Invest in Yourself…

I have had the pleasure of assisting many many people how improve their trading results, and one of the unfortunately common issues I often come across is beginners trying to work it all out themselves.

It’s mostly the guys (sorry fellas), and I guess it’s similar to the old “I don’t need the instruction manual!” routine that even I suffer from. But I only have to look back to yesterday, building a flat packed piece of furniture, only to mess it up and have to take it apart to start again. If I had just looked at the manual I would have saved a lot of time.

Across my emails and sometimes in conversation I often see things like  “I’m trying to build my own system….but”.

That’s a very common line unfortunately. I purposefully use the word unfortunately, because this is always a mistake.

Personally speaking, when I began to learn to trade my initial thought was….”who are the experts?” “who can teach me this stuff?”.

There’s a lot of ego in thinking you can simply walk into this arena, and become one of the 10% who win just by working it all out yourself. I think it’s insanity.

The world has been around for a long time. A long time before me and you entered it. Huge generations of people who lived before us and have experienced things. Learned lessons. Become wiser before their death than you and I will probably ever be.

Many of these people left behind what they learned. Often through books.

Now, the financial markets have only been around for a couple of hundred years, but guess what? In that time, many people have made fortunes and shared with us how they did it.

It then begs the question for me, why wouldn’t you seek out that information and learn how they did it, before trying to then build your own trading system?

When people tell me they have never traded but are trying to build their own system and trade using their (real) money I feel like screaming!

Its frustrating for me because I know you will do much much better learning a successful established system that makes money, understanding why it makes money, and THEN building your own system afterwards. Otherwise, you’re simply trying to re-invent the wheel. You are trying to invent someone new, when it’s not needed.

If someone came up to you and said “I know televisions already exist, and that I could just buy one, and I know nothing about building them, but i’m going to try and build my own one from scratch”  you’d think they were a nut job and send them away to the funny farm.

So why are people taking that same approach when it comes to trading?

People are so risk averse with their money, yet do the strangest things like try and work things out the hard way when there’s a much easier path right in front of them.

My advice? Invest in yourself by learning from other peoples mistakes so you don’t have to make them yourself.

If you won’t invest in training, to save yourself £1000 in losses, you’re nuts! Anyway, Happy Friday & have a great weekend all!

 

The Advantages of Automated Trading Systems

Automated trading systems, also referred to as mechanical trading systems, algorithmic trading, automated trading or system trading, allow traders to establish specific rules for both trade entries and exits that, once programmed, can be automatically executed via a computer. The trade entry and exit rules can be based on simple conditions such as a moving average crossover, or can be complicated strategies that require a comprehensive understanding of the programming language specific to the user’s trading platform, or the expertise of a qualified programmer. Automated trading systems typically require the use of software that is linked to a direct access broker, and any specific rules must be written in that platform’s proprietary language.

There is a long list of advantages to having a computer monitor the markets for trading opportunities and execute the trades, including:

  • Minimize Emotions. Automated trading systems minimize emotions throughout the trading process. By keeping emotions in check, traders typically have an easier time sticking to the plan. Since trade orders are executed automatically once the trade rules have been met, traders will not be able to hesitate or question the trade. In addition to helping traders who are afraid to “pull the trigger”, automated trading can curb those who are apt to overtrade – buying and selling at every perceived opportunity.
  • Ability to Backtest. Backtesting applies trading rules to historical market data to determine the viability of the idea. When designing a system for automated trading, all rules need to be absolute, with no room for interpretation (the computer cannot make guesses – it has to be told exactly what to do). Traders can take these precise sets of rules and test them on historical data before risking money in live trading. Careful backtesting allows traders to evaluate and fine-tune a trading idea, and to determine the system’s expectancy – the average amount that a trader can expect to win (or lose) per unit of risk.
  • Preserve Discipline. Because the trade rules are established and trade execution is performed automatically, discipline is preserved even in volatile markets. Discipline is often lost due to emotional factors such as fear of taking a loss, or the desire to eke out a little more profit from a trade. Automated trading helps ensure that discipline is maintained because the trading plan will be followed exactly. In addition, pilot-error is minimized, and an order to buy 100 shares will not be incorrectly entered as an order to sell 1,000 shares.
  • Achieve Consistency. One of the biggest challenges in trading is to plan the trade and trade the plan. Even if a trading plan has the potential to be profitable, traders who ignore the rules are altering any expectancy the system would have had. There is no such thing as a trading plan that wins 100% of the time – losses are a part of the game. But losses can be psychologically traumatizing, so a trader who has two or three losing trades in a row might decide to skip the next trade. If this next trade would have been a winner, the trader has already destroyed any expectancy the system had. Automated trading systems allow traders to achieve consistency by trading the plan. (It’s impossible to avoid disaster without trading rules.
  • Improved Order Entry Speed. Since computers respond immediately to changing market conditions, automated systems are able to generate orders as soon as trade criteria are met. Getting in or out of a trade a few seconds earlier can make a big difference in the trade’s outcome. As soon as a position is entered, all other orders are automatically generated, including protective stop losses and profit targets. Markets can move quickly, and it is demoralizing to have a trade reach the profit target or blow past a stop loss level – before the orders can even be entered. An automated trading system prevents this from happening.
  • Diversify Trading. Automated trading systems permit the user to trade multiple accounts or various strategies at one time. This has the potential to spread risk over various instruments while creating a hedge against losing positions. What would be incredibly challenging for a human to accomplish is efficiently executed by a computer in a matter of milliseconds. The computer is able to scan for trading opportunities across a range of markets, generate orders and monitor trades.
  • Conclusion. While automated trading will not be for everyone, we master in the above approach to FX markets and this is validated in our audited and third party verified trading accounts. At the time of writing (November 2017) our main fund has returned over 60% for 2017 with one loosing month. Our recently opened (September 2017) Acorn G10 PAMM account over 13% profit in two months. Investing in our fund is simple, secure and regulated, more details here

Warren Buffett: Investing VS Speculating

The line separating investment and speculation, which is never bright and clear, becomes blurred still further when most market participants have recently enjoyed triumphs. Nothing sedates rationality like large doses of effortless money.

But a pin lies in wait for every bubble.

And when the two eventually meet, a new wave of investors learns some very old lessons: First, many in Wall Street – a community in which quality control is not prized – will sell investors anything they will buy. Second, speculation is most dangerous when it looks easiest.

The Week Ahead: Dollar Mixed Awaiting Fed Meeting

The US dollar managed to end the week on a positive note despite North Korea’s missile launch,  a lower than expected retail sales reading on Friday and flat US inflation data on Thursday. Economic data has begun to reflect the impact of Hurricane Harvey and later in the month, the effects of storm Irma will be taken into account. The pound was one of the few currencies that gained against the dollar after the Bank of England (BoE) left rates unchanged on Thursday, but said rate hike could come sooner than expected boosting the currency against the USD. Central banks will remain in the spotlight with the Fed and the Bank of Japan set to publish their September monetary policies in the week of September 18-22.
Probabilities of US Rate Hike in September and December
The US Federal Reserve will publish its rate statement on Wednesday, September 20 at 2:00 pm EDT. The US central bank will also release its updated economic projections and will host a press conference at 2:30 pm with Fed Chair Janet Yellen. Last month the Fed added that “relatively soon” it would start shrinking its massive balance sheet accumulated during its QE program. On the topic of a change to the benchmark, Fed funds rate the CME FedWatch tool rates the probability of a September rate hike at 0 percent, with December a 50 percent chance.
Inflation in Japan remains low despite BoJ Stimulus
The Bank of Japan (BOJ) will publish its monetary policy statement on Wednesday, September 20 at 11:50 pm EDT with a press conference to follow on Thursday, September 21 at 2:30 am EDT. The Japanese central is not expected to make a change to its monetary policy as inflation remains stubbornly low despite unprecedented stimulus by the BOJ. Growth has continued its upward trend but with little help from inflationary pressures, no reduction in stimulus is on the horizon.
Tax reform talk helps Dollar
The EUR/USD lost 0.812 percent in the last five trading days. The single currency is trading at 1.1932 after US tax reform got closer to reality this week. The euro had advanced at the start of the week as more USD weakness was anticipated, but a turnaround in market expectations on a December rate hike and a show of momentum on tax reforms started a dollar rally putting the pair below 1.20. Political uncertainty has been a big factor of USD trading and a Trump administration ready to embrace dialogue with Democrats is seen as a productive development.

Next up will be the September Federal Open Market Committee (FOMC) meeting. The market is expecting the Fed to formally announce the start of the reduction of its balance sheet. Since the move is expected to be gradual the Fed could push the announcement back, especially if there is some uncertainty about a December rate hike but the dollar would suffer if that were the case. The White House has remained tight-lipped about who will be the Fed Chair next year. Yellen’s term ends in February, and with the falling out to favor of Gary Cohn, she could even remain in the job. While Janet Yellen was not the first choice of the Obama administration she got the nod after a scandal took the front-runner Larry Summers out of contention.
Higher interest rates for BoE?
The GBP/USD gained 2.867 percent during the week. The currency pair is trading at 1.3567 near weekly highs of 1.3617. The hawkish policy by the Bank of England (BoE) drove the pound to its highest post Brexit referendum. Even the doves within the central bank have endorsed a rate hike in the near future. Rising inflation and a tighter job market have convinced uber dove Gertjan Vlieghe to back a higher interest rate.

The Office for National Statistics will release UK retail sales on Wednesday, September 20 at 4:30 am EDT. The forecast calls for a rise of 1.1 percent, but taking the volatile items out of the equation will show a 0.1 percent gain. Rising inflation in the UK is a concern because despite a tighter job market wages remain flat putting more pressure on households to cope with higher prices.
Oil Prices Surge
US oil prices surged 4.016 percent in the last five days. The West Texas Intermediate is trading at $49.63 after briefly touching $50 per barrel. Oil prices recorded near two-month highs as demand expectations picked up after the Organization of the Petroleum Exporting Countries (OPEC) released higher demand in 2018. US refineries getting back online also boosted energy prices. Higher demand with limited production due to Hurricanes Harvey and Irma boosted prices.

The International Energy Agency (IEA) also published a report this week that forecasts strong demand keeping the price of Brent above $55 and WTI near $50.

Macron Holds Final Rally, Pledges Fairer Society

The Latest on France’s presidential election

French centrist candidate Emmanuel Macron has held his last campaign rally before Sunday’s presidential runoff in southwestern France, calling on voters from the left and the right to choose his reformist, pro-European platform.

Macron promised to “give strength back to the country” and “build a more efficient and fair society,” addressing the crowd from an open-air stage in the central plaza of the town of Albi.

One day after his crucial televised debate with far-right Marine Le Pen, Macron said that showed his rival’s plan “doesn’t go anywhere” and “has no proposal for our country.”

He encouraged voters who chose Socialist Benoit Hamon, far-left Jean-Luc Melenchon or conservative Francois Fillon in the first round to make in the second round “the choice of hope, of future” and to reject Le Pen’s “authoritarian, anti-European, nationalist project.”

Global Stocks Mixed Ahead Of French Vote

European stocks declined while most Asian markets rose Friday ahead of the first round of voting in France’s closely watched presidential election.

KEEPING SCORE: In early trading, France’s CAC-40 retreated 0.6 percent to 5,043.53 and London’s FTSE-100 shed just under 0.1 percent to 7,124.36. Germany’s DAX was little-changed at 12,023.01. On Wall Street, the future for the Standard & Poor’s 500 index was up 0.1 percent while that for the Dow Jones industrial average was unchanged.

FRENCH ELECTIONS: French voters will choose among 11 candidates Sunday in the first round of a presidential election that has the country and financial markets on edge, especially after a shooting on Paris’ Champs-Elysees boulevard that killed a police officer and wounded three other people. The Islamic State group claimed responsibility for the attack. Candidates include populists Marine Le Pen and Jean-Luc Melenchon, who both say they want to tear up agreements that bind together the 28 European Union nations. Citigroup said a victory by either could drive a 5 to 10 percent selloff of European equities. Other contenders seen as more supportive of EU membership include Francois Fillon, a conservative former prime minister, and Emmanuel Macron, a former banker and economy minister.

ANALYST’S TAKE: “With the French elections bearing down on markets the bulls seem to be wrestling back some control here and despite the prospect of real volatility on Monday, there is hope that all will be well,” said Chris Weston of IG in a report. “Having pared back expectations around the issue to a minimum, some have even bought into the idea that perhaps U.S. tax reform could be on the cards.”

U.S. TAXES: Treasury Secretary Steven Mnuchin, speaking at an IMF event, said the Trump administration’s plan for tax changes will come “very soon.” Mnuchin’s goal of getting it passed by Congress’s August recess has slipped. He said the administration still hoped to get a measure through Congress well before the end of the year. Mnuchin is also working on proposals to overhaul regulations put in place by the Dodd-Frank Act passed after the 2008 financial crisis. He said he would have a report with recommendations for the president by June that would address major issues in changing the law.

ASIA’S DAY: Tokyo’s Nikkei 225 gained just over 1 percent to 18,620.75 and Seoul’s Kospi added 0.7 percent to 2,165.04. The Shanghai Composite Index was little-changed at 3,173.15 and Sydney’s S&P-ASX 200 rose 0.6 percent to 5,854.10. Hong Kong’s Hang Seng shed 0.1 percent to 24,042.02 and India’s Sensex retreated 0.3 percent to 29,315.79. Benchmarks in New Zealand, Taiwan and Southeast Asia also rose.

ENERGY: Benchmark U.S. crude shed 7 cents to $50.64 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell 14 cents on Thursday to close at $50.71. Brent crude, used to price international oils, fell 2 cents to $52.97. It rose 6 cents the previous session to $52.99.

CURRENCY: The dollar declined to 109.09 yen from Thursday’s 109.32 yen. The euro fell to $1.0701 from $1.0717.

USD Weaker on Geopolitics Ahead of US Inflation and Retail Sales

The US dollar is weaker across the board since Wednesday’s afternoon comments by US President Trump on the currency being “too strong” that prompted a selloff of the currency. Geopolitical risk has risen after the US confirmed the use of a huge non-nuclear bomb in Afghanistan. Risk aversion reversed some of the dollar loses as investors got ready for a long weekend in most major markets and expected lower liquidity on Friday and Monday.

The US Bureau of Labor Statistics will release the Consumer Price Index (CPI) and the core CPI (removing the volatile energy and food components) on Friday, April 14 at 8:30 am EST (12:30 pm GMT). The forecast calls for the core data a 0.2 percent gain and for the full CPI to remain flat. At the same time the US Census Bureau will release the retail sales data. Core retail sales is expected to gain 0.2 percent while adding auto sales will result in a gain of 0.1 percent for the total value of retail sales in the US.

The US consumer continues to be confident about the economy as today’s Consumer sentiment shows by hitting a three month high but there has been little spending to go with that increase in confidence. The preliminary report from the University of Michigan also noted a gap between democrats and republicans in regard to their different levels of optimism. Economic indicators back up a stronger US economy but political risk at home and abroad have taken their toll on the dollar which could get a boost form strong sales and inflation data and vice versa could keep on the back foot if low inflation and weak spending get the Fed to reconsider their rate hike path.