Marble Jar

Posted on by Anatoliy Schneider

In the example with 60 white/40 black marbles in a jar, most traders will agree that it does not make any sense to hesitate pulling the marbles out (provided, the bet on each trade/marble is small enough). Each time there is a signal, it must be taken, being excited that it slowly but surely increases one’s profits.

In “marble jar” trading system the signal is very simple:

  1. See the jar – take the marble
  2. Replace the marble, mix the jar
  3. Repeat

Very high frequency trading – as fast as can be done manually.

In any real trading system the signals are understandably complex. However, anyone trading a system is assumed to know that it has an edge. It is assumed that the system has been tested and proved to be working.

No matter how complex the signal is, it must be defined clearly enough to be identified consistently, without question. After it is identified, it must be taken.

Why would anyone want to dismiss the trading signal? The reason is very simple – not having any idea if the system has any edge.

We know that the marble jar has a clear edge – we know exactly how many black and white marbles there are. But in your real system you might not have done your homework well enough in order to identify your edge.

Now imagine that you are given a non-transparent jar with marbles. There is no way for you to know how many black and white marbles there are in the jar. In addition, you’ve no idea what is the profit upon grabbing white marble or the cost upon choosing the black one.

Would you trade this system with the same amount of confidence? Probably not. One could go as far as saying that it would be stupid even approach such literal “black box”. What if all the marbles are black? What if the cost of taking a black marble is all your life savings?

And yet, in essence it is exactly what majority of traders are doing every single day. They have no idea where the next trade is coming from, what odds are attached to it and what is their worst case scenario.

No wonder they hesitate to reach out for a marble!

Consistent Market

Posted on by Anatoliy Schneider

The work you invest into the Market must be consistent, day in day out. Each time you allow yourself a day off or a week of half-hearted effort, you are making a big step back. Until the state of consistency is firmly established in a trader’s mind, he is not a trader.

Being a trader means willingly, gladly, gratefully investing personal time into studying the Market. All the required work must become effortless, if one is to be called a trader.

To trade with conviction you have to first establish a conviction in your daily trading habits. You cannot afford losing momentum even for a day. You cannot afford failing to appreciate the valuable lessons the Market offers each and every day.

To profit consistently, you must work consistently. The Market is consistent – consistently uncertain, complex, yet open for everyone to learn. The Market is an open book – trading profitably is simply a matter of learning the language in which it’s written.

The Market is Your Friend

Posted on by Anatoliy Schneider

Market is my psychological, emotional mirror. It will reflect back all the frustration I feel towards it. At the same time it will just as readily reflect all the curiosity, confidence, acceptance and fascination that I experience towards it.

I am already consistently profitable. I already have all it takes to be the trader I aspire to be. I can already follow the Market, never losing its flow.

Every single day I have but watch, listen, learn and follow. There is no struggle. Good trading cannot require any effort. When I am in the flow, the trade ideas are coming to me automatically.

I attract profitable trades. I attract the understanding of the Market flow. I attract consistency. I attract confidence.

The Market is my friend, my partner in this business. Always willing to offer me a hand, always providing valuable guidance. Always showing me exactly what it is doing and where it is going. The Market hides nothing from me – it is an open book indeed! And I know its language really well – it is in my bones. I intuitively feel each and every little hint the Market is ever so subtly telling me.

Lithium/Cobalt – One of the better long term investments?

Posted on by Anatoliy Schneider

As usual on Sunday morning, I am spending most time researching fundamental information online.

I started with this great infographic:

Nearly 3000% expected increase in demand for Lithium? That could drive prices up quite a bit! Cobalt nearly 2000%.

More at this link.

Then I checked out the car that UBS tore down to research materials (all prices in pesos):

Wow, that’s not so cheap! But seems like a great car – 238 miles with no charge really let’s you travel gas free. Charges completely in under 10 hours. Great daily car, but it seems like it’s not the time to be buying EVs yet. In the next 2-3 years the prices are bound to go much lower.

This is pretty much the direction the world is going into. It is not even so much about Tesla or Chevrolet – pretty much every major car maker has semi or full EV, or developing one.

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So I thought that maybe this is something worth looking into as an investment.

Let’s look at the chart, first for Lithium:

One after another many major R levels broken since 2016, including major Bearish trendline. Next target – all time highs near $45. This is the furthest back I could find with a quick search.

And Cobalt:

Unsurprising correlation.

Zooming in on Lithium…

(Note that this is not actually Lithium chart – it is ETF. More on that later)

Major Bullish trend, no question about it! Best investment opportunities were in 2016, but there are bound to be more corrections along the way.

Wait, what happened during the last week??? Huge gap and the biggest Bullish week in recent years. On top of that, the biggest trading volume EVER.

Apparently, as I was reading earlier this week (but not connecting the dots properly in my head), China has just unveiled a plan to ban petrol cars! Sounds crazy! But the crazier part is that in case of China it means that they are going to replace gas powered cars with coal powered cars, because that’s where China gets 65% of its power. 😀

Well, leaving environmental issues aside, the news is driving Lithium way up.

Coming back to the recent volume/price spike, here is an article going into it in more detail.

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So how could one trade Lithium? Apparently, you can’t – at least not pure Lithium (i.e. Futures). All the details are in this great article by Reuters.

And this article discusses top Lithium producing countries.
And top Lithium producing companies.

Uncertainty

Posted on by Anatoliy Schneider

When you look at the chart about to take a trade, you are still hesitating, still unsure whether this is the right one. You are still uncertain about pulling the trigger.

Remember – it will always be like this!

No matter how much you trade, this feeling of uncertainty for the outcome of any one trade is not only to be expected, but to be desired. This is the feeling that tells you – you perceive the Market correctly.

Recognize the uncertainty, accept it with a smile. The nature of trading lies in this everlasting uncertainty, never being sure about the outcome of any given trade. Having accepted the uncertainty – pull the trigger, take the trade.

If you already have a solid system, then over the next 20 trades you will turn a profit, of which you can be certain. If you are still in the process of fine-tuning your system, it is only possible to fine-tune through placing these trades amidst all the uncertainty the Market throws at you.

Be comfortable with ambiguity. Take the fear out of equation by accepting that losses are needed to turn a profit, by accepting the uncertainty as the core part of the game. You are only afraid of something you try to avoid. Fear dissipates as soon as you embrace that which you are afraid of.

Inappropriate Expectations

Posted on by Anatoliy Schneider

Trading is only difficult when you have inappropriate expectations. You ensure it will be difficult by expecting it to be easy. You ensure frustration when you expect the Market to be certain and predictable. By expecting the Market to do what you think it should do, you ensure disgust and subsequent lack of confidence – guaranteeing that you will not be available for the trade which the Market does agree with.

Expecting not to lose, you are sure not to win.

Expecting to be right, you are already wrong.

Give up all your expectations, let the Market go where it will, do what it must and behave as it should. Stay fascinated, stay uncertain and confused but with a smile. Place a trade and be fascinated when the Market occasionally agrees with you!

Frustration Is Inside

Posted on by Anatoliy Schneider

How often do you feel frustrated because of the Market? How often the Market behaves in ways causing stress and anxiety? But truly, how can anything be “because of” the Market?

The Market can only reflect back what’s already inside of you. If frustration is boiling inside, if you are anxious and unsure, all these emotions will find the way out. It is irrelevant whether the Market will be the final straw or something else in your life.

The Market is a great teacher. The Market is fascinating. It is not “bad” nor is it the cause of anything.

Gather courage, look inside and face your own issues. Use the Market as your looking glass – what does it reflect back unto you? Seek such a mindset where the Market will reflect curiosity, fascination and acceptance.

Follow the Market

Posted on by Anatoliy Schneider

Never allow yourself to lose track of the Market. It is constantly changing and as soon as you let your attention to waiver, it will take you to places you have never seen before.

Never let the Market travel far ahead of you! It will always be ahead, but it is your job to anticipate each turn it takes, carefully comparing what you have anticipated with how it moves in actuality. Be ready for all possibilities, avoid surprises.

Stay vigilant, follow the Market, gather rewards.

Survival Before Learning

Posted on by Anatoliy Schneider

If you are trading without first assuring your survival, you are just playing a game, a crazy gamble that a drunkard places over the weekend in Las Vegas casino. No real trader who aspires to reach constant profitability will participate in the Market without first assuring their survival.

The above is absolutely essential and goes without saying. It is assumed by default that your risk and money management, as well as psychological well-being, are taken proper care of.

What’s next?

Before anything else, you need the willingness to put in countless hours of work into the Market. Only this will allow you to gain this important subjective feel of the Market as you watch it. The trading ideas will come to you effortlessly and it will only remain for you to execute them. This is how you build your trading system.

Ask yourself: “Why am I not putting enough time into watching the Market? Why am I not willing to take losses, make mistakes and yet continue with my method, learning and improving with each passing day?” Find the answers. Write them in your diary. Propose the solution and implement it.

When you spend enough time on trading and seemingly totally committed to your success in trading, ask yourself this: “Why am I not acting on each and every idea I have? Why am I closing the trades before my targets are reached or my system tells me to close them? What am I afraid of?”

Honestly answering these questions in your daily diary will lead to important improvements to your trading system. Go back to the first step – putting countless hours of work – and repeat the process times and times again, with humble understanding that you will never be good enough to cease improving your method and your execution of it.

Above all else, remember – it is only possible to go through this difficult process when you have absolutely, perfectly ensured your financial and psychological survival! You cannot be worrying about your well-being or losing more than you can afford to lose AND going through the mandatory learning process of taking losses, making mistakes and being clueless.

Fading Trend

Posted on by Anatoliy Schneider

It is important to be able to see the first signs of a fading trend. There is no better exercise than to watch hundreds of strong moves on history – the moves that always, inevitably fade, lose strength and reverse. Nothing lasts forever, and in order to stay in balance, Market must go through constant change, allowing some instruments to appreciate while others must depreciate. Inevitably, they will trade places, as one trend changes into another.

Take any market you trade and see a trend fade. Do not just look at one instrument, ask where the money is going if it is flowing from this market? If stock market becomes bearish, the money must go somewhere, whether it is bonds, metals, oil or just cash.