Apr

2

 Pain is a subject with which traders are probably familiar. There is psychic pain and physical pain. The amount or intensity of both kinds of pain is not commensurate with the amount of the loss in all cases. There is not a direct correlation between the increasing amount of loss and the increase in the amount of pain. For example, the pain of losing 100,000 is not a hundred times the pain of losing $1000, and the pain does not increase in a linear fashion. The pain of losing a loved one is not 1000 times more painful than losing say $100,000. (multiply amounts for wealthy readers). The pain of a small burn can be as painful as a major illness.

The other curious thing about pain is that it ends and its hard to remember after its gone. Experiments have shown that in time people tend to revert to their mean disposition even after horrific personal losses. Some people can handle pain better than others or recover at different speeds. When one is tired, small things can feel more painful. Pain and sadness are closely related to anger. There are mental techniques to handle psychic pain and effective drugs to deaden physical pain. I suppose one could write a book on the subject.

Sushil Kedia adds: 

Pain is a signal to consciousness or to the mind to search for changing the situation. Those traders who are not experiencing pain up to a level of loss are "willing" to lose that much and will thus have lost that much.

Like all of our perceptions, pain too is relative and there is no absolute measure feasible such as the measurement of temperature. Varying wealth levels or varying risk perceptions will, for one example for traders, bring varying intensity, length or sensitivity to pain.

For another example, in a simple surge-protector the fuse is expected to blow up before "paining" the computer to a point that the computer blows up. Some traders believe their stop loss strategies akin to this surge protector. Others believe their computers can withstand any power-surge, by placing some probabilistic calculations that having a surge protector will increase the probability of a power surge. Different hourses, different courses.

Jeff Watson adds:

The real sad thing is that you can be 100% right and the mistress of the market won't stop flogging you. Need to have my head examined. 

Apr

2

 As was discussed pretty well on this site last summer, the US corn crop last year was hardly bountiful, courtesy of a drought. In Texas, the drought resulted in the base of many lakes being visible as sheets of dried/drying mud, with piers off in the sky above. I assume that the rattlesnakes didn't fare too well either, but as a severe herptophobe, I won't get into that.

It appears that the drought is here to stay for a spell. At some point, even the CPI will record the resulting increase in grain prices.

Russ Sears writes:

While reading about a drought is interesting from a historical perspective, it is a sure way to trade yourself into the poor house. If yesterday's weather is not already built into the grain markets; then the thousands of farmers who experience it and for years have bet the families bread, do not know what they are doing and should pack up and move to town and find work in auto repair, factory work or construction where they can still work with their hands but predicting the future is not part of the job. The joke on the farm is that these articles always start popping up when the local sail boat lake is once again in business and the next 4 days call for 3 inches of rain… as it is here in OK.

Apr

1

Does anyone feel like an idiot when your system encounters a series of losses? I know it is not warranted, but subconsciously I have that feeling and I don't have a good way of getting rid of it. Any advice please.

Apr

1

In trading stocks (and stock index futures) I'm finding most useful to put things in a proper framework, so I can compare apples with apples.

I'm working for a few months with a seasonality framework for the daily changes, within a month.

Taking the last month's close as the "Equator Line", I would divide the month in 3, having, thus:

1: The first third of the month, while above last month's close (LMC);

2: The second third, above LMC;

3: The third and final period of the month, above LMC;
-1: The first third, but below LMC;
-2: The second third, below LMC;
-3: The end of month (3rd third), also below LMC.

What I found is that a daily change of - % or + % has different significance in each of this "seasonality sectors".

One two-day strategy I was researching showed profits only at the -3 (end of month below last month's close).

Some strategies show profits only in sector 1, or 2, etc.

The rationale behind it would be the mutual fund industry, which have to release a monthly report, therefore having the incentive to buy in the end of a bad month, to give a least horrible report, etc.

But I could be lulling myself into error, so I would like the Specs contribution.

Apr

1

 The Family just returned from Florida. One can see a boom or a bust around every corner. On one hand (econ joke) you can see the boom– new real estate projects, Disney full to capacity as of noon. On the other hand the bust– the Space coast Condos at whole sale prices 89k a few hundred meter walk to the most beautiful beaches.

What is remarkable to me is to see and hear of old friends doing the same things as 11 years ago. Yes, the bucket shoppes are back with 50 men screen watching.

I love Florida. My family and friends are there. The weather was a bit cold for a few days, then it was perfect. The Atlantic waves were a blast with the full moon set to the West and the magnificent sunrise over the ocean. What a perfect way to start the day.

After a 12 hour drive into the Nashville rain, with the grass a bit greener, a few leaves on the trees, it is a very late spring here. I asked the wife, FLA? She replied, not a chance. Make some money honey and buy one of those condos with in walking distance and do learn how to surf.

Kudos to Watson and Sogi… what a workout those waves are! One may never forget how to ride a bike, but when it comes to the waves, I put on the towel. Not sure if I'll ever learn. 

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