Why Do So Many People Find Trading Challenging?

Summary:

Trading is not a discipline, which cannot be measured by science; nor is it a job, which cannot be evaluated by progress. It is more like a kind of practice, where people can follow their hearts and not exceed the rules after seeking to internalize and return to the basics.

Behind the Excellence

For the self-disciplined person, time is the best friend. Although there will not appear too much difference at the start, slowly such changes will take root, and the quantitative changes will gradually lead to qualitative changes. A simple example is people who stick to fitness. You may not see the gap between these types of people and their peers at first, but as they come up in age, the gap gets larger.

I remember that a 96-year-old man went viral on the Internet last year. He has been working out for 26 years and is fit and healthy, not at all like an old man of nearly 100 years old. His daily routine is very regular; he never goes to bed later than 10 p.m. and gets up at 4 a.m. to activate his body and to the go gym every afternoon. However, many of his peers are no longer alive.

Discipline of Trading

The trading industry is never short of stars, and we often hear about how much profit someone has made from how much money. Perhaps we just see the light of this result, but often ignore the fact that these traders put in self-mutilating efforts on trading, and they do so for over a decade. Many successful people have been "grinding a sword for ten years", and behind the excellence is ascetic self-discipline. If trading fortunes are not earned through such an exercise, you might earn quickly and lose more quickly. With luck, you earn a large sum of money, but with strength, you lose the entire amount.

There is a TV series named "Tian Dao", which is worth watching for traders who already have some experience. There are too many things you can perceive in it, and a strong trading philosophy is reflected everywhere. There is a line in it that I am very impressed with: "God is the truth, and the truth is the pattern; if the pattern comes, you must not suspect it; and the one who works according to the pattern is God. The one who works according to the rule is God.

We often talk about those trading gods in trading, but in fact, they just follow the patterns of trade. The hard part is not to find the patterns, as the great truth is quite simple. Trading patterns implemented by good traders are extremely simple. The seemingly simple pattern is difficult in the execution; there is no secret to trading, and success depends on the execution. A trader's self-discipline is a decade as a day on the trade patterns for non-discriminatory implementation, also known as the trading discipline.

Power of Faith

Sowing and harvesting are in different seasons with a long interval of time in between. In this process, we carefully take one step at a time to operate each procedure, which we call perseverance. And the power of persistence is that we know that following this routine will eventually usher in the harvest. This is faith; the original intention does not change, and there is no slackening even if the road is long.

Many failures in trading are due to a lack of strong faith. Faith is the result of seeing the good in things, but the process is allowed to be tortuous, and one should be brave enough to accept its imperfection. Yet in front of market-tested trading patterns, many traders are the ones whose pragmatism makes them give up executing the trading pattern because of several failures.

From knowing to believing to faith, it takes a long time to adapt and settle. Knowing is the process of learning to recognize and build a trading pattern. Believing is when you know the strengths and weaknesses of the trading rules you are building; pragmatism prevents you from doing so if there are distractions in your mind. Believing is unshakably looking at the market with your trading rules and trading accordingly to achieve unity of knowledge and action.

It is not the market we are trading, but a set of trading rules and trading ideas. Only faith can provide the power to act on rules and ideas.

Risk Warnings and Disclaimers

You understand and acknowledge that there is a high degree of risk involved in trading. Following any strategies or investment methods may lead to potential losses. The content on the site is provided by our contributors and analysts for information purposes only. You are solely responsible for determining whether any trading assets, securities, strategy, or any other product is suitable for investing based on your own investment objectives and financial situation.

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Alex

Economic

Total employment: -14.6k from 58.3k (revised from 64.0k). Unemployment rate: 3.5% from 3.5% (revised 3.4%). Participation rate: 66.6% from 66.8% (unrevised 66.8%). We suspect we have now past the low in unemployment.

Total employment declined by 14.6k (0.1%) in December 2022, following an increase of 58.3k in November (revised from 64.0k) and an average monthly growth of around 40k between August and November.

Monthly hours worked decreased by 0.5%, greater than the decline in employment, for the second consecutive month following and hours worked peak in October.

The decline in employment and hours worked in December followed strong growth in both through 2022, with an annual growth in employment of 3.4%yr and hours worked of 3.2%yr.

There appears that a lift in illness could have been a drag on employment with the number of people working reduced hours due to illness increasing by 86k to 606k which is over 50% higher than we would usually see at this time of the year.

We were surprised that the number of people working fewer hours due to annual leave, flextime or long service leave decreased 489.2k to 842.6k in December 2022. The proportion of employed people taking annual leave in December 2022 was 6.1%, slightly below the pre-pandemic December average of 6.7%. Having been the first clear summer break since the Covid pandemic we had thought that the number on leave would be higher than average in December.

Australia December Labour Force: Disrupted by Greater than Usual Illness_1

The increase in the number effected by illness may also be why there was a 0.2ppt decline in participation to 66.6%. This led to a 8.8k decline in the labour force which was enough to hold the unemployment rate flat at 3.5% (revised from 3.4%). At two decimal places there was an almost 0.1ppt rise in unemployment from 3.47% in November to 3.51% in December. It was rounding that held the unemployment rate flat at 1 decimal place.

Australia December Labour Force: Disrupted by Greater than Usual Illness_2

The underemployment rate lifted to 6.1% from 5.8% and is not back to where it was in June 2022. Given just how tight the labour market is it is somewhat surprising there has not been a great improvement in underemployment given just how far unemployment has fallen. Given we expect the unemployment rate to start to rise through 2023 it looks as we have past the low point for underemployment.

Australia December Labour Force: Disrupted by Greater than Usual Illness_3

Employment declined in all stated except in SA and WA (both +0.3%) while NSW has the lowest unemployment rate at 3.1% (a 0.1ppt decline in the month) and SA has the highest rate for a state at 3.9% (also a 0.1ppt decline in the month).

December is always a tricky month as there is normally a last minute run up in employment (in original terms) before the Christmas/summer holidays. This December employment lifted 69.1k in original terms. Australia December Labour Force: Disrupted by Greater than Usual Illness_4

Australia December Labour Force: Disrupted by Greater than Usual Illness_4

Source: Westpac Banking

To stay updated on all economic events of today, please check out our Economic calendar

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Samantha Luan

Forex

Yesterday saw another broadly positive session for European markets, with the FTSE100 once again underperforming, after UK inflation data showed itself to be much stickier than was anticipated, putting upward pressure on the pound in the process.

US markets initially started the day on the front foot until a double punch of weak data saw yields slide sharply on both the short and long end, prompting concerns that US economic activity was being impacted by the lagging effects of multiple rate hikes.

This concern about the economic outlook, along with announcements from the likes of Amazon and Microsoft about job losses, saw US markets roll over after European markets had closed, closing sharply lower, as once again the S&P500 failed above the 4,000 level.

Yesterday's weakness came as a result of concerns about the health of the US consumer. After a strong performance throughout most of 2022, consumer spending appears to have run out of steam with November and December retail sales declining 1% and 1.1% respectively. US PPI for December also saw a lower-than-expected rise of 6.2%, a sharp drop from the 7.4% seen in November.

The Fed Beige Book added little to the picture when it came to how the US economy is doing, apart from an acknowledgement that price pressures are starting to slow, however St. Louis Fed President James Bullard added to the uncertainty by insisting that the Fed needed to get rates above 5% sooner rather than later. This view conflicts with the prevailing market narrative of a 25bps hike next month, as concerns rise that the Fed could well be hiking into a potential recession.

These economic concerns also translated into crude oil prices which having hit their highest levels since the beginning of December early on the day, promptly reversed course to close the day sharply lower.

One thing in the favour of the US economy in the face of disappointing economic reports is a resilient labour market, with today's weekly jobless claims expected to see a modest rise from 205k to 214k.

We also have housing starts and building permits data for December, with the recent cold weather not expected to offer much hope of a respite here.

Last night's weaker US close looks set to translate into a lower European open.

The US dollar had a mixed day slipping to a marginal 8 month low against the euro before recovering, while against the Japanese yen we saw a 400-point range, after the Bank of Japan pushed back on market expectations of further measures to tweak its monetary policy settings around yield curve control.

Governor Kuroda went on to say that a further widening of the YCC band wasn't needed yet, as he looked to finesse the central banks messaging around its next policy move. The BoJ's biggest problem is that yesterday's events only delay the inevitable, with national CPI for December expected to reach a 42 year high of 4% later today

With the Fed closer to the end of its rate hiking cycle, and the Bank of Japan yet to start its tightening regime, the line of least resistance for USD/JPY is likely to be a move towards 120 and possibly lower in the coming weeks.

EUR/USD – made a marginal new high of 1.0887 yesterday, before sliding back again, as the market struggles for direction. Could see a deeper fall towards 1.0720. The key resistance sits at 1.0950 which is a 50% retracement of the move from the 2021 highs to last year's lows at 0.9536. A move through 1.0950 opens up a move towards 1.1110.

GBP/USD – ran out of steam just shy of the December peaks at 1.2440. Above 1.2450 could see a move towards 1.2600. We need to hold above the 1.2000 area for further gains to unfold or risk a return to 1.1830.

EUR/GBP – the failure at the 3-month highs at 0.8895 this week has seen a move below last week's low at 0.8770/80, with the risk we could see a move towards the 0.8720 area, and 50- and 100-day SMA. The next support below 0.8720 targets 0.8680.

USD/JPY – the failure to hold onto the gains above 130.00 yesterday suggests the prospect of further weakness and a move towards the 126.50 area which is the 50% retracement of the up move from 101.18 to the highs at 151.95. Below 126.50 targets the 120.60 area.

Source: CMC

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Thomas

Central Bank

A seismic policy shift by Japan's central bank is still a matter of when not if, say investors now hunkering down for fresh havoc in bond markets and wild swings in currencies.

The Bank of Japan on Wednesday maintained ultra-low interest rates, including a bond yield cap it was struggling to defend, defying market expectations it would phase out its massive stimulus programme in the wake of rising inflationary pressure.

Analysts say a policy change is inevitable at some point given that Japanese inflation is at 41-year highs and the cost of keeping borrowing costs down rises.

"Although the timing is uncertain, we are not changing our view, this is something that has to happen at some point," said Cosimo Marasciulo, head of fixed income absolute return at Amundi, Europe's largest fund manager.

He added that Amundi remained positioned for rising Japanese government bond yields (JGBs) and for the yen to strengthen.

Japan's 10-year bond yield, trading at 0.4%, fell on Wednesday but is not far off its highest levels since 2015.

Expectations that yields will move higher are enticing cash back home and investors now have to adapt to a potentially sustained fall in Japanese demand for global bonds. That is a risk some say is underestimated at a time when major central banks have started offloading bonds they own as part of their monetary tightening efforts and government debt sales surge.

Total holdings of foreign bonds by Japanese institutional investors, excluding Japan's $1 trillion reserve portfolio, reached $3 trillion at their peak. While they have been trending down lately, they are estimated to remain well above $2 trillion.

BOJ Has Markets Bracing for More Bond, FX Turmoil as Shift Seen Inevitable_1

With Japanese investors the biggest foreign holder of U.S. Treasuries and among the biggest foreign buyers of debt in the likes of Australia and France, those flows are significant for sovereign bond markets worth almost $70 trillion.

"The scary thing about Japanese (monetary) policy discussions is the numbers are absolutely enormous," said Simon Edelsten, global equity manager at Artemis. "So, any direction of travel matters and you have to pay attention to it."

Going Home

The implications of higher inflation and a possible end to ultra-low rates are not lost on Japanese investors. For the first time in years they would not need to send their cash overseas in search of a return.

A rapid sale of foreign bonds is unlikely as investors would incur sharp losses, analysts said.

Still, anticipating a shift, Japanese investors sold a net 2.1 trillion yen ($15.94 billion) of foreign bonds in December, marking a fourth straight month of selling.

Brad Setser, a senior fellow at the Council on Foreign Relations, said it was no exaggeration to say that Japanese flows have had at least as much of an impact on the global bond market as Chinese flows over the last decade.

U.S. Treasuries and French bonds are vulnerable, said Canada Life Asset Management fund manager David Arnaud.

BOJ Has Markets Bracing for More Bond, FX Turmoil as Shift Seen Inevitable_2

Japanese U.S. Treasury holdings are worth more than $1 trillion or just over 4% of the $24 trillion market.

UBS estimates Japanese investors hold at least 10% of France's 2.3 trillion euro ($2.45 trillion) sovereign bond market and around A$260 billion ($181.14 billion) or some 19% of Australian debt.

To The Yen, And Stocks

The yen fell over 2% after the BOJ decision but soon cut losses and was still expected to gain from Japan moving away from its ultra loose policy - which some say they anticipate after BOJ chief Haruhiko Kuroda steps down in April.

Kuroda's last meeting is in March and who will succeed him as governor remains unclear.

"What they're doing with yield curve control is not long-run sustainable," said Christopher Jeffery, head of rates and inflation strategy at Legal & General Investment Management.

LGIM calculations show the BoJ has spent the equivalent of $264 billion on its yield curve control purchases since Dec. 1.

A further surge in the yen - one of 2023's most favoured trades - means volatility in the $7.5 trillion a day foreign exchange markets is unlikely to go away soon, another headwind for investors.

The yen has already gained almost 18% since October.

"There are a lot of people willing to take a bet that the yen goes considerably further," said Kit Juckes, chief global foreign exchange strategist at Societe Generale.

Heightened volatility could support the safe-haven dollar, though, analysts said, muddying the impact for major currencies from a BOJ shift.

Finally, global equities could be another casualty.

According to Nomura, Japanese investors have been far more active buyers of global and overseas equities than domestic stocks in the last decade.

Global equity investment trusts sold in Japan received more than 14 trillion yen of net inflows from January 2013 until November 2022, according to Nomura. However, it forecasts much less Japanese interest in investing local currency in overseas funds going forward.

Source: CNA

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Samantha Luan

OPEC has increased its control of oil markets as supply concerns return to the fore and amid declining output growth in other crude supplying countries, according to global investment banking and securities firm Goldman Sachs.

A "broader environment" of lower supply has returned market power back to the oil producer's group, the New York-based company said in a report.

Oil prices have been volatile since the start of Russia's military offensive in Ukraine last February. After surging to a 14-year high of nearly $140 a barrel last March, Brent, the benchmark for two thirds of the world's oil, is currently trading in the $80 to $85 range.

The OPEC+ alliance of 23 oil producing countries slashed its collective output by 2 million barrels a day in October, citing concerns of a global economic slowdown.

OPEC Has More 'Market Power' as Crude Supply Concerns Returned, Goldman Sachs Says_1

The supergroup of producers will most likely unwind its output cuts for the second half of 2023 at its June meeting, Goldman Sachs said.

"We believe the sequential demand increase we expect this year in the face of sluggish supply will require a reasonable supply response from the producer group to plug the widening deficit.

"However, OPEC+ decisions are unanimous, and such a production increase will require the support of a group where few members possess the spare capacity to see their revenue increase."

Goldman Sachs, which expects Brent to rise to $105 a barrel by the fourth quarter, said only a combination of "bearish shocks" would affect its forecast such as flat China demand in the first quarter and no Russian supply disruption.

Futures gained on Wednesday on an improving China demand outlook but were weaker on Thursday morning on US recession fears as St. Louis Fed President James Bullard and Cleveland Fed President Loretta Mester said interest rates need to rise beyond 5 per cent to control inflation and Microsoft said it is cutting 10,000 jobs and recording a $1.2 billion charge.

Brent was 1.26 per cent lower at $83.91 a barrel at 6.25am UAE time on Thursday, while West Texas intermediate, the gauge that tracks US crude, was down 1.42 per cent at $78.35 a barrel.

Despite bearish forecasts from the International Monetary Fund and the World Bank on the global economy and the US potentially sliding into a recession, Goldman Sachs has said the US, the world's biggest economy, may avoid a recession. It also expects the global economy to have a soft landing.

Meanwhile, the latest data shows growth in China slowed to 3 per cent in 2022 as December's Covid-19 wave hit industrial production in the world's second-largest economy. Still, the results beat analysts' estimates of a 2.7 per cent growth.

China's economy is set to improve and is highly likely to reach a normal growth rate in 2023, Liu He, a Vice Premier, told the World Economic Forum in Davos this week.

OPEC Has More 'Market Power' as Crude Supply Concerns Returned, Goldman Sachs Says_2

The country's imports are expected to increase significantly this year, Mr Liu said, adding that corporate investment will rise and household consumption will have recovered.

The data from China is "broadly positive even if it confirmed one of the slowest annual growth rates in decades", Craig Erlam, senior market analyst at Oanda, said.

"The prospect of a soft landing in the US and a shallower economic hit in China from the Covid transition, not to mention a strong rebound, has driven the latest rebound in crude prices," said Mr Erlam.

Earlier on Tuesday, OPEC Secretary General Haitham Al Ghais told Bloomberg TV that the group was "very bullish" on China, which could drive a 500,000-bpd growth in oil demand this year.

Addressing talks of a supply deficit in the second half of 2023, Mr Al Ghais said the situation would become clearer after the Lunar New Year in China.

"There are many fluid factors moving together at the same time, whatever it takes to manage the market and keep it stable — we will do."

OPEC has stuck to its global oil demand forecast for the year.

The group still expects oil demand to grow by 2.2 million barrels a day this year, which is lower than its estimate of 2.5 million bpd growth for 2022.

On Wednesday, in its monthly oil outlook report, the International Agency said it expects global oil demand to rise to an all-time high in 2023 on the back of China relaxing its Covid-19 restrictions, which could increase crude prices in the second half of the year.

Demand for crude oil could rise 1.9 million barrels a day to 101.7 million barrels a day, the Paris-based IEA said.

"Two wild cards dominate the 2023 oil market outlook: Russia and China," the report said.

Source: The National News

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FastBull Featured

Daily News

【Quick Facts】

1. The Bank of Japan reiterated its easing policy.

2. IEA: Global oil demand will hit a record high this year.

3. New York Fed model shows the likelihood of a recession is the highest since 1982.

4. U.S. retail sales decline will lead to a slowdown in consumer spending in 2023.

5. A number of Federal Reserve officials delivered hawkish speeches.

【News Details】

1. The Bank of Japan reiterated its easing policy.

The Bank of Japan (BoJ) kept its dovish interest rate resolution unchanged at -0.1% and will increase bond purchases in a flexible manner. BOJ Governor Kuroda Haruhiko said he does not see the need to further expand the yield band and that yield curve control (YCC) is fully sustainable.

2. IEA: Global oil demand will hit a record high this year.

Global oil demand is expected to grow by 1.9 million barrels per day in 2023, reaching a record 101.7 million BPD, according to the IEA's monthly report.

3. New York Fed model shows the likelihood of a recession is the highest since 1982.

The Federal Reserve Bank of New York has a model that measures the probability of a recession based solely on the difference between the 3-month and 10-year U.S. Treasury yields. According to the latest data from December, the probability of a recession in the next 12 months is 47%. That means the New York Fed's Treasury yield curve model shows the highest probability of a recession since the early 1980s. Since then, the yield curve inversion has widened by another 50 bps.

4. U.S. retail sales decline will lead to a slowdown in consumer spending in 2023.

U.S. retail sales recorded a monthly rate of -1.1% in December, the largest decline since December 2021, highlighting the weakness of the U.S. economy. Economists expect the decline in retail sales at the end of 2022 to lead to a slowdown in consumer spending in 2023, leading to slower economic growth. Despite a strong job market supporting consumers, Americans are still feeling the pinch. Savings rates are near record lows and credit card balances are surging. A separate report released at the same time Wednesday showed that business and wholesale inflation slowed more than expected in December, bolstering hopes that price pressures are cooling in the economy.

5. A number of Federal Reserve officials delivered hawkish speeches.

FOMC member for 2023, Dallas Fed President Logan said he supports a slower pace of interest rate hikes and that inflation levels are too high and may need to be raised gradually until "persuasive evidence" suggests inflation is near 2%. 2023 FOMC member, Philadelphia Fed President Harker reiterated his support for a 25 basis point rate hike, saying the Fed needs to raise rates to more than 5%. Cleveland Fed President Mester said further rate hikes are still necessary and the policy rate should be "a bit higher" than the 5%-5.25% range commonly forecast by policymakers for the end of 2023. St. Louis Fed President Bullard said that even if inflation falls this year, the Fed will tend to keep interest rates high to ensure that the task is completed and can continue to shrink its balance sheet after stopping rate hikes.

【Focus of the Day】

UTC+8 8:30 Australian quarterly unemployment rate and employment change (Dec)

UTC+8 18:30 ECB President Lagarde speaks at the World Economic Forum

UTC+8 20:30 ECB releases its minutes of the December 2022 monetary policy meeting

UTC+8 21:30 U.S. initial jobless claims for the week ending Jan. 14

UTC+8 22:00 Federal Reserve official Collins speaks at a conference on real estate

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Owen Li

Bond

Asian stock markets struggled to make headway on Thursday, after weak U.S. consumer data stoked recession worries and nudged investors toward safe assets such as bonds, while Japan's yen rose as markets doubted the Bank of Japan's policy commitments.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.8% and benchmark 10-year U.S. Treasury yields, which fall when prices rise, hit their lowest since September at 3.66%. U.S. crude futures fell 1%.

Japan's Nikkei also dropped 1% and the yen rose about 0.4% to 128.45 per dollar, unwinding moves that followed the Bank of Japan (BOJ) scotching speculation of a shift and leaving monetary policy settings unchanged a day earlier.

The BOJ has pursued ultra-easy policy settings for decades in an attempt to generate inflation and growth, but markets doubt it can keep that up, and traders have been selling Japanese government bonds and buying yen to bet on a shift.

The Nikkei dip and the bounce for the yen suggest such speculation is here to stay, at least for now.

"There's an intense amount of speculation in the market that now that the January (BOJ) meeting has happened without any changes ... that we'll see something in March," said Shafali Sachdev, head of FX, fixed income and commodities in Asia at BNP Paribas Wealth Management in Singapore.

April was another possibility, she added, since by then the BOJ would have a new governor. "My guess would be that more speculators would look to build positions going into these meetings."

Ten-year Japanese government bonds, the focus of markets' challenge to the BOJ because of the zero-yield target and 0.5 percentage point limit on its upward movement, yielded 0.415%.

Recession Risk

Overnight, the S&P 500 lost 1.6% after data showed U.S. manufacturing output had slumped last month and retail sales had fallen by the most in a year.

S&P 500 futures dropped 0.2% in Asia and were close to breaking below the 50-day moving average.

"The decline in retail spending and industrial production adds to the theme of the economy slowing and heading into recession in 2023, and pushes back on the soft-landing narrative dominating markets since January," said National Australia Bank's head of market economics, Tapas Strickland.

Microsoft's announcement of 10,000 layoffs and hawkish comments from Cleveland Fed President Loretta Mester and St. Louis Fed President James Bullard added to the gloom, with both Fed officials expecting U.S. interest rates above 5% this year.

The dollar wound back London-trade losses in the New York session and made gains in Asia. The Australian dollar was last down 0.5% at $0.6907, losing ground after data showed an unexpected fall in Australian employment last month.

The euro was under gentle pressure at $1.1078 and the New Zealand dollar wobbled slightly lower on news of Prime Minister Jacinda Ardern's surprise resignation.

Minutes from last month's European Central Bank meeting are due later on Thursday, as is an appearance from ECB President Christine Lagarde at the World Economic Forum in Davos.