Mar

26

Nigel 1975For a chessplayer it's part of the job to consider that the opponent will try to test you with the most unpleasant possible line of play. But I suspect there's a problem here for countists in that the main thrust of the thinking is in what happens in a 'typical' case.

Nevertheless we have to consider what the plan is when the market does exactly what you fear the most. Is there a plan?

Perhaps the most pernicious scenario is the margin call that acts effectively as a stop loss. Let's call them margin stops. If considered during tests, margin stops would render a lot of the systems useless in the first place. Might as well be betting on the ponies.

Bruno Ombreux asks:

Isn't it easier to aim for 10% a year, which is achievable with far less risk, and far less work? I mean, at 10% a year for 20 years, one would probably rank high among the top 1% of market participants. And it is incredible what 10% a year can achieve compounded over 20 years if one keep living expenses reasonable in the meantime.

What matters is the end game, isn't it?


Comments

Name

Email

Website

Speak your mind

3 Comments so far

  1. Anatoly Veltman on March 26, 2008 12:42 pm

    There was this crazy idea to go long commodities for a trade this Monday. This contrarian idea (everyone was saying that cross-margin liquidation will last through the end of Q1) was based on hypothesis that commodity crash last week simply and surely followed $ zig-zag. During last week’s run, EUR hasn’t quite reached its long-standing ultimate objective of 1.6180. So it would only be natural for it to back-off the smallest required 38.2% - before the final surge attempt.

    Amazingly: the very same moment EUR turned back up from 38.2% marker at 1.5342, every single commodity futures contract was bouncing off its own precise Fibonacci retracement markers on daily charts. For the CRB Index, it was 38%; for GC, CL, S, GIC exactly 50%; for NG, SI, PL, W, CO 62%; PA, SU 76%; KC 100%.

    So, this was one very rare opportunity to enter long trade with a very tight stop. You see: usually deep pull-backs of 50% or greater result in trend change. So, while you are buying relative value in commodities - you risk placing yourself counter-trend. But this was the case of a small currency zig-zag; so you were protected. Truly rare risk:reward opportunity worth millions, with a miniscule stop that made sense!

  2. George Parkanyi on March 26, 2008 3:49 pm

    Margin stops. Would that be like ground stops in skydiving? :)

  3. Mitchell Jones on March 27, 2008 10:02 pm

    R x g6

Archives

Resources & Links

Search