Increasing the Margin

There was a link on one of the forums here to a story about a hedge fund manager who recently liquidated a large Gold spread position. It seems that with a relatively small amount of money ($10 Million hedge fund), the hedge fund accumulated a "$850 Million" position. While the characterisation of the size of the trade as $850 million may not be a correct description of the amount of gold held on a directional basis, it none the less shows that this guy was holding a highly leveraged spread position.

The spread went against him. I've had option spreads go against me too. I then evaluate what will happen between the now and expiry and make a decision. What seems to have happened here was that the clearing house decided that the margin needed to be increased. The increase was of such a magnitude that the hedge fund's cash investment would have needed to be multiplied. The position was closed, the hedge fund made a loss in excess of it's drop dead level and was closed down by the operator and what money was left was returned to investors.

The story reminded me of a number of things I have strong opinions about:

1. I need to directly look after my own investments rather than outsource. To do this I need to make sure I have educated my self sufficiently to do a good job. There should be no one who you trust more than yourself with your own money.

2. Markets can stay out of line a lot longer than I can stay solvent. Don't fight the market. Being right in the long run doesn't mean anything if I can't hold the position comfortably in the short run. If something strange is happening, cut and run, and re-evaluate. There was an old stockbroker called Stanley R Johnson who, (must have been over 40 years ago now), taught me "the best loss is your first loss". Stan was of the old school of broking and died from a heart attack in the office one day at the age of just over 60 having just remarried.

3. Remember that smart people act in their own best self interest. During the previous Gold and Silver boom that ended in about 1980 after the Hunt Brothers tried to corner the Silver market, members of Comex found themselves short a lot of gold and silver as the market went up and up. Increasing margins didn't stop the Hunts as they were, then, richer than Croseus. Comex ended up making a rule change prohibiting opening of new positions. Only liquidation was allowed. Gold and Silver crashed, the Hunts were toast. This was my second experience of "tulip mania". I've seen a few more since and I'm sure that there's a lot more to come.

I had ES expectations for today that were not realised. The ES dipped overnight before London woke up. I tweeted that I tried to sell the early highs but the market didn't co-operate. I also tweeted that I would sell against 1279ish if the flow turned down. I ended up with a couple of OK trades as the vid shows, but the market didn't oblige and rather gave us the usual after a hard move down - consolidation.

Steeler Nation Welcomes New Arrivals

By Mike Jones
Chartiers Valley Patch
Jan. 28, 2011

Little Brayden McQuillan was in the world for less than 10 minutes Friday morning when the staff at St. Clair Hospital wrapped him in a gold Terrible Towel and placed a Steelers knit hat on his tiny head.

“They’re born Steelers fans here in Pittsburgh,” said Sharon Johnson, clinical supervisor at the hospital’s Family Birth Center.

The staff at the hospital in Mt. Lebanon wrapped up 10 newborns in the towels Friday in celebration of the Steelers’ run to Super Bowl XLV. Each baby born this week at the hospital will also be wrapped up in the black and gold, a tradition the staff also did in 2008.

First-time dad Alexander Ameredes said his wife, Rachel, gave birth to their son Alexander on Wednesday, two weeks earlier than predicted. The Collier Township man said he thinks his son wanted to make sure he was around for the big game on Feb. 6.

“I was worried about the Super Bowl,” Ameredes said. “I think he was, too."

Read more...

Where are the Customers' Boats?

For me, trading is a numb3rs business. I've said this over and over and have posted often on the maths of trading. Reading different blogs and comments around the web, I remembered the story of a millionaire who visited Wall Street from the mid west U.S. looking to invest some of his newly made money. His broker, rubbing his hands with glee, took him for lunch and afterwards took him down to the Hudson River and pointed out to him one big yacht after another, saying: "That's JP Morgan's boat, that's Rothchild's boat, that's Hutton's boat" and so on. After about 5 minutes of this, the rube millionaire turned to the broker and asked: "But where are the customers' boats?"

Sadly, most of the customers don't have boats.

When I was on the floor, at the height of the boom when communism collapsed in Eastern Europe, I was trading about 2,500 contracts a day. As a local, I had very low clearing costs and there were a number of European and American clearers who competed for my business. Even at those low costs, my daily clearing costs amounted to between 25% and 30% of my daily profits. Making the move from wholesale to retail, I can't trade the same way as the costs of trading from upstairs are considerably more, even though costs have been pushed down hugely over the years.

I look at lots of trading systems and methods every year. I'm trying to find improvements and ideas just like everyone else. One thing that makes it difficult to assess the value of trading systems is the fact that often commissions are not included in trading results. I go to great lengths to make inquiries so I can factor the trading costs into results. When I succeed, I have often found that once you deduct commissions, the trading system or methodology doesn't really make money.

If you are trading large enough volume and want to obtain electronic exchange memberships then costs can be reduced. However, the costs for retail traders are much more. If you are trading 5 contracts say 4 or 5 times a day then you can get your costs down to between $3.80 and $4.20 on the emini. These costs MUST be factored into your trading plan. If your average profit per contract - taking into account every contract traded, winners, losers and scratched, is $4, then you are not making money. Your profit per contract has to be more than marginal.

I'll beat my win rate drum again. High win rate is critical to CP as otherwise you need very large profits on each of your winning trades. It's that simple. If you have, say, a 40% win rate, you also need to win the lotto once or twice a month with a super large profit to offset not only the many losing trades but the scratches and commissions on them all.

The issue is that you need to exit a trade only when you know it's a loser. Often, you can't know it's a loser until you have lost money on the trade. If your stop loss per trade (or average loss per losing trade) is, say, $125 per contract and your average profit per contract is $75, with a 70% win rate the maths of your business is:


On 100 contracts, $5250 won - $3750 lost - ($4 x 100) commission = $1100 Profit. BTW, the $400 commish is 36.4% of the profit. This is a little on the high side and needs to be brought down under 30% if possible.

There have been some comments and mails on this subject from people who have an issue because the result of their equation above is break even. The solution is in the numbers. Maybe its more aggressive entries, maybe its squeezing another tick out of your profitable exits and saving some ticks on your losing trades. If my maths is correct, the profit per contract in the above example is $11. Doesn't sound a lot does it. Now if you improve your entries or exits by just one tick on every trade your profit per contract is suddenly $23.50, more than double the previous profit figure. So instead of $1100 profit on your 100 trades, you are suddenly making $2350, a huge difference. What if you can improve by 2 ticks?

Today's trading was very cool in the afternoon. See the vid.

An open message for Blue Origin.

Blue Origin is Mr Bezos's company and he can run it any way he wants. If he is running it to create a profitable business with maximum advantage for B.O. then the rest of my message has no applicability.

If on the other hand if Mr Bezos has a passion for space and making the human race spacefaring then B.O.'s actions are destructive. Most of the "new space" companies are somewhat open from Space X down to the smallest garage operation. Other companies participate in conferences, they publish their success, the publish their failures, and all involved learn. B.O does none of this. They have access to everyone's information and yet share none.

In addition B.O has started filing patents that restrict the trade space. Today's news of the barge landing patent is a perfect example. Other new space people have publicly talked about barge landing of various vehicles to recover stages. I remember John Carmack talking about barge landing more than 4 years ago. Others have commented to me personally that they have written notes talking about barge landing from more than 5 years ago.

There is a huge on-line discussion base about lower cost space flight and it clearly covers this and other B.O patents. If the patent is challenged the patent will be clearly invalid, but if it is issued it will cost millions to have it declared invalid. This is a huge expense to any small organization that might want to use that technology.

So if Mr Bezos's intent is to help get the human race off of the planet, please don't be evil, try being more open.

Addendum:
I am not anti patent, but the patent needs to actually be innovative.

Vacuuming up common sense, not adding anything new, and attempting to patent that, is destructive. This is just a make work patent for patent attorneys. No real new ideas, and if you want to use one of the concepts covered in the claims one will now have to go back and find reference to the prior art, document it, and budget funds to have a lawyer defend your position.
I won't go line by line to refute the claims, that has already been done in several forums by myself and others.

If the patent actually had some new art, say:

• A unique way to adjust trajectory to compensate for performance changes and still land on the barge.
• A cool stabilization and retention system that would capture the rocket on a rolling barge and stabilize it.
• An innovative method to incorporate a flame trench or blast diffusion system on a barge.
• Anything that someone "Skilled" in the art would not find obvious to the extreme.

Then you would not hear a peep from me about it.

The CP Hump

get a huge number of emails from traders that say they are almost CP, but can't seem to make it over that last hurdle. You also know I have been working on an HT(hybrid trading) system Flo. I think that this post could be most interesting for those of you who are trying to reduce the learning curve to CP. 

The vid today is a series of ES trades using what I call HT (hybrid trading).The computer acts as an expert system that has been back tested to oblivion by the trader. To that expert system, we add fixed and consistent context sensitive trade management rules. This allows the trader to turn the system on when the probabilities are in their favour, manage the trades and then turn off the system when their targets are met.

The vid is a lot more detailed and longer than usual, but I want to make my point.  If you have an issue with the vid (Youtube is having a problem today) then go here.

More Than Just a Yellow Dish Rag

By Mike Jones
Chartiers Valley Patch
Jan. 26, 2011

In the early 1990s when the Penguins were winning Cups and Pirates were still relevant, I tended to follow those teams rather than root for the downtrodden Pittsburgh Steelers.

They had won four Super Bowls a few years before I graced this Earth, but had fallen on tough times in the 1980s.

That all changed when Bill Cowher took the reins in 1992 and rejuvenated the team and catapulted it to a playoff berth against the Buffalo Bills. However, I still didn’t quite grasp what it meant to be a Steelers fan at the tender age of 9.

That is, until my mother handed me a yellow dish rag and told me to start waving it around.

“Are you crazy?” I asked her. “Why would I do that?"

It’s probably the same question people in Baltimore or New York or maybe even Green Bay ask themselves when they see those golden cloths twirling in the stands. But that was just about the time when I began to understand the lore of the Pittsburgh Steelers and The Terrible Towel.

Read more...

Tips for creating a free business listing in Google Places: Adding useful descriptions and relevant categories

(Cross-posted from LatLong)

With this blog post, we’re concluding our three part series about the Google Places quality guidelines. Today, we’ll discuss how to choose the best fitting categories for your business listing as well as how to provide a useful description. In case you missed the first two blog posts, you can find here the first post about business titles and here the second part about business types.

Adding useful descriptions

As a business owner, we encourage you to add a specific description of your business in the “description” field. This gives potential clients more information to understand what your business is about and see if your business matches what they are seeking. You can also use this field to provide further guidance about the location of your business which might be useful in some cases where it is hard to find, e.g. if the entrance of your business is only accessible via the rear.

Keep the description clean and concise, so it is helpful to users and catches their attention. A series of repeated keywords or categories may turn off potential customers, but a crisp and catchy summary of the services you offer help users determine if your business is right for them.

Choosing relevant categories

If you provide appropriate and accurate categories, we can better match your business listing to relevant user searches. We recommend choosing specific categories that describe the core of your business well instead of broad ones. A good way to find representative categories for your business is asking yourself the question “What is my business?” Be sure to capture what your business is as opposed to what it offers or sells - in that sense, “bakery” would be a good category as opposed to “cakes” or “bread”.

Also, do not include location information in the categories field. If you would like to provide such additional information about your business, you can use the description field and, if appropriate, the service areas feature.

You will be asked to choose at least one category from our standard list - just start typing in the categories field to see what is available via the auto-suggestions.

We recommend always choosing the best matching and most specific category for your business - for any specific category, Google will be able to automatically determine the more generic category as well. That means, if you are a Mexican restaurant, you should go for ‘Mexican Restaurant’ and not ‘Restaurant’ - Google then automatically knows that if you are a Mexican restaurant, you are also a restaurant.

You can provide up to five categories for your business listing. After picking a standard category, you can add up to four customized categories. To add another category, just click on ‘Add another category’ and an additional field will be triggered. Put only one category per entry field. Entering more than one category into a category field is not compliant with our quality guidelines and could result in your listing being suspended and not appearing in Google Places. In case you find it difficult to find an appropriate standard category to start with, just pick a category that fits best and add more specific custom categories. If you are uncertain about categorizing your business, you can also ask for advice in the Google Places help forum and discuss with other business owners.

We hope that this information helps you add a concise description and accurate categories to your business listing in Google Places. This gives potential clients more information to determine if your business matches what they are seeking. For further questions you can visit our Google Places help forum.

Posted by Sabine Borsay, Consumer Operations

I'm sitting here, shouldn't I be doing something?

We sit in front of our workstations way too long. The result is often a loss of discipline with impulse trades, going off piste, fudging our trading plans, and trading when we shouldn't be because the odds are not in our favour.

I've made trades where IMMEDIATELY after I click my mouse I think to myself, What in the world did you do that for?

In testing, one of the things that can be tested for is "time of day". When do your setups work best? I've said that I knew lots of locals who only worked the opens and the closes and, in London, the opening of the U.S. markets.

One clearing firm I used had a room that became the poker room where we could try and pick each others pockets off the floor. It was a way of staying away from markets we didn't want to be tempted to trade.

Most markets have definite sweet periods and confining trading to these times makes more money. I make money when a market is out of balance and is trying to find new balance - balance between buyers and sellers.

Another way to limit myself is by taking my Market Profiles and marking out the areas where I want to do biz.

Today's vid shows an attempt at the Gap trade in the ES and then a change of mind and why.

Google Boost: Now Appearing On Mobile Phones

(Cross-posted from LatLong)

Back in October we announced Google Boost, a new advertising solution to help local businesses connect with potential customers in their area. Today we are excited to announce that Boost ads can appear on Google Search results pages on Android and iPhone devices.

Consumers increasingly use mobile devices to search for products and services, and Boost will give advertisers the opportunity to reach these customers exactly when they are looking for local businesses on their phones. This feature will automatically take effect for current and future Boost advertisers.

In case you aren’t familiar with Boost, it’s Google's new advertising product that helps business owners quickly create an online advertising campaign that targets local customers. Using information from the business’s free Google Places listing, Boost automatically suggests and creates text ads that appear on Google Search and Google Maps results pages.

Google Boost is now available in all U.S. cities to select business types. To find out if your business is eligible, sign in to your Places account (or create a free one if you haven’t yet) and visit the Dashboard. If Boost is not currently available to your business, fill out this short form and we’ll notify you when it is.

Posted by Kiley McEvoy, Product Manager

EL in the Cloud

I've moved to the Cloud. Well, to a data centre (center) in the New York area to be more precise.

The internet is getting more congested. I'm having to fight through the traffic like a London cabdriver trying to get into the City from Knightsbridge. What's more, the cloud has given me other advantages besides reducing the congestion problem. Not only has my ping time to my broker gone from 144ms to less than 2ms, but I have fantastic redundancy. The reduced latency should translate into extra dollars in terms of trading results by getting better exits. My entries seem fine, but the latency of exits were definitely costing me money. This is valid for both auto and discretionary trading. Everything is just that much faster.

For those who are not too technical, there is a site here, that allows you to check how long it takes for your orders to hit the city where your broker's servers are located. When you access the site, your location is pinpointed. You just need to move the rectangle on the small lower map into the area where your broker is and then hover over the cities until you find the right one. After clicking on it, the broker city is selected and when you run the app you first get a "ping" number. My ping rate from France is between 123 and 144, too high. When I ping from Flo's new Cloud location I get 2 or even 1.

Better yet, I am completely mobile and can access my usual workstation from anywhere. This is a big plus as I spend time between London, France and OZ.

Additionally, I feel much more confident in my auto trading with Flo living in the Cloud, as I am much less likely to lose connectivity in a data centre environment.

Choice of technology that creates the VPS (virtual private server) is critical. There are a number of solutions out there, but the one I wanted was using Microsoft's Hyper-V. The reason for this is that the resources I am allocated (CPU and RAM) are locked to ME. When my VPS was set up, my CPU and RAM were hard wired into it, which means that my VPS has part of the actual hardware that it is virtualised on, allocated only to me. Practically speaking, my 4Gb of RAM cannot be used by anyone else who is virtualised on the same server hardware. Typically, lots of VPS solutions being sold allow a server with, say, 32Gb of RAM to be allocated out in, say, eight 4Gb VPS. That means that if everyone needs to use their 4Gb, they cannot and are fighting each other for memory.

The only disadvantage of the VPS is the single monitor. I am used to using four 24 inch monitors, so I had to make a few changes to my desktop to accommodate this. I'm still working on the best solution.

Great trade today in the Dow Euro 50. See the vid.

I had a second Gap trade, but from the long side, in the ES. The vid, as usual, shows it all. My comment at the end was very prophetic. You can see the orange line on the bar chart at just under 1278.00.

Google Apps for Business now available for Verizon customers

[Cross-posted from the Google Enterprise Blog]

Editor's Note: We're excited that beginning today Google Apps for Business is available through Verizon. We've asked Monte Beck, Vice President of Small Business Marketing for Verizon to share more details.

At Verizon we make it easy for companies to get online and be productive in the office or while on the move. We do this by offering business owners a bundled solution of essential services to fit their particular needs.

Beginning today, our small- and medium-sized business customers will also be able to access the same applications that come with Google Apps for Business: Gmail, Google Calendar, Google Docs, Google Sites, Google Video, and more.

Most of Verizon’s service offerings are in the cloud and delivered to any business connected to the Internet with a click of the mouse. So it makes sense for us to offer Google Apps for Verizon to allow businesses to communicate and collaborate in the office or on the go.

Google Apps for Verizon – with three free user accounts – is available to business customers that subscribe to a bundle consisting of Verizon Internet service and either Verizon voice or TV service or both. Customers have the option to buy additional accounts. Also included is a domain name free for one year (i.e. yourbusiness.com).

Other small business essentials provided in Verizon’s bundled solutions include an easy do-it-yourself “kit” to develop your business’ professional website, Internet security, online backup, and more. Most importantly, we offer WiFi access – a necessity today to quickly respond to customers and access programs and files while out of the office.

Verizon’s business bundled solutions are available in parts of 12 states (CA, CT, DE, FL, MD, MA, NJ, NY, PA, RI, TX, and VA) and Washington, D.C. Those who just need Apps can subscribe to Google Apps for Verizon for $3.99/user/month.

To better help and inform small businesses, my team also developed the Verizon Small Business Center, a one-stop online portal with free resources, industry news, expert advice delivered through free webinars, networking opportunities, discounts, and much more. In combining these free resources with cloud products and services, we’re helping small businesses gain a competitive edge. Even the smallest companies now have access to technology that’s being used by larger businesses at minimal cost.

Google Apps for Verizon helps Verizon’s business customers harness the power of the web in new and exciting ways.

Posted by Monte Beck, Vice President of Small Business Marketing, Verizon

Something's Broken? Part 3

I have a roulette "system" that usually wins. Everybody says there is no such thing, but I can go to a casino and can usually walk away ahead. That's the key: "walk away ahead". I discovered that my methodology in roulette results in cyclical swings a lot of the time. I play for fun, not money, as there is no real edge. But how I win is that when the cyclical swing is in my favour and I'm ahead, I stop as a winner.

There are advocates of this "system" in trading. Every time I put a trade on, I assume risk. So if your stats show that you can usually get to a certain profit per contract a day, or if you need certainty of a daily profit, then maybe it's something to consider. The question then is, do you stop at a maximum loss for the day and if so, what multiple, if any, of the daily profit target should it be? Or if there is no profit target, should one use a daily loss limit?

One of the programs we have in Flo is exactly that. We can optimise what daily profit and loss targets give the "best" result. I have put "best" into quotes because "best" means something different to different people. Is it return on account size? Return on maximum drawdown, most absolute profit, etc?

The beginning point to answering all this is defining what is important to the trader and to his psychological requirements. If the most important thing is to make $500 per day, then the whole trading plan should be built around the achievement of this goal.

In designing a trading plan, it's not only setups and profits & losses, but the achievement of a business aim. Just saying "I want to earn as much as I can" without defining the numbers around this goal will often put a trader into the situation of having to make hard decisions in the heat of battle, without having the back tested results on which to base an intelligent decision.

The chart above shows a great example of managing trades that were entered automatically. As you can see, there was a short @ 1.3573. However, I saw the support from the Fibs below - context - and decided that support should hold and covered making a tick. I then had the option of re-instating the trade but at a better price at a better trade location, or, just waiting for the next trade to be auto traded. I chose re-instating it and carried the same dollar stop but at a better location, which allowed me to hold the trade and it became profitable.

Today's trading was a bit boring. I talk about how the markets' characteristics can change from one time zone to another and you need to adapt.

Something's Broken? Part 2

OK, we have said "Houston, we have a problem". It's important to differentiate between normal drawdown and a problem. Usually, the look of the chart gives the answer.

If the issue is YOU, then it's easy. Stop trading until whatever took away your focus and discipline passes. I know I can't focus on two things at the same time, so I try not to.

If it's the market then what I do is identify what is happening: usually one of two things - sideways chop or change in volatility.

If it's sideways chop then I change modes from trading inside-out to trading outside-in, fading the moves. I can use the Keltner or CCI extremes to do this.

If its volatility, it can be more volatile or less volatile. Are targets not being met or are stops being continually hit? More volatile, I can increase my range bars and less volatile I can shorten them. When I do this I make sure that the resulting chart is smooth and without too much bar overlap. I look at my CCIs as well, ensuring that they look "normal". In the next part, I'll talk about daily profit targets and loss limits. 

Meanwhile, I found my trading badge from the old LIFFE days. It's a little worse for wear. It had my mnemonic originally outlined in green on all the letters, which signified I was a local and did not fill paper. I also had an old Disneyland badge on my jacket that said "Bear Country" as like most locals, I preferred the short side of the market because I made more money more quickly. Another local offered me 1,000 pounds for it one day after I had had a particularly good day. Like an idiot, I didn't want to sell my "lucky" badge. I don't even know where it is now. Probably still on an old trading jacket being used as rags.

 

EDIT: Mrs EL read the draft of this post and went to ebay and bought me my lost Bear Country pin. What a Lady!!!  I'm now an even bigger idiot for missing out on a great trade; SELL 1 Bear pin @ £1,000 and BUY it back for $5.95. What a trade to miss.

Today was an interesting day in the ES. The vid tells the story.  Youtube is having issues formatting the video so if it's still black it means it has not been processed by them yet. Been waiting an hour and have uploaded 2 versions.

Our big gift for small businesses

To kick off 2011, we wanted to thank a few small businesses for taking the first step toward enhancing their online presence—and to provide additional resources for achieving this goal. So over the holiday season, we paid a surprise visit to five small businesses who recently started advertising their businesses online: Create A Cook and Twinkle Star in Massachusetts, Ramy’s Garage and Atlas Flooring in Texas, and Cloud 9 Frozen Yogurt in Georgia. These small businesses span several industries, but their founders share one common goal: to expand beyond their brick-and-mortar storefronts and into the world of e-commerce.

To help, we gave them each of them $100,000 in AdWords spend for 2011 as well as free consultations with AdWords representatives. Because we know online presence means more than just AdWords, we’ll also be providing them with web consultations, wireless service for the year as well as a few other little surprises. See footage from our surprise visit below:

We’re looking forward to making big investments in small businesses far beyond these lucky five. Small businesses have long benefited from Google products and services; now our hope is that all small business owners can have greater access to the tools and training they need to develop a cohesive strategy for doing more business online. We started last year by creating the Google Small Business Center and asking small business owners about their biggest wishes for 2011. We received an overwhelming response from business owners who, like the owners of these shops, want to do more business online in 2011.

The Google Small Business Team surprises Atlas Flooring in Texas.

We’re thrilled to help these five small business owners find online success in 2011 and we think we have a lot to learn from their experiences. We’ll check in on them from time to time and report on their successes as well as their growing pains.

In the meantime, check the Google Small Business Blog for updates, and if you’re a business owner, visit the Google Small Business Center for information on how you can bring your business online in 2011.

Posted by James Croom, Product Marketing Manager, Google Small Business Team

Day at FAR...

Thursday we had a delivery of new clean propellant. So we got up at 5am and drove to FAR.
We waited three hours for the delivery truck who thought the road was still to rough so we met him at the end of the pavement and took the delivery the rest of the way in our truck.

We then set up the test stand and fired the stainless DMLS motor. It was much better than last time, but we still have catalyst issues as we were not getting full decomposition. The beginning and end of the very long run were identical so we are no longer poisoning our cat packs.!!
I think I need to add some anti channel baffles.

The test stand worked flawlessly and set up to fire time was less than 45 minutes with just two of us.

After we finished that I went back and made another attempt on the generator:

I replaced ALL the banjo fitting seals and soft feed tubing. After doing that the prime pump was much more solid and priming was faster and seemed less random. The Motor still did not run.

Then I removed the side panel (Item D in the picture from two posts ago) and tried to figure out what moved when your moved the shutoff lever..... nothing moved.....

Then I removed the fittings and bolts holding block Item 9, from the top of the injection pump.
I discovered that the pump pistons have a little cam arm that comes out and engages a rod that should be moving. One of the injector pistons is stuck in the full up position and will not turn as it should. This jams the rod keeping all of the injector piston cams stuck in the shutoff position.
I freed that piston and reassembled everything.

Now when you move the shutoff lever you could see moment inside the area exposed by cover Item D. When the motor was turned over the outlets made little sequential squirts.!!!!

After fully reassembling everything the Generator started on the second attempt.
We then cleaned up the oily mess inside the generator enclosure from all the bleeding.
We buttoned up all the covers and ran it one more time. We now have a generator!!!!

Many thanks to Dave Weinshenker for the diesel help. He deduced what the problem was and provided me the information I needed to resolve the issue.


I should have data and possibly video of the rocket motor test in the next week some time.
I won't have much time this weekend as my Dad fell down and is in the hospital (Nothing major, he should be out Today) We also have a 99th birthday celebration for my Step Mom's mother this weekend.

Something's Broken? Part 1

The last few days I have had both emails from students and from readers asking about when to stop trading on a losing day, or whether one should have a daily loss limit. Some of this was because of the post looking at whether one should have a daily profit target or not, but also from traders who had been having a string of profitable days before hitting a deepish pothole.

The first job is to identify that something is different. The something different can be that the bars on the charts are not as smooth as usual or that the EMAs are going sideways or that the CCIs are chopping around the zero line, or, it can be that you have a stomach ache or are thinking about the fight you had with your spouse or that you feel out of sync. The result may be that your loss pattern is different. Have you traded your TP?

Losing days for inside-out trading are a result of sideways markets where the moves are not long enough to give a profit. In my course I teach traders to switch modes when they identify those markets and to trade outside-in. Identification is the issue because you need to know its chop before you lose too much. Whether you use EMAs or ADX or something else, being aware of market conditions is important.

If something different is happening and you are losing and don't know why, I think you should definitely stop. Trading in the dark is the road to losses. Once you have identified what is happening, then the next job is finding a solution. We'll look at this in the next part and talk about profit and loss limits in yet another part.

The video of today's ES trading is based on Market Profile and shows how I use it. In addition to what I talk about in the video, the info from the range bar chart helps time the trades too.

What a Business

Do you think of trading as: "What a business!" or "What? A business?".

My Dad developed real estate. His projects were always successful unless he got caught by the cyclical recessions that came and went. This taught me a couple of important lessons which I apply to my business.

Firstly, when, as a boy,  I asked him how he knew that the project was going to be successful he said, "I make my profit going into the project. I do my research and then I buy the land and improve it's value by getting a building approval onto it. I then build the building while I sell it to buyers off the plan. I know it will be profitable because each step improves value."  This taught me to do a lot of preparation in my methodology and make sure that the odds were on my side when going into a trade. Assuring my profit going in.

The second lesson I learned is that stuff happens. Recessions come, wars break out, announcements are made. Don't take overnight positions.

Although I have wandered from this last lesson somewhat, I do it in a very protected way. I use options extensively as part of my strategies. The bulk of what I make comes from intraday, as it's safer. Lots of smaller risks are more comfortable than one larger risk.

So in constructing a TP, these are the things to also keep in mind. It's not very different to any other type of business in that respect. Can you imagine a business surviving if it only made profits on, say, 40% of it's sales and lost money on the other 60%?

Due to the way I envisioned today, I did NOT tweet the Gap trade. The market went down as I envisioned. I'm showing a 3 tick range bar chart today to show what I do when I want to see more or scalp. As it turned out, today this chart gave a much better entry into the ES shorts than the 5 or 6 range bar chart.  Price did the right thing and hit my Fib line targets too. This is discretionary trading.

Trading Every Day to Make a Living: Part 4

OK, we have all the ideas in Parts 1 to 3. Now how do you make at least $250 a day?

It's all based on your win rate.

As a rule of thumb, the closer the target of your trade, the higher the win rate. I want a win rate of at least 75%. In the design of the strategy, I also have to match the drop dead stop loss or use an optimised or logic based stop (eg ATR stop or MOMDOT Stop or EMA stop, etc) to the strategy. The type and design of the stop loss is also dependent upon whether I want to trade by HT or completely automated.

OK, my target is $250 per day or 5 ES points or, better still in today's markets, 20 Euro futures ticks.

After building, back testing and forward walking (SIM) my HT system, I arrive at, say, the following stats, for the Euro in this example (real example from my trading):

Win rate 80%

Average win/Contract: $112.50

Average loss/Contract: $212.50

For every 10 trades I make 8 x $112.50 = $900

For every 10 trades I lose 2 x $212.50   = $425

I pay brokerage                                    = $60

                                                            ________

Net Profit                                              = $415

There is an average of 12 trades a day during the hours I would trade, so my $250/ day is doable on the maths. My testing is confined to my trading hours. If the number of trades are fewer, or the net profit less, then I would have to adjust the number of contracts traded so that my expected profitability is more than the $250 plus the buffer, as I explain below.

As I have a 20% loss rate, I take my daily profit requirement and add 20% to it to make it $300.

I now implement my strategy. I KNOW my trader's profile because it has been tested. I trade every day until I make $300. The extra $50 will pay for any losing days. If I want to make $500/day, I double the number of contracts. I don't trade longer hours unless the TP has been revised and tested as before.

When creating a trading algo for both fully automated trading and HT, there are a number of DON'T DOs, which include:

1. Don't create a strategy based on curve fitting rather than fitting the strategy to the market. Curve fitting shows a mythical profitability as there is  No real "edge". The methodology I use is all described in this blog. The DVD training sets out the trading pictures in detail and show, live, how I trade them. Incorporating these into HT is an extra programming step but many of you will have already done that as part of your back testing. You can use any alternative strategy that you find suits you and have tested correctly.

2. Don't leave out testing properly and Don't forget the importance of forward walking. Unless the traders profile is known, #3 will kill this idea because of this "don't".

3. Don't cherry pick trades. Not sticking to the strategy because the trader has not done the work to KNOW their trade profile and thus not having the confidence to follow his own rules is a definite way to find it hard to trade successfully.

I firmly believe that no matter what anyone says, the high win rate is a critical psychological component of CP. Most of us find it hard to put on a trade that may have a significant financial impact if our statistics show that there is, say,  a 60% chance of it being a loser. That's one of the reasons I have my students trade the most minuscule size possible when they start so that no matter what, the financial impact is the least possible. It's just easier to maintain discipline.

Below is the chart of this morning's (London time) Euro trading. As you can see, there were 5 trades, 4 winners and 1 loser. The winners each made 14 ticks per contract and the loser lost 14 ticks- all on a fully automated basis. As HT, I ran the 4 winners as is, but managed to cut the loss on the loser to 11 ticks. The net result was $475 as fully auto and just over $500 on an HT basis, all per contract. After the 5th trade, I turned Flo off, as I was finished for the morning.

 

This morning I tweeted, London time:

$ES_F Looking for resistance for the Gap trade at 1293/94 area. Blast past 94 invalidates. Jan. 18 at 11:05 AM

Price touched the 1293.00 and was easy to see the short at 1292.25 - a great trade down to 1286.75 where I covered at my Fib number. These Gap trades are high win rate trades and are very black and white to do and you can easily see when you are wrong.

Trading Every Day to Make a Living: Part 3

The way I set up my auto trader, Flo, for Hybrid Trading is very different to the parameters for my algos of the completely unattended auto trading. While the methodology is the same, the way that it is managed is different. There, I'm after the best return on investment, unattended.

There was a comment to Friday's part 2 post saying: "Your losers are three times as big as your winners so wouldn't the drawdowns (troughs) be large?" The annual maximum drawdown ran at less than $2,000 per contract traded as a fully automated basis and on a managed basis I estimated it to be half that. By using HT, the average losses are NOT three times as big as my winners. That's the point of HT. But even if they were, the high win rate makes the overall method profitable, as long as the winning trades are traded to a reasonable percentage of their potential.

For HT, I am after a high win rate only, with optimised drop dead stops and optimised first scale out points.  The aim of HT is to increase profitability from that base using discretionary but rule based trade management.

I put the above in bold because it's important to understand this. Every trade's outcome is different, although the general entry criteria may be the same. It's what happens after the entry that determines the outcome. I look for trade entries that fit my Trading Plan. However, I cannot program in all the context that, as a discretionary trader, I use. So Flo enters in HT mode with an optimised drop dead stop and optimised or money related first scale out target. I then have to manage the trade.

Some trades I scratch straight away. For example, a long just below a strong resistance and that has the odds against the trade, I scratch. I manage my losing trades so as not to lose the whole drop dead stop. I typically have a drop dead stop of around  $300/contract for the ES in case I need to double down. But I rarely use it. The market tells me to get out much earlier, but as it's different for every trade and not a fixed number, I can't as yet program all the possibilities. Also, using HT, I can add trades that Flo misses.

The same goes for profit targets. Every trade is different. Using a fixed profit target would limit my profitability, so I have a first scale programmed where I exit at least a third, but I manage the rest. I have a version of Flo HT with scaling out built in that I use when I'm not paying attention. It does well but not as well as when I manage manually. Again, because every trade is different, I manage my exits to make sure that I can earn the most after assuming the risk of the trade.

When setting up Flo to run in a purely automated way, the result is that the win rate is lower and the trade profile is very different. 

HT can be used in many ways but I see a lot of merit in it for many traders, as HT helps get into the trades in a consistent and disciplined manner. This is a big component of what is required for Hybrid Trading. Managing the trades after entry can be done using strict rules that are consistently applied.

Beginning traders can start with a more robotic approach, having programmed stops and scaled out exits, and as their skill level improves with screen time, they can slowly take more hands on control.

On Saturday, I sent the screen shot above to one of my students. It is Friday's ES RTH trading. This is a good example of HT . As I said, We have programmed Flo to achieve fairly high win rates and profitability, yet there are times when I override her by scratching a trade, moving profit targets up or down, or moving stops closer (never further).

The question I have been asked is "Why?" If Flo is doing OK, why do I mess with her? There is an opportunity cost to trading. If I'm risking my money, I want to maximise the return.

Looking at Friday's ES, the key to the RTH session was the Gap trade. I tweeted it a few times on previous days to draw your attention to this great type of opportunity. Friday's Gap was especially low risk and high reward for me because of the Fib point below that fit the MP context so perfectly. It was really easy to see if I had been wrong.

What followed from that successful Gap/Fib entry was that I had great confidence in Flo's long trades after that. In fact I increased size and did not exit the extra lots, as per Flo's all out exit, but rather scaled as I do manually and then reloaded at the next Flo long signal. The end result was a pretty awesome green day.

Looking at Flo's results, they were great. 100% for 2 trades, 2 ES points. Again, win rate is king. With a high win rate I can trade size with confidence, as the drawdown can be managed. With a low win rate the drawdowns can bury you without a trace and your account can be empty by the time the winning trades decide to appear and match your stats. The basis of what I teach students to get to CP is the maintenance of this high win rate. The psychological and financial criticality of this aspect of my strategy should not be under rated.

For me, HT is definitely the best of both worlds.

Holiday in the U.S. I traded a bit of Euro futures in the London morning but taking the rest of the day off.

Trading Every Day to Make a Living: Part 2

Following on from Part 1:

OK, you have an 80% win rate and the drop dead stops look alright. The system is profitable, but perhaps only marginally, as you have used a reasonable first target to ensure a high win rate. Many times traders sacrifice the win rate by changing the targets, in order to become profitable on paper. They often do this to the point where the win rate drops to as low as, say, 35%. In the experience I have had with many traders, when this target changing happens, the trader can't follow the system, as he doesn't know when it's broken. Usually the system is curve fitted and, from the trader's experience, if he followed it he would lose all his money.

So, that doesn't work but what does? What I do is to keep the win rate, use it as a first scale out point and then manually manage the trade in accordance with rules that I can't program, as they are so context sensitive. I codify my rules in my TP so I have consistency.

The outcome is a high win rate and good profitability with low drawdown.

Today's early trades in the Euro future are a good example. The Flo managed trades were great, but the one I exited manually was obviously in trouble, so I used my rules to manually exit and saved the $300 drawdown and spent about $165 instead. If I do this every day, then the difference at the end of the month is very considerable. It's the EXIT to the trade that makes the difference.

More in Part 3.

Trading Every Day to Make a Living: Part 1

Let's reverse engineer consistent profitability.

Start with how much money you need a month in order to trade full time for your living. I'll pick a number that I've heard from some of my students: $5,000. If that's not you, then take multiples of it. Out of this you pay all your costs and taxes too.

OK, $5,000/month is about $250 per trading day.

When you see the fluctuations in the market it doesn't look too hard, but not quite so easy to achieve without a structured methodology.

Now $250 is 5 ES points (or 20 ES ticks) or 20 Euro FX futures ticks. Still doesn't sound like it's hard. Now consider that these 20 ticks are the difference between your winning and losing trades. It could be 40 winning and 20 losing or 60 winning and 40 losing. I'm ignoring commissions, but the more you trade the more the broker gets out of your $250 and the more ticks you need to earn to get to keep $250. All assuming you can make more ticks than you lose.

This is where it gets interesting. What if you could be fairly sure of, say, an 80% win rate? Could that make you CP? Look at the stats below for a 1 month period of a stock index future.

In the next parts of this post in the next days, I'll explore how to exploit this information. How to lock in that $250 per day, and how to reduce that learning curve.

The chart today is of the Dow Eurostoxx50 that trades on Eurex. It shows how I used Flo to make entries and how I override the exits plus make additional entries. I have added some additional PaintBars so I can visual see some order flow details. The CYAN up arrows are additional manual entries and the RED down arrows are manual exits.

Now available: Google Places with Hotpot for iPhone

[Cross-posted from the Hotpot Community blog]

We recently released Google Places with Hotpot in Google Maps for Android, and starting now, you can have that same great experience as an iPhone app. We realize the importance of finding places you’ll love while you’re out and about, no matter what mobile device you use. And Places with Hotpot not only helps you find places near where you are, it gives you the best places to go for you by personalizing your search results.

In case you aren’t familiar with Google Places, it lets you quickly search for places nearby and personalizes the results based on places you’ve rated. We get you started with a few popular search categories, but you can also tailor the list by adding your own favorite searches. This makes it fast and easy to find the best places for you with little fuss.

Use a default search category, save your own, or rate the nearest place quickly.

It can be pretty rewarding to discover a new place you love, but we also realize that there are some experiences you just can’t wait to share. So Places makes it super simple to rate a place with your iPhone while you’re there. Just fire up the app and hit “Rate now.” It will use your location to guess your current place and let you post a Hotpot review right from your phone. But it’s not just about getting to say what you think—the more you rate places, the more you’re sharing about your tastes and the more we can give you personally tailored recommendations.

Give your star rating and add optional details or a review so Hotpot knows your taste.

If you want to make things even tastier, just visit google.com/hotpot from your desktop computer. Here you can add friends to the mix and quickly rate all the places you already know. Once you’ve added friends, you’ll find your results seasoned not just with reviews from around the web and recommendations based on your own personal taste, but also with your friends’ opinions too.

Once you start rating and add friends, Places can give you personalized recommendations.

Get the Places app on your iPhone now by searching for Google Places in the App Store or going here.

This first version of Places is available for all iOS devices in English only. However, expect more features and improvements to roll out soon, including localization in many new languages. We’re hard at work to make Places with Hotpot more and more delicious.

Posted by Greg Blevins, Software Engineer, Google Hotpot team

Know when to Hold'em and Know when to Fold'em

Kenny said it all. I guess life and trading is all about timing.

I  posted a link to a Mark Douglas video a few days ago that stressed the importance of ACCEPTING THE RISK of your Trading Plan. If you're not taking or holding your trades then you are deep down NOT accepting the risk. It's important to know when to hold'em and know when to fold'em and it's difficult to know that without having done your homework.

The requirement for me is BELIEF. I can put my trades on and manage them because I BELIEVE, and I believe because I have back tested. Because I have back tested I can accept the risk, because I KNOW that I will be profitable over time. This is a 3 cornered chair; Testing, Belief and Acceptance. This makes for a stable trader's profile.

I'm working on some posts that show more of the maths that are involved in CP. There are a number of things to decide in order to create the necessary numbers. I'm hoping to have the first post of a series ready by tomorrow.

Today I tweeted:

$ES_F, My cup runeth over, nother Gap Trade setting up not much Res above so need to watch Order Flow & momo

I put my money where my tweet was and went short about 15 minutes before the RTH open @1278.25. This is one of the trades we spend time on in the course. The DVDs have me trading a couple of them live and shows how to handle this trade, even when it doesn't quite go as planned. See the vid below.

Introducing Google Engage for Agencies in US and UK

[Cross-posted from the Agency Ad Solutions Blog]

Are you a US or UK based Webmaster? WebDesigner? SEO? Marketing Consultant? Freelancer? or offering web related services to Small Medium Businesses? then keep on reading...

At Google, we’re committed to the success of the digital economy and we believe that helping small business get online and thrive is fundamental to that success.

We recognize that many SMBs rely on freelancers and small agencies to create and manage their online presence as well as help them with their online marketing. To make the jobs of these agencies easier, we’ve launched a new training and incentives program called Google Engage for Agencies.



Google Engage participants will receive free access to educational resources dedicated for them and more incentives to grow their own and their clients’ businesses.

We hope Engage will help businesses that offer web services in attracting new clients and in adding value to existing clients. Check out Google Engage today and learn about the benefits the program can offer your business and the SMBs you support.

If you’re a webmaster, web-designer, digital agency, freelancer, SEO, IT consultant, or provide any other web services to US or UK based small businesses, you can apply to join the program starting today.

Please see links below for information on participation for US and UK-based agencies:
Google Engage for US Businesses
Google Engage for UK Businesses

Posted by: Alon Chen & Esra Guler, Product Marketing

A Plan for tanks.

The rocket equation has two parts structural efficiency and motor performance. Since the beginning of our project we have spent considerable effort thinking about structural efficency.

Clearly modern composite structures hold real promise for improving structural efficiency. I've dabbled in composite structures but I am very much a beginner. The tanks produced by professionals like Scorpius Launch Systems/Microcosm are both amazingly functional and beautiful. It would take me a decade to acquire that level of expertise. The recent composite coupons I tested for peroxide compatibility were fabricated by Microcosm/Scorpius. I'm currently riding home from a meeting at their facility where we finished the details of a joint development program to build peroxide compatible liner less tanks.

I think this is a win win for both parties Scorpius will get a new product line and we will gain access to world class tanks.

One Methodology, One Chart, Any Timeframe

Robustness of methodology is very critical to CP. If you can't rely on your methodology, then you will find it difficult to put the trade on. I use the same methodology on any market and on any time frame. That doesn't mean that you can just load any periodicity, but it means that within the periodicity range you want, you should be able to find a time frame that is in sync with the market's rhythm or fingerprint.

Robustness means that I don't want the methodology to "not work". "Not work" is a fairly subjective measurement. I'm OK with a losing day and a losing week and perhaps a borderline losing month if I can see why. These are things that need to be addressed in back testing. Getting the right mix of trade frequency, risk and reward is very important, taking into account your own inputs such as available capital, risk tolerance, hours available to trade, time required by you to make decisions and more.

I use the same methodology for longer term trading and short term trading, as I have said before, but I choose the best instrument to trade it: future, ETF or option, depending upon the context. I was always determined to be responsible for my own investments after seeing the mess that agents made of other people's. I remember the quote from Woody Allen in "Midsummer Sex Comedy" where he said he was an investment advisor: "

In actual life, I help people with their
investments until there's nothing left.

Sadly, the quote is often true. The problem with investments managed by others is that you really don't have a handle on the risk aspect a la the flash crash. I like risk as long as the reward is commensurate. Where people get unstuck is when they get, say, a 12% annual return and suddenly lose 50% or more of their capital. Hard to make that up. On the other hand, everyone can't be an expert at everything so most people find a half way plan. I get trading ideas from all sorts of people and then choose what I think suits me.

The Chart below of the daily Euro chart is a good example. Even the daily charts can be traded as HT or auto.

Today's trading was quiet in the London morning. One great trade and then a change of idea. I tweeted the Gap trade yet again. The Gap trade is one of my favourite trades, as you probably have gathered by now. For me, it's a really easy trade to put on and manage. It's also very easy to back test, so I can get it right. Look at the vid for today's action.

Expert Systems

It has long been known that well designed processes and procedures allow less experienced people to carry out more complex jobs.

Taking this into our world, using the computer in real time to instantly identify the possible setups to trade has merit for many traders. The concept of hybrid trading (HT) - auto entry with manual trade acceptance and management- in which the auto trader, such as my FloBot, automatically initiates trades certainly fits with this idea.

HT has benefits for both the expert and beginner trader. For the expert, it allows the trading of more markets simultaneously and requires a lower level of constant concentration - certainly something for those of us approaching old farthood should think about. For beginning traders it brings in even more benefits: having a trading plan built into the algo and its management policies, having a "mentor" looking over their shoulder identifying high percentage trading opportunities, an enforced discipline and several other pluses, all resulting in the beginner achieving consistent profitability more quickly.

I've got 5 markets under HT at the moment and the results are very promising. I'll share experiences in the blog of both the day trading as well as the longer term trades. They are all based on the same methodology you have seen in the blog for the last 15 months. That doesn't mean I trade them robotically.

Today at about 8.30am NY time  I tweeted the Gap trade with a reminder to watch the zipper: $ES_F Gap trade possible but beware MP zipper dn to 1257.75 You can see in the video how I traded it.

Measuring the Health of Your Business

The SBA says that in the last decade, the small businesses of America employ over half of all private-sector employees and created up to 80% of all new jobs annually.  Hats off to you, the small business owner for that accomplishment. We certainly need you in today's economy.But yet in the same breath, being a small business owner is very risky. In fact, government data says in recent years for

Diesel frustration...

I spent the day at FAR trying to get the diesel motor running.
I sent the following note and picture to the vendor I bough the generator from. Any ideas from the peanut gallery? I realize the text is kind of rough, but it is part of an ongoing conversation....



I've attached a picture with parts labeled.
I still don't have it running, so I'll explain.

Today:
First thing I did was fix the return plumbing on top of the injectors.
I did not end up replacing the injectors as when I got the new bolts it all sealed up.
The return line that goes from the right end of the injector string down to the filter was rubber and leaking so I replaced it with the new metal part
I got from you guys.

Between each step below I'm loosening the screws #B and pumping the little pump until I get clear fuel with no bubbles.
I'm treating screw B like one treats a brake bleed, you need to close it while clear fluid is coming out so it does not suck in air.

So after fixing that and priming and bleeding I try to run... nothing.

The I remove the left most injector line nut #A (shown removed in the picture)
when I crank no fuel comes out the empty fitting, nothing not even a drop.

Then I remove all four nuts, and nothing not even a drop from ANY of them.

I open cover #3 and lift up the plate and turn the motor over to make sure gear inside is turning. It is.

So one of the guys says diesel pumps have shear pins and that could be it.

So I remove panel #D and turn over the motor, you can see the plungers moving up and down so the shear pin is probably good.


At this point I text you.
So for the next step I remove the screws #2 and then unscrew the left most two fittings #1 and the one to the left of it.
Inside are little plungers and springs, the plungers may have been stuck but the are now free.

Then I reinstall the springs and plungers and turn the motor over (after bleeding) and noting comes out.

So I remove #1 again and manually operate the prime pump and fuel comes out.

If I only screw #1 in part way the prime pump can make fuel come out. IF I screw it in all the way the prime pump can't
make fuel come out. If I only put number 1 into the point that the prime pump can make fuel come out and crank the motor No fuel comes out.


A couple of comments
The Hose #10 is really stiff and too big for the nipple, I really can't keep it from leaking air.
All of the banjo fittings on the inlet side of the world seem to have non metalic seals that are dried out and leak.
These were some of the seals I asked you for, but I've removed #10 and the banjo fitting behind it and all the fittings going to the first fuel filter,
I've brought these home and I'm going to get new seals and new hose before I go back out.


Some questions:

So at this point I'm lost? The only thing I see that could be wrong is that the inlet check valve into the plunger pump assembly is stuck open?
At this point is seems like I'm down to a fairly simple concept" plunger pump and two check valves.
Where will I find the inlet check valves to unjam?
Can I remove the whole upper pump assembly #9, if so do I just remove the 4 nuts, or do I have to do something else?


#J is fixed and I'm guessing it should not be adjusted?

#H moves all the way counter clockwise when you try to start, I'm guessing that that is the ONLY shutoff the electronics has for the motor?

#C What is this and does it do anything?

It takes be 4 to 4 1/2 hours each way to go the the site.
I've now been to the site 4 times to work on the generator. not counting time on the phone at home or asking researching at home
I've spent close to 50 hours working on this what should I do next?

Did you guys actually run this motor at your office? (based on the way it was packed I'd guess no.)

So realize this motor has NEVER EVER EVER run, so what else could be wrong?