What I Learned From My German Brethren Part Ein

GermanyMapRandom Thoughts

It’s important to get out and see the world. I spend far too much time confined to my four walls sitting (or standing) in front of my six monitors. Getting out helps to confirm or deny what you believe.

Whenever I take a trip, I like to do a post mortem titled “What I learned while I was in….” On this trip, I think the main thing I learned is that my German brethren are not unlike my American brethren.

Like my American brethren, my German brethren are searching for the Holy Grail with a gravitation towards the complex. As I often discuss, we all seem to have to go on the trader’s journey. And, this journey often leads us through the complex and archane. However, the ironic part is that we often end up back at the start. So, do go on the journey but realize simple systems are much easier to follow and work much better in the long run. I would never trade a system that you couldn’t explain to me on a cocktail napkin. Never forget that you must make a trade off of price and the only way to profit is to capture a change in price. Therefore, be careful not to venture too far from price itself.

On The Go? Listen To This Column

On The Go? Listen To This Column

Plot the 15th oscillator if you must but make sure you take a look at the price chart and only the price chart before pulling the trigger.


brainsLike here, the distance between you and your success isn’t very far. In fact, it’s only the distance between your ears. I met two young traders. One was successful while one was struggling.  Did one have a superior methodology? Nope. In fact, they were trading partners. One was following the system while the other was micromanaging the trades vs. following the plan.

As mentioned ad nauseam: Way back when the earth was still cooling, I used to program trading systems-a lot of trading system. Sometimes I’d program as many as a dozen a day. One day while bragging to my wife about my latest and greatest discovery she asked “How many trading systems to you really need?” Bam! It hit me, one, just one. The one viable one that you will follow.

If you’re not following your system, especially if you have proof that it works, then take action to follow it. Since this is fodder for an entire trading psychology course, I’ll see if it can squeeze it into my next column. So, watch for “What I Learned From My German Brethern Part Zwei.”

Like many of my American Bretheren many seem to be craving action vs. being patient. I heard people talk about systems that were “very interesting” but, and I quote, they “just didn’t trade enough.” Some were placing multiple daytrades even though they haven’t been very successful at it. If you’re not successful making a bunch of trades, then make fewer trades. This way, at least you’ll lose less money. Find a methodology (or tweak your own) that produces less but more robust trades-not just more trades.

Like many of my American brethren, many were more concerned with being right than making money. Some were even shorting big cap US stocks even though they are currently making new highs. Never forget what Keynes once said:  “A market can stay irrational a lot longer than you can stay solvent.” I’ve given up trying to look smart. This is how I earned the badge “Trend Following Moron”-one that I wear proudly. This keeps me from picking tops and bottoms and just following along. Yep, I might not be right all the time but that’s okay. I’ll be right over time.  

beer2Like many of my American brethren, they enjoy a good beer. This one I have no problem with. If I’m a microcosm for the Americans, I can say they do seem to be more immune to the effects of German beers than us. After a few, I lost track of time.  I got the “It’s 1:30 AM. You better be dead” text. Whoops. 

Like my American brethren, they think someone has the secret. When I showed them a losing trade, someone pointed out that the trade fit my system but yet, it turned into a loser. Why? Well, explained to them that if I knew they ahead of time, like my American brethren, they’d never see my fat ass again.

stankyAfter attending the conference party at the disco, I can attest to the fact that Germans can dance quite well but they don’t know the “Stanky Leg.” I explained this to my bride and she said, “Oh no, please tell me you didn’t.” Well, since I had one more speech pending and I just recently became more than a 1/2 century old, I decided I that I didn’t want to turn “break a leg” into literal thing.  Maybe next year I’ll show ‘em. While I’m at it, I’ll also show ‘em how to “Whip” and “Nae Nae.” I guess it’s a sad thing when an old fart tries to stay hip, cool, and relevant. At cocktail parties, my wife often apologizes in my defense: “In Dave’s case, age doesn’t always guarantee maturity.” Hey none of us are going to get out alive–life’s too serious to take seriously.  

Hey Dave, your resistance to say R.I.P to you youth stories are fascinating, but can we get to the markets?

To The Markets

Well, as I showed my German brethren by flipping through hundreds of charts, the average stock is down or looking questionable at best. This is in spite of the major indices flirting with new highs. As I began to dig my way out Monday morning, I found this gem from my friend Gary Kaltbaum in my inbox:

“Amazon and Google…have added approximately 460 points to the Nasdaq 100 this year. The index itself has gained about 420 points. If not for these two stocks, the index would be down. If you add in #3 and #4, Facebook and Netflix, we are then at a -5% for the index.”

Nice work Gary! This exemplifies what I’m seeing empirically-leadership is narrow.

Keep in mind that with markets it is always a moving target. If more and more stocks/sectors start hitting new highs along with the indices, then I’ll start to get a little more excited about the long side. Right now, a buy side setup really has to knock my socks off. We do have one on the radar. Sign up for the Foresight In Hindsight Service and you’ll see it next Tuesday.

So What Do We Do?
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