10.4 A Complete System

[Nidolap]

I have a few open trades right now,wonder how this gaps will affect them. Just a few more hours to know the truth...

How about that...it turned out positive! Not bad...but totally random...

[nanningbob]

There were gaps all over the place but none went outside the previous high/lows of last week sooooooo ...... wait for the markets to settle and go from there. Banks clear out the sales/buys first from over the weekend, which causes the gaps and then the market settles into the direction it wants to go. I wish I could give you a rule but I have seen these things gap and run or gap and reverse. Never have quite figured it out. See you all later.

Steve's EA for 10.6 interests me because if it works, I can then use it when I see a trade possibility and let the EA handle the trade. Nice job.

[nanningbob]

Looks like there could be some good setups crossing the DPs today.

[nicoacademia]

was posting that Japan has a holiday today.

but by this point its apparent the gap is more to do with how things are(not) playing any direction.

[nanningbob]

This is what is scary about China:

Matthew Zhou and his wife spent 1.6 million yuan ($261,000) to buy a two-bedroom apartment last month in eastern Shanghai after seeing no potential for long-term returns in China’s financial markets.
“Home prices keep rising, so I’d rather buy a place now than put the money in the stock market,” said Zhou, a 30-year-old information technology engineer at a state-controlled bank in Shanghai, who plans to leave the home empty while the couple live with her parents. Gains in equities “could never outpace the growth of home prices,” he said.

The second part is a lot of these people pay with cash, so it doesnt collapse and keeps going up. At what point does a cash real estate market collapse? I have no answer to that.

The third part is they keep buying new properties and they dont sell because they dont need the money. At what point will people want to get their money and find there is a very small secondary market. I dont know any Chinese who buy older homes. They all want new and are willing to pay for it. I have never seen anything like this and have nothing in history to compare it too. Any comments.

[pg2205]

That CSS chart reminded me of a strategy I studied a few years ago based on Nzd and Aud hedging, when the Usd pairs moved apart then as here, go long Aud/Usd, short Nzd/Usd. When they come back into line, one or both will pay out and you have hedged so minimising your risk to USD moves!
The other consideration is swap rates of course, used to be Aud long only to get positive swaps all the time. Gbp and Eur same thing but interest rates are so low that it is not worthwhile for the carry trade element.

I think a lot of people really don't understand hedging correctly. If you were to hedge as stated (go long Aud/Usd, short Nzd/Usd), then you are:

Trade 1. Buying AUD, selling USD
Trade 2. Selling NZD, buying USD

When you add this all up, this REALLY means you are trading AUD/NZD long, so why pay 2 times the spread for 2 trades when you can just trade AUD/NZD.

[FXTrucker]

This is what is scary about China:

Matthew Zhou and his wife spent 1.6 million yuan ($261,000) to buy a two-bedroom apartment last month in eastern Shanghai after seeing no potential for long-term returns in China’s financial markets.
“Home prices keep rising, so I’d rather buy a place now than put the money in the stock market,” said Zhou, a 30-year-old information technology engineer at a state-controlled bank in Shanghai, who plans to leave the home empty while the couple live with her parents. Gains in equities “could never outpace the growth of home prices,” he said.

The second part is a lot of these people pay with cash, so it doesnt collapse and keeps going up. At what point does a cash real estate market collapse? I have no answer to that.

The third part is they keep buying new properties and they dont sell because they dont need the money. At what point will people want to get their money and find there is a very small secondary market. I dont know any Chinese who buy older homes. They all want new and are willing to pay for it. I have never seen anything like this and have nothing in history to compare it too. Any comments.

History teaches that this is classic bubble psychology . A technical counter trend trader would tell you the market will not collapse until it begins to go almost strait up.

tulip bubble.jpg

Daryl Guppy Parabolic Trens line.gif

The Book "Nobody Would Listen" tells the story of Bernie Maddoff's Ponzi Scheme and one mans attempt to get regulators to stop it. If I remember correctly the scheme was not uncovered until people tried to pull money out because they needed it after the 2007 financial collapse. I think something like that will pop the China real estate bubble. Some other event or crisis will trigger it. This will make whatever crisis is going on that much bigger in China and then world wide. A kind of domino effect.

Imagine a mountain covered with snow all winter and the snow keeps piling up all around the mountain eventually avalanches happen. The book "Endgame: The End of the Debt Super Cycle and How It Changes Everything " uses the term fingers of instability to describe this phenomenon. The triggering events are random occurrences that usually only cause small or sometimes medium avalanches but eventually and inevitably you get a super avalanche. The causal chain of events cannot be predicted.

The good news (well sort of...) is that this type of thing can go on much longer (as in years longer) than it makes any rational sense to and if you are aware you can prepare some what. Also if you can trade a market that is collapsing from a parabolic bubble like Gold and Silver were 2011, even an idiot can double an account. Hopefully you will actually be able to use those spectacular gains for something other than bragging rights since delaying the final collapse will only make it worse.

A hypothetical chain of events: The increasing and continuing boom in US natural gas production and the export of the fraking technology and CNG will lower the price of oil permanently below $100 per barrel, this could cause Russia to be unable to meet its budget requirements and cause a second collapse there in a couple of years. I have read by 2015 it will be cheaper to manufacture goods in the US than in China due to lower energy costs and inflation. That kind of combination could cause Chinese to need to liquidate there real estate "investments" and then... POP goes the bubble!

[nanningbob]

This is what is scary about China:

Matthew Zhou and his wife spent 1.6 million yuan ($261,000) to buy a two-bedroom apartment last month in eastern Shanghai after seeing no potential for long-term returns in China’s financial markets.
“Home prices keep rising, so I’d rather buy a place now than put the money in the stock market,” said Zhou, a 30-year-old information technology engineer at a state-controlled bank in Shanghai, who plans to leave the home empty while the couple live with her parents. Gains in equities “could never outpace the growth of home prices,” he said.

The second part is a lot of these people pay with cash, so it doesnt collapse and keeps going up. At what point does a cash real estate market collapse? I have no answer to that.

The third part is they keep buying new properties and they dont sell because they dont need the money. At what point will people want to get their money and find there is a very small secondary market. I dont know any Chinese who buy older homes. They all want new and are willing to pay for it. I have never seen anything like this and have nothing in history to compare it too. Any comments.

History teaches that this is classic bubble psychology . A technical counter trend trader would tell you the market will not collapse until it begins to go almost strait up.

tulip bubble.jpg

Daryl Guppy Parabolic Trens line.gif

The Book "Nobody Would Listen" tells the story of Bernie Maddoff's Ponzi Scheme and one mans attempt to get regulators to stop it. If I remember correctly the scheme was not uncovered until people tried to pull money out because they needed it after the 2007 financial collapse. I think something like that will pop the China real estate bubble. Some other event or crisis will trigger it. This will make whatever crisis is going on that much bigger in China and then world wide. A kind of domino effect.

Imagine a mountain covered with snow all winter and the snow keeps piling up all around the mountain eventually avalanches happen. The book "Endgame: The End of the Debt Super Cycle and How It Changes Everything " uses the term fingers of instability to describe this phenomenon. The triggering events are random occurrences that usually only cause small or sometimes medium avalanches but eventually and inevitably you get a super avalanche. The causal chain of events cannot be predicted.

The good news (well sort of...) is that this type of thing can go on much longer (as in years longer) than it makes any rational sense to and if you are aware you can prepare some what. Also if you can trade a market that is collapsing from a parabolic bubble like Gold and Silver were 2011, even an idiot can double an account. Hopefully you will actually be able to use those spectacular gains for something other than bragging rights since delaying the final collapse will only make it worse.

A hypothetical chain of events: The increasing and continuing boom in US natural gas production and the export of the fraking technology and CNG will lower the price of oil permanently below $100 per barrel, this could cause Russia to be unable to meet its budget requirements and cause a second collapse there in a couple of years. I have read by 2015 it will be cheaper to manufacture goods in the US than in China due to lower energy costs and inflation. That kind of combination could cause Chinese to need to liquidate there real estate "investments" and then... POP goes the bubble!

Nice chart, looks like a martingale trader.

[nanningbob]

I loved Maudin's book and get his newsletters. He doesnt speak of Forex in his letters but the Fundamentals he teachers are applicable to trading. When he says watch out Portugal is next I will wait for the news to hit and then go all in Euro sells. He was also the one that turned my onto the JPY story in the Spring. Once you figure out which fundamentals to look for when they come into play almost makes this easy. But until then I get to grind it out like the rest of the gang.

[nanningbob]

some nice gaps this morning and then 25-50 pip ranges. Going to bed, maybe tomorrow.