday as many bailed early for the long weekend. I look for a bit of uptick on Monday. The week's economic reports are spread pretty evenly over the week. On Tuesday the PPI and home sales are released. Tuesday will be Inflation guessing day. It could be a very volatile day.

On Thursday the Conference Board releases its "Leading Economic Indicators" report. Analysts are predicting no change. We'll see. I don't think we need take any specific steps to protect ourselves … what we do and the way we do it pretty much takes care of that … but I do think we need a heightened awareness and focus on those 2 days.

Maybe be just a tad more demanding of entries and a skosh tighter on rolls. The close on Thursday at 107-03 leaves us looking at 107-00 and 107-16 as the starting points for action Monday. We can play quarter points after an initial -00 or -16 trade but not before.

DECEMBER 06 Eurodollar

There's just nothing for us to do here at the moment. 94.790/.800 is a clear area to initiate trades either way. I also will stretch the reasoning a bit and try a trade at 94.675. I'll buy the break above or sell the failure of a retest there. The stop on the buy is .665 and .685 on the sell. The target for the buy is 94.800 but we'll roll at .675 and .790. The charts give us no target for the sell so we'll get it to break even rather quickly … by .665 … and then utilize periodic RRR to manage it from there.

JUNE Canadian $

We did fairly well with the currencies last week. The numbers were absolutely spot on but again the trading hours posed problems in some cases for us. After digesting the chart we are right where we were a week ago so everything I wrote then is still in play for this week … well, at least for Monday. We'll fly with that and I'll provide any necessary adjustments in the DAILY UPDATE.

Any return above 8740 to 8760 that fails is ripe selling ground as is a break below 8720. Use close stops on all these. Either the first 3 or 7 above the entry is good. Try to get any trade to B/E as it breaks lower at 50, 40, 30, 20 or 10. The target for any of the above sell trades is 8560-40. As we've been pointing out pretty consistently and emphatically in previous edition, there's tons of S&R all over the chart, practically every 10 points or so. This presents a definite management challenge.

At a bare minimum keep a good handle on the periodic RRR and make appropriate adjustments to keep it comfortable. Expecting to roll every 10 points is just not feasible so we must do the best we can. If by chance we blow right thru 8720 we can sell 8700 with a 8703 or 7 stop and the same 8560 target from above. I don't see my first buying opportunity until we get a failure to go lower at 8660. We'll buy that with a stop at 8657 or 53 and look for a return to 8760 as a target.

Be protective at 8680, especially so at 8700, then 8720 and 40. We can also sell a break below 8660 if that appears. The stop would be 8663 or 7 depending on your risk threshold and the action on the chart when it does it. 8560-40 remains the target.

The rest of the markets below are covered in the Subscriber Edition. To get yours hot and fresh BEFORE the markets open, go to

JUNE Swiss Franc
JUNE 06 Mini Russell
JUNE Mini Dow

MAY Cotton
JULY Cocoa
MAY Corn
MAY Wheat

Those of you who've been around for awhile may remember this. I wrote it a couple of weeks after my surgery last summer. There have been some questions and comments I've received and heard lately that made me think this might be a useful redoux.


When my appointment was first set with my surgeon I was like a kid on Christmas morning. I had heard from 2 or 3 friends who'd been operated on by Dr. Abou Somra. Everyone in the medical community I talked to unanimously stated their belief he's the best and world class. Finally this pain and all the ramifications of it were going to go away.

I met with him and was jubilant with what he had to say. It was really gonna' happen, I was on my way to feeling like the 20 year old I felt like just 3 months before.

Long story short … what I learned is that expectations can grow and develop in our minds until the train wreck of reality shows us how with sometimes startling clarity how unreasonable were those expectations.

Now I know it will take 6 months or more before the final effects of the surgery will be in place. Now I know I must endure 6 weeks of physical therapy to assist in getting there.

I believe there is a strong correlation to trading in this lesson I've just learned.

The anticipation of the beneficial final outcome opens the door for us to hear what we want to hear instead of the real words which were spoken. The focus on the final outcome so blurs the path that must be traveled, the inescapable process of putting one foot in front of the other, step after step after step … tediously, monotonously, plodding. How we long to take shortcuts … we know where we'll end up, just let me bewitchingly wiggle my nose, let me turn to Number 2 and say "make it so" without work or sacrifice or the necessary effort to insure reality matches expectation.

That's the way it is for many traders. They can see the riches made available by the leverage in our markets, they day dream of the cars and boats and luxurious homes … the anticipation supplants the reality of the steps that must be performed to attain those expected goals. The nonsense we all, including myself, have bought into for so long that one book, one tape, one course will, like #2 "make it so".

We now know the reality, don't we, brothers and sisters. It is in us and always has been. Yes, there are things we needed to learn to do this effectively … what is unfortunate is all that we needed was not, in fact, available to us.

And now we know the reality of it. It will take me 6 months or more following a specific regimen to get where I need to be. To be where we expect to be with our trading also requires a regimen that includes much more than just analytical skills. Things like an effective means of executing orders, like management skills incorporated in a total cradle to grave plan for each trade. That lying in wait is a much less taxing method of attack than chasing the prey every day.

Those expectations are an insidious, dangerous and disappointing approach to issues we choose or need to address. Long live reality for its honesty and the reminder we frequently need to stay simply putting one foot in front of the other. Get real every body!! What drives you? Expectations or reality? It is a worthy determination.

Good night all …