Trading journal 01/04/2013

• Psychology is very important
• Actually, except for the crazy trading, I did perform better than before
• No one needs to rely on trading 
• A learning curve is expected
• Don't have any illusion that I'm born to trade
• If I cannot stop trading, I cannot trade at all
• New rule: 100 per month, lose it and done; if remain profit, another 100
• Don't listen to others' ideas, AUDEUR, USDJPY are just stupid
• Do some homework, some quants ones
• The market can go in any way, any story can kill a trade, unless a medium-term pattern is identified; Yen is strong on some investors taking profit and on the closure of European markets; Dollar is weak on weak manufacturing data and on the nerves after a all time high S&P; although the negative news about EURO is all over the world, it can still climb for its silence and weakness and other currencies. In fact, I strongly suspect the way the media and I look at the FX movement. AUDEUR seems attractive but it's total bullshit
• Following the news and seeing the flows are essential in FX trading; what I can do now? Pause FX trading for now, it's just not for me
• The strong performance in S&P and dollar is definitely fragile given the market reacts strongly to the weak PMI data. It's good to be on the net short side of the S&P while betting on the S&P FTSE spread based on correlation collapse.

Relection about myself 31/Mar/2013

• The only way of living meaningfully, and achieve my ambitions is to work with the best and go to the best place
• Don't struggle too much about the availability of choices, act just as what I told others: think first, but do it diligently
• Don't get too disillusioned by the current fact, there is always hope ahead
• Don't try to avoid competition by differentiation; Differentiation itself is good, but cannot be an excuse of poor work
• Plan for the following two months: CFA > Credit > Maths > Programming > Investing (do the homework first and saving is currently the most important, not make money)

Trading journal 25/Mar/2013

• Riding the news is difficult, and modest profits at best, if you decide to trade on news, you can either anticipate or discover that market responds to the news in a wrong way
• The above is not necessarily true, if that's the only obstacle to a bull market
• Combination of long-term investing with the short-term intraday trading
• Over time, add more strategies to my portfolio
• Not have enough capability to position trade the index, leverage is too huge; always put stop loss on day trading 
• Fifth time got wiped out: fail to recognise the significance of the policy maker's bullshit and emotion emotion emotion!

Trading journal 18Mar2013

• Yen is an anomalily bullish in the risk off environment, why did that happen?
• Need to investigate the correlation across all the markets
• AAM trading is stopped by order
• But it appeared to me market moves in my favour -- open ridiculously low and rebound. If anything like this occurs in the future (major negative event, but considered to be not fundamentally detrimental), long index call is a viable trade
• I did it! 45 profit out of the Dow call
• In this scenario, I should lower the stop loss point for the long-term investment; Aberdeen actually rallies today!!! FXXX!
• Cannot believe I underestimated the rebound efforts after all
• Long binary option less than 10 is a good trade in this scenario
• One observation: FX market is more dependent on the confidence

Trading journal 17Mar2013

• Interested in seeing how the Cyprus event impacts on the financial markets
• My current view is that it's not a disaster, market will retreat to a point and then rebound to the previous level; Nothing really changed, if the market respond too much to this event, that implies that previous high is a bubble. Unless the bank run occurs, market will be back to the previous level within half a month or even shorter.
• Wolfgang's view is pretty much all negative, it makes sense that, even this bailout doesn't change anything fundamentally whatsoever,  the confidence shift is a real thing to worry about. Mr. Draghi and Central bankers will definitely lose their credibility and in game theory terms, creditors are rational to have a bank run because the ECB had already started it.
• What would I do if I'm trading: flat on everything until I see the sentiment.
• Ramsey reading:
• Fundamentals as a trading indicator: when QE is finished, dollar will rally; correlation between equity and commodity and when commodity breaks out this connection, that's the market to sell
• Fundamentals as  a contrarian indicator: when fundamentals look bad for bonds and everyone holds that opinion, yet bond rallies, then there must be a potential bull market for it
• So if my macro assessment is right, the euro/equity rebound and fall in bonds would be a profitable trade, by using his method 
• On short term trading:
• No matter how bad a market looks, it will rebound after it touches a crazy low, but the problem is that will not alway lead to a profitable trade due to bid-offer spread and uncertainty over the floor.

Trading journal 17Mar2013

• Stupid bailout plan for the Cyprus, hypothesis: small market sell-off in the Euro, but the confidence is still resilent. The market prices in a stable solution to the Euro, which I believe is not gonna happen
• Medium term view: Volatility is going up during the course of the remaining year, around Italy, Greece and possibly Spain. Long Straddle is a viable choice. Before that, market will see a modest uptrend, which I won't even call a bubble but over-optimistic expectation. Euro problem is on its own, hard to justify the performance with its econ data and any other parts of the world.

Trading journal 15/Mar/2013

• Market timing is difficult to capture, short-term trading makes on extremely emotional
• Lesson from this time: emotional, eager to make it back, trade too much, this cycle comes all the time
• Given these, and time and money constraint, I need to do my research and switch to medium-term trading
• Stop short-term trading until very convinced, also never do binary again, unless for hedging purposes.

Trading journal 14/Mar/2013

• FTSE trade: Handsome profit, but actually a mistake, don't do option until clear what I'm doing
• Interview: act what markets told me, don't have to know the whole story; fundamental views matter, but don't mean I can make money out of that, sometimes you have to be happy to be in the bubble, but always try something liquid enough to get out when it's necessary

Trading journal 13/Mar/2013

• Found the correlation between weakness of yen and nikkei, I believe the causality goes from the FX to the Equity. Based on the FX moving down again, long Nikkei is the choice for me.
• Need to look into this further to understand whether the easing news or the FX movement are a key determinant
• This can be either a short-term or long-term trade, given yen is expected to fall even further
• Seems like I was right about the relationship but wrong about yen falling, therefore nikkei falls accordingly. Do more research before putting on a position
• A reflection: cannot be faster than the market, almost have to be a contrarian to beat the market
• In investing, cannot put stop-loss too close the initial position
• Profitable FTSE100 trade: market is overshooting, there are four consecutive mins that the index rebounds, catch a 10 points rally. So the combination of market view and technical analysis ( a little bit) works in the short-term. Cannot believe technicals in the long-term, still can't.
• Successes of short-term trading: a) in anticipation of a data surprise; b) take contrarian positions when market overshoots, especially when market overreacts on news and data release; c)market doesn't absorb information enough when the fundamentals really support a directional move
• Having said all that, although this is still short-term trading, basic market conditions need to be taken account of. For instance, in a bull market, in the case b) scenario, market's falling is more likely to be an opportunity.
• Profitable EURGBP trade: apply principle b), however, I don't have a set of rules to get out of a position
• Need to think about medium-term trades as well
• Sales and IP data are very important

Trading journal 12/March/2013

• Last trade turns out to be right, however on the same reason yen should rally, miss a good opportunity but never mind.
• Reuters said nikkei should rally in the long-run, this may be the truth
• Don't believe the reasons laid out by the media, a bunch of non-sense
• Lost yet another 200, 400 in total
• Lesson: never trade binary options any more. It has a lot to do with luck, focus and short-term volatility; One can make money on it one time, some one may make money on it constantly. It's not the idea trading, just tricks. Overall it's a zero-sum or even losing game
• Put thought into the market, do some hard work
• The Nikkei trade is a combination of a fundamental view and a contrarian view on the chart shape, on the short-term this might be a good way to go; on the long run, I believe efficient money management with portfolio diversification is the key. Ray's method is quite amazing, though I'm not sure I can achieve that with limited capital

Investment journal 11/Mar/2013

• Securities available to trade: stocks, stock indices (even the index is a bit over risky)
• Have a set of rules before the trading
• Bill O'neil's approach is interesting, although I hate technical analysis. I think the profession has leaned against fundamentals significantly
• Volume is important, need to look into that closely.
• Not a very good short-term trader, not smart enough to gauge macro movement, at least for now
• Short-term movement is either random, or subject to in-depth technical analysis
• Over-trading is never a good strategy
• Don't worry about the opportunity cost, there are always opportunities coming ahead
• A trade before sleep, short Nikkei, I think the index rallies on the easing, however, the news has already priced in, so this rally is overshooting in my opinion

Investment Journal 7

• Due to increasingly central bank intervention, long-term FX positions are close to impossible
• FX world has seen many reverse trends, overreaction, and trade on news
• So is equity index, but the trend correlates with news less closely, short-to-medium term or long-term is more realistic
• In terms of trading, I need to distinguish between risk premia positions, medium term positions, and short-term market distortion (trade on news or mean-reversion)
• Put close stop to the short-term trades, close positions if I'm wrong; let the winning ones run
• Have a clear rationale for each trade

Investment Journal 6

Learnt the terrible lesson, lost all today, need to take a step back and do extensive reading: momentum vs mean-reversion

• Jim argued noise/information is way too much, so over short to medium-term, mean reverson must work
• Some interesting comments on trend following: 
• Academic work by Titman, Sarno etc.
• Market Wizards
• Well I don't think anyone has a silver bullet for when/where trend-following vs mean-reverting works. At least if they did they should be sipping margaritas on a yacht in the Riviera. Here though is how I think about it. Auto-correlation whether positive or negative is a function of two things. The first is order flow persistence, i.e. it's a well known fact that if there are more buys than sells in one period, than one would expect all things being equal more buys than sells in the next period. The second is order flow elasticity, i.e. as the price rises there will be fewer buyers and more sellers and vice versa. The former is the logic behind trend-following. The latter is why that logic doesn't always hold, if there was heavy buying action that pushed the price up it might dry up buyers and flood sellers in the next period pushing the price down.
  
  I think this paradigm goes a long way towards explaining why trend-following works in certain markets and mean-reversion works in others. For example take one of the most well-known mean-reverting markets, the idiosyncratic return component of equities (i.e. the returns of single stocks neutralized against the major market factors). This formed the core of many stat-arb strategies for a very long time. And with very good reason, one would expect order flow to be highly elastic for idiosyncratic equity factors. Most equities outside of their core factor exposures are very close substitutes for each other. So investors have very little tolerance if the idiosyncratic returns drive prices away from fair value. E.g. if the idiosyncratic component of one firm in the S&P 500 was higher than the others most investors would substitute to the others very easily.
  
  In contrast one of the best markets for trend-following tends to be commodities. And with good reason, the buyers and sellers are very price inelastic. For example if the price of oil goes up, consumers can't quickly substitute away from using crude oil. There are massive infrastructure changes that need to be made. Similar if say wheat is falling, it's not like farmers can easily switch over to growing corn without making large capital expenditures. So low elasticity leads to momentum, because when there's an imbalance between buyers and sellers it takes longer for prices to readjust to a point to bring markets back to equilibrium.
• LowVol, Down Market: Just punt
  LowVol, Up Market: MOM performs well
  HighVol, Down Market: MR performs well
  HighVol, Up Market: MOM & MR performs okay
• Keep reading and I'll reach my own conclusion

Investment journal 5

• low volatility, inflow to risky assets, equity up, bond down, bad-performing safe heaven assets (CHF, treasury), is it a new era or people just overact the eurozone heal and fiscal cliff?
• Trading is fundamentally different from investing, need to distinguish them two

Investment Journal 4 -- 10/Jan/2013

• The markets priced in the message from ECB that they would lower the rates, the public announcement suggested the other way, so Euro is shooting; nothing was known to me before. Following news is important in short-term, even medium term trading
• Market can be very naughty: FTSE falls below the opening price near the close, and back literally in the last minute.This less than a hour volatility has no good reasons to explan, which implies high-freq trading without technical support is essentially gambling
• Volatility is very very important, needs to understand this more. VIX is a volatility index for S&P

Investment journal 3 -- 09/01/2013

• Opening level is a biased estimator
• Gold falls, yield increases, after fiscal cliff, money is fleeding away from heaven to risky assets, is it the end of a low-yielding era? Fed increases the rates?
• Stocks increase across the board
• Yen weakens, due to new QE
• Inestigate into to Swisse! Sounds like an opportunity.

Investment journal 2 -- 08/01/2012

• Never gamble, never! Very short-term trading is essentially a gamble (5 min binary)
• It often makes sense to look backwards, rather than forwards. For instance, markets followed the upward trend looking backward from the peak point; looking forward, you cannot really know whether it's a bubble or a trend to follow. Choosing trend-following or contrarian thinking is a really tough job.
• Currency value should pick up with the growth figure
• QE, inflation up, purchasing power down, FX depreciates; in this way, if QE stops or inflation down, FX appreciates; USD is argubly a substitute of gold, so if USD is up, gold might be down
• Economic not always works, needs to think about the whole picture

Investment journal 1 -- 07/Jan/2012

• Never be emotional about the market
• Need to be clear about long-term and short-term trades
• There must be clear goals with any trade that you've got
• Extreme pessimism is a great source of profit (Standard Chartered, AAM)
• History often goes in the positive way during the so-called crisis, after you eliminate the tail risk