Risk Management according to King Bumi of Omashu (Avatar: The Last Airbender)

[Imperator_Cat]

Do you guys know who this old cat is from the hit show Avatar: The Last Airbender?

This is King Bumi of Omashu, the second largest City in the Earth Kingdom.

Before we head into what we can learn from this guy (who looks like a whack), let’s have a little backgrounder:

Last week (Aug 31, 2020 to Sept 04, 2020) was an incwedible show of how sentiment and biases can quickly change in the blink of a kitty eye!

Some pairs and commodities show the shift in sentiment more pronouncedly compared to others and many of da pairs became spiky (lots o’ needles in the chart).

You can blame the Fed, blame the Central banks, blame the hedge funds, blame the big businesses, blame the pandemic, blame the economists, or everything else but one thing remains the same - you hold the cards you play!

Back to King Bumi, we learn about the concept of JING which simply means OPTIONS on how you are gonna use your energy (figuratively and literally) in a kitty battle! In other words, JING simply represents tactics of bending that you can employ in response to a battle situation. You can be aggressive by striking fast, first, and hard (POSITIVE JING) or defensive (NEGATIVE JING) by evading, avoiding, and blocking.

Accordingly, people in the lore of Avatar: The Last Airbender are commonly aware of two Jings only (Positive and Negative). King Bumi introduces a third kind of Jing: NEUTRAL JING (But yes if you read the lore there are 85).

So what is NEUTRAL JING? It’s simply… DOING NOTHING! (or WAITING)

In the woild of tradin’, many people act as if there are only two types of Jing when there are actually three!

Last week was incredibly busy and stressful for me outside of tradin’ so I was unable to observe the market firsthand and consequently, I had no trades.

The mid-week shift in sentiment may have either chipped off gains or resulted in losses for some traders but I was able to avoid… everything.

While it was not necessarily premeditated in my case, applying neutral jing is an option that most traders often fowwget.

“Humayghas the Central Bank is gonna announce rates tonight! Izzit gonna be hawkish or dovish?!”
“Holy cat! The Fed is gonna decide on QE tonight! Izzit gonna be a yay or a nay?!”
“Muwow! NFP is ganna happen in an hour! What should I kitty bet on?!”
“This top cat said that. How should I trade that statement?!”

Many people think it’s BINARY that they HAVE TO HAVE AN OPINION (AND A POSITION) in every major market move.
But not everyone has an intuitive feel for how the markets will respond to a given high impact economic event
MANY TRADERS DON’T HAVE A foolproof SYSTEM to weed out false breakouts or respond to sudden reversals, or a RELIABLE TRADE MANAGEMENT and ROBUST RISK MANAGEMENT to react to choppy markets.

The key lesson from King Bumi is this: You don’t have to.
You can sit and sip cool aid as the major news happens and resume trading when things stabilize and fit your criteria.
You don’t need to have an opinion or a position with every major high impact economic event. No one is forcing you to take a stand.
You can sit through volatility and wait for choppy markets to begin trending again.
You can wait for price to settle back into the setup that you are comfortable with instead of forcing yourself to trade.
You can stay in “cash” until you figure things out or until you find something “tradeable”

NEUTRAL JING is sometimes (but not always) a good option.

[Johnscott31]

@Imperator_Cat

One thing about ‘market analysis’ is it tries to dissect where a market is going.

Much of it is pure waffle and goes something like this

"The moving average alignment means the price is supported so the bulls are in control but we have strong resistance immediately above which is likely to reject it.

Meanwhile rsi is bottoming and macd has now formed a head and shoulders top on the 5 second chart which means a pullback is likely.

But buyers are likely to come in on the 4 hour charts which makes sense as on the weekly we have no overhead resistance.

I read this sort of diatribe on a daily basis and frankly it isn’t worth the page space it’s written on.

It’s all very Oracle of Aldelphi like but has little meaning to me at least.

My own market analysis is exceptionally boring - it’s like - if the market goes above the latest high within the next bar I’m buying - if it doesn’t then I’m not buying.

I rarely have an opinion on what the market is about to do until it’s actually started doing it.

Such an approach keeps your head in the here and now

[Imperator_Cat]

@Johnscott31

I rarely have an opinion on what the market is about to do until it’s actually started doing it.

Such an approach keeps your head in the here and now

Thanks for the input, oh pawesome hooman! Yes, your approach is good and has its merits. You are probably one of the traders who likes to keep it simple yet effective.
The important thing is, despite its simplicity, it works for your trading style and it works well with your psychology.

You remind me of this legendary Japanese “bedroom trader” named CIS. He says he has this basic principle central to his trading style: “Buy stocks that are being bought, and sell stocks that are being sold.”
Simple but effective.

Purrhaps you and your simple (yet pawesome and effective) strategy are gonna be legendary as well someday! I’m glad you have something that works well for ya. Keep it up!

PS Here is his kitty story. It’s a pawesome read too!

Famed bedroom trader reveals his wealth secrets as he guns for $1 billion

[Johnscott31]

@Imperator_Cat

That’s a really great read thanks - one I’ll file away for future reference.

Talking of SoftBank it appears they are the whale that has been supporting the nasdaq through options trading

I think the big downmove recently may be due to their sudden absence

It’s a story very worth watching over the next few weeks - Softbank have made some awful decisions of late.

[Imperator_Cat]

@Johnscott31

Talking of SoftBank it appears they are the whale that has been supporting the nasdaq through options trading

Thanks! Will look into this.

[Tygralanim]

And it seems to me that your approach has certain prospects, I generally respect my colleagues who know how to go beyond and see the situation from the unexpected side.
It seems to me that such people become professionals.

[Ariular]

Ahahah, you have an interesting vision of the market and an original attitude towards all this.
I don’t have any comments on your observations or your work, but I wish you to keep the same optimism and get a stable profit under any circumstances…

[finglingbitzer]

It is a lot of useful information that you have shared through your charts. I see a lot of merits of using your approach.

[Maverdana]

Wow, this is actually pretty cool. It’s the first time I’ve seen someone getting some wisdom for trading from the Avatar animated series, but you did it very cool. Not only were you interesting to read, but I really was able to even learn a little something XD
P.S. I love this animation series, I recently finished re-watching it. I’m surprised that it still doesn’t bore me