A Deep Breath Before The Plunge

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I’m ready. That’s the best way to put it. I feel ready. For the past two months, my instincts have been fairly good, but I was too uneasy, too hesitant, too scared to really take a dive and follow through on them. If I had followed my inclinations, I would be doing very well. The fear was too much though and as a consequence I have remained on the sidelines for too long. I don’t feel like doing that anymore. I have reached an inner calm and I believe that this week will finally see me take a plunge once more into the big pool.

I’ve looked at some of the markets, but oil is what I’m thinking of most. There is no certainty that I will enter into a position. If it doesn’t look conducive, I suspect I will just let it pass, but I will for the first time in almost two months be keeping a sharp eye out. That is the simple plan for this week. Keep an eye open, wait and if I see an opportunity, I’ll take it. The hunter is back and he’s found his appetite.

Post Seminar Thoughts

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I’ve just come back from a seminar given by Worldspreads, the spread betting company that I use. It was a most informative and interesting evening. One half of the talk was given by Alpesh Patel, in which the usual “Mind, Money Management and Method” were discussed. The other half was given by Brian O’Neill of Worldspreads. Both were useful and Alpesh’s in particular was entertaining.

All in all, I think it was helpful in some ways but not in others. I feel reasurred that I do understand how Worldspreads do their business which of late I had felt a bit hazy on. It was also very interesting to find myself amongst other clients. Some looked similar to myself, lost in a sea of suits. Of a less helpful nature is perhaps a confusion that I thought I had dispelled with regard to the style of trading that I believe is best for me. I find myself considering day trading again. But as I sit here, thinking rationally, I still don’t believe that is a viable (or should I say profitable) option for me.

One other thing I found quite interesting was that the level of unease about financial institutions at the moment seems to be even higher than I had believed it to be. Whilst not exactly off my radar, (I have not exactly been keeping a close eye on the stock markets), I expected some pessimism about the markets but there appeared to be a much higher level of fear in the room than I would have thought likely. Northern Rock, it would appear, is in even deeper trouble than I had noticed.

These are merely my impressions of the evening. I’d like to go through the material that they have provided and perhaps run through what I will take from it as a Stepping Stone.

P.S. I’ve just deleted my order for Oil. Once again I pick a winner but chicken out! It’s heading towards 97.50 which would almost have been a doubling of my account size. Everything is so easy in hindsight.

Once more unto the breach! Well almost.

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For the past several weeks, I have been asking myself, “Should I return?” At times it has been more insistent, such as around the time of my last post but since then it has waned a little again. It is certainly a less frenzied question now than it was then.

My desire and interest to re-enter the markets has been fluctuating. This has as much to do with other things that I have been doing as it has with my own thoughts and feelings about the experiment that I had embarked on several months ago. At first, it was a desire to take a break, not just from any open positions but from everything in general. Indeed the month of October was a steady decline into complete burn-out. During the past few months, with work during the day and other projects such as my trading and this blog taking up my time afterwards, I had been burning the candle at both ends and it eventually caught up. A project I had been working on went live in October so that was my priority and the trading fell by the wayside.

At the tail end of October though, I think it had more to do with the fact that I had been out so long already, much longer than I had originally intended plus there was a nagging fear that I would lose everything. I must admit I don’t think I have completely overcome that fear but it is more in control. Add in a mix of other interests and personal projects and the time soon flies by. So we come to this week.

I have been slowly and haphazardly reintroducing myself to this world of trading by keeping an eye on a handful of markets and today I finally put in an order for a long position in Oil. Having already missed the boat a couple of times I was determined not to miss it again, then a little of the fear and probably some greed took hold and I moved my order much lower to the point that I felt sure it wouldn’t be hit today and possibly not for several days. Sure enough my original order would have been hit later in the day and at the close I would have been ahead. With my current account size, it would have made quite an impact.

So while I have re-entered the fray, it’s more on the edges, in the back, near the emergency exit and I probably only have a little toe inside the room at all. Still, it’s a start, but to where?

Hesitation Sickness

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I feel like I’ve just woken from a blissful sleep, after a long and crazy party, to find myself with the mother of all hangovers and destruction and disaster everywhere I look. Back when I started taking my little nap, I was very interested in both Crude Oil and Gold. In fact I was on the verge of opening a position in Oil but I hesitated and the hesitation grew into a complete stop. As I do my sums now, I am groaning as I calculate how much money I have missed out on.

Today, roughly speaking, if I had entered long positions in Oil, Gold and Soybeans around the time I was stopped out of soybeans, I would be looking at an account position around the €2,500 mark. Take away the soybeans and gold, which I probably would not have gotten into straight away as my account is so small and I would still be at the break even mark. I feel sick. Hell, even if I had entered two weeks ago, when I felt my absence was stretching a bit long, I would still be much better off.

So where does that leave me? Do I now wait for a correction or do I open a position now expecting the trend to continue? I find myself still hesitating. I am wary of waiting for a correction which requires me to guess a good price. Also, I’m not sure whether I should buy now as there has already been such huge movements recently.

Caught between, jumping one way or another, I find myself sinking further which then introduces the overriding factor. I don’t trust myself to make the correct decision when I feel like this. I can feel the panic. It’s the same feeling as when I am losing large amounts of money. Losing money and not making money, to me, feels the exact same. So, I figure that perhaps the best move to make at the moment is not to make one at all, until the panic has subsided. But is that the right move?

Frantic Day at Work = Little Time for Commodities

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A hectic day at work meant that I didn’t get a chance to check up on much today. I scanned a few articles during my lunch break but really I was too busy to be thinking of anything under than what I needed to get done in my job. Truth be told, I was exhausted by the end of the day and I’m heading to bed in a few minutes.

I did get a chance to catch up on some of the news as reported over at Bloomberg. It’s the usual stuff, some things went up, some things went down. I think that come the weekend, I’ll be looking closely at metals and energies. From what I’ve been reading, they might be worth looking at. They’re also areas I’ve been interested in for the past six weeks, especially metals. I may have missed a large movement already, but it may not necessarily be the end of the trend yet. In any case, they’re on my list of things to look at this weekend.

Open Positions

None

Account Details

Account Balance: €585.48
Open Position P/L: €0.00
Account Position: €585.00
Overall P/L: -€1464.52
   

Time-Out

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Today was a needed break. Not from the markets as a whole, but really from having an open position. For the first time since I started this whole adventure back in June, this was the first time that I didn’t have an open position and also most importantly in soybeans! I needed that. It was time I took a step back to assess my progress so far and also to reacquaint myself with the myriad of other commodities out there other than, that most versatile of grains, the soybean.

Soybeans, if you are interested, actually closed up 7.25 cents. A lot of the news stories I’ve been reading have been talking about how the commodities markets shrugged off the continued recovery of the dollar today. I’ll admit that I was a little surprised to find that after yesterday’s drop, but should I really? It seems typical of the panic and fear that frequently visits itself upon the exchanges. There one day and gone the next.

I have no regrets however, I stuck to my trading plan such as it is. I had placed a reasonable stop loss based on the Average True Range and a weekly low. In fact, I didn’t actually realise how close the price was to my stop loss until I checked my account and found that it had been hit. Previously, I probably would have moved my stop loss lower as the price moved lower and this time that would be working out fine for me at the moment but in the long run, such an action is simply inviting ruin.

I’ve been trying to bring in cognitive biases into my posts as they are an idea that I find very useful for looking at my own behaviour. Curtis Faith provides an excellent explanation of some cognitive biases that can impact on trading in his book, “Way of the Turtle.” I am sure that I will be discussing this book at some later stage. For now, I just want to talk about the outcome bias. This is a tendency to judge how good a decision was, based on its result rather than the factors that went into why the decision was made. In the past I know that I would have been really annoyed with getting stopped out and I would have been frantic to get back in. Today, I had no such feelings. I think that is progress.

Instead, I read up on other commodities such as gold, silver, copper, coffee, sugar and oil. This is part of my fascination with the markets, all these every day items that are traded across the world and each day there is a power struggle to either push the price up or down. It was good to be able to broaden my horizons again. I also read some interesting articles on trading specifically on trading discipline and expectancy. Both seemed to be timely reads for me.

I’m not sure if I’ll open any positions before my WRAP UP this weekend, it seems unlikely that I will as I haven’t found the time to do any serious analysis of any trends in the markets. Instead, I think I’ll just enjoy this unexpected time-out.

Open Positions

None

Account Details

Account Balance: €585.48
Open Position P/L: €0.00
Account Position: €585.00
Overall P/L: -€1464.52
   

Stopped out of Soybeans

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I was expecting Soybeans to close lower today, but nowhere near limit down. The market touched limit down during the session and just before that I was stopped out. The overbought nature of the market and the pressure of harvesting were finally able to push the price down with the strengthening of the dollar as the catalyst. Wheat and corn closed limit down for the day and it will be interesting to see how much further wheat will fall.

Having no positions now open, I have a decision to make, whether to take my money and set it aside to build up a reasonable stake once more or to open another position in something. Initially I was leaning towards putting the money aside for the time being. However right now as I see that this correction was across the board, including not just grains, but metals, energies and softs, I think I might instead see if there is something that is worth getting involved in.

So much for my worries at the weekend of feeling comfortable with my position in soybeans. If I don’t quite feel the hunger, I’m not feeling the fear. Of course, I have yet to pull the trigger. I won’t be getting involved tomorrow, it’ll be the following day at the earliest before I open a new position. In the mean time, I will be looking at everything to see what the possibilities are at the moment.

Open Positions

None

Account Details

Account Balance: €585.48
Open Position P/L: €0.00
Account Position: €585.00
Overall P/L: -€1464.52
   

A Day of Waiting

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I think you could best describe today as a day of waiting for soybeans. It was a tight session of trading, with the high of $9.98 and a low of $9.90 and only closing up a 1/4 of a cent. There wasn’t much change from the information available last Friday. Over the weekend, the USDA announced that they wouldn’t be opening up any more acres which probably accounts for the slightly higher opening of $9.96 but there was no attempt to break the $10 mark nor much effort on the downside.

If everybody was waiting for some direction from the crop progress report, there wasn’t a lot of change there either. The harvest is well under way with 29% of it complete and there was a slight downgrading of the crop condition by 1%. That might provide a gust of wind tomorrow, but it feels like we’re back in the doldrums.

Open Positions

Asset Contract Position Change
Soybeans November 2007 Long +0.63

Account Details

Account Balance: €271.48
Open Position P/L: €513.52
Account Position: €785.00
Overall P/L: -€1265.00
   

Too Much Fear, Not Enough Hunger

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Today is the end of September, and last Friday saw a lot of funds moving money around at the end of the month. I’ll assume that there will be some carry over of that change around tomorrow. For me though, things haven’t changed all that much from last week. Soybeans finished the week +12 cents and there is no signal to get out yet. I’m not even going to change my stop loss this week, as I’m happy with where it is at the moment. The coming week may have choppy waters as the news at the tail end of last week percolates through the market and it decides what it’s going to do.

Wheat is tantalising. I don’t know how much higher it’s going to go but the knowledge that due to my own mistakes I have lost out on the biggest move of the year is frustrating and infuriating. In short, I’m afraid of it clouding my judgement. Then there’s the fear, that just as I get in, it’ll reach its top and then start the slide down. In truth, it’s more likely that it’ll go up and then move sideways for a while before falling back down again.

As I look around the various commodities that I have been interested in and keeping an eye on for the last few months, I see that a few trends appear to have started, but again I’m feeling the fear. If you’ll forgive a metaphor. I feel like a hunter who’s been knocked up badly not so long ago, let’s say an elephant. I barely escaped with my life but now I’m back out on the plains and I’ve got a few animals within range. As I line up the sights, my eyes lose focus and I can’t pull the trigger. I can feel that some of these trends could be big movers in the months ahead, but I just can’t seem to get over the experience of being almost wiped out.

This fear is affecting my hunger for the markets as well. I’m comfortable with soybeans at the moment, that’s all that my trading diet consists of right now. I’m too afraid to branch out into other markets, due to this fear of my account getting wiped out and the idea that I’m too late to get in on these trends. I need to get out of this state of comfort and back into a mindset where I have the hunger and I can lose the fear. So that’s my little assignment for the week, to get back into the game and stop sitting on the sidelines.

Nursery Rhymes

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As I was searching the source of all modern day knowledge for yesterday’s post to ensure I got the correct words for “Seesaw, Margery Daw,” I came across what that nursery rhyme is all about. Seemingly, a “daw” is a slovenly person and Margery was a common rural name in England during the 18th and 19th centuries. The rest of the rhyme supposedly refers to child labour in the workhouses of the time.

Workhouses were covered in my history classes during Primary School, when we were learning about the Irish Famine. They were truly the last refuge of those without any other options. To think that such an innocuous children’s rhyme could be about such a dismal and awful place. Another source, from the BBC’s H2G2, indicates that the song was originally sung by workers to keep time while sawing logs with a two-man saw. This strikes me as quite likely, before it was picked up by children. I wonder is it from this rhyme then that the word for a “see-saw” originated? I can imagine a see-saw being thrown together by a lumberjack for his children and then the children singing their father’s song as they played on it.

I am wary of any meanings behind nursery rhymes however, having learned that the modern interpretation for “Ring a Ring O’Rosies,” is just a popular misconception, first introduced in the 20th century. The repository of all modern day knowledge covers in more detail in its article the supposed allusions to the bubonic plague in the song. It seems neat and tidy, but again you have to wonder, could a children’s rhyme have such a dark undertone where they all die when “we all fall down.”

A final thought on Nursery Rhymes and that comes from a television program I saw a few months ago where there was a story about how nursery rhymes were dying out as children no longer knew them. I know that I sang lots of rhymes as a child, but I notice that my little cousins don’t use them in their play. So if you want to join the fight to bring back Nursery Rhymes, I’d like to suggest http://www.rhymes.org.uk which includes the lyrics for the kids and the origins for your own entertainment.