Boris Schlossberg
BKTraders and Prop Traders Edge
“Good luck making investment decisions on gut feel,” writes Barry Ritholtz and I couldn’t agree more. But I also couldn’t agree less. Because I could flip that statement around and say good luck making investments without your gut feel.
We all know that a systematic, well thought approach to the market is far more effective than the seat-of-the-pants-let-me-see-how-this-goes-method that many of us employ. In fact, there is absolutely no dispute that a simple dollar cost averaging long only investment into the S&P index is the only assured way of making money in the market. This strategy beats 90% of all Masters of Universe hedge fund managers including Ray Dalio, Paul Tudor Jones, David Einhorn, Bill Ackman and anyone else you can think of with the exception of Warren Buffett and George Soros.
But knowing something is true and feeling it true are two very different things. And although we like to think of ourselves as thinking organisms that feel, we are actually feeling organisms that think. As a colleague of mine remarked this week in his typical sardonic East European way, “we are just animals with bigger brains.”
So the intellectual truth of an idea is not enough. It must be emotionally true as well if we are to accept it.
I fully comprehend the power of indexing - yet I have avoided it all my life because I had the misfortune of starting my “savings career” at the peak of the dot com boom only to have to cash out the money for my son’s education around 2010 when the S&P basically made two round trips to the same place. The disappointment of seeing my money produce zero return for more than a decade colored my attitude towards indexing for the rest of my life. That was a very dumb decision in retrospect. I would have saved tens of thousands of hours of work achieving the very same results that I did by day trading - but history couldn’t have gone any other way. Although I knew intellectually that indexing worked, I didn’t accept it emotionally and therefore for me it would have never worked no matter how many times I would have tried it. I would have inevitably sold at the bottom and bought at the top and never achieved even remotely close results of the passive index.
Past performance is not indicative of future results. Trading forex carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade any such leveraged products, you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading on margin, and seek advice from an independent financial advisor if you have any doubts.
Editors’ Picks
EUR/USD hits two-day highs near 1.1820
EUR/USD picks up pace and reaches two-day tops around 1.1820 at the end of the week. The pair’s move higher comes on the back of renewed weakness in the US Dollar amid growing talk that the Fed could deliver an interest rate cut as early as March. On the docket, the flash US Consumer Sentiment improves to 57.3 in February.
GBP/USD reclaims 1.3600 and above
GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.
USD/JPY drops back below 157.00, as focus shifts to Japan snap election
USD/JPY is back in the red below 157.00 in the Asian session on Friday. The Japanese Yen recovers ground against the US Dollar amid some profit-taking ahead of Japan's snap general election on Sunday. The preliminary reading of the Michigan Consumer Sentiment Index report for February will be released later on Friday.
Editors’ Picks
EUR/USD: US Dollar to remain pressured until uncertainty fog dissipates Premium
The EUR/USD pair lost additional ground in the first week of February, settling at around 1.1820. The reversal lost momentum after the pair peaked at 1.2082 in January, its highest since mid-2021.
Gold: Volatility persists in commodity space Premium
After losing more than 8% to end the previous week, Gold (XAU/USD) remained under heavy selling pressure on Monday and dropped toward $4,400. Although XAU/USD staged a decisive rebound afterward, it failed to stabilize above $5,000.
GBP/USD: Pound Sterling tests key support ahead of a big week Premium
The Pound Sterling (GBP) changed course against the US Dollar (USD), with GBP/USD giving up nearly 200 pips in a dramatic correction.
Bitcoin: The worst may be behind us
Bitcoin (BTC) price recovers slightly, trading at $65,000 at the time of writing on Friday, after reaching a low of $60,000 during the early Asian trading session. The Crypto King remained under pressure so far this week, posting three consecutive weeks of losses exceeding 30%.
Three scenarios for Japanese Yen ahead of snap election Premium
The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.
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