Cross ref: http://awanginvest.com/?p=523

July 4, 2008 – 8:27 am Following my post for July 4 entitled: From Right to Left, I have received this romantic story from James Kaminecki of Chicago who has become a good friend from my world of trading companions!

The article is self-explanatory, and without further ado, please read on:

SUBMITTED BY JAMES KAMINECKI, CHICAGO, USA.

When Ana kindly asked me to write a piece about being an American during our Independence Day holiday, I had to take a step back.  I began thinking to myself, “What could I say that people would take the time to read as I am just your average every day American guy?”  But knowing that Ana’s  and Ray’s blogs touch an international community, in asking this question, I think, I may have touched on the manner I should discuss this topic.
 
My thoughts turned to the idea that maybe people are less interested in hearing from corporate executives, Hollywood ‘stars’, politicians and typical media commentators.
 
What are a typical American’s thoughts on this coming Independence Day?
 
I cannot speak for all, but the following three words really come to mind when I personally reflect on this holiday: family, freedom and opportunity.
 
These words are almost synonymous with the coming holiday here in the United States.  However, maybe I can shed some personal light on this topic and will start with a story. 
 
Like most Americans, my family came here from ‘somewhere else’.  The one detailed story that has been passed down through the years comes from my father’s side of the family.  His grandmother, my great grandmother Catherine, emigrated to Chicago in 1907 from a small town outside of Krakow, Poland.  Unknown to her at the time of her departure was that Frank, a young man in her town was in love with her.  However, he had been too shy to speak to her.  After she had left, he listened to family and friends who told him that he should not expect her to return to Poland.  If he wanted to meet her, he would have to follow her.  He chose to change his entire life, leave all that he knew behind him, take a chance and follow his heart.  Thousands of miles away, a different culture, a new language and many unknowns awaited him.  He arrived in Chicago a short time after she did.  They were introduced to each other through mutual friends who also made the same journey.  Frank and Catherine were married within a year and eventually had five children together; three daughters and two sons.  Wanda was the middle child and is my grandmother.
 
Frank never was able to listen to any of the twenty albums his eldest daughter would go on to record or have the opportunity to see his five children grow up.  Fifteen years after he was married, he passed at the young age of 34 after being severely burned in an accident at the factory he worked during the Depression.  Wanda was thirteen years old.  The family pulled together and the younger kids used older relative’s IDs to get employment wherever they could.  The entire family worked to support each other.  They got through the difficult times and the kids all went on to having families of their own. 
 
After getting married to John when he left the Air Force at the end of World War II, she raised three children.  Eventually, with the kids grown up, my grandmother Wanda went back to the workplace during the late 1960’s and early 1970’s.  This time it was for a very large Chicago-based retail company called Sears, Roebuck and Co.  The company built a new headquarters in downtown Chicago that was completed in 1973.  At completion they let employees write their names on the final I-beam to be put in place at the top of the building.
 
I believe you will find many similar stories about how families were started here in this country.  You can change the names, the city and the circumstances…but the storyline follows a similar path, and they will be reflecting on this during our Independence Day Holiday.  Families around the globe have their own stories to tell and reflect upon it as well.  It does not take a holiday to remind us of these things, but here we are in 2008 and we are upon the 232nd anniversary of this young country’s independence.
 
Family.  Freedom.  Opportunity.
 
Family - The foundation from which all communities and nations are built
 
Freedom - To have choices, make informed decisions and to be able to take action once a goal has been set
 
Opportunity - To follow your heart, to take a chance and to follow your dreams
 
You might ask the question: “How does this all relate to a trading blog?”  For me, trading is almost a microcosm of independence and life:  you are presented with numerous opportunities every day and are always looking to improve your skills.  You have the freedom to make informed choices in the marketplace and to take actions,  such as, enter, exit or wait for additional information.  You have a ‘family’ there to support you along the way such as Ana Wang , Brett Steenbarger, Jim Pendelbury (J.P.) or Ray Barros.
 
This post is a dedication to all those individuals, not just in America, but around the world that have worked and sacrificed to provide the freedom and opportunity to create a better life for themselves, their family and friends and future generations. 
 
We all have hopes and dreams that are waiting to be accomplished.  To everyone reading, I would like to say: Take a chance, follow your heart, then make an informed decision and dedicate yourself to following through.  Keep your eyes set firmly on the goals you wish to accomplish instead of any difficulty you might be experiencing along the way.  Know that there is light at the end of the tunnel and if you persevere, you will reach that goal you are seeking or will come out stronger than before.  
 
Do not be afraid of failure.  Mistakes are guaranteed to be made. 
 
But, aren’t the most important lessons in life learned after you have stumbled? You just need to pick yourself up, dust yourself off, and try again with the new information…you never know what you will accomplish or just how high you might reach.
 
Wanda Kaminecki passed away this past March after a very long and fulfilling life.  She may no longer be with us, but her family and friends are better off today because of her and all that she had done during her time here.  The Sears Tower in Chicago ascends 110 stories, higher than any building on the continent.  Her name and the other family members’ names that she engraved on that I-beam are still on the top of that building that ‘scrapes the sky’. -JK

ANA aka IDKIT

Ag Moderator

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……….Is From Inspiration to Perspiration.

More : http://awanginvest.com/?p=18

We often encounter the words inspiration and perspiration in trading literature and this brings me to share some insights on the Right and Left workings of the brain. Our brain works like through the convergence of kinetic energy and motion in our everyday zone.

Gouthum Karadi wrote:In this dual universe everything exists only as paired with an opposite. Positive and Negative. Good and Bad. Masculine and Feminine.

One force obtains and holds advantage over the other. This is the natural ebb and flow of life which produces the endless variation which we experience as the phenomenal world. When things are in perfect balance, as in Yin and Yang, we have stagnation.

It is only through imbalance that we experience change. Let us take a tank with a partition in the middle; it has two halves of negative 100 degrees and positive 100 degrees respectively. When the partition is removed, do watch carefully. With the convergence at the zone, all kinds of kinetic energy and motion exist. Similarly, our everyday life is this convergence zone.From most recorded history, the masculine energy had held the initiative. Projects were undertaken due to their logical and conceptual value - first conceptualized and then built. In earlier history there were also cases where the feminine held sway.Generally, the male reasons things through, then develops them. The female can be thought of as the right-brain, or the initiator, who comprehends things as a whole, only to analyze afterwards.

Some of the world’s greatest left-brain thinkers, like Einstein and Bohr, achieved their crowning ideas through dreams. This is the quintessential right-brain gestalt.

Thus, the masculine has clearly ruled from the age of reason and enlightenment until the present. Now it is time for the feminine to take the lead once more. This involves the right-brain receiving an idea, complete and whole, through an intuitive process. It then directs the left-brain to analyze and develop the idea. The left-brain masculine generally seeks to break things apart and to rebuild them in its logical framework.

NOW, our world seeks cohesion once again. Here the right-brain feminine excels. It seeks to unite and connect things into organic and harmonious wholes. The quote below describes how this shift in thinking affects the way we see and analyze the world and our place in it:

“The realization that early humans were the hunted and not hunters has upended traditional ideas about what it takes for a species to thrive. For decades the reigning view had been that hunting prowess and the ability to vanquish competitors was the key to our ancestors’ evolutionary success (an idea fostered, critics now say, by the male domination of anthropology during most of the 20th century). But prey species do not owe their survival to anything of the sort, argues Sussman. Instead, they rely on their wits and, especially, social skills to survive. Being hunted brought evolutionary pressure on our ancestors to cooperate and live in cohesive groups. That, more than aggression and warfare, is our evolutionary legacy.” (Begley 2007)

The quoted text above illustrates how the complex dance between masculine and feminine occurs with the divine intercourse of everything in our galaxy.

We see the masculine mind seeking a single advantage which accelerated humans to dominance. Now humanity is about to shift again - to more feminine driven reasoning.

It will be inspiration driving perspiration versus perspiration creating inspiration.

CONCLUSION

Think less, feel more, yet never surrender logic at the door.

It is only through integration that humanity will reach the next level in human evolution without destroying itself- a new level, a space consciousness.

By space consciousness, EckhartTolle implies that you are not the objects flowing through your consciousness . But you are so powerful at creating your life, that if you decide that those objects (beliefs and emotions) are you, then you will create that reality for yourself. But if you decide that you are just the awareness of your beliefs and emotions, then they are just things moving through you.

FOR MY FRIENDS IN AMERICA, HAPPY INDEPENDENCE DAY

My good old friend Martha Nicolaides (Origin Amman) has this to say: To be an American is to be free i.e. speak freely, think freely, live freely….to be an American is to be equal amongst all people who live in this country. UNQUOTE

http://www.youtube.com/watch?v=SlqvBjYgiQ4

I WELCOME ALL AMERICANS TO COMMENT FREELY AS FREE CITIZENS; AN OUTSIDER, I WILL REMAIN NEUTRAL, POLITICALLY SPEAKING

ALSO MY BELATED HAPPY INDEPENDENCE DAY TO MY CANADIAN FRIENDS:

http://www.youtube.com/watch?v=AhVtOdPgY6A

ANA aka IDKIT

Ag Moderator for final post of series

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With a balance of self-discipline and cognitive flexibility, rules can be applied to enhance trading performance.

This self-discipline includes:

1. Start every day fresh. Think of a mantra : “There’s a bullet coming toward my head today, and I’ve got to figure out where it’s coming from and how to stop it.” This mantra can bring down overconfidence, instill humility and encourage preparedness.

2. Invest an amount of money that is comfortable. If we invest on money that is on the line, or what we stand to gain, then judgment will be impaired. When emotions become overwhelming, ‘throw a maiden in the volcano.‘

3. Plan and Invest :Linda Bradford Raschke counsels, “Know what you are going to do BEFORE the market opens.” Mark Cook remarks: “Planning is the objective part of trading. Start with the worst case scenario and work from there.”

4. Learn from past mistakes. Keep a psychological journal. Journaling is the most commonly prescribed method as trading psychologist Dr Brett Steenbarger points out. Keeping a decision journal is an important part of a trader’s daily training and practice. While athletes exercise their bodies and hone their physical techniques, investors need to be aware of defects and advantages in their mental game. If athletes must spend hundreds of hours in practice and training for each hour of actual competition, journaling process may seem excessive and time consuming, but this is the price traders have to pay.

Some Questions for template of Psychological Decision Journal:

1. Pre-decision : What are my qualitative reasons for investing in this security? What is my level of confidence in this decision? What is my advantage? What objective changes in conditions will change my decision? What are my specific criteria for a buy/sell?

2. Post-decision : How am I feeling about the pre-outcome?

3. Post-outcome : Was it accurate ? Any flaws in the decision process? Can I find patterns to compare with my previous decisions? Did I deviate from my investment philosophy? What were the most successful aspects of this decision.

CONCLUSION

This psychological decision journal template should be used in conjunction with a spreadsheet journal with quantifiable statistics. They include style of trading, eg swing trade, intraday trade, long-term position etc. Also stop boundaries for both time and price and objectives including expected risk/reward probabilities, number of losing and winning trades, to find evidence of loss aversion.Biases towards periods of favorable sentiment can be detected on both templates BUT by dragging this out into the light of day, one can then try to solve the problem/s to become a better trader.

ANA aka IDKIT

Ag Moderator

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As trading has gradually moved from the floor of the exchange to the electronic screen, I am lucky to have persuaded a very shy former pit trader to share his views as to why he moved to the electronic screen. He is undoubtedly one of the best pit traders in Singapore. However, to give in to his request to remain anonymous, I shall call him Pitt.

Pitt unlike many of his former colleagues was the first to recognize the importance of moving forward with technology. I managed to get a few questions put to him which he has graciously consented to reply. He is a man of few words but his brain is ticking all the time, make no mistake about this.

Without further ado, let me pose the following questions with his laconic replies:

• How did you start to be a student of Ray?

Pitt: In the year 2004 , when I realised that the pit was going to close soon , I told myself that what I used to do in the pit would not be the same as trading electronically. When the first seminar came along in Singapore conducted by Ray Barros on the nature of trends, I enrolled and became one of his earliest students.

• What prompted you to get off the pit to learn electronic trading?

Pitt: I was convinced I had to acquire a new set of skills and a totally different mindset to prepare for electronic trading which was slowly taking over the pits all over the world. Either I acquire new skills or I perish in the pit!

• Having commenced a course, what made you to continue with new seminars or courses run by Ray?

Pitt: After going through Ray’s seminar and getting to know him more, I realized that his seminars have helped me in my trading, especially the aspect on psychology. His concept and approach of the market suited my trading style. Whenever new and advance courses were held by Ray, I would be there as I believe in continuous education.

• What did you find so different , trading in the pit, as opposed to trading electronically?

Pitt: Well, as a pit trader you had an edge over other players because you were right there where all the actions were. You would be the first to react when there was any breaking news. You could also lean on the tight spread of the bid and offer prices. In electronic trading , you are” blind” as you don’t hear the sound and see the sight of the floor. So most of the time you are lost, and the only way to be in the game is to have a set of skills and correct mindset.

• What are your observations of other pit traders who would not learn new methods?

Pitt: Sorry, no comment; I only see they are still trading.

• What is the single most important lesson that you take away from Ray?

Pitt: The most important lesson I learn from Ray is: trading is simple but not easy . To be successful we must always keep learning new things, and know when to change when market changes .

• Have you any advice for newbies?

Pitt: Yes . One other thing I take away from Ray is “ capital preservation “ . We need capital to stay in the game - ” no money, no talk” . If you lose all your capital , you will not have a chance to make back your money. So always remember the saying : “ cut your losses short and let your profits ride.”

ANA aka IDKIT

Ag Moderator

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As the mantra of the Girl Guides or Boy Scouts go, Be Prepared. http://www.pinetreeweb.com/B-P.htm

Having a contingency plan is a form of trade management, I am re-calling an incident I had last year. There was an electronic failure on GLOBEX, and it affected my exit for ES. However, I was lucky to exit later with just 3 pips off.

This is a good lesson in having contingency plans in place, and while this is still fresh in my mind, I would like to share some good lessons here.

When electronic systems fail: Is your Disaster Plan up to date? With big volatility hitting the market, as we are seeing lately, a key electronic trading execution conduit can shut down.

On July 25, 2007, around 10:25 a.m. EDT, the Globex trading application that matches trades for the Chicago Mercantile Exchange shut down. So anyone trading e-mini futures through that conduit could not place or cancel orders for about 15 to 20 minutes.

This would be a problem for any trader, especially day traders. However, this outage happened in the middle of a 20-point drop in the S&P index! So it went from being a problem to a potential disaster.

The setting was in reaction to a strong down move, as the market was making a relatively weak rally when a double dose of bad news hit: the Chrysler leveraged buy-out and existing home sales were much lower than already reduced estimates, so the market started tanking.

Trying to take profits off the board was not nearly as stressful as trying to get out of a trade that was going against you. But not having any control is stressful in itself. I had my stop in the market and was just moving a profit target order when Globex died. Another good reason why we must have our stops in, as my mentor emphasized many times.

It was time to hit the disaster plan:

1. I disconnected and reconnected my execution platform - order rejected.
2. I picked up the number from inside my phone log to dial direct – line
   busy.
3. With the market still moving in my direction, I could afford the time to
   shut down and restart the whole trading platform – order rejected.
4. I finally got a pop-up message that Globex was down. That was why
   I could not get through to the broker – thousands of others were in the same pickle.
5. So I had to keep hitting the exit button and hope that Globex would come back up ; after an eternity, “order filled”.
6. About 5 minutes later, the system finally gave a pop-up that Globex was back online.

I really learned several useful lessons from this episode.

By having a Disaster Plan in place:

1.It will give me a sense of calm as I can follow the steps than if I were to come up with the steps when disaster strikes. The direct line to our broker should be at hand.
2. It does not mean that I can avoid the consequences of the disaster, but I can take actions to limit the effects of the problem.
3. With the exchange’s communication conduit down, no trader can get through.
4. Because we cannot always avoid disasters, position sizing has shown its importance especially for highly leveraged instruments like futures, forex or options. ALSO our stops should be in the moment the order is filled.

I hope to use these lessons to prepare for the next hiccup that comes along; come it will as the market chops around.

ANA aka IDKIT

Ag Moderator

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Before I look at the ES, I want to thank all who dropped me a ‘get well note’. As soon as I can sit for more than 20 minutes at a time, I’ll reply to each of you individually.

Secondly, I want to thank Ana Wang for doing a sterling job while I was away. Just four more days,  Ana, and you’ll be off the hook. Thanks too to all who have assisted Ana with contributions.

Thirdly, I subscribe to Steve Briese’s ‘Commitment of Traders’ newsletter. There is a timely warning at

http://CommitmentsOfTraders.ORG/?p=37. I recommend you have a quick read of this post.

Let’s turn to the ES.

Friday’s price action is a warning to the Bears not to become complacent. Let’s see why.

The current trend is a sideways market. Figure 1 shows (all figures basis cash):

1. The boundaries of congestion: 1440 to 1256

2. The Value Area: 1399 to 1318

3. The Primary Buy Zone: 1258 to 1281

4. The Primary Sell Zone: 1440 to 1418

5. Friday’s Bar Range of 17.45 was at the lower end of normal BUT its volume was at the higher end of normal. This is a Negative Development Buy Signal (see Nature of Trends).

Given Friday’s small range/large volume day, the market is warning of a possible rally. This is one side of the picture. On the flip side, notice that the average daily volume on the way down has been around 457,000. I’d have been more comfortable buying if this volume would have been less than that. In this congestion, volume of this magnitude has resulted in breach of the previous lows (on 01/23/08 and 03/17/08).

So how would I handle this situation? Recall that I trade the 18-d and it has signaled the probability of a down trend:

• An Upthrust Change in Trend affirmed by the Whole Point Count (WPC) and other filters.

• What is missing to confirm the down trend is a series of lower lows and lower highs.

So I would not initiate long positions until the downtrend signals are invalidated. But, if short, I would take profits on some of the positions. I’d also be on the lookout for how the market behaves on a breach of 1256. If the market shows signs of facilitating trade to the downside, I’d look for a place to initiate some new shorts.

FIGURE 1 S&P Cash

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