Thursday, March 26, 2015

WHAT IT SHOULD BE versus WHAT IT IS.

Over the years, financial markets have evolved into a new creature compared to when my first foray back in 1990. One school of thought is prices are dictated by the economic financial factors and the other is the non-economic factors.

My honest observation is that I conclude cycles exist 1) when prices are in coherent state with the economic derived financial valuation according to textbook and 2)there is another cycle when prices will remain in a state that contradicts the valuations better known as IRRATIONAL.

Irrespective how we want to view the market trend be it align or non-align with our expectation per educated valuation it goes to tell us that IT DON MATTER what we think the valuation should be simply because market has its own agenda and direction.

This is the challenge that all financial educated based analysis will face because of the training and bias in thoughts.

WHAT IT SHOULD BE versus WHAT IT IS. 

Market trends is not driven by economic valuation alone. It is a combination of many factors. The most powerful factor is PERCEPTION and EMOTION.

Perception controls emotion and overrides the economics. Perception controls confidence. Confidence swings market trend back and forth depending which force is stronger. A state of range trade is a draw between the UP and DOWN forces. The one with the upper hand will lead the trend direction.

QE 1, 2, 3 did not weakened USD despite the many soothsayers on USD on the contrary USD gained strength. There is no sign it is letting down the "BULLS". Now how will the economics justify such ABNORMALITY? 

To be honest what I learned in school is when supply increases, prices drop. I can't explain this per textbook financial economics simply because the dogmatic theory cannot accept such situation.

Beware of what you know coz it is only half of the story.  
 

   

Sunday, February 1, 2015

Do you really know what you want, what you have and what you lack ???

Confidence develops when you are certain when outcomes are according to your expectation. Fear develops when things don't turn out as you expected after applying the same methods that produced the expected results earlier. Fears create DOUBTS and leads to confidence LOST. This is a natural progression when one swings between CONFIDENCE - DOUBTS - FEAR especially when you are trading, speculating or investing (whatever name you want to call it) in financial markets.

Luckily market are easier to manage.One needs to understand confidence is not gained over night and it is a LONG LONG LONG road to success. Success leads to confidence. Failure lead to doubt.

The internal battle is and basic foundation to overcoming fear and sustaining profitable venture is to have a CONSISTENTLY RELIABLE and PROFITABLE technique or system that survives all market conditions (up, sideway and down) that helps you make decision consistently profitable.

It is the human weakness and desire to sell at the highest point and buy at the lowest level. This shift one focus to "perfecting" the technique to pick points. In the long run it is less stressful to be able to work with a system that can identify the LOW RISK HIGH REWARD opportunities.

It is impossible to commit all the funds at one go when the market peaks out or bottom outs. It is more likely we will be taking positions in stages assuming one has sufficient funds and buffer range.

One needs to understand if your objective is to pick market extreme points or make profits consistently. This will ultimately decide your "future".

CUT LOSS and STOP LOSS are only for people who do not know the RRR (Risk Reward Ratio) and limited funds (poor planning). If you have a system and a consistently profitable reliable system that can guide you through, why would you want to indiscriminately take positions and continuosly put Stop Loss and Cut Loss.

Yes, all the seminars and books will tell you to limit your losses to X% of capital .. blah blah blah. If you have a system that can tell you or locate the market bearing, you should be able to next deploy a plan or strategy to act accordingly. This systematic techqnique should and must work across all different markets and instruments not forgetting time frames.

I have been trading for more than 22 years starting from financial analysis, rumors, charting, system and developing system in forex, stocks, futures, commodities and agricultural options. Evolving into a more systematic strategic trader from the indiscriminate irresponsible haphazard trading.

Do you really know what you want, what you have and what you lack ???
 





FEAR and you ....



Monday, January 12, 2015

Agro and Metal Commodities - Gold and CPO the defiant pair


A quick comparison of the above for CPO versus Soybean and Soya Oil show CPO is still way too expensive and a decent level to be align with the competitors benchmark is about Rm1600 - 1800 zone.

How long can CPO remains at cloud nine before it loses the steroid effect back to sanity... TIME will tell.

Gold is again way too out of alignment with SILVER the closes proxy.

With Crude Oil leading the way will GOLD and CPO remain defiant???

Sunday, December 21, 2014

2014 - Ending

2014 started with a BANG and ending with a KABOOM. Crude Oil, GOLD, CPO, Currencies (non USD) and KLCI index enjoy the ride to the top and down.

 
Every good show need to come to and end. Is Malaysia financial markets and commodities following the same route?

What 2015 holds will be interesting. Will it be the everlasting feel good? Or will it be just a follow through from 2014?

In the meantime, I will enjoy the show and look forward to the opportunities it present.

Bye Bye 2014 and Welcome 2015


Friday, November 28, 2014

Buffer and turbulence

How often can we sit and wait? How often are we mentally and emotionally wreck when we see the red numbers appearing? How often when a decision to exit with losses only result in market turning back to our earlier expectation?

The problems is mentally we are conditioned not to accept red numbers. A lot of this deals with our game plan. The ability to weather storms like this is not for everyone. The ability to sit tight and wait must be base on proper plan and strategy.

1. The confidence that when positions are initiated, it must be close to the TOP if SHORTS  and BOTTOM for LONGS. There must be sufficient buffer during this period.

2. When SHORT positions are accumulated mid-way rebound in a major downtrend, one must be able to verify that it is a temporary rebound and sufficient buffer to withstand until the downtrend resume or LONG positions are taken mid-way correction in a major uptrend, you must be sure that this is a temporary trend change with buffer to hold on to a temporary down draft until the uptrend resume.

3. Never over-gear your positions until you got no buffer to withstand all these temporary turbulence.