The Use of average true range to determine risk points that can be allocated to a position under prudent money management....
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John Jacob Pitera @ GFA • In volatile markets it can make sense to reduce the percentage of your account to adjust for the increase in volatility.... Larry Hite in his interview in the first Market wizards books I believe mentioned that he used a 20 day average of the daily true range to calculate his volatility and thus the risk points that could be assigned to a market at any time... his single best comment was that when markets got too volatile they stepped aside as the risk profile became too unpredictable..... It's not how much money you can make it's...... containing your loses even on the crash black swan statistical outlier days... and weeks that lets one stay in the game...
John
2 days ago
 JordanUnfollow
Jordan Lindsey • I use a 14 period ATR to measure market volatility and set take profits and stop losses accordingly but position size is INCREASED when markets are moving/volatile as that is when the most money is made and size is decreased in slow moving markets.
9 hours ago • Like
John Jacob Pitera @ GFA • in my humble opinion that is a recipe for blowing up a trading account.... You wil find that there are rare times when price discovery will disappear... and or their will be huge gaps in price from one market to the next.... In 1980 Gold topped out in London at $1047. or so I have seen in the past on older charts. ( when something has gone astray it fixed.... the fix is in... Comedy Central had a saying when News breaks .....we fix it) The Silver Market topped out when the US authority proclaimed that no new long positions could be established in Silver existing positions could be liquidated.. thus ending the Hunt Silver Corner......more
19 minutes ago
John Jacob Pitera @ GFA • The London gold fixing or gold fix[1][2] is the procedure by which the price of gold is determined twice each business day on the London market by the five members of The London Gold Market Fixing Ltd, on the premises of N M Rothschild & Sons
On Feb 2nd 1985... $/Dem topped out at 3.43 as near as we could tell in UK trading..... by the time it opened in New York it had moreof a 3.41 handle... Reading the two Market Wizard Books Interview by interview and then going back every 6 months of year will provide more illumination as to the many levels and profound aspects of what the wizards discuss. On Oct 19th 1987.... the tape ran several hours behind and it was was not accurate price discovery. Several of the traders went home with positions such as Eurodollar (interest-rate futures) positions that had massive jumps the next day and obviously a number of people blow up their accounts or firms in these episodes. It can and will happen again as events wil occur over the weekend when the Markets are closed. And you will see a massive statistical outlier occur when price discovery resumes. The day that an electoMagnetic pulse wipes out the computer network will be one such episode... An earthquake in New York or Tokyo, or a Nuke going off in London or Hong Kong would be similarly disruptive.. But Not to worry when the Amaranth Natural Gas Hedge Fund Blew up with a 6 billion plus account.... the chief trader had another job within a year.... but you have to be able to regroup emotionally when you blow up yyour account or firm... or your clearing firm blows up on you.
My very best regards,
John
1 second ago • Delete • Edit Comment You have 14 minutes
note that the US dollar had already topped out and turned when the Plaza accord was conducted on Sept 22 of 1985.... Central Banks are inherently selling when currencies are over valued and buying when they are undervalued they scale in and out of bull markets on the way up and scale into bear markets on the way down.
The Plaza Accord or Plaza Agreement was an agreement between the governments of France, West Germany, Japan, the United States, and the United Kingdom, to depreciate the U.S. dollar in relation to the Japanese yen and German Deutsche Mark by intervening in currency markets. The five governments signed the accord on September 22, 1985 at the Plaza Hotel in New York City
Between 1980 and 1985 the dollar had appreciated by about 50% against the Japanese yen, Deutsche Mark, French Franc and British pound, the currencies of the next four biggest economies at the time[ citation needed]. This caused considerable difficulties for American industry but at first their lobbying was largely ignored by government. The financial sector was able to profit from the rising dollar, and a depreciation would have run counter to Ronald Reagan's administration's plans for bringing down inflation. A broad alliance of manufacturers, service providers, and farmers responded by running an increasingly high profile campaign asking for protection against foreign competition.
Major players included grain exporters, car producers, engineering companies like Caterpillar Inc., as well as high-tech companies including IBM and Motorola. By 1985, their campaign had acquired sufficient traction for Congress to begin considering passing protectionist laws. The prospect of trade restrictions spurred the White House to begin the negotiations that led to the Plaza Accord. [2] [3]
The justification for the dollar's devaluation was twofold: to reduce the U.S. current account deficit, which had reached 3.5% of the GDP, and to help the U.S. economy to emerge from a serious recession that began in the early 1980s. The U.S. Federal Reserve System under Paul Volcker had halted the stagflation crisis of the 1970s by raising interest rates, but this resulted in the dollar becoming overvalued to the extent that it made industry in the U.S. (particularly the automobile industry) less competitive in the global market.
The 1985 "Plaza Accord" is named after New York City's Plaza Hotel, which was the location of a meeting of finance ministers who reached an agreement about managing the fluctuating value of the US dollar. From left are Gerhard Stoltenberg of West Germany, Pierre Bérégovoy of France, James A. Baker III of the United States, Nigel Lawson of Britain, and Noboru Takeshita of Japan.
Effects[ edit]Devaluing the dollar made U.S. exports cheaper to purchase for its trading partners, which in turn allegedly meant that other countries would buy more American-made goods and services.
The exchange rate value of the dollar versus the yen declined by 51% from 1985 to 1987. Most of this devaluation was due to the $10 billion spent by the participating central banks.[ citation needed] Currency speculation caused the dollar to continue its fall after the end of coordinated interventions. Unlike some similar financial crises, such as the Mexican and the Argentine financial crises of 1994 and 2001 respectively, this devaluation was planned, done in an orderly, pre-announced manner and did not lead to financial panic in the world markets. The Plaza Accord was successful in reducing the U.S. trade deficit with Western European nations but largely failed to fulfill its primary objective of alleviating the trade deficit with Japan. This deficit was due to structural conditions that were insensitive to monetary policy, specifically trade conditions.
The manufactured goods of the United States became more competitive in the exports market but were still largely unable to succeed in the Japanese domestic market due to Japan's structural restrictions on imports.
The recessionary effects of the strengthened yen in Japan's export-dependent economy created an incentive for the expansionary monetary policies that led to the Japanese asset price bubble of the late 1980s. The Louvre Accord was signed in 1987 to halt the continuing decline of the U.S. dollar.
The signing of the Plaza Accord was significant in that it reflected Japan's emergence as a real player in managing the international monetary system. Yet it is postulated [4] that it contributed to the Japanese asset price bubble, which ended up in a serious re ]cession, the so-called Lost Decade.
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The Hunt Brothers endeavored to corner the silver market when everyone thought the Financial System was coming to an end in 1980-82.....
Nelson Bunker Hunt (born February 22, 1926) is an American oil company executive. He is best known as a former billionaire whose fortune collapsed after he and his brother William Herbert Hunt tried but failed to corner the world market in silver. [1] He is also a successful thoroughbred horse breeder. [2]
Silver Thursday[ edit]The Hunt brothers had invested heavily in futures contracts through several brokers, including the brokerage firm Bache Halsey Stuart Shields, later Prudential-Bache Securities and Prudential Securities. When the price of silver dropped below their minimum margin requirement, they were issued a margin call for $100 million. The Hunts were unable to meet the margin call, and, with the brothers facing a potential $1.7 billion loss, the ensuing panic was felt in the financial markets in general, as well as commodities and futures. Many government officials feared that if the Hunts were unable to meet their debts, some large Wall Street brokerage firms and banks might collapse. [2]
To save the situation, a consortium of US banks provided a $1.1 billion line of credit to the brothers which allowed them to pay Bache which, in turn, survived the ordeal. The U.S. Securities and Exchange Commission (SEC) later launched an investigation into the Hunt brothers, who had failed to disclose that they in fact held a 6.5% stake in Bache. [3]
Aftermath[ edit]The Hunts lost over a billion dollars through this incident, but the family fortunes survived. They pledged most of their assets, including their stake in Placid Oil, as collateral for the rescue loan package they obtained. However, the value of their assets (mainly holdings in oil, sugar, and real estate) declined steadily during the 1980s, and their estimated net wealth declined from $5 billion in 1980 to less than $1 billion in 1988. [4]
In 1988, the brothers were found responsible for civil charges of conspiracy to corner the market in silver. They were ordered to pay $134 million in compensation to a Peruvian mineral company that had lost money as a result of their actions. This forced the brothers to declare bankruptcy, in one of the biggest such filings in Texas history. [5]
And the Long Term Gold Chart... I have read in books written in the early 1980's that Gold was said to have briefly traded above $1000 an ounce in London the night that the fever and prices broke..... I number $1047..and it may opened in New York in the 877 level or so..... that's what happens at market extremes and that's why traders and investors who want to be around for the long term do not use to much leverage and use it with a definite plan.... I would check your money management and asset allocation techniques with the a Best of Breed Asset Manager.... I know I spent 2 hours on Friday April 26th in Sugarland Texas talking with a Partner of New York Life..... a truly brilliant man, who is part of a very sophiisticated and wize Global Insurance and asset management company with $287 Billion in Assets.... New York Life is privately held and was founded in 1845 as the Nautilus Company.... named after the ship in the epic novel Moby Dick...
New York Life saw the CDS/CDO blowup and market collapse and they moved to treasuries in 2007.... made beaucoup de money in the Great Financial Crisis and needed no money from the Government... The firm ha 16 attornies in Houston, who work for the company and go out and meet with the Financial Advisor and his team and the client and handle the legal work involved in estate planning,, creating foundations, Trusts and other tax effectiveness strategies
OK..... the Market Lab is going to the Lake...... -vbg-
John Jacob Pitera. |
