Sobering look at the price of oil and it’s effects on pockets of US employment.
[quote]Dr. Pangloss wrote:
Interesting article, Aragorn. Essentially, Russia is saying, “Our economy is so bad, we can no longer hold our foreign reserves in dollars. Instead, we need to repurchase rubles to deposit into our domestic banks in order to keep them afloat.”
When Russia did hold their fx reserves in dollars, they didn’t just stuff them in a mattress, they invested in US assets, mostly Treasuries. This had the effect of pushing down the interest rates the US gov’t had to pay on those Treasuries.
A few observations: Zerohedge (God bless 'em) is the Chicken Little of the financial press. I stopped reading it regularly when they were positively giddy over the Fukushima meltdown and it’s effects on the Japanese markets. Their general viewpoint seems to be that they would like nothing more than for every asset to go to zero.
Second, Russia is not converting it’s dollars to Rubles from a position of strength. They had tried this before and even during the 2007-2009 financial crisis, people wanted to hold dollars more than nearly any other currency. Russia’s economy is in desperate straits.
Lastly, if not the dollar, then what? If you’re a Central Banker, what are you going to hold your reserves in? Euro? It’s at decade lows and the ECB is looking to ease further. Yuan? No one trusts the Chinese, their financial system is shrouded in fog. Gold? No.
The fact is, %62 of the world’s central bank reserves are held in dollars. The next 4 are euro, yen, pound sterling, and Swiss franc. Yesterday would have been a great day to hold Swiss Francs; today, not so much. Additionally, no other country is prepared to start unwinding their easing like the US. Higher US rates will only serve to make US investments more attractive to the rest of the world.
Interesting fact: the ticker tape symbol for the Swiss Franc is CHF, an abbreviation of the Latin name of the country, “Confoederatio Helvetica” or Confederation Helvitica. The Helvetii were a Gallic tribe or tribal confederation occupying most of the Swiss plateau at the time of their contact with the Roman Republic in the 1st century BC.
[/quote]
Great to get your impressions. I know zerohedge is a sensationalist site, or at least the majority of their articles I’ve ever read have left me feeling that way, but I simply don’t know enough about the markets to determine what is bearish but reasonable, and what’s Chicken Little. Give me fitness, nutrition, genetics, biochemistry. Philosophy, history, all the rest…financial markets are like gibberish to me and I have no way to guage my sources.
I don’t mean that I don’t understand the concepts behind economy, but that I literally can’t follow the intricate ins and outs of high level market analysis because I dont have enough experience with it lol. I was able to follow the point about Russia as well as their Game Theory analogy.
I’m aware of the Helvetii actually, its a fascinating period in history for me and an interesting if tragic story pf their losing war against Rome. In fact, one of my favorite metal albums is a concept album following the war between the too. Interesting musical blend.
Some recent market headlines:
China’s growth slows to weakest in 24 years.
Bank of Canada cuts rates, C$ falls to US 80 cents (18 months ago it was at par).
Alberta mulls sales tax to make up for lost oil revenue.
BP head says oil prices could stay low for next 3 years.
ECB expected to start purchasing gov’t bonds on a large scale.
Greek brain drain: Young, gifted and Greek: Generation G – the world’s biggest brain drain | Greece | The Guardian
- %2 of the population has left the country, mostly doctors, professors, and engineers.
[quote]Dr. Pangloss wrote:
Some recent market headlines:
China’s growth slows to weakest in 24 years.
Bank of Canada cuts rates, C$ falls to US 80 cents (18 months ago it was at par).
Alberta mulls sales tax to make up for lost oil revenue.
BP head says oil prices could stay low for next 3 years.
ECB expected to start purchasing gov’t bonds on a large scale.
Greek brain drain: Young, gifted and Greek: Generation G – the world’s biggest brain drain | Greece | The Guardian
- %2 of the population has left the country, mostly doctors, professors, and engineers.
[/quote]
What do you think of the combination of China’s weak growth and sub $40/barrel oil means?
And who do you see blinking first, the Saudis or the frackers?
Can I play the optimist for a moment?
[quote]Dr. Pangloss wrote:
Some recent market headlines:
China’s growth slows to weakest in 24 years.
[/quote]
Do you think this is a legitimate concern, or headline grabbing fear-mongering? Growth was 7.4%, just below the Chinese government target of 7.5% growth at the beginning of 2014. Most forecasts also predicted 7.5% early last year. Even the 7.5% growth would have been the lowest in 24 years.
Forecasts in October were predicting Q4 growth of 7.1-7.2% and full year growth of 7.3%, so the Q4 numbers were actually a slight surprise to the upside.
How much of the drop in CAD is due to a strengthening dollar, and at what point does a strong dollar become a negative?
Maybe a better question would be is the dollar gaining because of strength in the US economy or weakness elsewhere?
There’s also whispers hear of an increase in the US gas tax. I don’t expect it to happen with a Republican congress, but it may be worthy of discussion. I guess this leads us back to the original topic, are falling oil prices more good or more bad?
ECB announced $60B a month through 9/16. I don’t like QE from a principle standpoint, but I’m not so naive to believe that government does have the potential to help. I think the jury is still out on the net effect of QE.
Not good for the Hellenic nation, but if these people can go elsewhere and be more productive, wouldn’t that be a positive for the world?
7%+ growth is phenomenal.
Is the ECB trying to mirror the Fed now? I think they need more then just a bond buying stimulus…
[quote]tedro wrote:
Do you think this is a legitimate concern, or headline grabbing fear-mongering? Growth was 7.4%, just below the Chinese government target of 7.5% growth at the beginning of 2014. Most forecasts also predicted 7.5% early last year. Even the 7.5% growth would have been the lowest in 24 years.
Forecasts in October were predicting Q4 growth of 7.1-7.2% and full year growth of 7.3%, so the Q4 numbers were actually a slight surprise to the upside.[/quote]
Demand out of Asia is the prime mover of oil prices on the demand side. I’m less concerned with Q on Q changes than Y on Y, or 2010 v today. Long term trends determine production decisions, not Q on Q changes.
[quote]
How much of the drop in CAD is due to a strengthening dollar, and at what point does a strong dollar become a negative?
Maybe a better question would be is the dollar gaining because of strength in the US economy or weakness elsewhere?[/quote]
I understand your question, but it’s a bit flawed. Currencies don’t rise of fall in absolute terms, they rise and fall relative to some other currency. So, the relative strength of the US economy (or the relative weakness of foreign economies) is causing the dollar to rise vis-a-vis other currencies. The US is lucky in that we have robust domestic demand; we’re not as dependent upon exports as countries like CHF and Canada are. That being said, I would expect to hear some chirping out of the export sector, especially heavy machinery, soon.
[quote]
There’s also whispers hear of an increase in the US gas tax. I don’t expect it to happen with a Republican congress, but it may be worthy of discussion. I guess this leads us back to the original topic, are falling oil prices more good or more bad?[/quote]
I believe falling energy prices are a net positive for the US.
I don’t disagree with you here at all.
[quote]
Not good for the Hellenic nation, but if these people can go elsewhere and be more productive, wouldn’t that be a positive for the world?[/quote]
I just thought it was interesting that 2,500 Greek doctors descended on Germany last year and were welcomed.
[quote]Dr. Pangloss wrote:
FRANCOGEDDON!!!
Biggest currency move I’ve seen in 20 years. The Swiss Central Bank unpegs it’s currency from the Euro.
http://www.reuters.com/article/2015/01/15/us-swiss-snb-cap-idUSKBN0KO0XK20150115
I haven’t heard any concrete horror stories yet, but one of my closest friends bought 30 Swiss on the close yesterday. If he held them overnight, depending on where he got out, he’s looking at a $650k - $800k winner.
Not bad for a day’s work.[/quote]
wait what? he made over a half a mil from buying 30 swiss franks?
Thirty contracts, which is 3,750,000 Swiss Francs.
Tied up $67,500 in overnight margin, but that’s not really a concern.
squating bear, I don’t know if you’re still following this thread but check out this Chicago-based start-up: https://www.dough.com/
They’re doing some really innovative stuff, both with their front-end and by allowing you to follow traders in real time.
[quote]Dr. Pangloss wrote:
squating bear, I don’t know if you’re still following this thread but check out this Chicago-based start-up: https://www.dough.com/
They’re doing some really innovative stuff, both with their front-end and by allowing you to follow traders in real time.[/quote]
Big thanks, that seems extremely helpful. Watching them for an extended period of time could make a huge difference.
[quote]Dr. Pangloss wrote:
Thirty contracts, which is 3,750,000 Swiss Francs.
Tied up $67,500 in overnight margin, but that’s not really a concern.
[/quote]
Do you know what would have happened to a little guy with a small account that had a losing trade on that type of move?
The price ripped down in less than a second and went right through people’s stops. Could someone wind up owing way more than there account balance by being on the wrong side in this type of situation? I didn’t think Forex could gap like that until I saw this
[quote]squating_bear wrote:
[quote]Dr. Pangloss wrote:
Thirty contracts, which is 3,750,000 Swiss Francs.
Tied up $67,500 in overnight margin, but that’s not really a concern.
[/quote]
Do you know what would have happened to a little guy with a small account that had a losing trade on that type of move?
The price ripped down in less than a second and went right through people’s stops. Could someone wind up owing way more than there account balance by being on the wrong side in this type of situation? I didn’t think Forex could gap like that until I saw this[/quote]
Absolutely, you can owe much more than there entire account is worth. Margin on 1 swiss contract was $450. The move from top to bottom was worth about $27,500.
If you were short swiss, your broker would blow you out of the position and if you didn’t have $27,500 in your account, ask you to make up the difference. If you refused, they would pursue legal action against you.
[quote]Dr. Pangloss wrote:
[quote]squating_bear wrote:
[quote]Dr. Pangloss wrote:
Thirty contracts, which is 3,750,000 Swiss Francs.
Tied up $67,500 in overnight margin, but that’s not really a concern.
[/quote]
Do you know what would have happened to a little guy with a small account that had a losing trade on that type of move?
The price ripped down in less than a second and went right through people’s stops. Could someone wind up owing way more than there account balance by being on the wrong side in this type of situation? I didn’t think Forex could gap like that until I saw this[/quote]
Absolutely, you can owe much more than there entire account is worth. Margin on 1 swiss contract was $450. The move from top to bottom was worth about $27,500.
If you were short swiss, your broker would blow you out of the position and if you didn’t have $27,500 in your account, ask you to make up the difference. If you refused, they would pursue legal action against you.
[/quote]
Craziness, that’s what I thought
In futures, stocks, or options your risk is defined on anything other than a naked call or shorting the underlying. In Forex your risk is never really defined since trading is effectively long one currency while shorting another - it could gap right through everyone’s stop at any second, tho rare*
Is this right? Is there any way to do defined risk trades in Forex?
- I know a move this big is extremely rare, but how about smaller gaps from news events? I didn’t think FX gapped except on the weekends. Does it regularly gap on news?
[quote]squating_bear wrote:
Craziness, that’s what I thought
In futures, stocks, or options your risk is defined on anything other than a naked call or shorting the underlying. In Forex your risk is never really defined since trading is effectively long one currency while shorting another - it could gap right through everyone’s stop at any second, tho rare*
Is this right? Is there any way to do defined risk trades in Forex?
- I know a move this big is extremely rare, but how about smaller gaps from news events? I didn’t think FX gapped except on the weekends. Does it regularly gap on news?[/quote]
Saying that you’re risk is defined on futures, short options, and fx is a bit silly in that you’re trading all of them on margin and you’ll be blown out long before some theoretical limit is reached. They all can go up enough to blow out your shorts and down enough to blow out your longs. The idea that somehow you’re protected because a long stock position can’t go negative is ridiculous.
In FX you’re risk is as defined as any other market; I’m not sure why you think it wouldn’t be? Sure, when you buy swiss you’re also selling dollars, but when you buy IBM, you’re selling dollars as well.
FX gaps all the time. It gaps on foreign news, domestic news, Fed announcements, fundamental news…it moves like any other market. If you put up $4500 for one swiss contract, at $12.50 a tick a 360 tick move will wipe out all your equity in the trade.
The only way to define your risk in any market (except long options) is to use stops and stops get blown through all the time. I’ve seen stops get filled 200 ticks worse than the trigger price.
Edit: Two posts above, I should have said margin was $4,500 not $450.
Dr.P,
When looking into day trading do financial goals play into how hard it will be i.e research, time commitment?
Every time this threads pop up here and on other boards people mention the potential for large earnings as well as people they know making big moves. However, if one had a goal of making 3k a month would things be different or is it more about how much you have to play with to begin with?
Hope that made sense.
I’m not sure I understand exactly what you’re asking, but I’ll try and answer as best I can and you can clarify later.
I think having a goal of 3k a month is terrific. It’s how I taught my traders to start. A tick in the euroFX contract is $12.50. Try and make 2 ticks a day, then after you can do that for 2 weeks, try and make 4 ticks a day. Once you can make 20 ticks a day ($250), then try trading 2 contracts at a time rather than just 1. Done right, it’s a long, slow process. What’s important is that you 1) are consistently positive, even if that means making $50/day 2) you don’t have losing days that exceed 2.5x your daily goal, and 3) you follow you’re trading rules, whatever they may be.
Small, realistic goals are not only desirable, but they’re necessary for the learning process. This is so important and people ignore it, especially if they have a lot of money in their account. I had nearly 30 guys trading for me and I kept all of their accounts at or near $0. The reason is, is that people trade differently when they have $100,000 in their account vs when they have $10,000 in their account. Your experience dictates the size of your trades, not the size of your account! If, after your first week, your favorite uncle passed away and left your $1,000,000 to trade with, there is no reason why you should trade larger size or more contracts per trade. Let your experience be the guide.
I hope I addressed your question, which seemed to be, does small daily goals or a small account affect your eventual success. I would say yes, but only is a positive way.
What will affect your success as a new trader is trading part-time. The markets are like a book. How much are you going to get out of the book if you only read every eighth page? How about compared to someone who’s reading every page? Now, technology has helped tremendously in this regard. It used to be you would put in an order to enter the market, then you had to manually enter an exit point and a stop. My professional software will handle all of that automatically, I don’t know if retail software can. If so, and you’re not trading frequently, it would be great to enter an order to buy the euroFX at 113.00 then when you’re filled, have your computer automatically enter a 113.50 sale oco 112.75xxx.[1] So, if you’re trading strict technicals or a system and you can automate it, you can get away with trading part time. If you’re trading is more discretionary, you need to put in the time like any other job. Markets are moving 23 hours a day, it’s not realistic to limit yourself to the hour before you need to go to work and expect to be successful [2].
Lastly, I share the stories about guys making killings because those are exciting. No one wants to hear about the guy who came in, traded well, and finished the day up $450. However, I know 100 guys who do just that versus the handful of people I know who’ve made 7 figures in a day.
[1] oco stands for "one cancels the other and refers to a contingency order. In this case, if the market goes up to 113.50 the sell order will be triggered and the stop order below will be cancelled. xxx is the notation for a stop. A stop is a sell order below the market (or a buy above) that is typically (%90) used to exit a losing position.
[2] it really depends on what your idea of success is. Maybe you want to try and make $50 and that’s it. If so, then that’s what you should be working towards. If your goal is to trade as a profession, I can’t imagine doing it while also holding down another full time job. There is no worse feeling than dropping a months salary in a day on a losing trade. It’s awful.
[quote]Dr. Pangloss wrote:
In FX you’re risk is as defined as any other market; I’m not sure why you think it wouldn’t be? Sure, when you buy swiss you’re also selling dollars, but when you buy IBM, you’re selling dollars as well. [/quote]
I can see the comparison with IBM, but no broker would be coming to you to cover your short. Actually, I’ve never thought of it like that. I didn’t ask that question well.
So in my case my broker has approved me for margin trading for stocks. But it is not a lot of leverage. I put up half and they put up half. So if I completely blew out the account, I could owe them their half - which would be what my previous account balance was. So my question was stupid because I know other people have more leverage, and they can owe more than their account balance. I believe daytraders have 4:1 leverage, so they could owe 3x their account balance, I think.
With FX tho, it is unlimited?
This matters to me for the same reason that I’m trying to learn with a small account
[quote]
FX gaps all the time. It gaps on foreign news, domestic news, Fed announcements, fundamental news…it moves like any other market. If you put up $4500 for one swiss contract, at $12.50 a tick a 360 tick move will wipe out all your equity in the trade. [/quote]
Thanks, I guess I just haven’t looked at enough stuff on a small enough timeframe to have noticed. The smallest timeframe I look at is 30 min candlesticks and I’ve seen the shape of the candle change very quickly sometimes, but I have only just now considered that you might be looking at a 5 sec candlestick chart or something and maybe you see gapping all the time. Like I said, I lack perspective - to me gapping is this terrible thing that happens in the morning very often
[quote]
The only way to define your risk in any market (except long options) is to use stops and stops get blown through all the time. I’ve seen stops get filled 200 ticks worse than the trigger price. [/quote]
For me, so far, I have only had my stops get blown through in the morning if the market opens lower than my stop. Having the market actually move so fast that my market order cant get filled is a whole new concern to me - I only learned that was possible because of this Swiss move recently
There are many options spreads with defined risk (they do all contain long options). I don’t consider myself ready to do stuff with unlimited risk, I’m almost only doing options spreads. But for example instead of a naked call I could sell a FEB 50 call and buy a FEB 80 call. My risk is limited and it would act similar to a naked call if the 80 strike was significantly OTM. I wouldn’t risk that much on a single trade yet, but conceptually I like defined risk as a beginner. Also I believe defined risk options spreads can be done in a self directed IRA, something I was considering someday
[quote]Dr. Pangloss wrote:
I’m not sure I understand exactly what you’re asking, but I’ll try and answer as best I can and you can clarify later.
I think having a goal of 3k a month is terrific. It’s how I taught my traders to start. A tick in the euroFX contract is $12.50. Try and make 2 ticks a day, then after you can do that for 2 weeks, try and make 4 ticks a day. Once you can make 20 ticks a day ($250), then try trading 2 contracts at a time rather than just 1. Done right, it’s a long, slow process. What’s important is that you 1) are consistently positive, even if that means making $50/day 2) you don’t have losing days that exceed 2.5x your daily goal, and 3) you follow you’re trading rules, whatever they may be.
Small, realistic goals are not only desirable, but they’re necessary for the learning process. This is so important and people ignore it, especially if they have a lot of money in their account. I had nearly 30 guys trading for me and I kept all of their accounts at or near $0. The reason is, is that people trade differently when they have $100,000 in their account vs when they have $10,000 in their account. Your experience dictates the size of your trades, not the size of your account! If, after your first week, your favorite uncle passed away and left your $1,000,000 to trade with, there is no reason why you should trade larger size or more contracts per trade. Let your experience be the guide.
I hope I addressed your question, which seemed to be, does small daily goals or a small account affect your eventual success. I would say yes, but only is a positive way.
What will affect your success as a new trader is trading part-time. The markets are like a book. How much are you going to get out of the book if you only read every eighth page? How about compared to someone who’s reading every page? Now, technology has helped tremendously in this regard. It used to be you would put in an order to enter the market, then you had to manually enter an exit point and a stop. My professional software will handle all of that automatically, I don’t know if retail software can. If so, and you’re not trading frequently, it would be great to enter an order to buy the euroFX at 113.00 then when you’re filled, have your computer automatically enter a 113.50 sale oco 112.75xxx.[1] So, if you’re trading strict technicals or a system and you can automate it, you can get away with trading part time. If you’re trading is more discretionary, you need to put in the time like any other job. Markets are moving 23 hours a day, it’s not realistic to limit yourself to the hour before you need to go to work and expect to be successful [2].
Lastly, I share the stories about guys making killings because those are exciting. No one wants to hear about the guy who came in, traded well, and finished the day up $450. However, I know 100 guys who do just that versus the handful of people I know who’ve made 7 figures in a day.
[1] oco stands for "one cancels the other and refers to a contingency order. In this case, if the market goes up to 113.50 the sell order will be triggered and the stop order below will be cancelled. xxx is the notation for a stop. A stop is a sell order below the market (or a buy above) that is typically (%90) used to exit a losing position.
[2] it really depends on what your idea of success is. Maybe you want to try and make $50 and that’s it. If so, then that’s what you should be working towards. If your goal is to trade as a profession, I can’t imagine doing it while also holding down another full time job. There is no worse feeling than dropping a months salary in a day on a losing trade. It’s awful.
[/quote]
Awesome.
To follow up is it easier to make small amounts of money $50-$100 a day? Using the ticks as an example you mention working up to multiple contracts. If I had a goal of just working up to 5 daily ticks how hard would that be compared to 10?
- I hesitate using the word easy because, I do not want to give the impression I think trading is a get rich quick scheme.