DAVID TEPPER - The market SWAT

We love David Tepper, his simple and clear way to express and communicate his market approach impress us. He have huge skills to detect, solve and get incredible yields from difficult situations in the market for this we consider it a special operations especialist. You can read about his huge profits with distressed debt of huge bankrupts as Enron, Worldcom or Conseco.

He talks, decide and execute from the experience of a fund manager with an average of 27,4% in the last 15 years and with the honour to be the top earning hedge fund manager the years  2009-2013. Let's see his last 18 years of yearly performances in his own Fun.

Two  points  to highlight over the rest:

- In average, his fund got a 20% excess gain vs S&P500 performance in a 15 years view. That is In credible.

- In the last 18  years, only  3 of them had losses. Furthermore, only one of this years he really did worse  than S&P performance.

Also, is fair to say that this table don't show years 2011-13 and this last year he fund, together with 2009 year, achieve the honour as the top fund earnings of the year.

We highly recommend to see his cnbc collaborations, this may clean our mind of confusions and allow to think in the clear and steigh way that Tepper do.

To finalize, here you can show his portfolio structure:

Have a great week!

The BFM Team

You really need to use any indicator?

My short answer might be no. But here below my longer answer.

As everybody I did start the trading with many indicators too. My hypothesis was that if I use properly my indicators and my whole system, I could be solvent and profitable. After a while - it took me four years - I abandoned all of my indicators. Why? Because simply they didn't deliver the numbers at all. In most cases, the same indicators with the same settings delivered different signals if I used different time frames. The H4 chart argued with the H1 chart or with the daily chart. It basically gave me huge frustration which I know understand well was a Cognitive Dissonance in my mind (about CD a bit lower)

So the signals argued with each other's and I was absolutely confused. I started to analyse the indicators because I could not believe no existing the holy grail, the accomplished indicator. I have a mathematician friend who prepared to me many statistics in principle about the most popular indicators, like MACD, RSI, Bollinger, CCI, MA's...etc. And you know what happened? He demonstrated that any of the indicators are not able to do better performance than if flip the coin or throw the dice. Anyone them couldn't do more than 50% hit rate in long term. If I would say in one sentence what was the lesson, I would say doesn't matter when and in which direction you open your position, sell or buy. What only matters? Only the money management - Cut the loss immediately and confess to yourself you made a wrong decision. On the other hand let the win ride. It's that simple. All in all I am totally against all the indicators, they are only lagging, they don't add any more information about the market. I am sure many of you still believe that once finding the holy grail or find the magic indicator. I don't know too many things about the market, but what I know for 100% sure is that the perfect indicator never existed and never will.

We can’t predict the future. The market is a dynamic random system. So quite often we need to random as well. I have a favourite example. You know what do if two statisticians were to lose each other in a forest, the first thing they would do is get drunk. That way, they would walk more or less randomly, which would give them the best chance of finding each other. Such considerations belong to the statistical theory of “random walk” or “drunkard’s walk,” in which the future depends only on the present and not the past, which means indicators doesn’t hold anything about the future.

The mental side of traders and the Cognitive Dissonance

I had a friend who once told me. „When I decided I am going sit on the whole day and just trading and stay focused and doing nothing else, basically those days were my worst days in terms of profitability. When I left the market and let it work itself and didn't care about the running position I made nice profits."

I started to think about his story because plenty of times I had the same experiment. Why happens this? I guess the reason is when he was at the computer in the whole day he was much more scared and he cut the winning position earlier than needed to be. Why he was so scared? Because it is part of our mental side of traders. We are human beings with many mental weaknesses. The Psychology call this Cognitive Dissonance. When simultaneously holding two or more conflicting cognitions: ideas, beliefs, values or emotional reactions. As traders we feel very often this "disequilibrium": frustration, hunger, dread, guilt, anger. A key assumption the traders want their expectations to meet reality, creating a sense of equilibrium so they want to make profit, but if not happens or simply the markets goes against us we started to be anger, frustrated...etc.

Try to ignore those bad feelings and skip them all as much as possible. I really know it is hard, but try to close out all the mental, emotional actions out of your trading. LESS EMOTION MORE PROFIT. How can we reduce our Cognitive Dissonance? Easily. If you are disciplined and sitting in a losing position take the loss and don't hope anymore. In this case, you will reduce the mental stress of the trading significantly. In bigger picture if you really want to be profitable trader the first step you have to do in this long way that ACCEPTTHE FACT THAT YOU CAN LOSE. YOU CAN NOT ALWAYS WIN. If you understand that you are going to be more patience and much more profitable. If you don't hold for too long time your losing positions you don't need to wasting your energy anymore on losing positions. You are going to have more energy to focus on the winning profitable positions and your frustration will disappear.

Have a good mental progress

The BFM Assets Team

Take a look into our fully regulated Swiss fund and and invest with us.

Six correction day...

in row in S&P500. Which is the longest decline this year. Last time happened at Fiscal Cliff paranoia in December. Last week on Wednesday was euphory in the market, when FED surprised most of the investors that no tapering. The market always does, which is the most unexpected. That six losing day was good to shake the longsiders out. The market always does what is causing the most pain. In the last couple of days the falling market could produce the bigger pain.

Some data from yesterday:

Dow Jones -0.40% lost 61.33 points, at 15,273

SP500 -0.27% closing down 4.65 points at 1,692

Nasdaq -0.19% lost 7.16 points, to 3,761

I am fine with these corrections. I do believe this is normal phase of the market, so far gained nearly the US markets 19% so it was a best time to do some bigger and longer correction before go to new high again. The volatility indicates me some movement has started under the surface and this week will see some big moves.

Technically if the bulls come back and occur the upside move our first key resistance is at 15.475 in Dow.

J. C. Penney:

The mid range department store company is just suffering. The share declined again yesterday- 0.10% and fell to 13 years low and leading the SP500 losses with a 15% drop. The projected sales would improve at a slower-than-anticipated pace and raised questions about the retailer's liquidity. This is the typical template of falling knife. But I am sure many-many investors still holding the shares and hoping and getting more and more frustrated day by day when looking at the price, which is in free falling mood.

DO YOU WANT EARN OVER 30% PER YEAR?

Take a look into our fully regulated Swiss fund and and invest with us.

Have a great day!

The BFM Assets Team

GBPUSD DAILY STRATEGY

Direction: short

Target: TP1 – 1,5900

Protection: SL – 1,6050

Our setup: 1,5980

Background: In the big picture all the crosses are in range and in the forex market after the FOMC meeting. Since last wednesday the Cable has been consolidated without any big moves. The Cable did modest movement in the last couple of days. The sentiment seems to us a bit bearish. So the possible outcome could be today and tomorrow that the Sterling will comes down from the recent weak levels and likely comes down to the 1,5900 area.

DO YOU WANT EARN OVER 30% PER YEAR?

Take a look into our fully regulated Swiss fund and and invest with us.

Have a great day!

The BFM Assets Team

How the economy works and how to fix it

That video is simply great!

Ray Dalio - founder of Bridgewater Associates - animated a video „How the Economy Macchine Works". He is one the most Influential People of the World, the owner of the largest fund globally with 120 billion dollar and Dalio is one of the top 100 richest man on the world. So this video is really worth it.

This noteworthy cartoon takes only half hour and it's summarizes three principle rules which he observed in the last 30 years:

- Don't have debt rise faster than income.

- Don't have income rise faster than productivity.

- Do all that you can to raise your productivity.

"Though it's unconventional," he says, "it's helped me to anticipate and sidestep the financial crisis, and it has worked well for me for over 30 years."

Video:

http://www.cnbc.com/id/101055852

Have a great day!

The BFM Assets Team

EURUSD DAILY STRATEGY

Direction: short

Target: TP1 – 1,3350

Protection: SL – 1,3575

Our setup: 1,3520

Background: After the FED's decision - no tapering . the cross settled and stayed broadly higher levels. Since last Wendesday could not really go up to new high so today might be a correction after few days hesitation. We sold this morning the pair with a long TP.

Do you want to earn 30% a year? Take a look on our Swiss Fund

http://www.bfmassets.com/our-swiss-fund

Mozart of financial blogging - Barry Ritholz

I do believe that Barry is one of the smartest contemporary author and investor from New York. His blog page http://www.ritholtz.com/blog/ taught me a lot how being better and more disciplined trader. I love his style and his different approaches to different things in this business. In 2010, Barry was named one of the "15 Most Important Economic Journalists" in the US. All in all he is not only a great author, but he has placed plenty of brilliant statements about his rules. Some of the rules are common with other great traders, some are unique but we should consider all of them. Personally I do.

-          Cut your losers short and let your winners run.

We are human beings with many many bad instincts. We love to hold the losing positions for long time to avoid the pain of a loss. Barry calls this phenomenon loss aversion.

-          Avoid predictions and forecasts.

That is really great point. The most complex system is ever invented by mankind is the macro economy with thousands of uncertainty. In my view nobody knows what holds the future. On the other I hate forecast too because if you proclaim your idea about EURUSD will go down and after a while all datas show you are wrong the cross is going up. You will still fight for your right and insist for your preconception. You have a commitment to your previous message and we don't really like to confess that we are wrong and made a wrong decision. We love to insist to our stupid preconceptions.

-          Understand crowd behaviour.

Humans often herd. People like what others like, especially when we are uncertain about the market or about ourselves. Barry says that is the real wise if you are buying when others are fearful and selling when others are greedy.

-          Think like a contrarian

Be most of the cases non conventional because the mass really seldom has right. If you want to make money in the market think unlikely and use always different approaches.

-          Admit when you are wrong

Namely means leave the position when you start losing money on that. It's that simple. Believe me, most of the traders don't understand that. Barry recommends, once you say publicly "X is going up" it gives your brain a shot of stupid juice when it comes to concluding that you might be wrong.

-          Understand the cycles of the financial world.

Nothing good or bad goes on forever. You have to accept the markets have correction periods in the strongest, stormy trends too. So don't be scary about the pullbacks use them as another opportunities to build better position structure.

-          Reduce investing friction.

Paying high fees, costs and commissions is one of the simplest investing errors to correct. Youcan find EURUSD spread for 2point and for 0,8points, obviously choose the cheaper one. If you fix this that is the first step for being profitable. 

-          There is no free launch.

There is no substitute for hard work and rational decision making. We have to work hard, sometimes on weekends too. Think about when you out there and partying around someone at the same time is working hard and getting smarter and just winning. You can't climb on the ladder of success with your hands in the pocket.