Every so often, I get zinged with trades, because of my convictions. Typically, due to asset allocation, methodical positioning, I am able to weather the storm, especially since the market chops a lot.
Here’s what went wrong:
I held onto 40-50% of cash+treasuries for 2/3rds of this run. The problem was not how retarded my TZA trade treated me. I want you to remember, I bought a shrill-load of TNA for a nice run, had the TZA for a nice run etc, several times before this recent foray. Just to put things into perspective: my account was up 250%, now it’s up 125%. It is an experiential account that exclusively trades The PPT mean reversion signals. It got this one wrong, or I misinterpreted it. Believe me, we are working hard to correct this error. For as good and awesome as The PPT is as a tool, I am much more focused on fine tuning the algorithm, so that it can pick up anomalies, such as this recent run. Frankly, our computers have no idea of the insidious nature of QE2. Had this been a “normal” market, I am sure it would have nailed the OVERBOUGHT range.
As we speak, we are developing a momentum algorithm, which will be added to The PPT, when finished, free of charge. More on that later.
My monster mistake was not choking off the VXX damage. I am stubborn, so I cannot say “I should have sold it.” Honestly, there is no scenario, given the recent facts, that would make me take off a downside position. I am emphatic about my beliefs that we will trade lower, in dramatically gay fashion. But, that should not preclude me from picking up trades. Truth be told, I haven’t even looked for ideas, until my recent AKS buy. I cannot remember a time in my career when I was not actively looking for trades. I am embarrassed by that fact and will work to correct my laziness.
Although I wanted the market to go down; I knew it would go up. It’s hard to explain; but I am sure many of you can resonate with that statement.
From here, I will be very active in taking short term trades. Do not expect me to come out of the gates with monster winners. It will take time to get my swing back. But, rest assured, before the turkey is on my plate, I will be back to all-time highs.
Top picks: Chinese Lotto. See me in PPT for details.
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First
Fly
Is
God
Now that I read it… Good post.
Sounds like the Fly is ready to start riding this market again. Looking forward to seeing those new trades in the PPT.
Also looking forward to this new algo, it sounds interesting.
Man, glad to have the happy and contrite Fly back. You Sir are all win! Now lets bank some coin before this whole QE3/POMO thing kicks us in the ballz. We can go live with Jim Rogers.
Awww I hate the Chinese lotto! You cannot trust those fuckers.
Anywho, will this be Danny momo method or do you have other nefarious plans?
Lotto is all the rage. That’s where it’s at. See BORN
Awesome post Fly!
I’m just saying again in case you missed it!
Most everyone on this site is fucked!
You’re beyond dillusional!
When this market finally tanks, it’s going to happen so fast that those fucking tight stops that you think you have in place to protect yourself against any downside won’t even matter because your stock will have a bid that is at least 20% below your stop!
Fuck you all and have a nice weekend!
BANNED
Thank you from the peanut gallery
Sorry but I have Banned myself with Pleasure!
Why would you ban someone as entertaining as IT?
Anyways, I know you hate advice but I have about 10 years on you so I am going to offer some:
In 1996 I had a period of about 6 months where I made over 70 trades and only 2 were winners. It was a time of upheaval, personally, and from this I learned that the way ‘you feel’ can have a profound effect on how you trade. Ever since, if I get three wrong trades in a row I drastically decrease the frequency and the size of the trade. I don’t need to tell you that you should have gotten out far earlier, you already know that. I am of the same belief as you that the market is cooked but I am not willing to give half of my gains pursuing the idea. You know this well but bears repeating; ‘never let your loses get large’ is for certain the best lesson anyone can master. Also one of the hardest one as one’s conviction can be very luring but in trading, very destructive.
I admire your honesty in admitting the size of your loss and I feel bad about it as I think you are the best trader I know. I am sure this loss you suffered will be the best thing that ever happened in your trading career. You will get this lesson and build from it!
BTW, I did suffer with TZA too, as well as fxp!
cheerio
learn to spell, you illiterate wack job.
I kind of liked “dillusional.” Gave it that “everybody’s in a pickle” flavor. And I must be “dillusional” too because I went short AEM a little over $70 and at $74. Pickle me pink. And damn, Fly, you seem too sane and polite in this post. Get back up on that Zarathustra summit, please.
If you really want to be that critical, how about the beginning of a sentence should start with a capital letter you fucking numb nut!
Another malcontent refugee from the zerohedge cult?
Get a grip, dude.
What is about Chinese lotto that are soooo enticing? They look so good until they are like a Mexican city official disapearing before your eyes. Cold blooded killing in broad daylight.
They may be the death of me oneday.
Humility leads to greatness.
Fly — I know it is humble pie is tough and tasteless, but I give you thumbs up for biting into it in public.
I know you’ll nail the next big trade.
Le fly,
It appears you are now “acting” again! how can you be up 125%? please explain..
Only in my personal/aggressive. I’ve nailed every single trade this year, but this TZA one. We were playing TZA/TNA using PPT ranges, flawlessly, all year.
For managed accounts, I am up about 25%.
You, my friend are honest. Hence, i will still watch your plays.
From my perspective of following you for two years: Look where you’re already at in your early 30’s. You have your priorities straight– eg your family, integrity and honesty, and growing a business you care a lot about. You’ve already succeeded at gaining monetary wealth, trading, blogging, putting together and growing an amazing team at ibc,, developing and testing the PPT engine, and teaching by example at least hundreds of people about many aspects of trading and investing.
“it will take time for me to get my swing back” “will work to correct my laziness” What are you talking about?
None of us and certainly not your family or friends want you to burn out by 40. One person can only do so much. Over the last few months you’ve clearly encouraged, coached and helped grow your ibc blogging team–how easy is that to do with you all in different cities and all with other jobs? That alone is making a big difference. You’ve been responsible for your client’s accounts- I can’t even imagine carrying a weight like that. You’ve done what, 3-4 blogs a day? But the thing that stands out the most to me is your ferocious dedication to pushing the PPT engine and its algorithms. If you want to look at what you could have done better, well, ok. But imo, you have made the right decisions for what comes first. Inventors need to invent.
Writers need to write. Entrepeneurs need to create businesses. Traders need to trade. And if someone is gifted at all of those? Well, there you have it.
You’re a class act docteur, and I am very very appreciative to be able to be a member of the PPT, an avid reader of the ibc, and to be taught month after month by you and your team.
Thanks. But there is no excuse for not succeeding. I realize there are levels of success. But, the quickest way to throw away your God given talent is to neglect it. That’s what I did, by sitting on my hands with cash. If I was all in short, I could accept it,since I just messed up. But, having it available to me and not using it is deer in headlights trading. I know better.
Lindsay’s right Fly.. you do a wonderful job that very few could do.. and it’s much appreciated…just don’t push too hard and burn out. Some of us older folks made it this far, in part, because we learned how to take our foot off the peddle every once in awhile.
>>…the quickest way to throw away your God given talent is to neglect it. That’s what I did, by sitting on my hands with cash.<<
This is *SO* not right. Remember what Buffett said about there being no "called strikes" in investing? We've got a market that's about equally balanced being its chances of going up or going down, in that either
a) stable or nominally higher earnings + ZIRP = multiple expansion = higher prices, or
b) sliding dollar + higher input prices with no sell-through pricing power = margin compression = lower earnings = lower stock prices; or the unsettled debt crisis + a possible dollar crash = soaring rates = a stock market crash
So, until prices get either much higher or much lower (hence "de-risking" taking a contrary position) there's nothing wrong with being in cash (for broad-market bets; if you can find non-correlative individual stocks, it's another story).
“There, there” and “It’s ok” don’t belong on this site. Don’t listen to them Fly, you fucked up…go get your swagger then come back and swing it around.
thanks lindsay for your post. since last summer i came across this blog i am addicted to it. even i don’t have time to trade or follow the market, i still can’t resist to make my daily visit to fly’s and his most excellent team’s blogs. maybe someday soon there will be a film based on these guys and all others influenced by this blog.
I’m thinking I see a reality show here. Better ratings then Jersey shore
There is a William Wallace,
whom I am not familiar with,
asking to connect on facebook,
which is fine,
but the only one I know of,
and that is by name only,
is you.
True?
I’ll save you some time…
Momentum safety valve for PPT shorts is to blow out of short position if NDX posts an RSI2 > 99 for 3 consecutive trading days.
just ran the chart- noted and appreciated
Fly,
You are right, texas is not part of america. We are a republic, and have been for over 150 years. Its the passion we have for our republic. We would shead blood for her, and we died protecting it once before. But its ours. We can split into five seperate regions that are bigger than a lot of states. And no jibes about ancient history! We still feel the same today as our heros of old, their spirit lives on, and yes, i am proud to be texan.
@The Fly…..given your current level of frustration, our ears would be burning right now if the Dow was below 10,000. But, since you made a vow to refrain from using “colorful” language until we are 1,000 points lower from here, you are to be commended. It’s to be expected that we’re all going to be wrong at various times along the way. Just don’t stay wrong. You made the needed adjustment and are moving on.
If I could pass on one bit of market lesson I’ve learned over the years, it is that we will never feel 100% that the timing is right, or the set ups are perfect, or we have enough information to trade or invest. It’s the nature of the game. There will always be uncertainty, there will always be conflicting data, opinions, arguments, etc. We are imperect people, dealing with an imperfect market, in an imperfect world. So, we all need to cut each other some slack and quit expecting perfection…… from others, and even ourselves.
The key is: don’t beat yourself up. The market will do that for you. Keep taking the risks, keep learning, keep adapting, and with a lot of dedication and hard work, and a little luck thrown in, you will thrive.
My sense is that you as well as the rest of the bloggers already know that, but I share that for the benefit of your general audience, aka “the unwashed”. as you say.
Agree w/ Chinese Lotto.
Mine started screaming 2 weeks ago after some egregious downside. It was gay and so is this engineered Chicom rally but fuck it – that’s how they roll.
Apocalypse is only just beginning – BAC now halts foreclosures in all 50 states, while WFC still fails to understand the problem: http://www.nytimes.com/2010/10/09/business/09mortgage.html?_r=1
Get Braveflaps!
Gotta be an SKF or FAZ-mobile ride coming here at some point.
Wait for it.
Dollar: 97% Bears, 3% Bulls. That’s, a crowded trade
Ya think G7, G20 this weekend will be Kum-bay-ya this time?
Check out HOGS…another BORN
Me so horny. Love u long time.
Don’t overfit your models, my algorithms were wrong several times this September and had it’s largest deviations for the past year in this month for me as well. I chalk it up simply to POMO buying that is unnatural and outside the scope of many models (as they are buying by decree and not logical supply-demand). I personally consider the move on 9/14 and 9/21 anomolies, we shall see if the Fed keeps doing shit like this to make it necessary to account for it somehow (I hope not)…
Overfitting is usually bad news, unless you saw something unique/interesting in the data in the past month. Being wrong once every so often is fine isn’t it?
In this new meal deal (if it is actually new), perhaps having a special POMO warning indicator would be worth fitting in? Could tailor it to something like the Homeland Security color-coded threat level. It’s really been gay doing some profit taking / selling in front of these only to rebuy on the burst and miss some gap movements.
Excellent advice mudkips.
I’ve sent Flyseph an email and am suggesting a method that will have him scaling back position size as the market becomes more stretched into abnormality, rather than a binary approach.
Glad to see you back in the swing of things. Can’t wait to see what you have in store in the coming weeks.
Happy Canadian turkey weekend!
I look at trending vs. oscillating market in 4 ways: average 50d historical volatility, average 50d gaps, average 50d candlestick length and average 50d ATR. I then look if these values are falling or rising. Right now they’re falling which tells me that we’re in a trending market and that overbought signals might not work.
Very cool Phil. Where do you get your stats on gaps?
It’s actually not really gaps, just the absolute value of today’s open minus yesterday’s close.
It’s pretty simple, really….i don’t know that you need to program the algorithms to recognize this situation, since it is such a rarity. Those trading the signals just need follow a simple rule — don’t fade the fucking fed when they are talking about flooding the system with trillions of dollars. That’s pretty much it….
I’ll be following that rule from now on. Maybe hedge or take exposure off during overbought cycles, but too risky to go outright short.
…… “Although I wanted the market to go down; I knew it would go up. It’s hard to explain; but I am sure many of you can resonate with that statement.”
You got that right!
Yeah, that VXX position is my biggest loser on my books, and, like you, I still think this market has to go down. But we know the saw about how long it can stay irrational.
What I don’t understand, Fly, is why you think that lower taxes will fix what QE2 cannot. We need a flatout 200 billion infrastructure program in this country… Have you ever been to an airport in China or Singapore. We live the bush, here, mon! We have been left behind, and the rest of the world is starting to wise up to it. Appearances need to be kept up, because perception is quickly becoming reality. All it takes is one look out of my NE corridor train window on my morning commute and the endless row of rotting factory carcasses to see why the jobs aren’t coming back.
Fly, I’ll check inside the PPT again,
but if I recall, the last time you bought some Chinese Burritos,
you got burned and exited fairly quickly.
I was amazed at the run FUQI made yesterday,
a company about to be delisted on the NAZ if it doesn’t restate Q1 earnings,
up 1.81 on no news that I could find.
Except at some time this month it will restate publicly.
It could drop a buck or more on Tuesday as well, who knows with these chimichangas.
Such candor from our bodhisattva is refreshing. As we all know, water that is too pure has no fish. So, a weekend to refresh, sip some marc from dirty juice glasses, be continental puffing Gauloises and gamboling with nature’s most powerful antidepressant, a bearded taco. AKAM and RAX shall ride again!
I think part of the fact that the market is going up when it should be going down, is due to expected inflation. It’s being priced into the market.
Whether or not this is part of your new “momentum” algo is up for grabs. Not sure how you would code such a thing, anyway – that could easily take you a year to figure out.
Check out Tom DeMark’s indicators that identify trends that are overbought our oversold. You may find some worthwhile ideas there… though you would need to customize this to take into account inflation somehow.
Thanks Dr. ’nuff said.
we are going higher….
Fly, I like your style. You’re honest and a thinker, with a sense of humor to boot. I’m new to reading your blog but am very much enjoying your posts.
What we can expect is a series of uncoordinated interventions into currency markets that will increase market volatility.
The Fed will continue to use monetary stimulus as if it were Viagra. Even though it works on the short term, it will eventually lead to the erection of capital and/or trade controls. The bond bubble will eventually burst… That’s the big if, and when TZA and TBT will in bed for more than a one night stands.
Human After All-Daft Punk
If we all made perfect trades, then who would be a loser?
Fly were you looking to sell tza if and when the dow breaks through 11k.
Because you are thinking we break out from here to the upside.
Apocalypse hasn’t started yet. One day people will realize the system failed a long time ago, and they’ve been living in a dreamland. Back to the basics.
Banned!
Too much credit is being given to QE2. We’ve had Zirp for a long, long time. Zirp + a little more Zirp was not the reason for this rally. The reason was the republican poll numbers. Once “Real” unemployment reached near 20%, there was literally nothing The democrats could have done to save their poll numbers. And, real unemployment has been near 20% since spring. This is the main thing that kept me extremely light on shorts, until the last week. Even as of now, i keep scaling in and out of swing shorts–because its very hard to judge the effect of a republican sweep of congress.All the technical signals in the world couldn’t predict the emotional effect of a pending congressional sweep. Which is exactly why you always need to add fundamentals to technicals.
I’ll be waiting for the day when people figure out that we are flat out screwed to the wall and the Repubs can’t get us out of this jam painlessly either. Theeeennnnnn the excrement will hit the air moving device in a bug on the windshield kind of way.
No indicator will ever replace skill and hard work
I still think working on one is a waste of time
Ta
Tell that to my account statements
That’s your superior skill
all due respect FLy. Love your blog, but where is everybody Chivas,DevilDog, Cash4Guns,Chart Addict,Henry,ect,ect…
You got a bunch of Don Harrolds rejects posting……Panama banana haha
everybody been banned? hope not
easy there, pal
Im not a populist, or a permabear.
i took alot of heat for calling euro 1.40, and EEM at new yearly highs for this autumn–back in late May.
As far as henry fool, he was last spotted in the basement of the IMAX
http://www.youtube.com/watch?v=seEchnfpdyc
Chivas pops up every now and then. I do miss the ‘ole DD though.
Not sure where I’m going with this but I’ve had this thought floating around in my head since the market started to reflate (sic?) Basically it is this……………
What is the ratio of how much equities have gained vs how much value the greenback has lost since the start of this runup? Could it be said that the market is merely reflecting the dollar getting shit canned as opposed to companies actually increasing their value? If the ratio is 1:1 then are stocks worth chasing in the first place?
My financially puny, inquiring mind want s to know.
Since Sept 1, the Euro is up 8.9%, the S&P500 is up 7.9% and oil is up 12%.
So what is (for this neophyte) THE indicator that would show the actual debasement of the dollar? My gut tells me that comparison to other currencies may not be accurate as they are being manipulated one way or another also.
And back to the crux of the issue, at least in my mind, are the companies posting higher prices actually increasing in net worth or is something else going on?
I keep thinking about earnings and how much is actual production vs inventory drawdowns. Those are nearly at an end I would think judging from what I see on the shelves of the places I visit connected with construction and building repair and maintenance. No one has anything in stock.
I have banned close to 1,000 people. They are no longer welcome at court.
The only court you belong is the food court
Banned! 1001!
Coincidence ??? Maybe !!!
But … maybe not !!!
—–
Fly goes on well deserved vacation with family !
Fly eats copius amounts of yummy seafood fare … with family !
Fly sees the sites … with family !
Fly (remotely) “blogs” back to iBC … while on vacation … with family !
Fly eventually RETURNS from vacation … with (aforementioned) family !
NOW …
Seemingly … no sooner is “Fly” … BACK … from vacation with (aforementioned) family …
…he departs again to Cali (the West Coast} … where he continues to “blog” … remotely !!!
Fly does “whatever” in Cali … for some days …
Eventually … he returns “home” !!!
—
The Point:
It’s difficult ENOUGH to stay in sync with “The Market” when you are engaged … constantly !!!
To do so when you are “out of your routine” … is a bit MORE of a challenge !
Of course … Nicolas Darvis (How I Made 2,000,000 in the Stock Market) … “claims” to have done so … back in the 60’s while traveling the World … and by just reading stock quotes in the paper …
… nevertheless …
In THIS “Market” … it is very difficult !
Just sayin’ !!!
.
Love your AKS trade. The timing seems perfect.
Yea … I took that one too