No escape from cryptos…

Friday, 10 November 2017
Melbourne, Australia
By Kris Sayce

  • What can be better than this?
  • The bleak truth you must avoid

I put in 17’, explained our colleague.

Really? Wow!’ your editor replied.

See here. It’s now worth 74. It’s been as high as 77. It’s been as low as 35.

So went the conversation in the back of the Toyota minivan on our trip from Rancho Santana, to the La Scala pizzeria, 15 minutes down the dirt-road in Limon Dos (Limon 2), Nicaragua.

The numbers in question were dollars…representing thousands of US dollars initially invested in cryptos…the current balance of the account…the highest it has been…and the lowest it has been.

The conversation continued, beginning with your editor’s reply:

You know, it doesn’t matter what happens to bitcoin from here, I won’t buy. I’m too stubborn. In fact, the higher it goes, the more determined I will be not to buy it’, we said.

Yeah, maybe if it falls back to 3,000, maybe buy then. Although, that’s probably what they said during the dot-com boom, right?’ our colleague replied.

We won’t say that crypocurrencies have been the only topic of conversation here at our financial publishers’ conference in Nicaragua, but it has been a topic of conversation.

We aren’t the only financial publishing firm to have entered this market. At least three others had. Two were considering it, but worry they’ve missed the opportunity to introduce the idea to their customers.

We’re not so sure. Bubbles often last longer and go higher than most folks ever expect. Then they crash harder and are more destructive than most expect too.

Ultimately, we fear that will be the outcome for bitcoin and the hundreds of other cryptos currently being touted. But it doesn’t mean you shouldn’t give them a crack. Or try your arm at the chance of making a big return.

And your editor’s stubborn refusal to jump onboard shouldn’t deter you either, if you’re really game for it…and providing you understand the risks. A hypocritical view? If we’re offering a crypto service, shouldn’t we partake ourselves?

Not necessarily. We leave the decision on whether it’s suitable for you up to you. You know your appetite for risk, we don’t. We’ve just gone ahead and hired two of the best crypto guys in the business — Sam Volkering and Ryan Dinse.

We hired them because we believe they have something useful to say, and can provide good advice. Your editor isn’t about to stand in the way of that, just because it’s an area in which we choose to not invest.

Anyway, just thought we’d pass on the conversation. It’s interesting. The whole crypto thing is interesting. We don’t understand it. But it’s interesting nonetheless.

Markets

Overnight, the Dow Jones Industrial Average closed down 101.42 points, or 0.43%.

The S&P 500 lost 9.76 points, or 0.38%.

In Europe, the Euro Stoxx 50 index ended the day down 42.54 points, or 1.16%. Meanwhile, the FTSE 100 fell 0.61%, and Germany’s DAX index fell 1.49%.

In Asian markets, Japan’s Nikkei 225 index is down 213.14 points, or 0.95%. China’s CSI 300 is up 0.52%.

In Australia, the S&P/ASX 200 is down 23.60 points, or 0.39%.

On the commodities markets, West Texas Intermediate crude oil is US$57.02 per barrel. Brent crude is US$63.75 per barrel.

Gold is trading for US$1,284.89 (AU$1672.70) per troy ounce. Silver is US$17.02 (AU$22.16) per troy ounce.

The Aussie dollar is worth 77 US cents.

What can be better than this?

There may be better places in the world to visit for a three-day business conference. But of all the places we’ve visited over the past two years for conferences — Berlin, Beijing, Baltimore, London, Mumbai, Dublin, Waterford, and Palm Beach — none of them out-do Rancho Santana, Nicaragua.

You can perhaps see why from the photo we took over breakfast earlier this week:



chart image



Meanwhile, apparently a bunch of stuff has gone on in Saudi Arabia. But sometimes, it’s hard to care! For now, we don’t.

We’ll soon begin our two-day trip back to Melbourne. In the meantime, we’ll hand you over to Quant Trader, Jason McIntosh, along with information about something we’ve never done before — a returns guarantee!

There is a catch. But we think you’ll find it quite reasonable. More details at the end of Jason’s essay. And if you haven’t already received priority access to this guarantee deal, look out for details in your email inbox on Sunday.

Oh, and for the avoidance of any doubt, Quant Trader is a crypto-free zone! Over to Jason…

Cheers,
Kris

……………………………………………………………………………………………………..

The Bleak Truth You Must Avoid
Jason McIntosh, Editor, Quant Trader

OK, I’ve got a question for you…

What percentage of punters make a profit?

Before you answer, consider this: about 70% of Aussies have a bet each year, according to a 2010 Productivity Commission report.

If popularity is any guide, then gambling must be a profitable pass-time. 

But, as I think you’ll know, most punters lose…

I read an interesting article last week. The title was ‘How often do gamblers really win?’ It appeared in the Wall Street Journal in 2013, and revealed a bleak truth.

The study analysed results from 4,222 online gamblers over two years. While many had short-term success, only 11% were ahead at the end of the period (and most by only a small margin).  

The ‘big hitters’ did worst of all. Nearly 95% of them were in the red after two years. Those who were down $5,000 outnumbered those ahead $5,000 by 128 to 1.

Why tell you this?

Well, the statistics between gamblers and traders are similar.

It’s often said that 95% of traders fail. That’s hardly surprising. Many people treat trading like they do gambling — just another game of chance.

The simple fact is this: You shouldn’t trade (or gamble) without a plan to put the odds in your favour. People who simply ‘try their luck’ have little chance of success.

Recently, I told you five questions every trader should ask. They provide the structure to ‘systemise’ your trading. This is a key step to successful trading.   

I’m going to continue where I left off in a moment.

But first, here’s a short recap…

The five Qs

Getting a 100% winner is great. But how do you repeat this triumph many times over?

Few traders seem to give this any thought. Instead, they rely on ‘gut feel’. Their decision-making is different for each trade. Every outcome is a roll of the dice.

But it doesn’t have to be like this.

You see, repeatable success is a formula. It’s a step-by-step process that you follow consistently. The key is knowing the framework in which to create your steps. 

Here are the questions every trader should ask…

  1. Which stocks will you trade?
  2. How much will you risk on each trade?
  3. What will be your entry strategy?
  4. How will you decide when to cut a losing trade?
  5. How will you get out of a profitable trade?

I told you about the first two in a recent article. Despite their importance, many traders don’t have a clear strategy for either. You can read more about them here.

I’m now going to discuss the final three questions. If you can answer all five, then you have the makings of a trading system. Learning to think this way could give your trading an edge.

Just like Lego

Lego is one of the most popular building games on the planet. You take lots of individual blocks and create something unique. About the only limitation is your imagination.  

A trading system isn’t all that different…

Think about the five questions: Which stocks to trade, how much to risk, when will you buy, how will you cut a loss, and when will you take a profit?

These are a trader’s building blocks. Connect them together and you have a trading system.   

The third question — or ‘block’ — relates to entries.

Now, this is an interesting one. Many people focus all their attention on when to buy. They believe entries are the key to trading success.

But this isn’t true.

Your entry strategy is only as good as the blocks it connects to. Even the best buying tactics are useless without the other parts.

Now, entry strategy is a big topic. I won’t focus heavily on this today. This is to highlight the components of a trading system. I’ll cover specific methods another time.

But in brief, Quant Trader’s strategy is to trade with the trend. The entry process involves buying into strength. I believe this increases the odds of making a profitable trade.

Strength is also an excellent screening tool. By only focusing on strong stocks, you automatically cull many underperformers. This helps you narrow down your choices.  

The final two parts of a system involve exits.

You have two crucial decisions to make:

  1. When will you exit a losing trade; and,
  2. How will you close out a profitable trade?  

No two factors have more impact on your results. Exits are hugely important. Getting this right separates the best traders from the pack.

Most professional traders use a pre-set exit point, or stop loss, for every trade. There’s no second guessing what to do if the market hits this level…you get out of the trade.

Letting losses run is sure-fire way to fail. A stop loss is your safeguard. It’s there to help protect your capital when a trade goes into reverse.  

Quant Trader’s initial stop loss is around 25%. If a stock drops this much from the first buy signal, then the trade comes to an end. 

There are many ways to exit a losing trade. Much will depend on your overall strategy. The most important thing is your commitment to sell when necessary. 

Exiting profitable trades is just as important.

Quant Trader’s strategy in this regard is to let winners run. I believe the key to catching big trends comes down to one thing: you need to resist the urge to bank a quick profit. 

One of the biggest mistakes I see people make is to take profit too soon. Traders who cash-out early never get the big gains. They sell every winner before the shares really get going.  

Quant Trader uses a trailing stop to exit profitable trades. This strategy won’t get you out at the high. But it does the next best thing. It helps keep you in a trade for longer.

Again, there are other ways of deciding when to take profit — there’s no Holy Grail. The key is to find a method that works, and then follow that process consistently.

You now know the underpinning of system design. I hope this helps you develop a ‘systematic’ mindset. You can then apply this to your trading. 

Maybe you’ll build your own system, maybe you won’t — that’s not important.

What matters is that you understand the core elements of a system. I believe that simply knowing this puts you a mile ahead of most traders.

Until next time,
Jason

Editor’s note: How would you like a MINIMUM of 12 chances to potentially double your money over the next 12 months — GUARANTEED?

Yes: guaranteed. Okay, I know how it sounds. But I really am prepared to make you that offer. I’ll work hard over the next year to find you a minimum of 12 chances to double your money from the Australian market. If I don’t manage to do that, I’ll work for you for a further year… for NOTHING. 

The offer is unlike anything I’ve ever done before…and (as far as I know) it’s a first in Australia. This is 100% genuine and I can’t wait to tell you more (there are a few details I need to explain about how this will work). Check your email on Sunday. I’m only offering this to a small number of interested traders. So you’ll need to be quick if you want to get involved. Places will be on a ‘first in’ basis.  

For full details of this unprecedented offer, check your email on Sunday for my special invitation.