Why All The Cool Kids Are Trading Facebook

Unless you’ve been living under a rock, you know the only thing of note that has happened in the last fortnight is Facebook.

Europe?  Bah!  Facebook has floated!

Trading opportunities?  There aren’t any.  Except in Facebook.

In fact I’m entirely surprised that any other stock in the world had any trading volume at all with everyone so laser-focused on $FB.

Experienced traders and newbies alike have flocked to the stock, but why?  What’s so amazing about $FB?

Well, there’s obviously the controversy – traders love a juicy story and the hoopla surrounding the IPO has certainly given us all something to gossip about.

But the real question is – why the heck are people trading it?

The number of experienced traders I’ve witnessed trading $FB so early in the piece has surprised me. People seem to have missed the memo that’s it’s actually not illegal to leave it alone.

The thing is, most traders have rules to follow. A technical trader, for example, has next to nothing to base a trade on in $FB at the moment because not enough has happened yet.  All the support and resistance is in the process of being created, and moving averages haven’t yet got enough data to produce a line.

$FB options have only just started trading and with no history to speak of, historic volatility has to be a guess, at best.

And fundamentally everyone knows the IPO was wildly over-priced, so I can’t see much of a basis for a trade there either.

So why are people insisting on trading it?

If traders have rules to follow for IPO’s that’s great.  But if that’s the case, they should’ve also been trading stocks like $PDH, $WAGE and $IRG and I’ve heard precisely zero about any of those stocks.  Funnily, there was a buck to be made by ignoring the $FB hype and investing in those babies instead.

Everyone’s trading $FB because it’s cool.  It’s just like everyone buying Crocs clogs, despite the fact they have as much appeal as over-priced gardening shoes.  We’re suckers for the limelight, and are happy to look ugly and trade ugly if it means we get some cred with the crowd.

Here’s a tip – just because it’s fashionable, doesn’t mean you should wear it.  Or trade it.

Realistically, unless you have an explicit set of rules created for trading IPO’s you aren’t trading Facebook, you’re gambling.  Don’t forget that it’s our job to make money, not be the coolest kid on the block and sticking with your worn-in favourites is often a much better look.

Enough said.

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What I have in Common With Zoolander

For those of you who have never experienced the viewing pleasure that is Zoolander, let me fill you in.   Be warned though – there’s every chance you’ll hate it because it’s not exactly a cinematic wonder but it made me laugh.  A lot.

Derek Zoolander is a remarkably stupid male model, who thinks there must be more to life than being really, really ridiculously good-looking.

Today I realised that Derek Zoolander and I are frighteningly alike.  And while I’ve long realised it’s not my calling to be professionally good-looking, we do share a problem that is it’s slightly…unusual.

You see, Derek is not an ambi-turner – that is, he can’t turn left.  And it appears that I have a similar difficulty.  I am not an ambi-trader.

I could never be professionally good-looking.

Why I’m Not an Ambi-Trader

If you’ve been following my blog you’ll know that I had the rather unfortunate experience of starting my trading career in July ’08, right before the Lehman Brothers turned themselves inside out.

Learning how to trade in the middle of a bear market had some pretty cool benefits, including the fact that any residual cockiness was ripped from me so fast I never had the chance to start thinking I had it going on.

I learned very quickly that I had to manage risk.  I learned very quickly not to write puts.  And I learned that a roaring trend has the potential rip my face off right off my head.

But in spite of all this, recently I’ve noticed there has been a detrimental side-effect to my bear-market birth.

I’m not an ambi-trader.

Since starting to trade shares in 2008, the Aussie equity market has provided sweet little opportunity to practice going long, and it’s showing.

I have an ‘affliction’ where I see short set-ups everywhere, but longs seem few and far between.

When I was trading equities this quirk proved very useful as I was able to short the living daylights out of things before most people realised that the market was about to tank.

But in the FX market it’s costing me money because I’m slow to recognise long triggers, and on a 5 minute chart you just don’t have the luxury of time.

I can trade the short side beautifully but I have a lag identifying long opportunities – something that is fatal in a fast market.

Fixing It.

I realise you’re waiting for me to say something very profound here, but the solution isn’t rocket science.

It’s just practice.  And then a little more practice, with a healthy side dish practice thrown in for good measure.

My short setup is second nature to me because I have had so much opportunity to short, and spent a great deal of time looking at down trending charts.  So if I want trading the long side to become second nature to me, I’m going to need to do it – over and over and over again.

So if someone would be so kind as to start an Aussie bull market, or buy a whole heaps of $AUDUSD, that would be very much appreciated.  Thanks.

The Best Bits of Zoolander

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JP Morgan CEO On Why Beauty is a Bad Investment

Well, that’s the last time I ask JP for help.  😉

A reply from CEO of J.P. Morgan to a pretty girl seeking a rich husband…

A young and pretty lady posted this on a popular forum:

Title: What should I do to marry a rich guy?

I’m going to be honest of what I’m going to say here.

I’m 25 this year. I’m very pretty, have style and good taste. I wish to marry a guy with $500k annual salary or above.

You might say that I’m greedy, but an annual salary of $1M is considered only as middle class in New York.

My requirement is not high. Is there anyone in this forum who has an income of $500k annual salary? Are you all married?

I wanted to ask: what should I do to marry rich persons like you?

Among those I’ve dated, the richest is $250k annual income, and it seems that this is my upper limit.

If someone is going to move into high cost residential area on the west of New York City Garden(?), $250k annual income is not enough.

I’m here humbly to ask a few questions:
1) Where do most rich bachelors hang out? (Please list down the names and addresses of bars, restaurant, gym)
2) Which age group should I target?
3) Why most wives of the riches are only average-looking? I’ve met a few girls who don’t have looks and are not interesting, but they are able to marry rich guys.

4) How do you decide who can be your wife, and who can only be your girlfriend? (my target now is to get married)

Ms. Pretty

A philosophical reply from CEO of J.P. Morgan:

Dear Ms. Pretty,
I have read your post with great interest. Guess there are lots of girls out there who have similar questions like yours. Please allow me to analyse your situation as a professional investor.

My annual income is more than $500k, which meets your requirement, so I hope everyone believes that I’m not wasting time here.

From the standpoint of a business person, it is a bad decision to marry you. The answer is very simple, so let me explain.

Put the details aside, what you’re trying to do is an exchange of “beauty” and “money” : Person A provides beauty, and Person B pays for it, fair and square.

However, there’s a deadly problem here, your beauty will fade, but my money will not be gone without any good reason. The fact is, my income might increase from year to year, but you can’t be prettier year after year.

Hence from the viewpoint of economics, I am an appreciation asset, and you are a depreciation asset. It’s not just normal depreciation, but exponential depreciation. If that is your only asset, your value will be much worse 10 years later.

By the terms we use in Wall Street, every trading has a position, dating with you is also a “trading position”.
If the trade value dropped we will sell it and it is not a good idea to keep it for long-term – same goes with the marriage that you wanted. It might be cruel to say this, but in order to make a wiser decision any assets with great depreciation value will be sold or “leased”.

Anyone with over $500k annual income is not a fool; we would only date you, but will not marry you. I would advice that you forget looking for any clues to marry a rich guy. And by the way, you could make yourself to become a rich person with $500k annual income.This has better chance than finding a rich fool.

Hope this reply helps.

signed,
J.P. Morgan CEO

Is This The End For Financial Bloggers?

Let’s face it, most financial bloggers and writers are as boring as bat-shit.

Profit margins, company restructuring, non-farm payrolls, dry goods index and other similar tediousness makes my brain physically shrivel – I can actually feel it killing me.

But it seems our fun-challenged friends who write this stuff might be about to lose their place in the world, alongside the unfortunate writers who find themselves getting paid to turn out pages of the stuff.

According to the Atlantic, computers are about to take over the realm of what passes for journalism in areas dominated by numbers and data sets – specifically the areas of sports writing and our beloved financial journalism.

Computers are obviously way better at, well, computing than the average human and now they apparently have the capability to churn out ‘stories’ based on the reams of data they are fed.

According to the Atlantic, “Wherever there is data, Narrative Science founders say, their software can generate a prose analysis that’s robust, reliable, and readable.”

Clearly readable is a relative term here.

Nonetheless, this is a warning call to writers everywhere.

It’s time to get raw.  Forget the reporting of numbers, any old computer can – and shortly will – do that.  We need to write using the stuff that computers have no concept of; things like creative thought, humour and affection.

I have never met an artistic computer with a sense of humour that blows me kisses as I walk out the door, and until that time comes there is a place for writers in all areas of journalism, sports and finance included.

It might just take a little soul.

She's phoning in her latest article for the WSJ.

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The Suckiest Thing About Being a Trader

I was mucking around online this evening, and it suddenly occurred to me that as an occupation, being a trader is seriously lacking in the humour department.

I stumbled across a blog post that literally made me cry laughing, and I realised that in my working day I rarely get to have a really good laugh.

And that’s a bit sad.

If you work in an office, or in sales, or in nearly anything else in the world you are surrounded by people who have the capacity to crack a joke, wear weird clothes, play a prank or even just do a surprise fart.

When you work alone, you don’t get that.  There’s no-one to talk to, and no-one to play pranks on (unless you’re into phone pranks but that’s not  funny, just creepy).

I suppose you might actually laugh at your own farts seeing as most of you are boys, but I don’t even get to do that.

And the thing is, most traders and people in the industry are too busy being serious and financey to have any fun at all because money is a very serious business and clearly not to be trifled with.

Think back to high school. The business and economics classes weren’t full of the funny guys, they were full of the nerds who are very lovely people but not at all funny.  Except their clothes and neatly combed hair, but I’m an adult now and not allowed to laugh at that anymore.

And it’s these lovely but very unfunny nerds who are now writing riveting articles like “State Pension Funds Sue BoNY Mellon over FX Charges” (which is a actually a little bit funny, you have to smile at Bony Mellon) or ” Durable Goods Orders 2.2% vs 3.0% Est; Prior (4.0)% Revised to (3.6)% Est”, which quite frankly makes me want to rip my eyeballs out just for fun.

They all know what happens when the Durable Goods Index comes in under expectation.

So in the interests of traders everywhere I’ve decided to list some of the financial bloggers and writers who were certainly naughty in school, and who regularly make me smile in my work day.  There are some out there, and you do bring joy to my trading day so thankyou.  It is now your challenge to make me laugh 😉

The Reformed Broker

When Not Where

The Trading Game Blog

BCLund

Altucher Confidential

If you know one that I’ve missed, please let me know in the comments section 🙂

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Why I Want to be American

I admit it – I’m jealous.

Right now, I want to be American.  I want to buy cheap houses and eat mega-huge fast food.

But most of all, I want a stock market that goes up.

Ours appears to have forgotten how.   In fact it’s almost as though it’s pulled the doona* over its head and decided never to get up again.

If you ask me, that’s kind of bizarre because you’d think the Australian Market has everything to live for.

You see, economically we rock.  We have stable banks, interest rates that actually pay money and a resource sector that has the rest of the world drooling.  And we have jobs for anyone who actually wants to work.

Now compare that to our American friends.  Their banks have a less than sterling reputation, interest rates can barely go any lower, and there’s very few jobs in many areas – in fact whole towns are dying through the extinction of industry.

And yet their market is merrily making higher highs without a care in the world, while ours is languishing like a drunk on Sunday morning.

The Aussie market, circa 2007.

*”doona” is Australian for a feather-filled quilt that you have on your bed.

So What Gives?

It simple really – the economy does not equal the stock market.

What does equal the stock market is people’s perception of what might happen in the future, and this goes some way toward explaining what’s going on with the US market.

Even though right now their economy is junk, people are overjoyed that there are green shoots appearing.  People are more optimistic about the future.  It doesn’t matter that right now, things are still rubbish – the fact is there is hope.

If the markets were a reflection of the economy, the US market may have risen marginally to reflect the odd green shoot.  But what’s happened is not marginal, it’s a beautiful big fat money-making up-trend.

On the other hand, the Aussie economy is solid and people are happy about that – in a very unexcited manner.  We’d actually be much happier if things had been dismal and there had been some kind of catalyst to make us think our future is brighter and things are on the up.

Sadly, while things are going well, us Aussies need more drama. We’re sick of ‘solid’.  We expect solid, and solid is priced in.

This puts us in a slightly scary place, because if things suddenly don’t seem so solid – due to China shutting up shop, for example – things could drop like a stone as we saw in August last year.

We need news that China is going to be building 20 new cities in the next two years.  That might spur things along a little.

One of China's 20 New Cities. Please?

It’s All About Expectations

The Stock Market is not a snapshot of the economy.  It’s a snapshot of people’s expectations and fears.  It’s a snapshot of their hope, or the absence of hope.

Make sure you don’t get confused, or suddenly you’ll find yourself long ‘solid and unexciting’, and short “optimism and hope” – and that would be a shame.

Wouldn’t it, everyone who’s been watching this spectacular rally from the sidelines? 😉

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Learning Humility

There is nothing more humbling than trying to learn something new.

Right now, I’m being encouraged to learn how to ‘skurf’.  (Which isn’t as weird as it sounds, it’s not like snurging which is a whole different ball-game.)

It’s waterskiing behind a boat, only with a surfboard instead of water ski’s.

But I refuse.

If I could practice in private, in the comfort of my own home with a boat that drove itself and automatically came to pick me up for the thousandth time with not even the hint of a you’re-such-an-unco-loser look on its face, perhaps I would give it a shot.

But while I do have an ocean in my backyard, it’s not a private one. And while I do have a boat, it doesn’t drive itself.  So the deals off.

He has a self-driving boat.

Ditch the Arrogance, and Get Humble

I don’t mind trying and failing, but I prefer to do it in private, with no-one watching.

Learning something new requires you to admit – “I don’t know how to do this, I need to find stuff out and I’ll likely make lots of mistakes in the process – some of which might be embarrassing/humiliating/enough to make me take to my bed in mortification .”

Which is okay, as most people will happily admit they don’t know everything, and can learn their stuff in practice mode.

The problem arises when you need to learn something you think you already know.

As an example, I think I know how to trade.  I’ve been successfully trading equities for a while now and feel like I’ve got it going on.

So it makes sense, seeing as I know how to trade, that I could change from equities on a daily time frame to FX on a 1H timeframe like a duck to water.  Or a squirrel.

WRONG.

To my surprise, I found I knew little about how to trade FX successfully.  I thought I could whack my equity method into another instrument and continue on my happy way, no practice-mode required.  Boy was I mistaken.

Be Ready to Re-Learn

There are times when you feel like you should know things, and it’s quite shocking to find you don’t.  There are things you think you are good at, and suddenly you find you’re not.

It’s embarrassing.  It’s like falling off the surfboard, only this time the person pointing and laughing as you struggle to get up is you. Suddenly you find you’re not quite as awesome as you thought, and it sucks.  It’s humiliating.

The truth hurts, baby – especially when you’re so arrogant that you think you can’t fail.

You can, and you probably will.

Staying humble is a challenge when things are going well because it’s natural to feel like you’re a trading god. You almost have to search for flaws in your trading to make sure you’re keeping it real.  None of us are perfect traders, and our strengths and weaknesses change with our fortunes.

People have reported that after their biggest trading win often comes their biggest trading loss, and this is due to nothing more than complacency and arrogance.  They let down their guard, and forgot to be humble.

In trading, humility can be thought of as constantly remembering that you’re imperfect.  Not in an “I’m-so-crap” way, but in an “it’s-possible-for-me-to-stuff-up” way. And it’s remembering that there are things you don’t know – and sometimes even what you do know might not be enough to get the job done.

It’s letting go of your ego and getting rid of the need to be seen by others, or yourself, as perfect.

Now, if you’ll excuse me – I’m off to find my surfboard.

Me, in about half an hour.

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How Being Cursed Can Affect Your Trading.

I think there must be something wrong with my eyeballs.

In the big scheme of things, this isn’t so bad – the other day I had a conversation with an important person which left me wondering if I had something wrong with my brain.

You know, it wouldn’t surprise me to find that I have been cursed with nasty form of brain-eye combo disease because every time I look at an FX chart, it has a habit of morphing into a glorious vision of perfection.  Gorgeous trends.  Strong support and resistance.  And a gentle voice that seductively whispers, “Trade me!”.

I know – what a strange affliction, right?

The problem is, every time I enter one of these delicious trades, it turns out to be a hallucination.  It’s disappointing.

The Root of The Problem

Forex is tricky, because it looks so damn easy to trade.  There are fabulous support and resistance lines to work from, great long-term trends, and loads of volatility to profit from.  Add to that the wicked leverage and it really is a girls dream come true.

Well, some girls perhaps. Or just me.  Whatever.

Nevertheless, right now it’s making me feel like punching it because nothing is working quite the way it should.

I mean – am I pointed in the right long-term direction? Check.

Good Risk/Reward?  Check.

Confirmed with Mr Bernanke that he isn’t about to say anything stupid?  Check.  Well to be honest, this wasn’t something I’d previously had in my checklist but I’ve just added it.

Dealing with the Unknown

Unfortunately our friends at the Federal Reserve can wreak havoc with our positions in the blink of an eye, while we’re left frantically trying to manage the shredded remnants of our once-beautiful positions.

Sitting and watching the market at all times might be a way to minimise the damage, but seeing as the forex markets trade 24 hours and most traders aren’t undead it probably isn’t the most practical solution.

The truth is that trades get trodden on all the time.  And when your pretty trades all get screwed in one go, it can sting a little.  And on the back of an existing losing streak it can sting a lot.

After being slapped by a few trades, you start to beat up on yourself and wonder what the hell you’re missing.

But the fact is you’re not missing anything – you’re just trading.

When you’re in the business of catching trends, you have to remind yourself constantly that you will lose way more than you win.

For me, that’s the very hardest thing, and the effect is compounded when I’m enduring a run of losses.  I dislike being wrong, I dislike losing money and the only thing that can really get me to push through these times is a whole lot of courage.

These crap phases require a good dose of attention on both the bigger (non-trading) picture, and our core motivations.   Refocusing on what actually matters – friends, family, mojitos – can re-energize us enough to get up tomorrow and do it all over again.

That’s all courage is – getting up and doing it again.  And again.  And again.

But on the odd occasion you start to have brain/eye issues, you may want to get it checked.  Just sayin’.

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The Dumbass Advantage

If you’d asked my high school Maths teacher what kind of student I was, he would very likely tell you, “She was a bit slow.  Not retarded-slow, although, when I look at her (rather incredible) siblings I suppose it might be a possibility.”

Maths wasn’t my strongest point.

It took me ages to work through those stupid problems, which resulted in half-finished papers and a constant tirade from my teacher that I wasn’t trying hard and needed to apply myself better.

Maths just didn’t flow for me.  I tried so hard my brain hurt, and it was a struggle all the way.

Her brain hurts too.

My maths teacher just thought I was slack.  He was accustomed to my siblings mathematical brilliance, and had apparently never heard of Howard Gardner.

Who?

My mate Howard has a theory that there is not just one kind of intelligence.  Rather than what is commonly thought of as intelligence – solving logical problems, being a nerd, being good at maths and science – it seems that there are multiple intelligences that cover a wide range of spectrums.  Although personally I’m not convinced ‘intelligences’ is even a word.

However, it makes sense.  People who are not thought of as traditionally ‘smart’ are often exceptional at other non-logical things that involve alternative methods of thinking and expression – people like artists, or sports people. Or supermodels.  Artists are extremely visual and process things very differently than a rocket scientist, for example.

Here’s The Good News

If you grew up thinking you weren’t very clever, didn’t get great marks and never held particularly high hopes of becoming a neurosurgeon, congratulations!

You have an edge in your quest to be an unfathomably great trader.

People who don’t naturally excel at everything tend to adjust to trading better than our logical, highly functional friends for a number of reasons, perhaps the most important of which is the lack of a massive ego.

The thing is, you’re kind of used to not being successful.  Now, that is not to say that you are a loser – just that you don’t get particularly surprised when you find you’re not instantly right.  And more importantly, it doesn’t offend you to the very core of your being.

When you are used to being wrong a few times before you are right, it doesn’t kill you when you make a mistake.  You find it easier to bounce back from being wrong, to get up and have another go.

It’s different for people who are effortlessly successful.  Being successful tends to be very much a part of their self-image, so these types of people do not fail gracefully.

The ability to be gracefully wrong is a pre-requisite skill if you want to be a successful trader, and explains why so many people who are highly successful in other fields fail terribly at trading.

Quite simply, they are used to being right. They are used to being fabulous at everything they turn their hand to, and assume that trading will be no different.

What a nasty surprise it is, finding out you suck.

Highly successful people are not equipped to lose, and lose, and lose; and be wrong, and wrong, and wrong.   They find it extraordinarily difficult to get used to being regularly and consistently wrong, which, as we know, is just normal trading life.

So, here’s to success – for the dumbasses.

When You Have No Friends on Facebook

I’m rarely bored.  I hardly ever bump around not knowing what to do with myself but on the odd occasion that I do, it’s usually when I’m sitting behind my laptop, putting off some tedious chore.

There are moments then that I find myself doing virtual bog laps like an online teenage bogan, cruising from my email to Twitter to Facebook to forums to my blog hoping to catch someones attention as I pass by.  Desperate for some kind of entertainment, action, or even better interaction; or, if the day would be so kind, a dose of inspiration.

It’s in those moments of shameful boredom that, failing to connect with people, I find myself turning to the markets.

Here’s a tip –  in those sad, sad moments when you have no friends on facebook, the market will not be your friend either.

Oh, it might do a good job entertaining you while it numbs your brain with its flashing lights and entices you to enter numerous boredom-fuelled trades.  But it won’t be your friend.

The disappointing thing is that before you know it you’ve blown a wad of cash, are feeling slightly queasy from way too much inertia and can’t wholly remember how things managed to deteriorate so quickly.

Go DO Something!

Usually when I find myself spending more than 1 minute on Facebook, I mentally slap myself and go do something productive.  To me, anymore than 60 seconds worth of friend-stalking is wasted time where I could actually be doing something that makes a difference.  (I’m not even talking about a world-changing difference here – taking a shower counts, too.)

And the same thing goes for market-stalking.  It’s important to stop killing time stalking those charts you don’t trade.  Stop checking the 5 minute price chart of your long-term investments.  And most of all, stop looking for that sure-fire-off-the-cuff trade that will ruin your discipline and savage your account balance.

Can you imagine what you might achieve if you added up all the wasted stalking time you do, and actually did something instead?  It’s possible that your life could end up totally unrecognisable.  At a bare minimum at least you’d be cleaner.

Have a Go.

So here’s a challenge for you.

Go and pick something you’d like to do better, or start learning, or create, or achieve.  Then, everytime you find yourself cruising the markets (or Facebook for that matter) for entertainment, mentally kick yourself and immediately do something to take you a step closer to your ‘thing’.  Even something tiny like writing down an idea, or reading a ‘thing’-related blog counts.

Go do it.  I bet those baby-steps won’t look so baby-like after 10 years.