I use TA all the time to trade profitably. Experience is also important, you can't really read a couple books and jump in... you have to understand market psychology which is what TA actually is.
Yes exactly. TA isn't a crystal ball its more of a compass |
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The " Turtle Traders" are a legendary group of traders taught by commodity trader Richard Dennis. He and his partner had a debate about whether or not trading could be taught. They conducted an experiment by placing an ad in the Wall Street Journal and giving a group of traders some accounts and a system. The turtles ended up making more than $150 million. Richard Dennis came up with the idea after visiting a turtle farm in Singapore and thought that traders could be "grown" like turtles. The Turtle Trading System's entry and exit parameters are quite simple. They are based on the Donchian channel breakout indicator. The Donchian channel merely measures the highest high and the lowest low in a series of bars. For example, if you set the lookback to 10 bars, then the system will give you the highest high/lowest low in the last 10 bars. The turtle trading system had two different entry systems that could be used. Each one based is based on the Donchian Channel breakout. The one we'll consider goes long/short at the highest high/lowest low of the last 20 days. It exits when when there is a new high/low 10 bars ago. Here is an example: https://i.imgur.com/SEIUCFq.pngIf we backtest the indicator, then we will get some information about how it performed historically on BTC prices. This information can be valuable when thinking about designing a system. However, my primary purpose in this post is to distinguish between an indicator and a strategy. Let's take the Turtle System which is given for fee by one of the former turtles: http://bigpicture.typepad.com/comments/files/turtlerules.pdfNotice that there are at least six things that go into the complete strategy: 1. Markets - What to buy or sell 2. Position Sizing - How much to buy or sell 3. Entries - When to buy or sell 4. Stops - When to get out of a losing position 5. Exits - When to get out of a winning position 6. Tactics - How to buy or sell Its important to notice that the entry/exit is only a small part of the entire strategy. I will illustrate by running two backtests and compare this with buy/hold. The first will be a backtest of the Donchian indicator itself as determined by the Turtle trading strategy. The second will be a backtest that includes the position sizing parameters of the Turtle system. Each backtest will assume an account of $10,000 with profits reinvested and trade from 1/1/2012 thru 6/1/2014. Here are the results for trading the Donchian channel indicator itself. (Note: all profits are reinvested every trade because there is no position sizing strategy.) The results include a 22 trades- 50% profitable- a profit factor of 1- a drawdown of 98%- and a net profit of $3,482. https://i.imgur.com/5REjbmN.pngHere is a youtube playback of the system. (You will notice the large drawdown occurs in April 2013). http://youtu.be/aTlpsat74dYAs is obvious, buy/sell signals generated from the indicator severely underperformed buy/hold. Buying $10,000 worth of Bitcoin would've netted you a nice profit of 1.38 mill. As you can see below: https://i.imgur.com/gqFHam9.pngNow, let's consider what happens when we include the position sizing algorithm that the Turtle's used. We will follow their rules of only entering 4 units per trade. Where a unit is defined by (0.01 x AccountSize)/ Dollar per point x the Average True Range). This position sizing algorithm leads them to enter less money when markets are volatile and more when they are not. Here are the results using the same time period. There were 22 trades-50% profitable-a profit factor of 5.27- a drawdown of 98% and a net profit of 3.61 mill. See below: https://i.imgur.com/4efSiUa.pngI will also add the Youtube playback so you that you can see how the position sizing affected the trading. Notice the awful trade that occurs in April 2013 doesn't destroy all the equity because the trade size is risk adjusted for larger volatility. http://youtu.be/cT5wu_ODap0 Here are some takeaways: 1. An indicator is not a system. It should not be used as a complete system when trading. It should not be evaluated as a complete system when backtesting. 2. An indicator that, by itself, underperforms buy/hold can outperform buy/hold when placed in a good strategy. 3.You can learn a lot from a Turtle. Personally, the 34 pages providedis one of the most concise and helpful pieces on trading that I've read. http://bigpicture.typepad.com/comments/files/turtlerules.pdfAs always, the code is given at my blog http://www.signalstrengthfinance.com/distinguishing-a-strategy-from-an-indicator-a-lesson-from-the-turtles/Historical Bitcoin Data can be downloaded for free in NinjaTrader format at the link below: http://www.signalstrengthfinance.com/bitconnector-bitcoin-trading-on-ninjatrader/Trade Well and Prosper excellent post! after trading for a while I find that you can't rely on indicators too much. A lot of trading is mental and risk management is a big part of that |
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People buy more when economies are robust and people have money to spend. Deflation is usually a sign of recession There is two kind of deflation. The good one, and the bad one, you are referring on the bad one, that gave us a traumatic experience. Good deflation happens results from technological progress that supply an excess of goods. This is good for customer which will see price shrink. The stocks will likely stay ahead, the technological progress backing faith in the future. Bad deflation happens when customers save money for future incertainty. When they fear a crash, and consequently, provokes it, by holding their money. In other words, the reduction of price does not come from technological advancement. It can be triggered by stocks fall, as the great depression. (that can come from multiple reason that goes from bad monetary policy, to lack of technological advancement to boost the demand) Not quite. You have to measure inflation/ deflation on basket of goods (CPI). Not just individual categories of goods. If you look at historical data, most deflation occurs in recession times. |
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w currency "backed by" means "convertible to"
nicetry is correct. gold & bitcoin price is speculative
another non miner that thinks bitcoins are worth pennies but only sold for $640 due to dreams and hopes and nothing more... Its worth whatever the market wants to pay at the time being. Its priced like any other commodity. But the price is volatile because there isn't a historic demand. The only business that needs bit coins are dealers like bit pay/ coin base & exchanges |
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The monetary base is still increasing at an alarming rate, whether its parked with the fed, in my savings account or stuffed in someones mattress, the fact remains the same: It's increasing rapidly. What you should be worried is that even w QE, demand hasn't risen and unemployment is still not dropping. Means its not working so they gotta find a better theory or we looking at possibly a decade of recession like Japan The goal of QE was to get people to take more risk with their capital and to get asset prices to rise. This has happened and QE has been successful in this regard. It was hoped that the rising asset prices and people taking more risk with their capital would result in higher employment rates. What has hampered higher employment was the amount of transfer payments and new regulations that has set back our economy. Things like unemployment insurance that lasts almost 2 years and disability insurance that lasts a lifetime give people disincentives to look for and actually work. Actually the goal of QE was to inject liquidity into the banking system w the hope that banks would lend the money out. But what happened instead was the banks used the money on investments so the stock markets shot up. The reason they did this because private sector doesn't want to take on new debt because they're paying down balance sheets I don't believe unemployment insurance de-incentivize people from looking for jobs. Its more like the jobs aren't available. Even though 2 years is a long time its still temporary Its not just unemployment, the entire US economy is in a slump by most metrics. Richard Koo has a good theory that explains this he calls "balance sheet recession" and another one called "QE trap" |
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it makes me laugh that you think you know what "backed by" means yet you have no hard facts, just your opinion to back up your theory.
try looking at some charts now and again, see the trends, try using a calculator and do some maths.. dont just reply based on an opinion your limited imagination dreamt up.
hell people have even made calculators to work out mining profitabilty.. just to save you some time..
your supply and demand theory is high school level stuff. or as i prefer, the analogy of an orange. your theory is just the outer skin, yea you can hold it you can show people it, and thy will think thats all it consists of.. but you have not peeled away the skin and looked or felt the segments inside, the truly juicy and important things that make an orange, an orange.
w currency "backed by" means "convertible to" nicetry is correct. gold & bitcoin price is speculative |
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It's depressing to see people in this thread talk about "mild inflation" as though it's accepted to be something good. It's like saying "mild theft of your bank account is OK". As central banker Paul Volcker said "a 2% inflation target means that a worker loses 70% of his savings during a 30-year working life".
Deflation is also otherwise known as "productivity". Humanity becomes more productive in things like agriculture, IT, manufacturing and the cost of goods is supposed to go down. Guess what, under that system the standard of living also goes UP.
But oh no, banks want to sell more debt and protect existing debtholders (even if insolvent) so they hire politicians and academics to spout absolute rubbish about how "oh oh inflation is good, really, no, no, really". Lower prices keeps people from buying things, oh, oh wouldn't want them to actually SAVE any money now would we? OK genius riddle me this: if LOWER prices mean people buy LESS, then why do companies like Amazon and Walmart do everything they can to make their prices CHEAPER? This reasoning would say oh no just raise prices and people will want to buy more.
Let's see, it's better for me if A. I go to the store and receive the same quantity of goods as last time I was there, or B. I go to the store and receive LESS goods for my money than last time. Select ONE scenario that makes you WEALTHIER. This is not rocket science
Short answer: Because mild inflation is easier to control than deflation or runaway inflation. Amazon or Walmart arent good examples. Thats micro. Were talking about macro. People buy more when economies are robust and people have money to spend. Deflation is usually a sign of recession |
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Thanks for the course on clearing house, does minsky explain that in details ? it is interesting.
I would point out that JP Morgan lead the campaign for its own self interest because they also have incentive to prevent the crisis from spreading. (I think we agree on that)
The debate of self interest versus system interest is clear for me. My background as an entrepreneur in one of the worse bureaucratic country in the world, a whale out of control, does not help. (France)
But from Game Theory, there is some kinds of problem (prisoner's dilemma problem), that might be solved more effectively by adopting a system view. (Which is why I'm not completely against gov)
But it is not proved that the money system can be modeled as a prisoner's dilemna problem.
I come from a developer background, so I primarily see Central Bank as a single point of failure of the whole system.
Clearing house members have incentives to kick a member that default on loan, because they don't want to absorb losses forever.
Also, I suspect there were lots of clearing houses, and so the failure of a big member bank in one clearing house will not make other clearing house member to absorb the big loss. (except with the psychology impact on depositors)
With the FED system, a bank that is too big will never fail, because member banks don't have incentives to kick them out (they does not loss from a default, since the gov will bailout the big dying whale).
If one day gov decides to not bailout by not emitting bonds (This is how money get printed as I understand), then the member banks of the FED will have to absorb the loss, and the whole system will get out of whack.
Minsky doesn't talk about clearing houses. I think its from Allyn Young's book Your intuition maybe correct about individual incentives. But I think you are too hung up on political disapproval of the Fed or Central Banks. What I mean is you seem to want to conclude that Central Banks don't work or cause harm so you are looking for justification of your hypothesis instead of looking at the empirical data. The reason I bring up Minsky is because his view of money is endogenous. That banks create loans then find reserves after. This view is more accurate about what goes on in banking rather than Friedmans exogenous money supply view. Minsky says the mechanism of financial crisis come from the borrowers. There are 3 categories of borrowers; hedge/ speculative/ finance. When times are prosperous, when the borrower has excess cash he takes more speculative risk due to "euphoria". The influx of speculative investors create speculative bubbles. The last to enter are Ponzi borrowers. In the case of the Ponzi borower, the investor relies on the appreciating asset to cover the debt. When the asset fails to appreciate to cover the debt the Ponzi borrowers money gets 'frozen' and he's forced to liquidate the position. When many investors are forced to do this you have a crash. Personally, I think Minsky's idea is the most accurate understanding of markets. It is inline w Keynes except Keynes description is a vague "animal spirits". (BTW Keynes was an investor so his view comes from being a market participant) Friedman tend to take a position of "efficient market hypothesis" because he follows Adam Smith. Whatever the market determines is the correct (natural) state |
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This is misunderstanding of basic economy. People do investments to increase productivity. But that capital has a cost, so they would not waste it. When productivity over all increases, workers will leave the less productive firms and join the more productive. The reason is that work is the most general productive factor of all. Then the less productive firms must consider investing in more capital, calculate if it makes economical sense. If it does, they will do it, else the firm will shrink or die. This releases capital and work for more productive uses. This is the basis of growth. We sometimes see the reverse, when wages shrink, capital is consumed and held at a lower level, reducing productivity and more workers join the industry. You fail to understand the linked essays in the OP. The repeating historical evidence of economic collapse corresponding with technological unemployment is that people don't adjust their education and skills fast enough to keep up. They especially resist by using debt to delay their adjustment. I understand the importance of knowledge, inventions and automation, but I propose that it does not fundamentally change the economic system. The appearant problem of automation has been the focus of people who do not understand the fundamentals of a free market since the beginning of the industrial revolution. They where called Luddites. The point is that in reality, the machines are not the driving force. It is the scarcity of human labour that is the motivation to invest in labour saving equipment. If there is no scarcity of labour, there is no need to invest. Then, every economic change, meaning every economic change, for whatever reason that change come by, will produce winners and losers. That is inevitable. Persons losing their job is obviously the immediate losers. That is all the Luddites see. But persons keeping the job in a factory with outdated machines are also losers, their wages will fall back compared to the general labour market. Eventually, shed workers will find new jobs, the lower paid workers mentioned above will move to better paid jobs, and the economy again runs smoothly on a higher production level, favoring all. What you are describing precedes globalization. What happens today is that labour gets off shored to cheaper labor markets. Within the US you start to see a division between classes |
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Thats similar to Milton Friedmans idea. He wanted a computer to set the inflation at a constant 3%
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Maybe by reading Minsky, I'll understand more how banking system works, Milton Friedman does not go in great length about it.
But still, why does the creation of FED lowered reserve to deposit ratio ? If it is not by the confidence of FED to inject liquidities instead of private banks ?
This is again, a quote from milton friedman I took in earlier post.
I suspect also, that before, multiple clearing house existed, or else, why not calling the one central bank.
If JP Morgan had not injected liquidity with the clear house. The effect of the crisis would be more or less local to member banks.
Also, maybe other member banks with better liquidity would have helped instead of JP Morgan.
The net result is that disaster and fire would be local, and the responsability to make the system work is in the hand of people who profits from it.
If every banks depends on FED for liquidity, contrary to before, this put tredemous power in the hand of one man. (or one board)
A failure of such man translate into a failure of the whole system.
More over, contrary to a bank, the FED will never close its door, which give it no incentive to make things work. Worse.
Any failure of FED will make them earn even more power because they are credited to save the system afterward. (Great depression)
If the responsability of providing liquidity would be in the hand of member banks (which coincide with their self interest to prevent a crisis), the whole forest would not burn because of the failure of one man whose own business does not depends on its performance.
W Fractional Reserve lending there is supposed to be a cap limit ratio like 1:10 or something like that. But in real life if somebody wants a loan the bank will write the loan and find the reserves later through interbank lending. You can see in practice that there's no limit except by demand on loans. The way clearing house associations work were like this: Member banks get together and deposit reserves (gold) in the clearing house balance sheet. The clearing house issue clearing house certificates (CHC). The member banks uses these CHCs as money. At the end of day they settle there balance w the clearing house. In times of crisis, the clearing house issues a clearing house loan certificate (CHLC). The CHLC is NOT backed by the reserves of the clearing house it is credit. If a member defaults on loan the other members absorb the loss and kick out the defaulting member. I think you have the cause/effect opposite of how I see it Private banks have incentive to maximize profit. The clearing isn't created for the purpose of preventing crisis. Its created so banks have an efficient credit system. Crisis happens because of some external event. 1907 crisis happened after 2 guys tried to corner the copper market and failed. In the event of crisis, there needs to be a "lender of last resort" to inject liquidity into illiquid credit market. 1) Clearing house only has self interest. -->Profit motive to save their own members first. 2) Central Bank has no profit motive. --> Incentive to look after the system (BTW, Not only JP Morgan & NYCHA; Rockefeller, Rothchilds & the Treasury also committed funds to inject liquidity into the banks. JP Morgan gets credit for leading the campaign to do this.) The debate is which motive is more effective? Self interest or the systems interest? Friedman is a free market believer so he says people do a better job when looking after their own money. This may be true to a degree but it may also lead to "Tragedy of the Commons" type scenario. And when crisis happens it takes a volunteer like JP Morgan to intervene. W a Central Banks its their job to intervene in crisis OTOH, without profit motive there might not be adequate reward to do a good job. Most govt agencies are slow and incompetent, stuck in bureaucracy, etc.. The debate w Friedman boils down to less regulation vs more regulation. In the 1980's, the influence of Friedman led to policies of deregulation which people blame for the bubbles and subsequent crash so we are back to Keynes (neo-Keynesian & post-Keynesian). Minsky & Modern Money Theory is considered post-Keynesian. Its still heterodox and not mainstream but I think Minskys ideas are gaining more popularity now after his Financial Instability Hypothesis explained the 90s Asian Financial Crisis & predicted the bubble burst http://www.levyinstitute.org/pubs/wp74.pdf |
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the fed has done a pretty good job of minimizing inflation with interest rates over the past several decades.
Do you really believe the graph and what you just said? I would argue that 4% inflation (the ~rate after the 70's) is a good target to try for in reference to inflation. During the 70's and the oil crisis the Fed did a very poor job handling inflation. 4% inflation is just above what the Fed would like it to be at as of now, and is much higher then it is now. Exactly! 4% is a happy medium between everyone's life savings is rapidly declining in value and that inflation is so low that there is serious risk of wide spread, long term deflation and economic contraction 4% inflation is very high. Losing 40% of your saving every 10 years compounded to financial elite on top of taxes mean no ordinary citizen will be able to have any saving. Only if your income doesn't keep up. If you sell goods or services those prices rise w inflation Salary lag inflation by months if not years while good are service are very sensitive to market and monetary policy. Fix wages income,where most people belong to this category, can not keep up with inflation. The thing everyone should fear is deflationary spiral or runaway inflation. You want a little inflation now to get us out of recession. Otherwise unemployment gets worse I would rather have price stability and let free market decide which company survive than letting government play god. Remember, innovation means finding a new way to do things more efficiently and cheaply. In the process, that will kill off old industry and inefficiently run companies. Labor law need to be more flexible to allow re-training and re-tooling workers. What does that have to do w inflation? Or the topic. Why is this the "economics" subforum when everyone keep talking politics Politician set the economic and tax policy, which influence market, price and pretty much everything we do. Nah its the other way. Market forces are stronger than policy. Govt makes policy in response to market forces. The contradiction is that evreyone expects policy to counteract recessions but nobody demands govt to cockblock the boom times so we gets bubbles and subsequent busts. If inflation was constant around 3% it would be very manageable |
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Prices going down were the only good thing in the Great D, do you think prices going up would have been better for people having very limited ressources?
People have less money in depression times so it is good that prices are lower not higher
Sure it's beneficial for consumers for prices to be lower when they go to the store and buy things, but the lower prices don't make up for the lack of consumption due to the hard economic times. Aggregate consumption falls, even though prices are lower. China will fair well after the USD collapsed and the dust has settled
I guess it depends on how far in the future you look. They would almost certainly recover better and faster than the US, but a USD collapse would greatly hurt their economy. It would destroy a lot of US demand for their exports, and because of our close economic ties with Europe, the European financial system would also probably collapse, which would destroy their demand for Chinese exports as well. It's impossible to predict how bad it could get, but I could see a USD collapse leading to a global depression. Its pointless to discuss in macro terms when the guy can only think in micro terms. Just write anecdotes from consumers point of view so he understands Price of gas drops so I'll just buy double the amount and store it in my garage. Same goes for food, clothes. I just got laid off but cars are 20% less this year so I'll just buy a car instead of worrying how I'll pay my rent or feed myself until I find work again Or I just made bonus this year so I'll buy a new car, take a vacation, etc.. Cause I have some extra money |
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the fed has done a pretty good job of minimizing inflation with interest rates over the past several decades.
Do you really believe the graph and what you just said? I would argue that 4% inflation (the ~rate after the 70's) is a good target to try for in reference to inflation. During the 70's and the oil crisis the Fed did a very poor job handling inflation. 4% inflation is just above what the Fed would like it to be at as of now, and is much higher then it is now. Exactly! 4% is a happy medium between everyone's life savings is rapidly declining in value and that inflation is so low that there is serious risk of wide spread, long term deflation and economic contraction 4% inflation is very high. Losing 40% of your saving every 10 years compounded to financial elite on top of taxes mean no ordinary citizen will be able to have any saving. Only if your income doesn't keep up. If you sell goods or services those prices rise w inflation Salary lag inflation by months if not years while good are service are very sensitive to market and monetary policy. Fix wages income,where most people belong to this category, can not keep up with inflation. The thing everyone should fear is deflationary spiral or runaway inflation. You want a little inflation now to get us out of recession. Otherwise unemployment gets worse I would rather have price stability and let free market decide which company survive than letting government play god. Remember, innovation means finding a new way to do things more efficiently and cheaply. In the process, that will kill off old industry and inefficiently run companies. Labor law need to be more flexible to allow re-training and re-tooling workers. What does that have to do w inflation? Or the topic. Why is this the "economics" subforum when everyone keep talking politics |
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the fed has done a pretty good job of minimizing inflation with interest rates over the past several decades.
Do you really believe the graph and what you just said? I would argue that 4% inflation (the ~rate after the 70's) is a good target to try for in reference to inflation. During the 70's and the oil crisis the Fed did a very poor job handling inflation. 4% inflation is just above what the Fed would like it to be at as of now, and is much higher then it is now. Exactly! 4% is a happy medium between everyone's life savings is rapidly declining in value and that inflation is so low that there is serious risk of wide spread, long term deflation and economic contraction 4% inflation is very high. Losing 40% of your saving every 10 years compounded to financial elite on top of taxes mean no ordinary citizen will be able to have any saving. Only if your income doesn't keep up. If you sell goods or services those prices rise w inflation Salary lag inflation by months if not years while good are service are very sensitive to market and monetary policy. Fix wages income,where most people belong to this category, can not keep up with inflation. The thing everyone should fear is deflationary spiral or runaway inflation. You want a little inflation now to get us out of recession. Otherwise unemployment gets worse |
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the fed has done a pretty good job of minimizing inflation with interest rates over the past several decades.
Do you really believe the graph and what you just said? I would argue that 4% inflation (the ~rate after the 70's) is a good target to try for in reference to inflation. During the 70's and the oil crisis the Fed did a very poor job handling inflation. 4% inflation is just above what the Fed would like it to be at as of now, and is much higher then it is now. Exactly! 4% is a happy medium between everyone's life savings is rapidly declining in value and that inflation is so low that there is serious risk of wide spread, long term deflation and economic contraction 4% inflation is very high. Losing 40% of your saving every 10 years compounded to financial elite on top of taxes mean no ordinary citizen will be able to have any saving. Only if your income doesn't keep up. If you sell goods or services those prices rise w inflation |
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There's almost 29M usd swaps now on bitfinex, and to me it looks like the upward momentum has stopped. If the price ranges from 640-660 for a while with no upward movement the probability of a long squeeze is going to increase dangerously.
Quite a lot of money they are holding. What stop them from running away or claimed hack like tradefotress did? They make money off of trading fees and earn a portion of the interest on Swaps. Over the long term they stand to make more money off of these fees would outweigh the amount they could get away with if they were to steal the coins from their customers. You don't have to worry if they run off with your money. You should worry about how to get your money out in case of insolvency |
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'Coin money and set the value there of' Coin gold and silver, not completely make up what they feel like the value should be.
I find it hard to believe Milton is so happy to go along with the Fed when he has so many good ideas normally. Just his basic premise, free to choose does not tend towards a central bank greater then all others and without choice like we currently have. It is a system of force not economic competition, he really wanted more of this as a solution?
Capitalism itself is basically defined by the distribution of capital and ownership by the people. Not a centralised system, not politically controlled for governments own benefit in their spending determination. Its all warped so badly now, this is not capitalism
Friedman is not Rothbard. He's a follower of Adam Smith. He just thinks free market comes ups better solutions than govt because of the incentive to profit |
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The monetary base is still increasing at an alarming rate, whether its parked with the fed, in my savings account or stuffed in someones mattress, the fact remains the same: It's increasing rapidly. What you should be worried is that even w QE, demand hasn't risen and unemployment is still not dropping. Means its not working so they gotta find a better theory or we looking at possibly a decade of recession like Japan |
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