Thursday, February 20, 2014

If you seek knowledge here, you will be rewarded!!!

Market trend moves up and down at different degrees along with rhythmic price change. Applying cycles to wave helps me to look for evidence of pending direction change setup.

What if you know where the market was going and which side of the market you should be on? What if you have a formula  that is reliable in all markets and in all time frames exactly the same way? What if your model can do just that without forecast or projection into the future but let you track or monitor progressively?

The weakness or the risk of forecasting ahead (months and weeks) is that there is a high element of failure. Cycle are not perfectly linear which is as good as all is fixed. The element of human behavior in the financial market game can distort a perfect linear cycle to a non-linear cycle (TIMING distortion) making future cycles to be potentially volatile and non-replicating.

Over the years the only thing I know is FIX is the DOW THEORY - Tide, Wave, Ripple concept. Despite having read this 2 pages material in Edward Magee book in 1994, I did not pay attention to the validity and potency of this concept. After having the opportunity to ponder over the past actions and results, one will wonder WHAT IS RELIABLY REPETITIVE IN THE MARKET? IS THIS REPETITIVE ACTION MANIFESTED ACROSS DIFFERENT TIME FRAMES AND MARKETS? CAN I DEVELOP A TOOL OR MODEL TO CAPITALIZE ON THIS?

The whole basic foundation of the markets is IT IS NEVER LINEAR with human actions. Bill Williams in his book TRADING CHAOS which I bought in 1995 strongly advocate Elliot Wave. But the biggest takeaway from the book is market is NOT linear.

The non linear actions resulted in different market patterns and influencing the analytical indicators. My disagreement with most authors is the emphasis on VOLUME including Bill Williams. Where is goodness, I will adopt.

With the materials available, I develop my own approach to Cyclical Wave Trading. Like any sensible person the next obvious question can I develop indicators just to track and confirm the cyclical movement using existing indicators and modifying them? There is no need to reinvent the wheels.

I have been trading on the Cyclical Wave Concept for years and happily trading all different markets.     

Monday, February 17, 2014

Buffalo or Eagle

Most (nearly all) human automatically knows and will not stop from complaining A to Z about almost everything wallowing in sorrows like a buffalo wallowing in the paddy field. Instead one should be thinking productively and constructively how use all the resources available and turn things around.

One must able to stop wallowing like a buffalo and think constructively you will soar like an eagle. BTW buffalo love to wallow together as herd. Eagle loves to fly and soar alone!

Bad and dangerous habits or behavior that will not help you to better yourself financially should be eradicated assuming you are reading this blog in hope of improving your financial wealth.

Can we see adversity and opportunity? Can we make adversity into opportunity?

There are many examples I can show you how to make full use of the resources available and not adversity. I have shown only in previous posting one of the many examples that I use to insulate myself and how you can also explore that avenue.

Back in 1989, I was involve in brain-storming sessions. Proceeding to the next level of thinking outside the box. This was the days when I was still in Corning Inc. NY., with all the catchy words. The whole idea is forget problems but focus on what are the possible solutions. What are the viable solutions? What are the implementable solutions? This simple concepts are applicable across everything we do.

Call me a skeptic when other people tell me a "story" about the short cut to prosperity. I have to experience it myself to believe with a money-back guarantee. The simple rationale is if the story teller is not able to provide me with a money-back guarantee, that tells how much that person's faith in his or her own story!   

Why would want to trade for a living when you can aim to trade to prosperity? Aim for A grade you might end up with a B. IF you aim for B, you can end up with a C! The choice is yours!         

Sunday, February 16, 2014

CHEF or TRADER?

We have more than sufficient data available to do what we want and hope to achieve. The problem is that most people do not have the proper mindset and strategy to achieve the results.

I like to equate trading or investing to cooking. Cooking is my hobby. The final product depends on the raw materials and the skill of the chef. Sometime I like my soup to be quick boiled and other time I prefer it to be double boiled which takes a longer time. Other maybe slow cook crock pot! Same ingredients but different end results,

There is no need to be concerned how other view your products since it is safe and edible for your own personal consumptions. There is no need to be concerned if other trash your technique as long as it is profitable and suit your risk appetite.

Focus on your own requirements. I have shown how you can pseudo-hedge property with proxies from stocks. There are many things you can do with stocks, commodities and currencies. You are the chef. You have a BRAIN that is God given without having to pay for it. Make full use of it.

During early part of my employment history I was involve in PATENTED chemical products like medicines and pesticides. If there is one thing that I can conclude, NO ONE IS GOING TO TELL YOU THEIR SECRET FORMULA. If it is a generic product, the patent has expired!

Be realistic and stop dreaming. IF you think you are going to learn the secret formula and recipe going to class, seminars or subscribing for those alert services, you are either plain dumb or deniable not willing to take responsibility for your mistakes.

Over the years, I have evolve and grown from an intra day scalper to short term and ultimately now a long term trader. I only take positions when the TIMING and Risk Reward Ratio is acceptable.

It is better to focus on a few stocks that suit your objective of buying stocks. I will only want to buy and hold stocks that are due to go for a bull run. I do not want to buy stocks that are in the initial stage of falling. It is better to wait till it is near the end of a fall (TIMING). PATIENCE KILLS THE CAT! You need to have lots and lots of patience. If your are tempted for a quick kill defying your long term objective, sooner or later you will die by the sword.

Unless you have a strategy that can allow you to blend both short and long term trade.   

Saturday, February 15, 2014

Regional vs KLCI - Update and Property Proxy

The tables and numbers are self-explanatory. I only use some of the stocks in SGX and BursaKLSE for analysis. The presence of Malaysia own local funds show the current level on Friday closing is only about 3% correction from the peak.

Some of these I have my own personal interest but I won't tell you exactly which ones. For simple layman academic education I call these stocks into 2 categories.

1) Heavy weights  (Bank Chip)
2) Property Construction (Green Chip)

One can opt to contra your trades or choose to hold for the long haul.   

We have heard Malaysia Singapore Property bull run. If you seriously look into the simple analysis above does it makes sense to "speculate" in property?

If you have the BALLS to buy and hold the decently Green Chip, your return for Malaysia stocks will be average of 321% (376% + 266%). Assuming you don't buy at the LOWEST and sell at the HIGHEST, we can safely assume absolute 250% return over 6 years (75% of 321%).

If you are buying in the initial or midway of a falling market to the low than your returns will be less!

Can you make 250% in KL property over 6 years? I have not been able to do these despite having bought a condo in Orchard Road Singapore at the lowest point of 2008-2009 GFC! You can look at Singapore Property stocks for a comparison.

The only consolation is that one can take bank loans to buy property if you qualify for the loan. Isn't it the same as share margin financing? Ok. Not same but conceptually same! Maybe this can give you a better results for property returns. Don't forget you have Real Property Gain Tax but no such thing for stocks! 

The best next proxy to buying properties is to by decently property good stocks in the exchange during the severe market correction.

Hmmm ... why is not Warren Buffet or George Soros heavily invested in equities and not properties?

So folks ..... do your home work. Track your charts to time your entry!

Have a great week ahead!   



 

Thursday, February 13, 2014

Simplifying your beliefs

There are too many recommended and suggested rules in trading by "guru" or self-proclaimed "guru". These may seem to be sound but more than often they are contradictory if one take the effort to analyze them. These rules permit the non chart traders and believers to ridicule the believers. Who can blame the "FA" folks for making jokes?

The most logical and sensible thing to do is not to accept these "rules" blindly but to challenge and questions the premise for such recommendations. Are there truth? It is reliable ALL the time irrespective of market conditions? What are the weakness or contradictions? Should you continue to blindly adopt the rules when there are elements of non-reliable?

These goes back to the foundation of our strategy. We all know that a trend in motion will never be smooth with human factor involve due to the ever changing emotional swing. This is the basic belief of Elliot Wave theory. While Elliot tried his best to document and "fix" the movements, by no means he is perfect. The perfect theory is still DOW Theory provided you simplify it by removing the volume elements.

Historically, trend in motion moves like ripples and waves in the direction of the tide. We can't fix the number of waves and ripples in each tide and how can we fix the number of moves in a trend? Elliot was correct to observe price trend moves in "waves" but the complexity arises when he "fixed" the number of waves in a trend. Doing so allow Elliot to predict the market. That is what everyone love and wants! When you have a theory that is unable to "predict", it loses the shine and credibility.

The question is are we in the business of prediction or riding the movements? Can we ride the movements without predicting the number of movements?

The problem we unintentionally and unaware that we blindly accept what we read as the TRUTH!

Yes, over the years I had to shed and discard many rules, beliefs and modify the reliable profitable rules into simple practical points.

The other challenge that one face is how do you know after a steep or severe fall or correction, the market will climb higher or fail to climb higher? Elliot Wave and Dow Theory did not state or mention market will climb higher! I don't even know who are the proponents that market will climb higher!

As we take the effort to distill the pure from the impurities, you will find there is a lot less of BS to trading. My  rules are:

1) Market moves in the direction of the tide (trend) with occasional interruptions within its own cycle.

2) Similar patterns do re-appear but will be different in magnitude. It is not the same as history repeats. One must differentiate between SIMILAR and SAME. All trend will end. It is a question of WHEN!

3) Under normal circumstances, all potential interruptions be it temporary or permanent will have set-ups before they happen.

4) STOP LOSS is only for people who do not know which direction the market is heading but insisting in taking positions (Gamblers).    

5) IF you do not know where market is heading, do not take positions and no need for stop loss.

Wednesday, February 12, 2014

Winners are few and minority

You think and believe that you are a "technical analyst". What do you hope to achieve with your analysis? "TA" is synonymously associated with forecasting the future. Is that your objective?

My trading skills mature over the years evolving from looking for BUY-SELL signals, Overbought - Oversold to FORECASTING and finally analyzing the trend anatomy.

If you are reading reports or attending classes, tendency you will be focusing on signals, overbought, oversold, forecasting, not forgetting the volume and candlestick analysis with Fibonacci thrown in!

I like to use the analogy of someone blind feeling the details of the inner body without seeing and appreciating the physical beauty before grading the value!

When you are not making consistent profit following seminars, lectures and textbook materials religiously, you don't blame the market. There is something wrong with the technique and strategy you are using! It time you analyze the error and where did it go wrong. It is impossible for you to know why it went wrong. If you know the reason, you would not have made the wrong trades!

The exams you are taking is not University or school graded. You are now in the Professional Free For ALL exam which I call OPEN BOOK EXAM. Those who have taken Open Book Exam will admit it is much harder than close book exams.

I hope those who seriously wish, dream or wants to make good decent money remember that there is no free lunch and many love to take your lunch from your hands. You need to seriously put in effort to move up the ladder where winners are few and minority. 

Monday, February 10, 2014

Risk and Risk Management

Everything that requires making a decision or choice involve RISK. How do you minimize and manage risk?

One of the interesting aspect of price movement is ONCE it direction (trend) is set, it is unlikely to change. Yes, there will be minor interruptions before the direction changes. We should not be shaken if we understand the anatomy of a trend.

There are set-ups period before the interruptions. We must be able to identify all these major and minor setups. Before it rains, there is a period of cloud condensations. Occasionally, you will have random rain without condensation. But such random rain last for a few seconds.

IF you can identify all the different setups and take the necessary actions, you have minimize your risks to the minimal. We cannot control is "act of god" risk which I call Govt. interventions! Again Govt interventions requires a long period of abnormal observations. When we see abnormal activities, we can anticipate some sort of interventions which again prepare us for some decisions ultimately managing risks to the minimal.

I am an advocate of BUY STOP and SELL STOP. I am not a believer of STOP LOSS. If you can perform what I mentioned above with the proper tools, STOP LOSS should be toss out of your vocabulary.

I am a firm believer in averaging. I do not have the time to sit and monitor markets all the time. I do not believe that staring on the screen quotes non-stop will yield better results. On the contrary when I observe a set-up developing, I accumulate my positions slowly at different levels averaging to the low side if I am buying into the market. If I have positions and waiting to exit, I will do likewise averaging my sell position to the higher side. I spare myself the agony of picking TOP and BOTTOM. As long as I am within 5% from the low or top, I am satisfied.

One must learn to enjoy the trades and decision making. Only than you will have a long happy pursuit.

It is not my intention to spoon feed others. It is better for me to educate and tickle your brain cells.Take the effort and habit to think! You will be surprised how far you can go! You can never imagine your confidence will develop overtime. Most of all, you will notice your journey will not be in vain.

From trading for a living, you will be trading to prosperity! 

I will occasionally post some charts for you to digest.

      

TOOLS and SKILLS

Our job is to determine which direction market is likely to go. But we face mental challenges or mental bias. It comes in the form of overbought, oversold, indicators cross overs (macd or stochastics), volume, patterns .... and the list goes on not to forget the plethora reports you hear or read.   

When your mental state has decided with the vocabulary, it is unlikely you will be able to switch off your views. This is one of the stumbling blocks we face as we swim with the sharks.

As we observe and track markets with charts, we can be deeply immersed in the details that we see the trees but blind to the forest. The holistic approach to successful and profitable trading is not about how much details and intricacies you know or how well verse you are with the reports that is published but rather do you have a tool that is statistically profitable consistently!

The people who taught us in primary schools remain as primary school teachers while the students progress to be world class renowned people or billionaire. Among students there are different grades performers despite using the same books and teachers. Why? The argument is we have different IQ. When we are in the financial markets, we can read the same reports. Some will view it as SELL others might feel it is a BUY. Yes, we will forever have different opinions and that is why there will always be sellers and buyers.

Don't think that after some lessons you are going to be expert. It takes an average of 16 years of education to get a DEGREE. How long do you think it will take you to be a PRO in stock market?

One of the thing that we fail to understand is market can do anything at anytime rationally or irrationally. Either agreeing or disagreeing with our opinions! Market activities comprise of cumulative emotionally charged actions.

You can create a "master piece" if you have the right and proper TOOLS and SKILLS. Do you have what it takes to create a "master piece'? IT is your responsibility to take care and serve your own personal interest. It is not the authors of the reports to serve your interest.

If your results has been consistently YO-YO, it is better for you to sit back and review if you have the right and proper TOOLS and SKILLS. 

Sunday, February 9, 2014

TIME and PRICE ..... hmmmm

TIME and PRICE are two important components in maximizing opportunities. I have put TIME first and PRICE second in that priority sequence. The charts will have Time on the X-axis (Horizontal) and PRICE on the Y-axis (Vertical).

Time will continue to move forward irrespective of what happens! Price continue to move UP and DOWN provided the target stock trading is not SUSPENDED!

Quite sometime ago I mentioned about entry at $1.00 in a falling trend to 50c makes $1.00 expensive. But entry at $1.00 in a rising trend to $1.50 makes $1.00 cheap! IT is still the same $1.00 but entry at different timings. This is where a true blue chart analyst must differentiate from a hardcore economic financial analyst (always claimed to be fundamentalist).

When the time is right, any price is correct! When the time is ripe, whatever candle patterns and volumes are irrelevant! 

We can't change ocean tide and waves when the time for change comes. We can opt to ride along or stay put! A pro-surfer will not wade out to the water when the timing is not right to surf back to the shore! We are no different from them.

Yes, many will come and tell you the black box of price and timing! To spare yourself the agony, I will advise you to not waste time. To be able to successfully develop a holy grail black box, one of the assumption that your model has the ability to predict both linear and non-linearly. I wonder if such a system exist! If yes, why bother to sell or share? When you can make all the money in the world and keep it to yourself?

May you ride the stallion high this year!

     

Tuesday, February 4, 2014

Horse arrrh! Mustang orrrh .... Mule .....ohhhh ....Donkey ... LOL

Today is the first day of Bursa KLSE trading. Market kick off with a bang! Or back kick by the horse!

Hmmm.... all you read is HORSE... HORSE ... HORSE....wooden horse .... golden horse .... dead horse .... maybe horny horse! Due to the poor English vocabulary, all you end up hearing is horse.

To the learned they will be able to tell you the difference between a horse and a mule or donkey. Those who explore a bit further will tell you there is MUSTANG! Have you hear of Ford Mustang! I have rented one before 20+ years ago in New York.

Well .... We will see if this year is a HORSE, MUSTANG, MULE or DONKEY. Some might think they are the same. But they are not!

Your performance will tell if you are a horse, mustang, mule or donkey! Enjoy the endless opportunities in markets