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PositiveDev's trading journey

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1 trade yesterday;

2L_zpsfb4f213c.png

 

1 loss

 

 

Currently in the process of evaluating a new strategy to switch over to which should address some of the key issues with the current one.

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Saw this article and thought it may be of interest to you (and others I guess). From what I've read of your posts, it appears that you are interested in the Psychology in and around trading etc.

 

http://www.businessinsider.com/the-gamblers-fallacy-and-the-hot-hand-2014-4

 

Personally, I don't trade or gamble, so can't comment much. Interesting read nonetheless.

 

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Saw this article and thought it may be of interest to you (and others I guess). From what I've read of your posts, it appears that you are interested in the Psychology in and around trading etc.

 

http://www.businessinsider.com/the-gamblers-fallacy-and-the-hot-hand-2014-4

 

Personally, I don't trade or gamble, so can't comment much. Interesting read nonetheless.

 

 

Thanks but I think that applies to someone that may be interested in betting on horses or something like that. It's clear that there are certainly many traders who approach trading from a gamblers mindset, those are the ones that provide the profits to the those that realise it's a business.

 

What's described in the article is the gamblers lack of understanding in the basic laws of probability.

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Currently backtesting a new strategy, the results look pretty interesting and it's quite tempting to launch into trading it straight away. One of the metrics I'm looking at is the average yield per trade, it's a distance higher than my previous strategy, largely as a result of there being fewer trades, suggesting a more efficient strategy and a more clearly defined edge. It averages 2 trades for every 3 trading days. The potential yield available on the winning trades is consistently higher so I need to consider how best to capture that. It captures some nice large points moves, just less than a third of the trades are of those type, providing an argument for a trailing stop loss, as opposed to a fixed stop I was using previously. It may also be worthwhile zooming out to see how it performs on larger timescales, and on other stock index futures.

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Interesting results.

 

Does the new method involve momentum?

 

MA's, crossovers, and Volume?

 

Or do you ONLY look at Price action

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It's mainly using order flow with an MA to identify points when there is a higher probability that the direction of order flow will mean revert toward the direction of the market. I'm looking for points where the order flow has moved far from the mean of the market, and then signs that it's swinging back. So it's order flow in context to the market.

 

So yes it includes an MA although I've typically never used them, no crossovers. The way I treat volume is through the style of chart I use, so each bar is 400 contracts traded, so heavy periods of volume produce more bars, sequentially on the chart. So the charts are volume bound rather than time bound. This makes it easier to identify entry points, so the data my indicators use are price and volume, rather than price and time.

 

I then have cumulative volume shown at the bottom, but since the charts are volume bound this means the days of higher volume extend further to the right.

 

Example;

Dow_zps1268cf70.png

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Seems it's been rather a while since I've posted. Still backtesting different strategies and looking at different variants currently. Would prefer to be more active in the markets but just not ready at this point.

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Well it's been while since I posted on a regular basis, hopefully I can pick back up where I left off.

 

In amongst the nappy changing and working I've been looking at different approaches to futures trading and aim to begin test trading a new strategy tomorrow. It also looks like a potentially interesting point in the markets with the precious metals appearing to have formed a low.

 

Interesting chart on margin debt, may be a harbinger for stocks;

C1_zpsead2e9fd.jpg

 

Implied volatilities back to pre-2007 levels

C2_zps7eab9c22.jpg

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Good one!

 

That chart on margin debt looks like a very useful bellwether

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E-Mini Dow futures

270614Trade1LHF_zps52e4c892.jpg

 

 

1 trade, 1 win

 

Risk reward ratio 1 : 2.5

 

 

There are fewer opportunities with this strategy so some days there may be no trades

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Shorts get trapped in the CYNK

 

An horrific story about a pump and dump with a nasty twist, from Seeking Alpha;

 

"Cynk Technology Is The New Scheme In Town

 

 

Summary
Cynk Technology is an abomination and a clear short sell which will drop 99.9% with 100% certainty.
However, it's also an example of a new kind of scheme built to extract money from the market.
This article explains the scheme.

You've probably never heard of Cynk Technology (OTCPK:CYNK). Unless you've been following Twitter the last couple of days, that is (Source for chart: Interactive Brokers).

CYNK now has nearly $6 billion in market capitalization. Which isn't bad for a company you've never heard of. That has 1 employee, no website and nearly no cash to its name. $6 billion for a company which doesn't exist, basically. It's even worse than Cannabis Capital (OTCQB:CBCA) and it will obviously fall 99.9% at some point.

However, CYNK also heralds a new age. It heralds the appearance of a new type of scheme engineered to take money from the market. A scheme which will naturally prevail until the SEC shuts it down.
How does this new scheme work

In the most simple of forms, the scheme goes like this:
A tight group of insiders controlling 100% of the stock of a company, trades between themselves until the stock is at an obviously unsustainable valuation;
Then, this group of insiders lets there be some shares available for selling short;
Naturally, some valuation-driven short sellers cannot believe their luck and short sell the stock at what's a clearly unsustainable valuation - like, say, $2 for a company like CYNK;
Here, the fun starts. The insiders once again shut down the availability of stock to sell short, thus shutting down the supply of stock, and at the same time drive the stock powerfully up. Up 100%, 500%, 1000% as with CYNK;
At this point, even reasonable short sellers who only sold 5% of their portfolio have a problem. The position compounds against them and becomes huge. Even a 5% position turns into a 50% position that wipes out half of their portfolio;
Here, two things can happen: either the short sellers cover, thus closing out the insiders at a gain, or they try to hold onto the position - certain that it will, at some point, go down 99.9%.

But this is where the scheme gets really creative. Since insiders control the shares being lent and sold short, they also control the pricing short sellers need to pay just to keep their positions open. This pricing is the so-called "short rebate". And this is what happens in a stock like CYNK (Source: Interactive Brokers, red and green highlights are mine):

Notice how 7 days ago, there was stock to be borrowed. Notice also how the short rebate shoot up into the sky and now stands at 120%.

The problem is not just that the position now needs to pay a fee at an annualized 120%. It's also that this 120% applies to the current stock quote, so in effect the position will be paying 1200% on the short seller's cost basis!

And therein lies the scheme. Either the short sellers quit or they pay through their nose at such a clip that even if they don't quit, they lose. Unless the SEC shuts it down or until someone in the insider circle breaks loose and makes more supply available to the general market, at which point this will, indeed, drop 99.9% with 100% certainty.
Conclusion

Beware of CYNK. It's a scam that's been driven to a $6 billion market capitalization. Yet, there is a rational scheme behind it which should allow its promoters to profit even if the stock ultimately drops 99.9% with 100% certainty.

The scheme involves both a traditional short squeeze, and the racking up of massive short borrowing fees. The stock will drop 99.9%, but those driving it up will probably make out like bandits, unless the SEC does something about it.

Editor's Note: This article discusses one or more securities that do not trade on a major exchange. Please be aware of the risks associated with these stocks."

 

http://seekingalpha.com/article/2309115-cynk-technology-is-the-new-scheme-in-town

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