Smoking The Corn Cob Pipe

Okay, I'm long Corn. Based on my current trading style, I'm probably long, flat, long again -- it's going to breakout! -- no I'm selling, there is a correction coming. In any case, I'm smoking the long agriculture trade. And it smells good, shall we say. What is there not to like? People need to eat, as do pigs and normal cow types (grass-fed types taste horrible and are not long for this world), and the dollar is going down. Corn, being denominated in dollar terms, will go up when the dollar goes down by simple default. If the dollar is worth less, then Corn must be worth more.Think of it this way. You want to trade apples to my corn and all of sudden your apples got smaller because of some Willy Wonka shrinking machine. Well, guess what? I need more of your small apples, please, to buy my corn.

Of course, the lower dollar is not the only part of this thesis. There is the demand for corn issue as well. And the fact that China needs to drop beef futures with higher Corn prices so it can buy its "quote" -- future beef -- at discounted prices.

Eventually, Corn will come in. But for now, we must smoke. Yee Haw, indeed.

Mind Your "Quote" -- Ps and q's

There is an important issue one must consider when trading foreign currencies, and that is whether or not to capitalize the noun in a tweet. Do you say Dollar or dollar? How about Yen or yen? It gets even more interesting when you throw Franc/franc, Pound/pound and Euro/euro into the discussion. Well for the record, the 16th edition of Chicago Manual of Style prefers the lower case. Surprised? You shouldn't be if you're paying attention and read the Wall Street Journal, Bloomberg or Forbes (actually, nobody reads Forbes but I needed a third reference for the sake of uniformity).

Minding your pints and quarts is an important matter when drinking in the old days. And as a trader, you should also be mindful of capitalization. You see, capitalization is important amongst trader types. It's also important to be observant. Because in the end, your edge is your ability to observe.

Learning From Losers

Traders will typically approach a large loss in one of two ways. First is the dumb way, and that is to become a petulant whiner and throw a fit. Next is the more-constructive way, and that is to use the loss as a means of developing as a trader and to "quote" -- learn from your mistakes. But there is a third way. And that is to view the loss as the cost of information.

I don't mean the cost of doing business per se. This is not typically associated with large losses. Small losses, yes. Because to make money you have to lose some along the way, as casinos do every day.  And not the cost of tuition where the market charges a fee to school us. No, I mean information.

Instead of asking yourself about where you placed your stops and getting all personal about the whole thing, ask yourself what happened. Why did the market move the way it did? If you haven't suffered a capital depletion, you are not likely to demand an answer and more likely to throw off the question with a wave of the hand and a shrug. "Who knows, who cares. I only play odds."

Markets are a beast and if you want to play with them, you'll have to be careful. Wear protective goggles and gloves. If you want to tame them though, you'll need to wrestle with them. And sometimes you lose some body parts along the way. 

Loser Cabaret

Samurai Chopped

Initially, I was playing small with the Euro/Yen cross with a bias to the downside. The hapless Kan government puffing about intervention but doing nothing about it was perfect. And with Greek issues unresolved, the table was set for a move in my direction.

But then the BoJ does the unthinkable. They intervened. What? Are you crazy? Well, after realizing a how silly this was I piled on. Twice. With my cost basis at 108.30, I went to bed comfortably. Waking up was a little rough though after I saw 111.00 being printed. Okay, don't panic. It will come in.

It did come in for a few hours, but then up again it went. I called my broker to find out when they would liquidate my position for me. This is a good sign. Actually it's a bad sign, but it's a telling sign. In the end, nobody was going to fix this blown up trade but myself. I closed it for a 280 pip loss.
 
I will be spending the remainder of the year trading small. Hopefully crawling out of the abyss I put myself into. I'm still trying to figure out how many fingers I have left after trying to catch a falling samurai sword.

Year-to-Date my forex trading is still up, but my style of trading yields wild drawdowns and dizzying runups. It's a small isolated portion of my entire trading portfolio. YTD return now stands at 95%. You don't want to even know where it was just last week.

Who Milks Your Cow

Humpff. 

The Compleat Trader

Traders are always fishing for new ideas and that can lead to trouble, but it can also lead to the discovery of a new lifetime pursuit, the pursuit of comprehensive knowledge. There is a general fear and loathing in trading when it comes to "quote"  -- thinking too much. We are admonished to keeps things simple and to not muddle our minds with too much, lest we lose our way.

Instead of saying "I don't trade options because they're too risky and I don't understand them" why not say: "let me explain how an Iron Condor is basically a long butterfly with an embedded short box." Over a nice cup of tea. Yes, that would be better. And let's not run from technology and the underlying mechanics of how it works. Yes, I'm talking about programming, every traders love-to-hate topic. There is no glory in being a Luddite during this extraordinary time of technological advancement.  The aw-shucks I'm just a stupid trader who makes millions of dollars playing dumb is so passe. That shtick has lost its luster, shall we say.

Don't cringe when someone says "contango" but teach the definition and the information it contains to your children. Embrace statistics. Learn how bonds are valued. Investigate how central banks influence their currencies and why. Explore how behavioral finance has turned Efficient Market Hypothesis on its head.

It doesn't hurt to be comprehensive in your knowledge and targeted in your approach. Who knows, you may get hooked on the idea if you try it.