We always say to the exponential smoothers or those that filter out tops and bottoms to “save it for the board room and keep it away from the trading arena. If we can’t smooth the losses from our account, we will not smooth the wicks and shadows out of our level calculations.”
We prefer to use the exact information because it paints the most accurate picture. Let’s send a nice dose of reality to any of you who are thinking about smoothing your results. Our politicians are the best data smoothers we know. Do you think they would be in office today, if they included the food and energy cost in the Consumer Price Index and the Producer Price Index Data? The U.S. Department of Labor, filters out this data because they claim it’s too volatile of a component to get a true read of inflation. This is a politician’s way to brush under the rug the fact that since 2006, the cost of gas has fluctuated from about $2.50 to $5.00 per gallon and it is holding above $4.00 where it has been sitting for the most part from 2008 – 2011. At one point there was a 100% increase in prices and today resting at and never below a 60% increase from 2006 prices.
The U.S. Department of Labor and Federal Reserve all hired and appointed by our Government peg inflation to only rise about 2% – 3% per year. They have been saying that we have been holding in line with that figure for the most part. Using the high end 3% figure; if gas prices were to climb 3% each year, and we started from $2.50 per gallon, that would mean the price of gas should have been $2.57 in 2007 (actual was well over $3), $2.65 in 2008 (never below $4), $2.73 in 2009 (never below $4), $2.81 per gallon in 2010 (never below $4) and $2.89 in 2011 (never below $4). Maybe the next time we fill our car up we should only pay the rate that it should be. See how well that goes over with the gas station attendant….
If you cant get it our of your gas station attendant, maybe our government will give some of the money back. Gas prices in our neighborhood for the most part over the last 4 years has been holding above $4.00 per gallon where at worst prices should have been $2.89, if we were maintaining the 3% pace our nation’s officials tells us things are.
We figure we spend approximately on the low end $70 per week (1 car) on gas over the last 4 years. Even if we used the 2011 price of $2.89 (3% pace) it should have been no more than $50 to fill our car with gas. $20 difference x 52 weeks a year comes to $1040 per year. Over the last 4 years we have been over-charged an extremely conservative estimate of $4160 on gas alone. Do you think they would be kind enough to send us a check right quick? Oh, wait a minute; they filter out energy cost data, I forgot!
I would hate to include the extra food costs we have spent over the last 4 years as well, but lets cut them a break; they have had to work a few more hours this year because they couldn’t figure out how to balance their spending. Oh, I forgot again; they don’t use food data either to calculate inflation, so I’m sure they will have no idea of what I am talking about. None of us need to eat or drive I guess…
I’m not even complaining; this is what just happened to come out of my mouth when somebody told me an exponentially smoothing indicator was better. No, thanks! Sorry to get off on a tangent here but when I see somebody smooth out a high or low that was made, and dismiss it as if it never happened, I quickly know they do not live in reality and most certainly do not trade live money for a living.
Data smoothers beware when you enter the trading arena! Make sure you use these indicators as a guidance source not as something that is full-proof or factual.
Whatever you decide to try; you can’t expect to win, if you don’t have a plan in place.
Trade Strong!! Trade Smart!! and Always Have Enough to Trade Tomorrow!!
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