Dangerous Pre-conceived Market Idea

Traders or Investors who have some knowledge will always predict the future of the markets. When this happen they become fixated that certain outcomes will happen in the future base on some patterns or theories.

The only thing that is predictable is prices go UP and DOWN. We cannot predict accurately WHEN and WHERE the price will reverse. Most probably one can get WHERE the trend will end but WHEN is the most difficult. Realistically and practical, we should let market choose the Beginning and the End unless you have reach the next level of WHEN!

Many have tried and failed to solve the WHEN equation. It is harder to predict WHEN given that market is a living dynamic evolving organism called CROWD. It is easy for me to predict WHEN are the high possible probability "reaction" dates but I will never be able to predict when market will END and START in the future. At best I can track on weekly, daily and intra day to nail down when the trend BEGIN and ENDs!

One should not be mislead by others calling the predictions simply because you are ultimately responsible for paying the losses and not the one forecasting or screaming!

From my own experience, market behavior is "quite" predictable. But that does not mean that I can predict the level where it will end or start. Honestly, market can choose to listen to my own prediction or premature or extended!    

Secret - Trials and Errors

One of the mandatory subject which I had to pass as part of the course requirement for Bachelor Agric Sc from UPM was Plant Breeding and Genetics. I took this subject back in 1982 conducted by Prof. Yap Thoo Chai and Prof Cheah. I was not interested in the 4-years degree program but what the heck I need a degree to start off! The main thrust of the subject was how to select plants and “cross-breed” to achieve according to the characteristics that you want ensuring the final product carries only the dominant genes desired.

Plant breeding involves “selection”, “breeding” and “selection”, “breeding” and “selection”, “breeding” and “selection”, “breeding” for many cycles until we get the final “breed”. It is the process of selection, discarding and breeding till it is “pure” (distillation). 

I have transferred this academic education into financial markets with numerous trials and errors until I obtain the formula that I needed with the objective of achieving CONSISTENT PROFITABLE trades.

1 Understand the indicators. 2. Understand what the indicators are measuring. 3. Selecting the indicators I am comfortable. 4. Determine the suitability of indicators for UP-DOWN – SIDEWAY market. 5. Fine tune the indicators. 6. Test the indicators across different time frames. 7. Test the indicators for different markets. 8. Re-tune. 9. Re-tune and 10. Re-tune until I can select indicators that is RELIABLE and CONSISTENT.

It is no secret that there is no short cut except numerous trials and errors.

How one looks and dissects the trend is entirely up to the individual and experience.     

Next month will be the first time B. Agric Sc (UPM) - Class of 1985 will meet. Long 29 years wait! 

Projections are used as REFERENCE POINTS

Investigative analysis includes cross-checking of visible evidence to ensure reliability and accuracy. We will need to review and revise our analysis with new developments as they come streaming. At best all absolute projections are used as REFERENCE POINTS.   

Human inherent nature to solving problems can be seen in our daily behavior. When we are physically sick, we take medicines and hope for the symptoms to go away or we visit doctors to look for answers. How many of us do not actually take preventive measures? We rather act after things have gotten bad. Is it any different from our investing and trading activities?  

In financial arena when things didn’t turn out right after one place the trades, the immediate reaction is to look for someone be it con-guru or analysts to provide solutions. Suddenly you become attentive what is said where you ignore any external inputs earlier! Never mind what the con-guru says. Important is you have suddenly clung onto something! That is life isn’t it!

Such behavior has no place in your trading adventure if you seriously want to embark on achieving consistent successful profitable trading financial markets.       

One must have the discipline to change and retain the positive changes if you do not want to be rock around. In all my 20+ years in trading, I concluded that those who say may not be any better than you! It is better for you to quietly analyze the market and listen what it is telling or trying to tell you. Act accordingly. Don’t act in haste. 

Have the patience to let market lead you.

Keep your forecast as reference and always cross-check as things develop.      

Market has its own LAW!

Genius is nothing but a great aptitude for patience – George Louis Buffon.

Human are engrossed and fascinated with prophetic predictions.  Predicting absolute levels is an exercise that one should make with cautions. These predictions are merely targets can be achieved, under-achieved or over-achieved. The key is what does one do when it is under or over the predicted levels? 

Markets are EFFICIENTLY driven by PSYCHOLOGICAL EMOTIONS. Market movements reflect emotional instability. Market is about mathematical game theory of probabilities and possibilities (GAMING THE MARKET). 

Price behaviors open many avenues of different interpretations. Market represents dynamic forces with developing variables which absolutes levels can never be fixed. 

Fanatics like to believe that predicting market accurately is the key to success. Investors’ refusal to be educated, willingly entertain wild fantasies and believing what one’s to believe instead listening to market are recipes for failures. The risk that traders face the risk of own destruction and victims of their own makings due to their rigidity with ever changing market conditions. When the predictions base on charts failed, no one will admit it is due to wrong analysis but rather failures attribute to other factors. Markets may appear to be randomly chaos to some but other can see “order” in this situation.

Market oscillates between optimism and pessimism distilling human emotions in a rhythmic manner. The basic recognition of appropriate elements and acquire a conceptual strategy for consistent successful conquest. The paramount attention given to prophetic forecasting is engrained in all human instead of finding or developing a strategy for consistent successful trading.  

Mastery of any technique takes time, patience and judgment.  Market will do what it wants to do and when it wants to do it. We have no control over market actions. We are merely participants in market’s dynamic actions. For us to succeed we need a “guide” to weigh probabilities and the knowledge to weigh them with confidence to act on the probable and not on improbable. Listen to what market is saying about itself!

You must have confidence in the tools you are using. Being humble is difficult but it will lead you to success. The most important intellectual quality of success is one’s ability to keep an open mind recognizing the limitation of knowledge. As the saying goes – “know what you do not know”.

Market has its own LAW!

KLCI - Macro view LONG TERM

One of the biggest problem for Technical Traders as people loves to be termed "TECHNICAL" is that most of these half past six traders loves to call market top and bottom without seriously understand how a top or bottom are formed.

From my own experience (after numerous mistakes) I can safely say that LET MARKET DECIDES WHERE IS TOP AND BOTTOM. Yes, I have the ability with a good level of confidence to know when peak or bottom but I don't think that is my OBJECTIVE. I rather exit when it is near the peak and accumulate when it is near the bottom. Spare myself of picking the date and level.   

 

Look into the past what did Malaysian politician said ....

Malaysia summons Australian Ambassador over spying allegations

Updated Sun 3 Nov 2013, 7:56am AEDT

Malaysia has summoned the heads of the US and Australian missions in protest at spying allegations, as a row over a vast US-led surveillance network deepens in Asia.

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US spy satellites monitored in Australia's heartland could provide crucial information in the investigation into the missing Malaysia Airlines flight MH370 - but the information is being withheld.

According to the New Strait Times, Malaysia's Defence Minister, Hishammuddin Hussein has requested that the US share information obtained from the Pine Gap base near Alice Springs.


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Now what are these Malaysian politician saying ..huh! ... Australia. Please help ka! Did you forget what happen in 2013!

Be Smart. Think Smart. Act Smart.

The most interesting fact about market is we always see and read or hear numerous explanation for certain past events. Rationale seem to be logical yet contradictory. Many and majority of the market participants are not wise enough to understand that market is a product of human emotional behavior. It is difficult to quantity such behavior and develop a perfect fit error free system to trading or investing decision making.

Dealing with human behavior means we are subjected to both linear and NON-linear activity. If the market is a product of linear activity (decision making), programming error free and perfect fit system is easy and achievable. The inclusion of NON-linear actions parameter alter the model drastically. Unless someone is able to develop a system that has the algorithm to process both premises, any mechanical system today is NOT Perfect and will oscillate between profit and losses.

The crucial questions one has to address are WHAT IS THE OBJECTIVE OF THE SYSTEM and WHAT IS THE SYSTEM SUPPOSE TO MEASURE before we even think about developing any system. How can the system aid the user? Is the system meant to flash trigger and signals irrespective of the risk reward? Can the system measure risk reward for each signal?

In summary, quantifying risk reward ratio refers to our assessment of a trend in motion from the start to the end of a trend.

1.How do you know the current trend is ending?

2.How do you know a new trend has just started?

3.How do you know the current trend is not midway to the destination?

4.How do you know the current trend is more than midway to the destination?     

If you have a system than can answer all the 4 questions above, you can easily determine and quantify your risk reward ratio. You have develop a reliable and profitable system. With this system, you are no longer walking in the dark. You are using a laser pointed weapon to shoot.

It is possible to develop a system that can answer all the 4 questions above. This lead us to the conclusion that decision(s) is no longer high risk but "contained quantified" risk.

One does not need a system that can pin-point the exact time and level the market bottoms or peaks. All you need is a system that can help you consistently enter or take position with favorable rewards and low risk. This is what a smart business person will and should do.

Be Smart. Think Smart. Act Smart.    

  

Market Wisdoms - Jesse Livermore

1. Nothing new ever occurs in the business of speculating or investing in securities and commodities.

(Profit is the ultimate objective irrespective what you call it) 

2. Don't trust your own opinion and back your judgment until the action of the market itself confirms your opinion.

(Market is the judge and jury)

3. Markets are never wrong – opinions often are.

(Market is independent of Our Opinions)
 
4. One should never permit speculative ventures to run into investments.

(Listen to market if our decisions wrong)

5. The human side of every person is the greatest enemy of the average investor or speculator.

(Our stubborness kill us)

6. Wishful thinking must be banished.

(Hope is another enemy)

7. It is not good to be too curious about all the reasons behind price movements.

(Past reasoning is just another academic exercise)

8. It is much easier to watch a few than many.

(Our brains are not super computers)

9. Few people ever make money on tips. Beware of inside information. If there was easy money lying around, no one would be forcing it into your pocket.

(Initiative to make money is yours)

Market Wisdoms - Dennis Gartman

1. Trade like a mercenary guerrilla. We must fight on the winning side and be willing to change sides readily when one side has gained the upper hand.

(Don't get fixated which we are guilty most of the time)

2. Capital comes in two varieties: Mental and that which is in your pocket or account. Of the two types of capital, the mental is the more important and expensive of the two.

(Mental recovery is longer than financial recovery)


3. In bull markets we can only be long or neutral, and in bear markets we can only be short or neutral. That may seem self-evident; it is not, and it is a lesson learned too late by far too many.

(Theory versus Reality)


4. "Markets can remain illogical longer than you or I can remain solvent," according to our good friend, Dr. A. Gary Shilling. Illogic often reigns and markets are enormously inefficient despite what the academics believe.

(Illogical and Irrational is how we describe financial markets)


5. To trade successfully, think like a fundamentalist; trade like a technician. It is imperative that we understand the fundamentals driving a trade, but also that we understand the market's technicals. When we do, then, and only then, can we or should we, trade.

(Common sense and trend)


6. Keep your technical systems simple. Complicated systems breed confusion; simplicity breeds elegance.

(Rocket science is not proof of profitability)


7. An understanding of mass psychology is often more important than an understanding of economics. Markets are driven by human beings making human errors and also making super-human insights.

(Not all quantitative economics can explain human behavior)

8. The market is the sum total of the wisdom ... and the ignorance...of all of those who deal in it; and we dare not argue with the market's wisdom. If we learn nothing more than this we've learned much indeed.

(Who can fight the market?)

9. Do more of that which is working and less of that which is not: If a market is strong, buy more; if a market is weak, sell more.

(If you avoid doing what is wrong, rights will take care of your profits)

Market Wisdoms - Gerald Loeb

1. The most important single factor in shaping security markets is public psychology.

(IF YOU HAVE LOST MENTALLY, YOU HAVE LOST)

2. To make money in the stock market you either have to be ahead of the crowd or very sure they are going in the same direction for some time to come.

(ALWAYS STAY AHEAD)

3. The difference between the investor who year in and year out procures for himself a final net profit, and the one who is usually in the red, is not entirely a question of superior selection of stocks or superior timing. Rather, it is also a case of knowing how to capitalize successes and curtail failures.

(REFINE AND STRENGTHEN YOUR SKILLS, DO THE RIGHT THING ALWAYS)


4. Profits can be made safely only when the opportunity is available and not just because they happen to be desired or needed.

(DON'T FORCE YOUR TRADE WHEN OPPORTUNITY IS NOT THERE)

5. Willingness and ability to hold funds uninvested while awaiting real opportunities is a key to success in the battle for investment survival.

(HOLD CASH WHEN NEEDED)



6. In addition to many other contributing factors of inflation or deflation, a very great factor is the psychological. The fact that people think prices are going to advance or decline very much contributes to their movement, and the very momentum of the trend itself tends to perpetuate itself.

(PEOPLE DECISION)




7. I feel all relevant factors, important and otherwise, are registered in the market's behavior, and, in addition, the action of the market itself can be expected under most circumstances to stimulate buying or selling in a manner consistent enough to allow reasonably accurate forecasting of news in advance of its actual occurrence.

(LET NEWS TAKE CARE OF ITSELF)





8. You don't need analysts in a bull market, and you don't want them in a bear market.

(BE YOUR OWN ANALYST)

Redefining Business and Investments - Technology

Advancement in technology has revolutionize opportunities.FREE Trading platforms accessible to commoners and no longer restricted to price quotes from REUTERS or BLOOMBERG for different global exchanges made opportunities readily available to us instead confining to bankers and fund managers.

The media coverage of the different types of fund managers known as investors and hedge funds draws a parallel line that prosperity is within reach if one focus on the right market(s).

To own and operate a brick and mortar business, there are many variables to consider or manage - 1.Physical location (lease or buy), 2.labor, 3.license, 4.currency volatility, 5.commodity volatility, 6.seasonal factor, 7.competition, 8. credit terms 9.laws, 10.inventories, 11. thefts, 12. security and 13. INCOME TAX.

To own and operate a personal investment business you can avoid all the above. All you need to do is to have a proper strategy to swim with the market cycles.

The returns on brick and mortar business is generally slow given that one has to invest in capital to prepare the site and time. In short, you have lost your money first before you receive any income which can be a few months to a few weeks or a few years before you break-even!

When one venture into the financial markets, the expectation of patience to break-even for a brick and mortar business is immediately changed to STOP LOSS!  Profits are INSTANT if you get it right.

Irrespective of operating a brick and mortar business or private investment business, one is subjected to RISK. The risk factor in financial market is easily managed if one has the proper and good strategy. When one has master the art of simple analysis, you will realize that one can achieve much substantial return per dollar in financial investments than brick and mortar business.

Until we fix out mindset, we will never be able to see and think properly the vast opportunities before our eyes. When one is willing to capitalize a few hundred thousands to start a brick and mortar business, the same person will be reluctant to invest a few hundred thousands in financial markets!   

My bias towards financial markets is not without much thought and considerations. I have thought over deeply the advantages and disadvantages. Having personally develop, build and operate physical brick and mortar business and running along financial investments in parallel, I have decided to unwind most of the physical business that demands a lot of my time and capital diverting most of my attention to financial markets which are more flexible and exciting.                 

Weaker RM or just excuse to cover up poor management

The biggest joke in town for the last few years is airlines of Malaysia origin are running at BIG losses while regional airlines including Indonesia Garuda is still operating with profits. I wonder what did Garuda does right that AirAsia and MAS did wrong? SIA as expected operating profitably. If SIA run into losses, I do not expect the rest will be opposite given that I use SIA as benchmark.

The best part of the whole story is the losses are due to stronger US$ or weaker RM and fuel. Well fuel factor has 2 variables namely a) US$ denominated material and b) material purchasing cost.

Guess what the CEO/MD, Finance Director/CFO who are salaried by the millions doing about the operational problems? Not customer problems. My conclusion is these salary should be tied to accountable performance. Imagine buying shares into companies run by people who have no idea how to manage these problems! Malaysia Boleh! All these folks are good at marketing gimmicks and publicity. At whose expense? Is this limited to Airlines operating from Malaysia? The truth is this malaise also spread to agricultural food based commodities companies in Malaysia. 

In 2013, Garuda saw net profits fall to US$11.2 million (S$14.1 million), down 89.9 per cent from US$110.8 million in 2012. The airline's operating income decreased 66.4 per cent to US$56.4 million compared to 2012 when it recorded operating income of US$168.1 million. The decline in profits last year was mainly due to a weaker rupiah and the airline's huge spending on developing its subsidiary, PT Citilink Indonesia

SINGAPORE - Singapore Airlines (SIA) said Thursday its third-quarter net profit fell 65 per cent from the previous year, weighed down by a huge legal settlement bill in the US and losses from associated companies.

The flag carrier said in a statement that net profit in the three months ended December was $50.1 million, down from $142.5 million in the same quarter the year before.

(Reuters) - Shares of AirAsia X Bhd (AIRX.KL), the long-haul arm of Asia's largest budget carrier, fell 4.8 percent to their lowest since its IPO last June after registering a net loss of 131.3 million ringgit for its fourth quarter.

AirAsia X cited high operating costs and foreign exchange losses for the decline in earnings. It recorded a net loss of 86.9 million ringgit for the full year ended December 31, 2013.


PETALING JAYA: With a year left to go, analysts and market observers are not convinced that Malaysia Airlines (MAS) can break even by end-2014, as outlined in its turnaround plan.

The national carrier, which had adopted a strategy to sell as many seats as possible, posted another quarter of losses in the fourth quarter ended Dec 31, 2013 (Q4’13), its fourth straight quarter in the red and the worst yearly performance since 2011’s shock net loss of RM2.5bil.

Trading - Full time job or Part time job or Hobby?

Before I quit Malaysia Equity industry, Phileo was the PIONEER introducing internet trading in the 1990s. This is never a problem given that I was sitting in front of the BFE (as we call it back then). During my tenure as a Remisier (Comm. Dealer Rep), I concluded that it is NOT necessarily to be full time in the market given than KLCI and stocks move in cycle.  

Over the years the economics and technology evolved so rapidly that the landscape of financial markets changed completely.

The introduction of FX platforms attracted me completely on the responsiveness and flexibility of placing my trades. I am used to the "physical trades" with the bank and limited avenues available, FX platform was a miracle where most bank involve high spread and costs. With FX platform, I was able to hedge my positions instead of physically readjusting my portfolios. Not to mention the small trades for coffee money. With my own fond for charts, this impressed me completely. It was one of my student that prod me to analyze FX platforms. 

The free availability of real-time quotes for Commodities, Futures Index etc... fascinated me while study each different markets. This has totally challenge many opinions that market are for "retired" or financially capable people.

Depending on one's intent, if you trade within a regular basket of stocks in your portfolio than you do not need to be full time. During a down cycle you will need to wait for bargains or low risk probability to accumulate stocks. It is boring while waiting for this period.  This is a one-way game ... BUY or ONLY LONG positions. Unless you keep looking for different stocks to game daily.

IF one is active in the FUTURES market, than it can be a full time job depending on the time frame you are trading. I do less of intra-day and more on daily or weekly, again I do not need to be full time.

Where in the past one need capital to trade the futures market, with leveraging, the entry is now miniscule requirement. I have been trading international markets for sometime, Bursa does not appeal to me except when there is super bargain that is worth for me to take positions.

I can trade any of the grains and oil internationally at anytime Monday to Friday ...24 hrs. One of the rule of being a trader is you must choose a turf that has time flexibility and not restrictive. Bursa has a long way to go.

I will keep to my FX, Grains and Index futures where I can either LONG or SHORT the market and back to stocks when I am hngry