Ray's amnesty page

[wiseambitions]

No surprises here really!




(Reuters) - Britain's anti-fraud agency said on Monday it has launched a criminal investigation into alleged rigging of the $5.3 trillion-a-day currency market.

"The director of the Serious Fraud Office has today opened a criminal investigation into allegations of fraudulent conduct in the foreign exchange market," the agency said in a statement.

Around 15 authorities around the world are investigating allegations of collusion and price manipulation in the largely unregulated foreign exchange market.

It is alleged that traders used online chatrooms to collude in the fixing of benchmark prices.

Scrutiny is focused on activity around London's 4 p.m. currency fix, a 60-second window where key exchange rates are set. These prices are used as reference rates for trillions of dollars of investment and trade globally.

Banks including Deutsche Bank (DBKGn.DE), Lloyds (LLOY.L), Citigroup (C.N), Barclays (BARC.L) and JP Morgan Chase (JPM.N) have fired or suspended - and in some cases reinstated - foreign exchange traders in the discourse over alleged manipulation.

Britain's financial regulator, the Financial Conduct Authority, launched its probe last October and the Bank of England in March appointed attorney Anthony Grabiner to examine whether any of its officials were involved in forex rigging.

The United States Department of Justice opened a criminal probe into the matter last October.

(Reporting by Clare Hutchison. Editing by Steve Slater/Jeremy Gaunt)

[wiseambitions]

Musings for the week. Extremely profitable but not stress free, Thursday and Friday morning were volatile and probably showed up my poor adherence to the rules - waiting for setups and opening on pending orders rather than impulsive moves with market orders and one or two "revenge" trades.

Mistakes included letting trades go to full SL at other end of Aims box rather than getting out when price had crossed green red and blue lines. And getting sucked into wave 4s (PCs) by not recognizing what the wave action was doing Elliott-wise in adjacent time frame. I still quit some winning trades too soon and hold on too long to others which retrace.

Homework for the weekend - Read some more of the Ebook about controlling emotions as posted a week or two ago.

18 trades opened and closed.
Best trade: 75 pips. Worst 27 (gulp). Net 210 pips up. (174 prev week)

[immy]

One thing is for sure clear to me. if you trade m5 or m5/m1 (which is basically not too different a thing, as we consider nearly all M5 AIMS levels so why the hell not trade them on m5... but this is a different debate one you already are laughing at i know you), it is extremely difficult to concentrate on other strategies, such as mine, when I try to manage and trade hourly charts. If you stay in tune with one pair e.g. DAX m5/m1 (because its moving) you will have clarity. You seem to be stuck to one thing and its working for you... I like it.

[wiseambitions]

Thanks for your comments, Immy. I am sure the way to make best progress is to concentrate on one thing and get really good at it.

This is the mantra of one of my clients who is a £1m a year surgeon. He doesn't find the work difficult, he has just been at it for years and he has become an expert in one specialism, such that it is just like shelling peas. In fact it has become boringly straight forward for him. I think it should be the same for us.


If we concentrate on one way of trading eg m5 0700 to 1600 daily, preferably less, and apply the proper discipline to our money management the returns are potentially stratospheric. 2.5% weekly, 10% weekly, 15% weekly, we've all had glimpses of this experience. No other investments I have ever studied stand any chance of getting near it.

Hopefully we can keep focused and attentive as we so often find that riches dont come by accident, yet so easily the losses do. We can't control the market we can only control ourselves.



On another note, Financial Times is this week reporting that hedge funds are struggling with their performance


Hedge funds braced for some of their worst returns since 2008


Hedge fund managers expect to deliver some of their worst returns since the financial crisis this year, amid rising concerns over stretched equity market valuations and signs of rising geopolitical tension.
Nearly two-thirds of hedge fund managers are anticipating full year returns of 6 per cent or less, according to Preqin, the data provider, which surveyed 150 hedge funds collectively managing $380bn of assets. Of these, 44 per cent expect a full-year return of 5 per cent or less.
This would represent one of the worst years in terms of investment performance since 2008, according to figures from HFR, the data provider.
The industry suffered negative returns of -5.2 per cent in 2011, but it recorded double digit gains in 2009 and 2010, and was up 6.4 per cent and 9.1 per cent in 2012 and 2013 respectively.
Amy Bensted, head of hedge fund products at Preqin, attributed managers’ increased pessimism to “macro events affecting fund performance and the sense that equity market [gains] will not last”.
She added: “We have seen lots of big funds make losses – everyone came into the year quite positive but the first half has been quite choppy and this is starting to take its toll on some managers.”
Roughly a quarter of all hedge funds tracked by Preqin have posted negative returns year to date, although the industry is up 3.2 per cent overall.

Some of us are getting weekly and monthly more than most of these supercar-driving whiz kid fund traders get for their clients in a year. Long may it last

[wiseambitions]

From Wall Street Journal

Re Libor price fixing. It amazes me how in such a big market place with such massive volumes these guys can manipulate things to their own advantage. Presumably forex in total, and stock market indeces as such (eg Dax) are too massive though for them to fiddle with, although the regulators seem to think there's need to investigate them. Libor is more of a London thing and although it is an important number I suppose less people control it all.


This is what WSJ say:


Authorities in the U.K. and U.S. have released transcripts of electronic conversations between traders relating to the roughly $370 million fine given to Lloyds Banking Group PLC regarding efforts to manipulate Libor.

Some highlights of the conversations are below. Excuse the spelling. And the, er, fruity language.

[For non-Brits, ‘mate’ means ‘buddy,’ ‘lovely jubbly’ means ‘OK, great’, and Tesco is a large supermarket chain that uses the advertising tag line “every little helps.”]

First, highlights from the Financial Conduct Authority’s documents.

“I ain’t got any 3s fixings mate. I’ve got no fixings today. So I can do my LIBORs wherever I f—— want to put them, mate.” (p12)

“I’ll have [bank] there as well…because that’s what you want. You don’t want the market to know what you’re f—— doing.” (p13)

“Lloyds Trader F commented that “every little helps … It’s like Tescos”. Lloyds Manager B replied “Absolutely, every little helps.” (p15)

Now from the Department of Justice:

“…oh dear..my poor customers….hehehe!! manual input libors again today then!!!!”

And from the Commodity Futures Trading Commission.

“just for your info skip … i need a high 1 mth today -so i will be setting an obseenly high 1 mth”… “sure mate no worries … give us an idea where and I’ll try n oblige … ” (p11)

“morning skip …. my little … [racial epithet redacted] friend in tokyo wants a high 1m fix from me today …. am going to set .37-just for your info sir”… Reply: “that suits mate as got some month end fixings so happy to ablige .. rubbery jubbery .. :-0” (p11)

Trader 1: “morning skip- [Rabobank Senior Yen Trader] has asked me to set high libors today -gave me levels of lm 82, 3m 94 …. 6m 1.02.”

Trader 2: “sry mate can’t oblige today … I need em lower!!!”

Trader 1: “yes was told by jimbo .. .just thought i’d let you know why mine will be higher … and you don’t get cross with me.”

Trader 2: “never get cross wiv yer mate” (p12)

He may never get cross. It seems some others might.

[immy]

The next message they would have sent these days would be,

"hmm seems like they found that out, lets plan something else.. cheerios"

[wiseambitions]

Most likely.

Sorry many of my posts are nothing to do with the trading system, but I do come across quite a lot of news from the industry through my work connections and they may be of interest to one or two here.

As Scotland now approaches the referendum and decides its future, either to stay in the UK or go independent, we are left wondering whether it would keep the pound, use the euro, or invent its own currency (for George Soros and others here to devalue asap!).

There is also talk of a lot of capital being withdrawn from Scotland, FTAdviser is today reporting that Aberdeen Asset Management saw ONE customer withdraw 4 BILLION from its funds. Now that isn't exactly pocket money either! Probably not a retail customer, but the flight of money south from Edinburgh is happening at a fast rate. Fear is a powerful driver

Cheers.

[wiseambitions]

An incredible day for me today, 4 Dax trades totalling 72 pips, worth more than 7% to me, basis s1 and s2 entries on m5. I also watch m1 and have added 25SMA and 170SMA as it shows the AO wave of m5 fairly well, I'd say with more precision, and of course it's good to trade m5 with the preferred double aims levels allied to m1.

The last couple weeks my trading has been rather smoother and I have had fewer occasions of self-flagellation due to trying to remain flexible, set measurable achievable goals, not to wish hope and pray so much when the trade is going wrong way, quit losing trades when it's obvious what they are and look for the next proper setup opportunity.

[wiseambitions]

Trust me, this is a guy worth taking notice of. Many know the name, Jack Shwager

[wiseambitions]

Trust me, this is a guy worth taking notice of. Many know the name, Jack Shwager


An Interview with Jack Schwager - Characteristics of a Super Trader
By Justin Pugsley
This is the first of our series of interviews about trading. Justin Pugsley speaks with Jack Schwager about the insights he's gained from chronicling the lives of some of the world's most successful traders.

In this interview he discussed some of the characteristics which define a super trader, their trading styles and the kind of psychology required to excel in this area.


Jack Schwager is a recognised expert on markets and trading who has authored a number of very well known trading books. Among them are 'Market Wizards' and 'New Market Wizards' where he interviewed many of the world's top traders discussing the secrets of their success and how they amassed millions of dollars.

Among the many trading legends he's interviewed are: Richard Dennis, Paul Tudor Jones, Ed Seykota, Jim Rogers, Bill Lipschutz and William Eckhardt.

These two books are avidly read by traders all over the world keen to discover what makes super traders tick.

You can find out more about Jack at his website: jackschwager.com


JP: Is trading something you're born with?
JS: A good analogy is that of a marathon runner. With a lot of training and effort almost anyone can learn to run a marathon. But it's impossible to do if you're not trained. And only a tiny fraction will run in what is considered to be a world-class time.

So bringing that analogy to trading, yes it is possible to learn to trade profitably. But to learn it to the point of becoming superlative – I don't think that's possible unless you have exceptional talent.

JP: You've talked with some of the world's greatest traders and from your discussions with them what are the characteristics which make them 'great'?
JS: It's difficult to answer that question in the time we have, but to give you an example, great traders are extremely flexible. They can very easily change opinion and go from bullish one second to bearish the next. So they don't become wedded to a particular position – they change it as they see fit.

This is contrary to human nature, which is to hope you're right and stick to your opinion and to try to find evidence that you're right. It's not in human nature to admit you got it wrong and to change your position.

You find that so many of the characteristics that make great traders are contrary to human nature.

JP: It's interesting that you talk about flexibility and being willing to change your position, because that runs contrary to another piece of trading advice, which is to stick with your system
JS: I was mainly talking about discretionary traders. But this can apply even with traders using a system. It is sometimes a case of admitting that the system isn't performing as expected or doesn't work any more maybe because the market has changed. So good systematic traders adapt their systems when necessary.

It's a fine line between sticking with your system and being adaptable.

JP: Is there a personality type for great traders – i.e. do they tend to be extrovert as often portrayed by Hollywood or are they introvert / geeks as often characterised by the trade press?
JS: Actually the answer to that is very clear. The range of personalities among great traders is as wide as you can imagine. So yes you have your extreme extroverts and introverts, you have people with PhDs in physics and maths and some who barely finished high school.

Some are nice guys some aren't, others are very easy going and others are very rigid.

Basically, there is no personality type that defines a successful trader.

JP: At some point in a trader's career they can go through quite bad demoralising loosing streaks – how do great traders handle that?
JS: The advice I've heard more than once is that you can't try harder to make it right when things are going wrong. When it's not working and you're not in tune with the market there's no point trying harder to make it work. That might work in some professions or jobs, but not in trading.

So when you go through that bad patch the best advice is to close out all your positions and go on holiday. Then come back and gradually build up your trading again.

You have to walk away from it for a while and clear your mind. But in trading it's more than that. It is also about regaining your objectivity.

JP: It's almost folklore in some circles that becoming a great trader involves getting wiped out or suffering some huge set back at some point – was that generally the case with the great traders you interviewed?
JS: Some did go through that, but others didn't. Some were successful from the beginning and others blew up multiple times on their way to mastering trading.

JP: Do you think those who had a smoother time becoming top traders, i.e. avoiding blowing themselves up, did more preparation and studying before becoming traders?
JS: I think it's just a difference of approach. Some people have an innate need to apply risk controls and that stops them from blowing themselves up. Whereas other people start out not understanding the risks and have to learn about them on the way.

JP: Reading some of your books such as Market Wizards many of the traders you profiled come over as very conservative in their approach to trading. So for instance they'll typically risk less than 5% of their capital on a trade.
JS: Actually most will risk far less than 5% on one trade. Many risk less than 1% on any single trade. That's true because risk management is such an essential part of trading.

You'll find that the vast majority of top traders have a robust adherence to their risk management strategies.

JP: Why do you think so many people find it so hard to master trading?
JS: Trading involves transactions costs, which includes not only commissions but also slippage, and if you don’t have any particular edge, then the mathematical probabilities overwhelming point to you losing.

Trading without an edge is very much like playing roulette where your chances of winning are less than 50/50. Sure you may have some lucky runs for a while, but you are guaranteed to lose if you play long enough.

Secondly, it's actually worse than that. As Bill Eckhardt who was profiled in New Market Wizards said, people will actually do worse than random because human nature is so poorly tuned to making the right decisions for tasks such as trading.

So to succeed you need to develop an edge. That's not all that easy when everyone else is trying to do the same thing and some of them are among the most brilliant minds on the planet.

JP: Are there big differences between how hedge funds and individuals trade the market (given the former have more resources)?
JS: I don't draw much of a distinction. Hedge funds can develop quite complex systems as can individuals, and anyway hedge funds are made up of individuals.

JP: Technical analysis is a major driver of activity in the forex market – in your interviews with top traders are there any particular tools that keep getting mentioned?
JS: Indicators come up as a key input in very few of the interviews I've done. What does come up repeatedly is chart analysis, which is more of an art than a science. However, these traders don't always interpret chart patterns in the classical sense.

Some of the systems these traders use are fundamental, but I would say most are technical.

JP: I guess it is nearly all technical analysis with the forex traders you've spoken with?
JS: Yes and no. It's common for a forex trader to have broad view of where a currency is moving and then trade in that direction using some technical analysis inputs. Their basic biases on market direction can be informed by fundamentals, such as economics and central bank activity.

JP: What would you advise a novice trader to trade?
JS: I would advise them not to assume any particular trading strategy is right or better for them.

I think it is a matter of personal discovery. Because what works for one person is not going to work for someone else. Some people will gravitate towards fundamentals, others to technicals, and still others to both. Some people will prefer short-term positions over long-term and vice versa. Some people will be more inclined to trade multiple markets, others just one market.

There are a great many possible combinations of trading elements, and people coming into the market first need to discover what's right for them. They can figure that out by reading books, then observing the market and then getting some experience. From there they can develop their own approaches.

But when starting to trade, new traders should start out with very little money, or even paper trade, and then gradually increase their positions as they become successful.

JP: Some people believe you should go straight to trading with actual money because it better replicates the reality of trading than paper trading – what do you think about that argument?
JS: I think you can use both approaches simultaneously. Paper trading lets you take bigger positions and in more markets. With your own money you might be restricted in what you can do because you don't have much capital. The benefit of paper trading is that you can test your ideas out.

But paper trading is not a substitute for trading with real money, because with money on the line you'll be inclined to make different decisions.

JP: Do you think trading longer-term positions is easier than trading shorter ones as some traders have claimed?
JS: My own belief is that if you're doing something like trend following, longer-term systems tend to work better. However, even though longer-term trading systems have tended to do better than the shorter time frame ones, they are harder to live with.

Longer term systems can go through very difficult periods, the whipsaws can be much worse, and you can give back large profits or run up big losses. It's the flip side of the bigger profits these systems tend to generate.

JP: Would you say that most successful traders use trending systems?
JS: No. It's just one style. And systematic trend traders are rarely the ones with the great track records. They may have really high returns in some years and even do well over the long-term, but from the perspective of return on risk they don't make it into the super trader category.

JP: So what kind of systems do the super traders tend to use?
JS: My belief is that those with really superior track records are usually – though there are exceptions – discretionary traders.

JP: Just to define a discretionary trader – that is someone making trading decisions not based on a system?
JS: Yes that's right. They're not using an automated system.

JP: So discretionary traders are people who have become so good that they've gone beyond needing to rely on a trading system?
JS: Actually, I would disagree with that. These are people who have very strong risk management strategies, which helps keep them out of trouble.

Following a system might be a good solution for most people, but it is definitely not a better approach.

I think whether you are a discretionary or systematic trader goes to the heart of your inner personality and using the style that suits you.