Disqus - Friends of maximumleverage

Re: Comment cleaner

Goldmund — Fri, 05 Dec 2008 18:02:33 -0000

Is that a head and shoulders I see on top, sitting right at resistance? ;)

Re: Process of building cause continues...

Goldmund — Sun, 07 Dec 2008 15:20:07 -0000

If you wire me $100 via PayPal, I may consider going long and thereby single-handedly stopping "the end of the world". Let me know.

Re: The word revolution comes to mind.

Goldmund — Tue, 09 Dec 2008 13:54:15 -0000

Atilla --

you weren't "deceived". You were wrong.

And I think you're making a bigger deal of it than is warranted. It's kinda like quantum mechanics -- when you look at the world from our perspective, objects are deterministic and in a certain time/space. You zoom in enough, and things become much less deterministic, and even the very location of things is only implicit -- particles are merely "clouds", things are only true with a certain probability, etc.

Same with this market. Trying to read it an hour, a day, or even a week in advance is a mere gamble to some degree.

But that shouldn't, and doesn't, undermine your larger strategy.

I'm nowhere near as good a trader as you, but I've achieved comparable profits to you this year (+650%). I did it very simply: bought long-term SKF calls when SKF was low (in the 100-120 range) and sold them when it was high (200-300). Currently I'm loading up on July 300s for under 2 grand a piece. I'd say that for much of the year, I picked entry and exit points pretty poorly; had I been a good trader in addition to having a long-term fundamental outlook that this market will crash, I'd have made much more than I have.

TK (who IMO is also a brilliant guy) has a different strategy, of making many short-term bets simultaneously. He deals with the above-mentioned "statistical cloud" by taking many positions, and hoping that a majority will go his way. What you (and I) do is take up large index positions, but we also must pay "respect" to market uncertainty -- which means taking longer-term bets . And in practice, that means never making bets that rely on what happens in the next day or next week, and not getting whipsawed out of positions (I've been down 70% before being up 900% many times).

So if you believe in your overall opinion of the fundamental unsoundness of the market, then who cares that you were wrong about what the market was going to do yesterday or the day before? Hold on and you'll either make a huge profit, or you'll be fundamentally wrong about the current nature of the market.

As for me, if I lose, I'd much rather lose because I had the whole game wrong, than by being whipsawed out of short-term quasi-gambles.

Re: The word revolution comes to mind.

Goldmund — Tue, 09 Dec 2008 17:01:25 -0000

Hey -- yeah, I've been reading xTrends for a while, but only now started posting.

I was refering to the opening sentence of Atilla's thread-opener post: "I admit I was deceived today.".

My point was not to criticize Atilla, but to the contrary -- to suggest that he's being too self-critical. The only way one can feel "deceived" by the market's few-day movement is if one thinks that the market offers enough of a window to make such predictions deterministic.

One way or another, the trader, IMO, must accept market's uncertainty and not rely on short-term alchemy a-la "my crystal ball says that the market will do X tomorrow". One way is TK's, spreading the strategy over many small bets. The other way is to have a fundamental conviction about the lack of soundness in the market and its general long-term (as in, 6 months or so) direction and refuse to get whipsawed by short-term semi-random phenomena.

One way is to cast a WIDE net, like TK; the other is to cast a LONG net (not as in "long" on the market, but "long" as the duration of time that you're allowing for your bet to materialize). You can't have your cake and eat it too: make a bet on a singular index and allow only a short time for it to come true.

Re: The word revolution comes to mind.

Goldmund — Tue, 09 Dec 2008 20:38:13 -0000

A thought occurred to me, and I'm curious if anyone has seen anything on this topic.

In short, has anybody ever seen a study done on the relative value of TA in predicting the market over time? In other words, was TA more predictive and valuable, say, 40 years ago, than it is now?

Two things made me think about this.

One, Atilla's post of LeFavre's "Reminiscences". I read the book a few years ago, and read lots of passages again today from Atilla's PDF. Livermore had an EDGE back then, even with his nascent TA that relied more on support and resistance levels than anything else. No stochastics, no MACD, no fibs; NO CHARTS fercryinoutloud. Primitive TA worked in a market that was even more primitive.

And the second thing was a post that somebody did today, can't remember who, who said that 8 is considered lucky in China and that many Chinese would buy stocks with 8 in their number during the Chinese market boom. Of course, being a bear at heart, my first thought was "man, I wish that US market players were as superstitious, I'd short every stock with 8 in its number".

Those with an edge in the market win, and take the money of those without that edge -- that is a truism, a tautology.

But now that every 13-year-old in his Mom's basement has the most sophisticated TA at his fingertips, does he gain an edge with that TA?

Now, I know that TA is as much of an artform as it is a science; or, the 13-year-old in his Mom's basement may have the TA available at his whim, but will not be able to milk it for the same value as Atilla; that's a given.

Still, the 13-year-old doesn't have the money at his will in order to influence the market. Nor do all similar 13-year-olds combined. But the big money has the computing power and the knowledge to take advantage of all the TA in the world.

I'm not making an argument that TA is worthless, of course; but I AM suspecting that the fundamental reasons that this market is crashing, and that Atilla (and I :)) are making money have little to do with TA and tick-to-tick and day-to-day movements and much more with the fundamental reasons that the entire Western economy is built on a cloud of fantasies, a complete loss of the concept of what "value" means at all -- and that the realization that this is so is slowly dawning.

To make a long story short -- has anyone ever seen a study on the change of value of TA over time in general?

Re: The word revolution comes to mind.

Goldmund — Tue, 09 Dec 2008 22:44:48 -0000

Thanks, I'll definitely look up those books.

If that hypothesis were to be assumed true, then it would follow that it's a losing strategy to place a large weight of your edge into TA, an "illusory value".

Edge, then, has to be found elsewhere, and TA can be no more than one of the many tools in service of that edge. It cannot be the edge itself.

Re: The word revolution comes to mind.

Goldmund — Tue, 09 Dec 2008 23:07:47 -0000

Merci, will do.

I think that's tangential to my point, tho; the reason that Jesse was a "good trader" is because he did TA when all that TA was is an acronym for certain parts of the female anatomy. I fully agree with you on what his weaknesses were, but what were his strengths? Would those strengths work now?

And if so, then why does that book to modern ears sound like an almost comic-like, fiction-like, idea of a trader; a naive and endearing tale only possible in some misty, far-away past?

Because we all know that what he was doing is, by today's standards, primitive, crude and archaic.

And I'm starting to lean toward a viewpoint that the very idea of high reliance on TA is in itself describable in those terms.

Re: Possibility to test 925 today

Goldmund — Wed, 10 Dec 2008 14:20:46 -0000

Putting a lil play money into Citi 7.5 Jan puts right about now. C around 8.30.

Re: Rinse and repeat?

Goldmund — Thu, 11 Dec 2008 14:28:38 -0000

Amen. +1.

Re: http://slopeofhope.com/2008/12/11/how_do_you_say_his_name.htm

Goldmund — Thu, 11 Dec 2008 17:05:43 -0000

Oh jeez... Are we trading based on Astrology now?

Re: long DUG @ 28.35

Goldmund — Thu, 11 Dec 2008 17:30:47 -0000

This is one common misconception about DIG and DUG.

It's not an ultra short oil ETF -- it's a ultra-short energy STOCK etf. Haven't looked into DUG, but I do know that XOM constitutes something like 1/3rd of the share in DIG.

So, if oil tanks and market rallies, or vice versa, each of these factors will mitigate the other.

Re: long DUG @ 28.35

Goldmund — Thu, 11 Dec 2008 17:51:48 -0000

Thanks for the tip -- it does seem you're correct.

Re: long DUG @ 28.35

Goldmund — Thu, 11 Dec 2008 18:43:03 -0000

Until the big plunge from $147, oil was divergent with the market. It only converged shortly after that event, and it was convergent on its way down.

I wouldn't bet on this equation (oil price roughly parallel to the market) necessarily holding into the future. We may get renewed divergence if the rising price of oil is seen as yet another bit of pressure on the economy/consumer during a time when that is least needed.

Re: Gold bugs freakin???

Goldmund — Thu, 11 Dec 2008 19:40:23 -0000

Now this is an example of TA I can get behind. Not based on some nebulous pattern-recognizing alchemy disconnected from any reality, but as a window, a flag, into a phenomenon that suggests reality-based cause-and-effect. Thanks.

Re: long DUG @ 28.35

Goldmund — Thu, 11 Dec 2008 19:42:35 -0000

Dude. Pass me that blunt.

Re: http://slopeofhope.com/2008/12/11/theyll_never_stop.htm

Goldmund — Thu, 11 Dec 2008 20:03:00 -0000

Hehe that reminds me of Einstein's quip when they asked him what he would think if his Theory of Relativity were to be experimentally disproven (this was before any experiment had confirmed he was right).

His response: "I'd think that God is wrong."

Of course, he was being sarcastic.

Re: Gold bugs freakin???

Goldmund — Thu, 11 Dec 2008 20:08:42 -0000

I don't have a link, but I second the 60 points answer. It actually happened not long ago -- several weeks, I remember.

Re: Gold bugs freakin???

Goldmund — Thu, 11 Dec 2008 20:20:06 -0000

They're not evil. They just behave differently from their professed mission of merely tracking the underlying.

It is true that they deflate over time (you only need to look at XLF+SKF chart and it's clear). They're clearly not "investment" tools.

I trade them (successfully so far) by buying call options on them in times of relatively low volatility and selling them on big spikes. The 2x and 3x ETFs can be so volatile that an unbelievable portion of the option price comes from the implied volatility. During this last "panic", I rode SKF from 120ish to 300ish, and made more than 10x on the calls. The SPIKES is what they're all about, and you have to be both patient and vigilant.

And yes, trade with an almost ideological certainty. No setting stops. If you believe that there's a good chance of a panic in the next several months, buy far-out-of-the-money, far-from-expiration calls and dump them during the next spike. And the spikes can truly be beautiful.

Currently I'm loading up on July SKF 300s. No other positions, no nonsense. I got some this morning for 1600 a piece. The bid at the end of the day was 2000. And this was before SKF went up by another 6 points in the AH.

My dream scenario is that we do get a xmas rally and the ES goes to 1000+, at which point I'll max out my account with these bad boys. I'm keeping some of my powder dry in the event that happens, but I'm already around 60% invested (can't believe I just used the "I" word) in these calls.

Re: Gold bugs freakin???

Goldmund — Thu, 11 Dec 2008 20:28:03 -0000

A problem with that is that they tend to spike so much that you're guaranteed a margin call at one point or another. Imagine the poor sucker who shorted SRS on Nov 1st. The winnings from shorting URE wouldn't have come close to covering his ass.

Re: Gold bugs freakin???

Goldmund — Thu, 11 Dec 2008 20:43:47 -0000

lol I actually think I get to be chiller than most. My position goes down by 20%, I sleep fine. I don't sweat the up days, the down days, the dojis, the triangles, none of that. I believe the financial system is on the precipice of a complete collapse and that's what my trading is all about. The only times that require trading skills are when entering and building up a position, and even moreso, when exiting and selling.

And my skills, to be honest, aren't that great at all. I'm getting better. But "better" means getting 10x on a swing as opposed to 3x. So I just carefully load up, and then live my life, check the ticker a few times a day and see if we're in spike-mode yet... When we are, I load up the trading platform and spend a week or so unloading. Then I take off until it comes down and just as importantly, calms down. That's all.

Re: Gold bugs freakin???

Goldmund — Thu, 11 Dec 2008 20:47:23 -0000

That's a great point. My rule of thumb is that I never hold options that are less than 2 months from expiration. If I have some and a spike hasn't happened yet, I roll over for longer-term options. I actually did that before this last swing, and lost a lot on the spreads. But the amount lost doesn't even come close to the amount gained when spikes actually happen.

Re: Gold bugs freakin???

Goldmund — Thu, 11 Dec 2008 20:58:57 -0000

That's totally sweet -- and I assume it works best on days when volatility increases, as straddles usually do. I'll have to try it out sometime. +1

Re: Gold bugs freakin???

Goldmund — Thu, 11 Dec 2008 21:07:03 -0000

Another very good point.

There's a division-by-zero phenomenon with inverse ETFs that makes them inherently more volatile. Think about it: what's the theoretical highest price for, say, UYG and URE? They're both ultra-bulls, 2x.

Say that you are the tard-est of the bulltards, and you believe that the underlyings will DOUBLE in the next few months. The ETFs will, then -- at least theoretically -- quadruple. Say that you smoked some of that bulltard ganj on top of that, and you believe the underlyings will TRIPLE. Your ETFs then, theoretically, sextuple. Whoopty-doo.

Now let's do the same analysis for SKF and SRS. What's the theoretical ceiling?

Infinity. The underlying goes to zero, the ETF is literally infinite.

And therein lies the rub, IMO.

Re: Incoming - 2

Goldmund — Fri, 12 Dec 2008 12:51:01 -0000

You say "TARP has $15 billion left" -- do you have a link for that? I thought they were saving close to a half for the Obama administration. Thanks.

Re: Incoming - 2

Goldmund — Fri, 12 Dec 2008 14:36:53 -0000

I think that Atilla needs to lay off the crystal-ball (and frankly, irrelevant) business of predicting extremely short-term movements and stick with his big strategy which is based on recognizing the fundamental weakness of the market and gearing up for the big fall which will come if not tomorrow, next week, and if not then, next month, and if not then, then soon afterwards. Who cares? I realize the time-traveler allure and all that, but it's frankly a little silly to have your credibility seemingly undermined by wrong calls in the very short term, when in fact his strategy doesn't at all depend on such movements. My 5 pesos.