Good Read on the Rise of Automated Systemized Trading/Investing Vs Humans

We can see the effects of automation all around us and how it is impacting the job market. The advent of self driving cars will soon be upending the taxi industry. What many people may not be aware of is automation is moving into many job categories previously thought to be “robot proof”. There are inroads being made in law with automated systems replacing the tasks done by paralegals. Robots can now perform complex surgeries that most thought could only be done by a human doctor. Some news articles are now being generated by computer, and the list goes on…

The trading and investment industry has certainly not escaped this phenomenon. Discretionary traders and portfolio managers are under pressure from automated index funds and system trading programs that are proving to be superior, at least under current market conditions over the last few years.

Here’s an interesting read on the rise of automated systems squeezing out human traders:

https://www.linkedin.com/pulse/revenge-humans-how-discretionary-managers-can-crush-leigh-drogen

 

 

Alert: Anthem Insurance has Massive Customer Data Breach Exposing Customer Data

This may be the worst consumer data breach in corporate history due to its scope of affecting up to 80 million Anthem customers as well as the data exposed.

It’s a jackpot for identity thieves as among the data exposed:

1) Name

2) Social Security number

3) Date of birth

4) Home Address

5) Employment Information

6) Income Data

7) Email address

 

This will clearly result in an investigation on why this data wasn’t encrypted with layers of protection so a breach would expose all this information.

This is as serious as it gets since most of this information is constant, unlike a credit card number which can be easily cancelled.

More info:

http://www.nbcnews.com/business/consumer/anthem-breach-what-should-i-do-right-now-n300796

 

The article lists precautions to take for those affected, but I would also add to be on guard against fraud calls where the caller pretends to be security or some authorized agency like a bank or police to get additional personal information. Real agencies will never solicit personal data information over the phone or via email.

 

 

Market Trading Updates of Updates – The Big Catch Up

I have been mostly MIA with regard to trading updates for the last several months during the revelation that Xanga was preparing to close its doors and possibly reopen under a new version on a “pay to blog” model, and my full-time transition to my WordPress site- so there’s quite a bit of updating to do….

During this “blackout period” I’ve been dutifully trading on a near daily basis. Trading this year has proven to be a big challenge and rough sledding. I guess one could call it “The Sophomore Jinx” after my prior highly successful 1st year of keeping and blogging my full portfolio trading results.

To catch folks up who are unfamiliar with my Xanga blog, I had committed to studying/learning how to be a successful trader/investor, success being defined as the ability to earn enough by my trades/investments to make a living – making it my primary income as opposed to the salaried route working for someone else.

I had been trading/investing for awhile, but I made a commitment to making learning to day trade well enough to make it my profession priority one in 2010 and spent more time and effort than ever before reading books on the topic of trades and investments combined with daily trading and analysis and keeping records of all my activities along with resulting gains or losses.

By 2011 I was using all that I had learned in 2010 to move forward with trading. It was a year where I started to see the first fruits of my labor with more consistency in my gains although I was still getting mixed results with some losses thrown in as well. By the end of 2011, I felt that I had acquired enough experience to be a successful trader. I kicked off 2012 with making the decision to post my trading results every month to make my progress public to my readers. The year had several instances of high drama with swings of greater than 15 – 20%, but overall, there was a solid consistency in getting gains and the overall year was a big success by any standard. I had indeed arrived with the capability to earn my keep trading the market.

I figured 2013 would be even better as I worked to smooth out some of my rough edges that put me in some high intensity roller-coaster trades the prior year. What I didn’t know is that the market had something else in mind as it “leveled up” on me and gave me a new set of challenges.

All of a sudden, I started having more difficulty in predicting day to day movement, but my long term predictions were still accurate. What usually unfolded was despite my knowing where the market was heading in a longer time frame, I was getting beat up trying to trade that movement in the short term. After such a successful prior year, it was a painful experience being spun around and beat by the market time and time again.

It felt like this mentally:

No need to point out which one is me.  >.<

So was 2012 just a fluke? No, I never doubted my trading ability, but I did realize that an upgrade in my methods were needed. My methods were working for the long term view, but were failing in the short term. The answer to why that happened lies in the chart data.

The market data this year is a lot more frenetic and volatile in the short term than it was last year.

To show you an example- here’s chart data of ES futures from 2012:

Chart of GLOBEX~@ESU2

Now here’s the same corresponding chart data for 2013:

Chart of GLOBEX~@ESU3

The day to day volatility is much greater this year that is was in 2012. This extra “volatility” is like kryptonite to my method of using trend line analysis to predict future trends in the short term, and it raises the difficulty for me to find the right entry and exit areas. It also greatly increases the risk of getting stopped out of one’s position as the market zigs and zags by significant amounts.

The net result was my original weakness in getting the right entry area was made a lot worse. It is all kinds of frustrating to enter a position, get stopped out of your position on a strong counter move, only to have the market reverse again and go to exactly where you thought it would. It’s even more frustrating when you thought one’s skills had progressed beyond getting caught up in this type of problem.

The market behavior this year basically demanded I solve my problem with short term entries if I wanted to move forward- and that’s where my focus for the much of the year went- staring at charts for hours and looking for commonality in behavior with trend line support and resistance.

It was pretty much like this:

Just replace the equations with chart data. =)
Weeks then months went by with me staring at and analyzing chart data, trying to establish order in the chaos. As fate would have it during my down time in NYC, while I was staring at chart data only since I wasn’t trading, I finally managed to make a good amount of progress picking up the cause-effect connections. That led to a much needed recalibration of my chart analysis techniques, and a restoration of my ability to deduce likely upcoming trends.

The end result is more successful market encounters:

This video is nearly identical in analogy in dealing with market behavior. It wasn’t until Tom Cruise’s character calmed down, concentrated, got in the zone, and started mentally seeing his opponents moves beforehand (battle precognition)- enabling him to finally get a draw in battle. Being able to see what the market is likely to do gives you a jump on your position compared to those who are less certain.

The best part about my updated knowledge is that I now believe I can analyze chart data at its roots – meaning if the data takes on new characteristics in the future, I shouldn’t have a problem in updating my analysis and methodology for it. What I now know would have greatly helped in keeping me out of tight situations last year.

In time I will resume performance updates, and I will include all the missed updates so you can see for yourselves the highs and lows of my struggles this year.