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Trading Platforms

Monday, December 5, 2016 - Weekly e-Newsletter - Issue No. 733

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Economic Calendar
Date
ET
Release
For
Consensus
Prior
Dec 5
10:00 AM
ISM Services
Nov
NA
54.8
Dec 6
8:30 AM
Productivity-Rev.
Q3
NA
NA
Dec 6
8:30 AM
Unit Labor Costs - Rev.
Q3
NA
0.3%
Dec 6
8:30 AM
Trade Balance
Oct
NA
-$36.4B
Dec 6
10:00 AM
Factory Orders
Oct
NA
0.3%
Dec 7
7:00 AM
MBA Mortgage Index
12/03
NA
NA
Dec 7
10:30 AM
Crude Inventories
12/03
NA
-0.884M
Dec 7
3:00 PM
Consumer Credit
Oct
NA
$19.3B
Dec 8
8:30 AM
Initial Claims
12/03
NA
NA
Dec 8
8:30 AM
Continuing Claims
11/26
NA
NA
Dec 8
10:30 AM
Natural Gas Inventories
12/03
NA
NA
Dec 9
10:00 AM
Mich Sentiment
Dec
NA
93.8
Dec 9
10:00 AM
Wholesale Inventories
Oct
NA
0.1%
 
This Week in History

Dec 6, 1994 - Wealthy Orange County, CA racks up debts around $2 billion before it declares bankruptcy

Dec 7, 1941 - Upon hearing of the Pearl Harbor attacks, the DOW falls 4.08 points as traders panic

Dec 9, 1865 - The NYSE completes its move to new location at 12-10 Broad St. in New York City

TRADING INSIGHT
What cumulative profits can sometimes hide

Let’s imagine that you come across a system that made $5,000 in one year

In this hypothetical scenario, a $5,000 profit represents a 30% return after commissions and fees. Let’s suppose you think this is a decent return. After all, a profit is a profit. You imagine yourself having subscribed to this particular system and how pleased you might have been to be 5K wealthier in a year.

Sometimes outcomes are easy, if you didn’t have to experience the actual journey

So let’s imagine you actually went through with this subscription last year. What if the system had sustained losses in every month except for September and October, where it had made tremendous gains? At the end of the year, the combined profits and losses (after commissions and fees) produced a gain of $5,000? Would you have been able to stomach the losses from January to August? Most people would not. But this brings up another important question: was the system developed to perform like this; were the two months of profits pure luck; or was there an over-exposure to risk through unusually large position sizes (plus luck)?

Distribution of profits and losses tell you a lot about the performance of the system

A statement of cumulative profits or losses can’t tell you anything about the behavior of a system. It doesn’t give you much to be skeptical about. In highly-leveraged speculative markets, skepticism is crucial.

Sadly, many people approach the futures markets with cognitive biases preventing them from considering information contrary to what they want to hear. It’s a matter of both greed and fear. Greed focused on the possibility of making high profits, and fear that such a belief will get debunked.

It’s best to do some hard research before you speculate in a risky and highly-leveraged market.

We’ll do one better for you…the info is free…it also happens to be very useful:
Systems Trading E-Book

 

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