Blow chunks, suck donkey dick, or whatever metaphor you want to use if it breaks through and closes below $1.35. Could it be temporary? I don't know but the daily chart (not shown in this post) already shows the 50 DMA below the 200 DMA and gaining traction.
The weekly chart has the 50 WMA awfully close to the 200 WMA and getting closer.
Well all the news about the PIIGS taking wing in Europe have rattled the EURUSD pair. I think it might be heading down to test the $1.25 level and I'll be keeping a close eye on it, since I'm about to start trading Forex in earnest again.
I have my models all rebuilt and my system ready to go, now its just a matter of moving to a new broker and setting up Metatrader 4. I'm going to start fooling around with Metatrader as well as testing some expert advisors because rules based trading appeals to me and my neural nets.
I'll be starting a NEW $100 Forex Experiment and seeing how quickly I can build it up or blow out!
The Aussie Dollar broke its trend, according to my system on December 16, 2009. This coupled with the recent breakdown of Gold makes me wonder if the shiny stuff is taking a breather or the global economy is truly in the mend. I don’t care anymore, I just care about riding a trend, taking a chunk out of it, and then saying goodbye when it goes bad.
Anyway, I'm outta here for the year! Happy New Year! See you in 2010.
I got my ass spanked in the markets over the last year. My 401k portfolios are surviving after some severe drawdowns (25%) between 2008 and 2009 and my trading capital in my Forex and Stock accounts got destroyed. Luckily it was only risk capital, money I could afford to lose, but it still hurts anway. So what did I learn from this hell of a market? I learned that I’m not as smart as the market and that I tried to second guess it too much. When times were good my system worked, when times got bad It hammered me.
Perhaps the biggest thing I learned in this market crash is that nearly all my neural net trading models FAILED. Yes, the models that were designed to alert me to impending market doom failed for the most part. My volatility and timing model did OK but they had some major issues as well which I’ll discuss below.
So today’s post is really a cathartic one for me. It’s a mea cupla of sorts, a post in which I take my lumps and start to exorcise my trading demons. It’s about the things I did wrong over the past year and hopefully a reminder to never repeat again. Plus, it’s another way to ease myself into trading and posting to this blog again.
As I rebuild my portfolios in 2010, I expect not to solely rely on neural net models again. I realized that in a crazy market, neural nets can’t adjust fast enough. As the market was crashing, my models were generating BUY signals when the market was obviously telling me they were wrong. If only I had listened to the market instead of the models! I learned that my biggest mistake was something called “confirmation bias.” I wanted to believe what my models were telling and I traded accordingly. Why? Well it always seemed to have worked in the past, so why should this time be different?
By the time I realized that there was a discontinuity between what the market was TRYING to tell me and what my models were generating, it was too late. I had to unwind many positions at a big loss.
I also made some severe psychological mistakes like not following strict money management rules and getting caught up in the market hype. I thought it would never happen to me but it did. In the end, I loosely followed money management rules and leveraged myself too much. I didn’t honor all stops and threw caution to the wind. In the end, I got what I deserved.
So I got trapped in positions that in a normal market pullback made sense, but not in a market crash. As a result of this shotgun approach, my 401K is up 20% for they year, as opposed to the 60% that the market has rebounded too. Oh well, I guess I’ll have to refine or rebuild those models.
This learning lesson doesn’t mean that I’m abandoning neural net models completely, I’m just reassessing how they’ll fit into my overall trading system. I’m also sticking with a trend approach to trading but severely simplifying it. I’m not as smart as the market and why should I spend time building sophisticated trend models when I can just look at Price and Volume, and trade accordingly. I will listen to what the market is telling me and avoid the hype in the news. Money talks, Bullshit walks.
In the end, this market crash taught me many BIG lessons and that I’m taking to heart. I’m a bit older and hopefully wiser now and look forward to a new year, filled with trading opportunities no matter if we’re in Depression, Recession, or Bull Market.
In closing this post, I wanted to thank all my readers who stuck around. My feedburner stats have keep relatively stable since I posted about closing down this blog. I do plan on returning to posting in 2010 but the frequency and content is still up for grabs, and I plan on providing a separate subscription service (separate newsletter of sorts) in the future.
Thanks for reading. I want to wish each and every one of you a Happy Holiday season and a Happy New Year, may 2010 be profitable for you!
My whole AUDUSD neural net model is shot to hell because of the massive selloff last year, so I’m forced to rebuild it from scratch. As I ponder the inputs for the model this time, I’m spending time familiarizing myself with that market again.
So what do I do? Well I pull up a chart of the AUDUSD currency pair and slap a Fibonacci Retracement tool on it. Its amazing how many traders use this tool because prices tend to “retrace” to certain price levels BECAUSE so many traders use Fibonacci. Self full-filling prophecy I guess.
Anyway, I’d be playing a breakout of 0.7461 in this currency pair, if it can ever get there.
(click to enlarge)
I’m so looking forward to start trading my favorite market of all time again, FOREX! I have my many neural net models to update for sure but this time I’m going to test out some automated systems, aka robots, as well.
I’ll probably go back to trading the London market open using a breakout strategy if its still viable. I like that strategy alot because I’m usually asleep when the trade is entered! LOL!
Trading Forex is a lot like watching Nature. Its all about the survival of the fittest. Often when banks intervene in a currency to halt its slide or stop its appreciation, the result is an outlier in the overall trend. As money floods or leaves the system, the currency will be shocked into the opposite direction. After a few days or hours, the same trend reasserts itself and the country would’ve wasted all that time, energy, and money.
Interventions in the stock market are a lot like Forex interventions.
The trillion-dollar infusions by the U.S. and European countries into their financial systems didn’t seem enough Wednesday to fuel more than a two-day rally. Major Asian markets fell on disappointing earnings and worries about a global recession.[via Forbes]
Why should this time be any different? My targets for the S&P500 are still at 900 then 700.