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Last week I was fortunate enough to spend the day in Mayfair at the Westbury Hotel (a lovely location if you’re ever in need of one!)

The reason?  Myself and Malte Kaub from the Traders Leadership Council were delivering an all- day seminar for ActivTrades on ‘Blink! The power (and the pitfalls) of instantaneous decisions in financial markets’.

We spent the day explaining the background (from Malcom Gladwell’s book Blink!) and how we could use our trading actions and results to help us evolve towards consistency in our own trading. We made people aware of the need for expertise in any environment and about the impact of cognitive and heuristic biases in our decision-making.

It was a hugely enjoyable day and the feedback we received was tremendous.

We were also filmed and interviewed by MarketTrader.TV during the day and you can watch their report on the day by following the links for Market Programme 11. (You may even see me scrabbling my way through my first TV interview!)

Market Trader Programme 11

Well, what a difference a few days makes!  I wrote a post on Thursday about price coming down to the 1530 – 1570 Support level. As you can see from the chart price crashed through that the next day and closed the week off at $1489! I’d love to say I timed my post to perfection but it was complete luck on my part!

Whilst I did think that the downtrend would continue even I was surprised by the strength and ferocity of the selling. And today it got worse! I was looking at support levels in the 1430 region and it sliced through them like knife through a butter!  The next levels for me were around 1334 and we started to see lows around 1335. That’s a drop of $226 over two days of trading!  Holy cowabunga!  That’s a massive move by anyone’s reckoning.

We shall wait and see what the rest of the week brings us. Should be interesting!

This last week or so has seen us remember* the 10th Anniversary of the Second Iraq War.  (* I’m not really sure that the word ‘celebrate’ would be the right word to use in this context.) It’s been interesting to read the views of people ten years on. I would ask you the reader to please indulge me as I offer my own perspective as a trader and an ex-military guy who’s friends took part in this war.

Naturally as Traders we know how easy it is to be right in hindsight and how difficult it is to make decisions at the right hand edge of the screen as things unfold in real-time.  History can sometimes be unkind on Generals and politicians who had to make decisions at the time based on incomplete evidence.  However I believe in this situation, the case for war in Iraq, there was a very real narrative before hand that this was a flawed plan and war was going to happen for all the wrong reasons.  It was clear that the invasion of Iraq was part of a bigger agenda and that the reasons for war given to us were at best, weak, at worst, downright fraudulent.

When someone holds the largest ever anti-war rally in the history of the world you know something is wrong.  When your main allies of Canada, New Zealand, Germany, France all choose not to follow the US/UK into war then something is up. When your main regional neighbours/players Saudi Arabia and Turkey remove their support and not even provide tacit physical and military support for the war then you know something is wrong.

As for the case of WMD’s at the time I was open minded. I wasn’t open to the Intel but I knew that Saddam had ‘form’ when it came to using chemical weapons and I know that any organisation (in this case the Hussein/ Baath party infrastructure) will do anything in its means to ensure its survival so it was plausible that there ‘ may’ have been chemical weapons and that they ‘could’ be used. However any one with half a brain knew that really the WMD piece was just another element that was being manipulated to encourage the case for war.

I spent the first night of the Air War (known as Operation Telic for British Forces) having a few drinks in a bar watching the build-up and the news unfold.  I had very mixed feelings about it all.  On the downside I was struggling with my decision to turn down the offer to return to the military to engage in what was pitched to me as “my generations great adventure”.  Whilst I may not have agreed with the strategic reasons for the war, part of me desperately wanted to be there and be involved. Most of my best friends were out there on their squadrons and I was struggling with coming to terms with my decision to turn down the RAF’s ‘once in a career opportunity’ to re-enlist. (Despite my reservations about the cause and reason for war I have every respect and admiration for the young men and women who carried out their orders and executed the tactical plan.)

The other downside of being in that bar drowning my sorrows?  I missed out on a hot date with a gorgeous blonde girl called Rachel. C’est la vie.

The upside of being in that bar drowning my sorrows? I ended up buying both the FTSE and Oil next day on a spread-bet.  Did I have some great trading strategy or marvelous insight? No, not at all. Did I know at the time that I would be picking the bottom of the post dot-com crash? Once again  no, not at all.  I was just very, very lucky. I knew that markets hated uncertainty and that now the war was on we had an element of certainty and it would likely cause a spike in Oil prices.  Take a look at the attached FTSE monthly chart. There was big hi-wave / pin bar candle for Mar 2003, after a couple of bearish years , the market reversed, turned bullish  and never looked back until the GFC of 2008. (The weekly and daily chart from those days is also worth looking at.)

The next upside was working from home the next day so I could watch the constant news feed. As soon as I saw what the Allies Day 1 war plan was, namely to secure the Oilfields in the north and south of Iraq , I knew that I’d made the right decision to not go back.

Laying my life down to defend a clear and present danger to my country? Yes, I’d have done it. Its part of the gig.

Put my life on the line to increase US access to cheap Oil whilst denying Chinese/Iranian access and making a healthy profit for shareholders and politicians? No, thanks. I think I’ll pass on that opportunity.

So what opportunities did come out of that operation for me?  Firstly when I watched the American rescue of Private Jessica Lynch, the American solider whose convoy was ambushed. She was injured and taken captive.  I noticed that in the footage of the rescue (courtesy of NVGs) that all the special forces had not only a pistol but a Tazer strapped to their leg. Once I saw that I realised everyone else would see that and what Special Forces used today the rest of the worlds, Armies and Police forces would be using tomorrow.  That made Tazr a buy.

The other thing I noticed was that on every TV News footage of the war they always showed footage of Allied Jets and Helicopters flying over whilst they deployed chaff and flare counter measures.  (Makes for an interesting TV shot I suppose.) This got me thinking into how the Forces must be burning through their counter-measures stocks and that whoever supplied them would have a healthy order book. I did some research and found a UK company called Chemring (LON:CHG) that focused on countermeasures for the US Military. Yep, they were a buy as well.

This is a good reflection of my investing style over my Trading style. Trading is all about rules, discipline, consistency and risk management. Investing , for me, is where my more discretionary, creative, intuitive side comes into play. I literally wait for a story to hit me (as in Tazr and the over-use of countermeasures) and then do some research. If the research backs up my intuitive reading of a trend / opportunity then I will invest.  I invest very rarely because opportunities that literally leap off the page at me come around rarely. I’ve learnt to trust myself over the years

So was it all worth it?  The US spent $60Bn and lost more than 4400 lives. The loss of Iraqi lives numbers somewhere between 10,000 and 100,000 depending upon your sources. We lost 179 lives and spent billions of sterling.  Was it worth it for my Forces friends? You’d have to ask them, I never do. I expect that cognitive dissonance would mean they’re unlikely to give a really straight answer. Are we any safer because of the war? Not noticeably.  Are the Iraqis? I suppose we should ask them, but I doubt it.  Progress has been interminably slow since the war ended.   There’s still a lot of this story to play out. (Dont even get me started on the CPA and the mis-use of all those UN/Iraqi funds!)  It maybe another 10-20 years before we see how it’s all turned out for us and the Iraqi’s.

Fellow Trader,

You may have seen emails / details for an event I am organising / contributing towards. There is a special Traders Forum event taking place on Saturday, 6th April I and I have some very exciting news regarding the agenda for you.

We now have several guest speakers confirmed for the day including:

John Burford, whom many of you will know as the author of the popular Money Week Tradernewsletter

Ashraf Laidi, who is the Chief Global Strategist at City Index and is guaranteed to present his uniquely controversial view of the market

Neil Norton, a successful professional trader who will be sharing his specific strategies for taking regular profits from the market

Ghassan Chedid, a professional Hedge Fund Portfolio Manager and a member of the London Society Of Technical Analysts

In addition, Paul Wallace of the London Traders Network, will be discussing his upcoming new book on turning aroundyour trading performance and Kevin Barry, of the Traders & Investors Club, will be presenting his latest Market Roundup discussing the technical setups for his market positions for the month ahead.

With your support, we intend the Traders Forum to be the first of a quarterly event that will be geared towards the more experienced trader and investor. We are aiming to foster a kind of Mastermindenvironment, which will encourage a free exchange of ideas in a conducive environment with plenty of opportunity for networking.

The event will be held in a Central London hotel kicking off at 09.00. As well as the presentations, you will have the opportunity to speak with market professionals in person and to network with your fellow traders and investors. The agenda will be flexible, which means that you can pick and chose the presentations that you would like to attend.

Our mission is to bring you a memorable day in comfortable surroundings at a reasonable cost. Therefore, we will be holding the price for the day down to just £127, which will include refreshments, lunch, stationary and, hopefully, glacier mints!

Networking will be a very important part of the event so there will be a bar available to you throughout the day if you would like something more than coffee to fortify you. When we have worn out our welcome at the hotel, we shall continue the debates and discussion at a nearby hostellery. This is a great opportunity to spend a whole day in the company of market professionals and your fellow traders.

This event will not be recorded so when it’s over, it’s gone forever.

To secure your Ticket, follow the link here:

http://tradersforum20130406.eventbrite.com/

We are looking forward to seeing you on 6th April for a memorable day that is guaranteed to change the way that you see the market.

Warm Regards,
Paul

Just a quick chart to show the size and scale of the gap down in EURUSD last night based on the weekend news regarding the Cyprus bail-in/bail-out.

There has been less than half-a-dozen plus 100 pip gaps on the EURUSD in the last 4-5- years so this gap is significant and for anyone who was long into the weekend they themselves (like the Cypriots) would have taken a good haircut to their trading accounts.  It’s a fine example of why we always manage risk and never risk more than a small portion of an account on any one trade because you never know when such events might happen.

I’m sure everyone will have heard the news about the Cyprus situation and also some of the rumours that have been circulating. Such rumours as:

1. Angela Merkel wanted a 40% cut of bank deposits in a take-it-or-leave it offer that would punish Russian Mafia Money (and make her look strong to German voters in the run-up to German elections).

2. It was the Cypriot governments idea to include a cut of smaller sub-100k bank deposits in order to not alienate their Russian friends when they go back begging for more Russian money.

3. Russian energy firm Gazprom has offered to restructure the bank debt in return for exploration rights of Cypriot gas fields.

I have no doubt that in the time I’ve written and published this piece there will be a whole host more rumours. Its the latter rumour/offer that interests me most as it links into a bigger geo-political picture including Syria. It’s been well known for some time now that there are significant gas fields in the Eastern Mediterranean that are now viable (commercially and physically)  for production. This would present a boon to those Eastern Med countries and provide Europe with significant gas reserves. The biggest loser from this scenario would be Russia who presently provides a good deal of Europe’s energy.  The fighting in Syria has delayed the move toward production and as long as this goes on Russia continues to benefit from the war. There is no incentive for them to change their obstructive approach in the UN towards finding a settlement.  There have been tales of Russian warships ‘patrolling’ the Eastern Med to prevent meddling from a NATO/UN fleet (basically the US Navy’s 6th Fleet).

I have a soft spot for Cyprus having spent several of my summers in the 90′s based at RAF Akrotiri whilst conducting air-to-air gunnery exercises.  It was noticeable to me in the mid-to-late 90′s that we were beginning to see a Russian influx (they stood out a mile: badly bleached hair, far too much make-up, stone-washed denim jeans and dodgy fashion styles that were a generation out of date!) In those 15 years it has become Limossallograd due to the influx of Russian money and subsequent influence.

If the Gazprom offer is genuine and the Cypriots take the deal then it will have been a very smart move by the Russians. They will have side-stepped pretty much everyone.  It’s all part of what Rudyard Kipling introduced as ‘The Great Game’ which has continued in use to describe the geopolitical machinations of the Great Powers and regional powers as they vie for geopolitical power and influence in the area (courtesy of wikipedia).

I have no idea how this will all play out but the message for traders is always manage risk first and foremost!

Trade well,

Paul