Slope of Hope Blog Posts

Slope initially began as a blog, so this is where most of the website’s content resides. Here we have tens of thousands of posts dating back over a decade. These are listed in reverse chronological order. Click on any category icon below to see posts tagged with that particular subject, or click on a word in the category cloud on the right side of the screen for more specific choices.

Market Wisdom by Selden (Leisa)

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I wanted to share one of Selden's quotes (there are so many of them that resonate). From Psychology of the Stock Market:

To a great extent we train our judgment to lend itself to our selfish interests. . . We cannot work for our own interests as in other lines of business–we can only fit our interests to the facts. . . To make the greatest success it is necessary for the trader to forget entirely his own position in he market, his profits or losses, the relation of present prices to the point where he bought or sold, and to fix his thoughts upon the position of the market. (p.57)

The EUR Falls to Pieces

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The last time the market began a serious downward turn was January 19th (the downward turn was terminated, as I've cited ad nausem, on February 5th). Prior to that turn, the EUR/USD was shaping up for a meaningful bounce higher. Instead, what looked like a nice saucer formation was punctured to the downside. I've highlighted January 19th below.

0324-eurthen 

Given the state of this market, I try not to offer the bearish side of me much in the way of optimism, but I will point out that we're witnessing a similar move right now, thanks to Portugal's downgrade.

0324-eurnow 

 

I'm making a particular point of this for one key reason – – – I've been frustrated at how disconnected the US dollar's strength has been from equities (e.g. it only seems to work to favor the bulls, and never the bears). But the fact is that, during the last significant EUR tumble, equities quickly "caught up." It'll be interesting to see what happens this time, since we could be experiencing another January 19th now, two months later.

Leadership (by Retracement Levels)

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Group members believe group leaders more than they believe themselves.

It is well known in military circles that the best way to predict an individual effectiveness in combat is his relationship with his sergeant. A soldier who trusts his sergeant/leader will literally follow him to his death.

A trader who believes he is following a 'leader' (i.e. a Secular Bear Market trend in equities) may insist trading that trend, until his account is wiped out.

Let us introduce a friend of us, his name is Joe.

Joe is a nice guy and he's convinced that, at the moment, short-selling is the best thing to do in the Stock Market.

Joe is a bearish trader. He loves to short. In fact, he likes to call himself a 'short-seller'.

Joe
What is Joe's problem?

Well, Joe is convinced that equities in the Stock Market are in a Secular Bear Market (although there is absolutely no scientific way to prove that, but a lot of blogs say we are in a Bear Market Rally,  and many experts says the economy is going bad, and we know the USD is in the shambles, and what about Elliott Waves? Didn't they say we are in a Grand Secular Bear Market Cycle? So, Joe thinks we must be in a Bear Market… or sort of).

Truth is, no matter what the reality is, Joe will always trust his sergeant/leader, the Bear Market trend.

People has been joining groups since the beginning of time. Especially at the origins of the human species, thousands of years ago, a group of hunters with a good leader was  more likely to survive than a lone hunter. That is still true for many animal species, like wolves, lions, etc., but not necessarily for humans, in certain situations, at least.

In fact, the problem with the leader+crowd approach is this: what if the leader is wrong? What if there is no Bear Market? What if we are not in a Grand Bear Market Cycle, but in a Grand Bull Market Cycle?

Boy, that would hurt

Actually it did already… since March 2009.

When we join a group, we act like a child following a parent. But to be successful in trading we must become adults and take our own way. Successful traders are independent thinkers.They are leaders to themselves.

What successful traders have in common are 3 things:

1) a good trading system

2) sound money management rules embedded in the trading system

3) mastership of his/her own psychology (i.e. no fear, no bias, etc.)

Some may want to add this one:

4) they are cheaters

and yes, that is true as well, very often the most successful traders are actually cheaters, using insider information or all sort of tricks to make great gains (just ask some pit trader in Chicago…or shall we mention Goldman Sachs 'sniffing algos'? Don't even get us started…).

Unfortunately trading is basically like trying to rob other people while they are trying to rob you, it's hard business, so we have to accept the cheaters as a part of the game.

Concluding this post, we'd like to borrow the name of a notorious NY hardcore punk band of the 90s, to give a suggestion to all the Joes in the world:

"Kill Your Idols, Kill Your Sergeant, Kill Your Leader".

It will greatly benefit you, as a trader, to decide that you can be alone, out there, into the wild.