Tuesday, October 19, 2021

Is it (1) or (2) ???

There is only ONE way to look at the chart. There are many ways to interpret the chart. There are different approaches to dissect the chart.  

While all these are being done, there are only 2 (TWO) questions remain that can determine whether you are going to make it or break it.

 

1. IS THE MARKET TREND TURNING?

 

2. HAS THE MARKET TREND TURNED?   


The premise to learning chart analysis is to ........................?????? The answer to the question will determine if you will be chart for (1) or (2) above.

IF we try to preempt and anticipate what market is trying to do before it actually happen, than we will embark on the mindset (1).

IF we do not attempt to preempt, anticipate or predict the turning point, than we allow the market to LEAD and act accordingly while we follow closely from behind, we will be operating from  (2).

The likelihood of jumping into many false alarms when we operate in the (1) mindset. We will be less likely to muddle into false alarms if we can successfully consistently take each and every step in the (2) mindset.

Operating in (2) sphere means an appropriate time frame has to be selected as the ANCHOR which has proven to be a reliable and good tool to use when each and every turn will run it course out over a longer period of time.


Sit back and ponder if one is (1) or (2)

Thursday, October 14, 2021

TREND ----- TIME FRAME ----- VOLATILTIY ---- REVERSAL

Trend ..... Time Frame .... Volatility ..... REVERSAL are all inter-related. 

A trend reversal or trend change is significant on a higher time frame. This is a rather generic open ended without specific which time frame refers!!!

I group time frames into 2 namely the intraday versus the non-intraday.

Depending on one's appetite, either one will end up trading the intraday or non-intraday time frame.

The intraday move will be frequent with smaller range as we trade the ripples.

The higher time frame namely the non-intraday will be bigger volatility range and less frequent.

Trend reversal or change on higher time range will run for weeks or months before the next reversal appears unlike intraday reversal which is insignificant with false moves.

Intraday is meant for "scalpers" and the non-intraday is for longer term trend traders/investors.

After going back and forth between the 2 groups of time frame, one has to sit back and have an honest deep soul searching to try understand the underlying profile and behavior. Decide which is best and suitable for your mass temperament.

Swinging between a fast scalpers and investing for a longer time frame, I conclude that a more reasonable strategy is to keep to higher time frame and minimize intraday shorter time frame.

When the market is volatile, generally this dynamic is for a short period against the higher time frame trend. Eventually the temporary diversion will revert to the trend direction of the higher time frame.

  

 

Saturday, October 2, 2021

Why Crossing the Plateau of Latent Potential Is Essential for Success


Click on the link below to read the article by

https://mikevanderpoel.com/plateau-of-latent-potential/ 

 

YOUR EXPECTATION = LINEAR THINKING

REAL OUTCOME = NON LINEAR EVENT 

 

Sunday, September 26, 2021

Time Frame ... The ever challenging dilmenma

Market with it's dynamic NON-LINEAR properties will defeat anyone who approach the market from the LINEAR tangent. The market trend trend swing intensity is inconsistent and irregular like the SEA TIDE and WAVES. Like sound travels in a cave tunnel or some might it refer it to wind flow draft.

The inconsistent and irregular trend intensity manifest only confirms the erratic human emotional behavior.

The sound wave components are wavelength, period, amplitude and frequency.

The trend behaves in the same manner under pressure.

Luckily, price trend behaves more like sea tide and waves with repeating cyclically.

The tide is made of many cumulative ascending and descending waves components. 

A rising tide is the NETT cumulative ascending waves greater than descending waves. On the contrary a receding tide is the NETT cumulative descending waves greater than ascending waves.

This bring us to the next question. Which is the IDEAL anchor time frame to determine the TIDE?

Will it be daily chart? Weekly chart? 4-hours chart or 1-hour?

Every time frame has a "normal" range and "outer" range. The smaller the time frame, the smaller the range. The bigger the time frame, the bigger the range.

Once the Tide has changed, it is the end of the current and the beginning of a new.

Question is what do we use to determine such change and confirmation?

It is never Finance or Accounting. It is about behavioral activities of CONFIDENCE, FEAR and GREED    

 

Sunday, September 19, 2021

The Forest or Trees ... Classical Basic Physics versus Quantum Theory

One part of the human minds strongly believes that the more sophisticated the theory or approach, the more reliable and accurate the methodology. On the other hand, there exist a minority group of traders/investors who on operate on the TREND directions.

This brings me back to evaluate and analyze what I am suppose to do and achieve. The most common pitfall a highly academic qualified person can step into is the path of microscopic analysis missing the macro view completely. I have ventured into this "quantum" path before I manage to reflect on my journey. This "quantum" analysis aka microscopic in layman term see the tree but miss the forest is very real as one get engrossed in QUANTUM approach.

Market is a function of human behavior and this are PRIMITIVE in nature. To use a sophisticated methodology to understand primitive behavior is INCOMPATIBLE and IRRELEVANT. More often it only results in FATALITIES!

Human behavioral instinct or patterns HAVE NOT CHANGED at all. It is always interchange between FEAR, GREED, CONFIDENCE and UNCERTAINTY. This 4 characteristics will control personal behavior, decision and choices.

Back in 1987, Prof Richard Thaler taught Behavioral Decision Theory (BDT) in JGSM, Cornell University before moving on to Chicago University. Finally got his Nobel Prize in 2017 after a long 30 years.

(https://en.wikipedia.org/wiki/Richard_Thaler) 

One of key or essence of his BDT class is above how human mind work alter behavioral decision. Despite the actual existence of human record of thousands of years, the computer age ... and the list goes on ... human behavior has NOT evolve drastically to complement human needs.

This observation only lead me to think deeply about the amount and the type of "knowledge" or "skills" one need to maneuver comfortably is a presumably dangerous/ treacherous risky markets!!!

Over the years growing up as a kid, I have seen small troupe of 3 or 4 males plying their Chinese Kung-fu trades selling medicinal oil displaying their spears and knives skills for a meager pittance amount to make a living. What spectators saw as dangerous and risky is routine daily chores to the troupe.

It took me awhile to replay my early years and how all this relates to the financial markets. 

FEAR can either be an  INHIBITOR or a STIMULANT. How we deal and manage FEAR will ultimately decide the ALTITUDE of our flight.

I do not know if QUANTUM theory is compatible with the primitive market behavior but I can sure that I only use basic Classical Physics applied to my decision making.

         

Saturday, September 18, 2021

The BATTLE ... is between ??????

We get to hear and read what the financial markets is all about. The risks, the dangers, the rewards and the successes. We also will be exposed to media discussing almost everything trying to link all the relevant and irrelevant subject to the market actions. All this sort of presentations can only do ONE thing ... ie to make a simple subject into a very cloudy and confusing.

The whole truth is there are only 2 "objects" in the whole analysis. The market as it presents itself and US. We can't control market actions BUT we can control our actions. To control our actions mean to control our minds. To control our minds means we need to manage filters what gets into our minds and are kicked out. 

This brings us to the next analysis. Our mental make up which is our BELIEFs become our tools for actions and decisions. This inner BELIEFS can either propel us across boundaries or we become a SLAVE where we become our own mental ransom inhibiting and prohibiting progress.

 Market like any other "nature" is INDEPENDENT. "They" act on their own accord independent of others. The rain will come independently irrespective of our presence and actions. The financial market behaves the same independently ignoring US. 

It is about how to act to adjust to the nature and the financial markets. Our actions is the product of our mental make-up. 

While we look "out" with our eyes, the truth is ALL arrows point back to us. WE CAN ALLOW OUR MIND TO MAKE SELF-KIDNAP RANSOM or WE CAN BREAK THIS.

Looking at the charts in early 1993 is not "SEEING". It is like the HEARING but not LISTENING. After many years I finally get to understand the meaning of "UNDERSTAND" the charts.

Understand the chart is no different someone who is able to SEE a piece of art and appreciate the drawing like masterpiece. There is no AI software in our eyes and brains to guide us. We see a piece of art as it is. It is the same for looking at the price chart.

The only different between the drawing on the wall versus the chart ("alive" and evolving) is the "drawing" is static and no longer evolving. The chart shows us what it has been, what it is NOW and we have to decide what it is MOST likely to be into the future.

It is about DIRECTION - DIRECTION - DIRECTION. How intense of the directional action will depends on the "pitch" or "tangent" or angle of the forward thrust. There is NO need to tie and relate all the irrelevant materials in the FINANCIAL BUSINESS SECTIONS of the news to this. All we simply need to do is to develop or create or use simple tools to track the "pitch" and changes.

All NON-VISUAL descriptions become academic discussions which is my opinions DO NOT contribute and able to track the "tangent".

All that matters is HOW MARKET VOTES UP or DOWN is REALITY. That is action that follows the law of physics. FINANCIAL theory is about HOW MARKET SHOULD VOTE in theory. The actual vote versus the theoretical vote. Sometime market vote in the direction as per theoretical vote. Sometime market vote against the direction of the theoretical vote. In conclusion market is INDEPENDENT and INDIFFERENT what the theory says.

Nobel prize financial theories works for a period of time than blow up! Unfortunately the world is skewed to the "financial theories" instead of seeking the truth in  "Applied Physics" that has stood the test of time.

If financial theories incorporate the non-linear properties into the existing linear financial theory approach, that we have a complete Dynamic and Non-dynamic Financial theory which I call Applied Financial Physics.

Accounting is LINEAR STATIC. Finance is LINEAR STATIC but market is NOT. Market is DYNAMIC that consist of both LINEAR and NON-LINEAR properties. Market is an emotional behavioral dynamic creature. 

The battle is NOT about how "academic" we become but rather how "creative" we get.

 

   


Thursday, September 16, 2021

Conceptualizing a basic system

My mistake is ALWAYS due to my own failure to ask the most basic question about TREND. I do get carried away when my mind switch to a state of believing the perception of HIGH and LOW instead of LOOKING at the trend. 

So what is TREND? Trend in my definition of chart analysis refers to DIRECTIONAL movement merely plotting where it was .. it is ... it will be ? IT is about price direction. This has nothing to do with all the rest of the jargon like candle, volume, support, resistance ..... etc.

Depending on the individual temperament, some is fitted to be intra-day, some on daily others maybe weekly charts.

In my opinion, it is a hybrid of all 3 and knowing when to use which. Yes they should be an anchor or base time frame and one higher and one lower. It can be 1h ... 4h (Base) ..Daily or maybe 4h ... DAILY (base) ... weekly. Some might prefer DAILY ... WEEKLY (BASE) ... MONTHLY.

IF the trend move on a tangent of 1 or 45 degrees, than one time frame is enough. Unfortunately, we are facing and dealing with a price trend that is DYNAMIC and not moving on a 45 degrees tangent.

What about financial award winning theories? NONE ... into the garbage bin.

What about Portfolio Theory? ....also into the shredder.

What about Risk Management? ...if one knows which direction it is going, all one need to worry is the SUDDEN u-turn of the trend. How does one protect against such situation? If one has the basic tool to track and confirm the change of trend... than how can one use such knowledge? The next question is HOW OFTEN DOES THE TREND KEEP CHANGING?   

        

Sunday, September 12, 2021

PHYISC - Auction - bidding ... simple explanation

Writing allows me to revise, recall and refresh my memories. Reading and re-read what I pen makes it a total at least 4x of revisions.

A simple concept and the most basic is about DIRECTIONAL force. Any object / force / energy / hydraulic / liquid directional pathway will always flow and move in the directional path of LEAST resistance. There will always be "resistance" opposing force but the resistance force will NOT be strong enough to change the stronger force.

Inertia as I initially learned back in 1978 while studying Physics as I understood it to describe the NON-changing "state" of an object. It can be stationary and remains stationary or it can be moving in a certain direction at a certain velocity without changing direction and velocity.

Comes the next phase of an object in motion. How it moves and why it moves in a certain manner. There are 3 forces namely the gravitational weight, directional force and the opposing force.

For the ease of understanding, gravitational force is ignored and focus on the basic directional and opposite directional force. This is like trying to understand the BUYING and SELLING force.

The action will move in favor of the "winning" force. Trying to decipher/explain why the force is winning is irrelevant as this is merely an academic importance but of NO financial value to me.

It is like going to bid for a house during auction. The LAST price will be the ONE and only bid. As long someone place the last higher bid it will move to higher level. It doesn't matter there are 100 buyers at lower level(s) what matters is who will be the next higher bidder. This 100 buyers are NOT bringing the price higher at best they prevent a crash at that moment if they remain there and did not withdraw.

The "background" of the last person or entity that brings the price higher is of NO IMPORTANCE and IRRELEVANT to anyone or the seller or the auctioneer. All that matters is .. IS THERE ANYONE WILLING TO BID  HIGHER like the directional force.

Too much unnecessary irrelevant discussions in the media why the stocks/commodities/currencies/index should be UP or DOWN. Such discussions only distract and ignore the most basic element ... WHO IS IN CHARGE ? BUYER or SELLER ? WHY is IRRELEVANT completely.

As  long we stand WITH the winning force or the same direction as the FLOW, the rest is IRRELEVANT. The rest are merely academic that can be FATAL if we do not know how to manage this as market force is a DYNAMIC non-linear capable to change in "seconds" speed while our views / opinions / bias can't change in "minutes" speed.

Market is not to EXPLAIN it's action(s). It is only PEOPLE that attempt to EXPLAIN. Right or Wrong explanation is IRRELEVANT to market. Market is not grading the answers/explanation. Market will do whatever it wants to do easiest and show anyone who is tracking the market actions that it moves on its own free will sometime contradicts what the media says and sometime agrees. Such market action only CONFIRMS that Market is independent of the news. SO WHY BOTHER THE NEWS? Just track market actions

  

Saturday, September 11, 2021

Applied Physics - Same principles and concepts different NAMES

In one my Physics class, an example of throwing a ball into the air. At the maximum distance from the ground is the end of the UP move where the next obvious move is the down path. I am not going to discuss about VECTOR (Mechanics) but the applied concepts. At the peak we can only determine the AVERAGE speed/velocity. The details of the forward thrust rising motion subscribe to the law of diminishing return (dy/dx). The Y= Price and X = Time. The highest rate of change (dy/dx) is NOT at the peak of the distance but SOMEWHERE in between the take off point and the peak from the ground. What happen in reality is TAKE-OFF, ACCELERATING, STEADY STATE, DECELERATION and CHANGE DIRECTION.

ACCELERATION means - same direction but increasing velocity

DECELERATION means - same direction but declining velocity     

The only way for us to tell if a moving object has change direction is that IT HAS ALREADY DONE SO. We are not going to debate why such action happen BUT we are going to understand the need to use tools to track such action.

We can develop or use existing tools/indicators that comes with the charting software to measure the changes to VELOCITY (NOT MOMENTUM) both have different formula definitions in PHYSICS. In general, the changes in velocity can signal POTENTIAL underlying changes which we should be aware and prepare. BUT the key is what do we use to determine to CONFIRM the directional change? Changes in velocity DOES NOT confirm DIRECTIONAL change. It is the CHANGE in DIRECTION of the moving object that CONFIRMS.

The most obvious visual before our eyes is to see the CHANGE happening as we record n plot the chart. The task is NOT to predict when the directional change is going to happen BUT to track when the change HAS happen (confirmation) and act accordingly.

Ignore all the financial news in media. Just look for simple tool to track where the price directional trend is moving and to confirm the directional change has happened. We do not need to determine the exact TOP and BOTTOM. Let me repeat - WE ONLY WANT TO KNOW AND CONFIRM THE DIRECTIONAL CHANGE. We do not want to act prematurely. We only want to act appropriately.

There is NO complex formula like F=ma or mgh or 1/2(mv2) or E=mc2 or sine O or cosine
O, merely plain simple drawing on the price charts to visually confirm the changes.

Many of us has walked the path of complex financial formulae and theories that we focus on the trees and lost sight of the forest. 

When we are mentally pre-occupied with the notion that complexities matter,  we work in a paradigm that we lost our compass n GPS.            

 

Friday, September 10, 2021

Revisit Phyisc applied to the financial markets.

Every now and then I need to refresh and remind myself that market is less of financial theory and more of Physics applied.

Law of Motion states clearly an object in motion will remain in the inertia state until an opposing force can change the motion and direction. Inertia is a lazy state and the easiest thing for an object to do. 

Energy flows the path of least resistance. The trend of the market flows the path of the least resistance. Other matters will come in to substantiate and justify the action(s).

Every motion has a cycle attached to it. There is UP cycle ... DOWN cycle ... REST cycle. Each UP and DOWN will follow the Law of Diminishing return. The acceleration ... steady state ... deceleration and reverse.

Kinetic Energy 1/2(mv2)= Potential Energy 1/2 (mgh)

Conceptually the changing state between KE and PE is no different from the changing state of UP trend and DOWN trend.

The intensity or the strength of the trend is NO different from the sound amplification and it is never static nor linear. I think it a form of both LINEAR and non-LINEAR state.

It is by plotting and understand the 2 dimension of the chart with PRICE (Y-axis) and TIME (X-axis) that one is able to visualize the actions and what are the most likely unfolding action and the probability of it happening.

I wish I can and want to admit that the financial market is a complex sphere, unfortunately the truth  ---- IT IS NOT. All we need to do, is to go back to basic things we learn in school (NOT UNI) to seek the truth.

 

Happy Weekend   

 

Tuesday, September 7, 2021

CPO - Monthly a comparison of cpo2 - CPO3 - cpo4 and cpo5


 Cpo 2 .. Peak first before the rest and subsequently the rest peak while Cpo2 lags.

Friday, August 27, 2021

SPREAD - misunderstood concept

The SPREAD concept is not only confined to Commodities. It is a "generic" concept but given a marketing brand or label.

There are times we compare 2 or more stocks and choose to SWAP one for the other. This is another form of spread. As long as we take a comparison between 2 than that is a spread.

The elasticity range of spread is "limited" unlike outright which is "very" elastic. Calendar spread margin is normally 25% of outright. In theory, the spread range should be 25% of the outright. HOWEVER, which pair will provide the equivalent?  Or which spread pair will provide the value for money and contain risk? 

Different months will give different elasticity or volatility and each different pair will NOT provide the 25% equivalent.

The leveraging as we learnt in physics refers to fulcrum and the more away from the fulcrum the wider the range. This brings us to the next question about liquidity and BID ASK quotes.

The nearer the pair months the more liquid they will be. The further far out they are the more illiquid they become. This means we need to find or identify the months that provide a balance of liquidity and leveraging so that we do not loose on the GAPS between BID ASK

Wednesday, August 25, 2021

Futures Outright versus Spread

When do we take Futures Outright open position and when do we take Spread positions?

The relationship between these 2 instruments or products above is NEVER fixed and NEVER constant. 

They have a Dynamic non-linear relationship which at times they are seen to be moving in the same direction but at different velocity. At times they can be moving in the same velocity in the same direction. 

Alternatively they can move in the opposite direction in the same momentum. Or different direction.

What we do know is we will need to understand when we flip out the spread trades and when we do not. When we use the Futures and when we do not.

Spreads have ceiling and a floor value. When the maximum threshold are achieved, they will reverse.

Like the Futures outright, it has maximum and minimum values for a reversal to happen.

Many things we will be able to learn from looking and studying the charts itself. \

All it takes is an open mind ... eyes .. to see and to think and plot the actions. Yes, it seems too simple but I guess that is how it works.

 

Saturday, August 21, 2021

NG - NatGasCalendar Spread

 
The above calendar months spread for NATGAS shows the across 4 different months produce different changes despite the movements are "similarly same". 

Choosing the appropriate months is to yield a balance of capital utilization versus returns. 

 

RELATIVE 

There are a few different possible actions or motions of 2 different objects i.e (A) and (B)

1. (A) and (B) can move in the SAME direction but one is moving faster than the other leaving one ahead and the other behind

2. (A) and (B) can move in OPPOSITE direction and both moving further apart

3. DIFFERENT direction where one is STATIONARY (STATIC) and the other moves away.        

4. MOVE IN TANDEM

Spread value in financial markets refer to the DIFFERENCE (GAP value) between 2 different selected instruments. The spread value change will depend on "1" - "2" - "3" action above. "4" spread value NO CHANGE.

 

For the ease of understanding, I have always use the pair A-B, with the front as the "BUY" and "SELL" corresponding to the opposite for back pair. ie. (+) A = B (-) and (-) A= B (+)

IF we BUY the spread, it means the SPREAD value is expected to go UP and if we SELL the spread, it means we expect the SPREAD to drop.

 

This is NOT rocket science but the MCE/"O levels" Physics conceptswhich I was learnt in the late 70s is now applied to financial markets.

 

The obvious question that most readers will ask is, how do we know the spread is going to go up or down? 

Are there "traits" that are consistent in the long term?

How often do the Spread and the Futures move in same direction? All the time? Sometime? How about opposite direction?

Irrespective whether it is CALENDAR Spread within the same instrument or products OR inter-commodity spread for 2 different class or group,  the concept remains the same   

     

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Friday, August 20, 2021

SPREAD TRADE - - - - - Calendar or Inter Commodity

A big word attached to something becomes a "branded name" giving it a legitimacy and some unique status.

SPREAD is the difference measurement in value between 2 object/products.

This brings me to my MCE/O level Physics topic of "relative". We learnt about objects moving at different speeds and directions. When the 2 objects will collide if they are on the same path or when one object will overtake the other in the same direction ( different path).

Calendar spread and "Inter" Commodity spread are the common spreads traded either offered by the exchange or synthetically created if not offered.

The trade is about BUYING one leg and SELLING another leg either

1)within the same product group different months

or

2) different product groups of same months or different months

The spread is a derived product of 2 FUTURES values. The rise and fall of the Spread value will depend on the RATE of change of the 2 FUTURES values.

The Spread rise and fall can either be in synch with the Future rise and fall or the Spread rise and fall can be contrary Opposite to Future rise and fall.

The margin for spread is NORMALLY 25% of the Futures outright and long term (years/months) magnitude movement is less than Futures outright. This does NOT mean the spread movement is 25% of the Futures outright.

The Spread can be POSITIVE ... ZERO ... NEGATIVE

The spread can remain static while the futures prices keep rising or the spread can be static and the futures declining.

It is all about direction and relative relationships
 

Tuesday, August 17, 2021

Magic number 3 ? ......Is it or is it not?

We all learn that in any competition ... the outcome can be a DRAW ... if there are no WINNER. To have a winner it means there is NO draw but loser(s).

When we analyze a situation, there are only 3 POSSIBLE outcomes BUT only ONE will be the CLEAR finale.

Instead of trying to sub-divide classifications, 3 class of different groups is more than enough to determine the situations.

In the last article, I have briefly mentioned the 3 class or groups.

We need to have different 3 set of rules to accommodate the different intensity for each group ie. 

STRONG/Greater than 45 degrees .. 

NORMAL/45 degrees ... 

WEAK/Less than 45 degrees...

The rules of engagement for the 3 above will be different.

Like driving we will be traveling at different speeds depending on the traffic conditions and the road conditions. This is the DYNAMIC nature requiring different sets of rules.

What do we do with SPREADs and will it be a CALENDAR spread or INTER-COMMODITY spread???   

I will leave that for the next !!!!

 



 


Wednesday, August 11, 2021

Consideration for Consistent results - Trading or Investing

When market move in a linear straight line, all one needs is a ONE simple rule to implement.

Unfortunately we are dealing with a DYNAMIC EMOTIONAL market that trend at different momentum and cyclical period. This can either make or break a system. 

Question is how do we move in such a market? Can we simplify the process? How can we use our daily experience in this? Even if put together a perfect or near perfect strategy, the biggest challenge and enemy is YOUR SELF ... your mental. The doubts will remain the GREATEST or mother of all enemy.

1. The system that ANTICIPATE will most likely be EARLY in flashing the signals and if one acts upon such notices, it means we will be early before the trend changes. This calls for a deep pocket and ones ability to remain mentally stable.

2. The system that FOLLOWS will NEVER be early but rather slightly later or late since it does NOT anticipate but flashes signal AFTER the change has happened!

Once one decides which of the (1) or (2) to adopt or HYBRID (1) and (2), than one must understand the rules of the game.

A DYNAMIC EMOTIONAL market means one is going to see and experience the different momentum through out. For the ease of analysis, I will refer to STRONG MEDIUM and WEAK momentum. I normally classify things into 3 categories for easy analysis and management.

SHORT TERM, MEDIUM TERM and LONG TERM

STRONG, MEDIUM and WEAK MOMENTUM

PRIMARY, INTERMEDIATE and SECONDARY WAVES

Is it possible that ONE rule for 3 different conditions? Yes it is possible BUT one need to be prepared to accept the opportunity cost. Why? It is most likely the ONE rule is only suitable for ONLY one situation with unprepared strategy for the other 2 situations.

Ideally, one will be able to develop a HYBRID system that warns before it happens and CONFIRM when it changes       

Monday, August 9, 2021

Rules ? Principles ? Laws?

The "art" of master charting analysis is about one's ability to change and adapt into a "DYNAMIC" trend situations.

There are basic rules or principles or laws when one decides to adopt chart analysis. While majority use the chart for short term intra-day trading/scalping, charts analysis is as potent for higher time frames.

I will categorically divide the "rules" into 2 classes or groups

1. BASIC ( you can find and read all the materials online or printed) aka TEXTBOOK level

2.DYNAMIC (you will need experience to be able to know which strokes) aka HARD KNOCK level

When one trains to get a driving license, it is the BASIC level. When one is on the road and outmaneuvering the crazy trading which is not static, this is the DYNAMIC level. One need the experience and skills to drive in such situations either avoiding being hit or crash.

There are some universal standard rules to apply BUT when one gets into a wild dynamic situation, it is about survival. Which rules to maintain and which rules will one ignore or modify?

If the market trend is at a constant pace and direction, well the BASIC rules is more than sufficient. The truth is market trend is not traveling in a "sphere" that is constant. It is traveling DYNAMICALLY like a plane cruising at different altitudes and headwind/tailwind even air-pockets.

The Captain of the flight knows the different controls for different situations mentioned. The Captain will not and cannot use the same set of control rules for different situations. He or she will have different protocol.    

Once one is able to understand and grasp what are REQUIRED and NEEDED to be a skill chart proponents,  than one is able to separate the truth and the facts from a con job 

 

Tuesday, August 3, 2021

THE GAME --- Sure Bet ? PROBABLE bet ? Possible bet ?

All market participants MUST realize that the MENTALITY of sure bet is highly dangerous given the dynamic nature of the market trend.

The correct attitude to approach the market is to map out the POSSIBLE trend direction from the 3 and only 3 different trend directions. Next is to choose the MOST probable outcome.

There are so many news and stories ... including rumors in the media that can be so confusing.

Sometimes the market direction jive with the "stories" ,,, sometime they don't or as we say "independent".

What we will and definitely going to encounter when we use any system is the NOT so consistent results. This is not to say the system is FAULTY if you believe it is reliable. Instead the DYNAMIC nature of the trend of varying intensity will results in erratic results.

If the TREND move in ONE straight line (LINEAR) than your system will be 100% predictably perfect. Given the trend move in a NON linear state, this will result in DYNAMIC varying results.

Thursday, July 29, 2021

Chart Analysis - Price & Indicator(s)

The early price records were translated in graphical representations. Hence the birth of Price charts. Moving forward, different formats were introduced BARchart, CANDLEstick, Point & Figure,Kagi, Renko, and the list goes on.

Later some creative persons introduced Moving Averages and came different types of calculations for Moving averages into the charting software.

The next level saw "indicators" included in the charting software.

With all the "gadget tools" ... what are we suppose to do ... and use ? Or what are we trying to do or NOT to do?

What is or are the ROLES of the indicators? How do they complement price?

What does the indicators suppose to do and what do they conclude or imply?

Bottom line is whatever the indicators derived analysis or implied analytical conclusions, the price will be the ultimate CONFIRMATION.

There are many points to consider since we do not live a perfect ideal world. All textbook materials will write about divergence and divergence and divergence

 Know when divergence works and when they don't work.

 

Under what conditions DIVERGENCE fail to function properly??

 

If one can identify and isolate the high probable conditions or probability it won't function accurately, than I say you have nearly solve the biggest hurdle.   

Sunday, July 18, 2021

CPO-2, CPO-3, CPO-4, CPO-5 - The past, Present and Future


 

The Earlier spike in CPO prices have sort of narrow and converging. Will there be more divergence of forward prices?

The erratic spread between months were extreme a few months back and now back to normal range levels.

Will the anticipated squeeze in supply or Dalian Futures or Soy Oil result in near month spikes? Or maybe the market has priced in all the anomalies?

Thursday, July 8, 2021

Relationship or Correlations ......

The simple market actions are seriously complicated by human desire to find the cause and effect to a certain event. This create another bigger problem and more damaging when one get MENTALLY chained to this correlation between cause and effect.

Putting cyclical nature of the trend and placing this correlation(s) into a full cycle, one should take note that there are times this supposedly POSITIVE correlation will NOT work 100% throughout the whole cycle instead there are many times they work NEGATIVELY or some prefer to call them RANDOM unwilling to accept that the opposite happens.

The biggest challenge is the accept BOTH positive and negative correlations exist in a full cycle and how will one adapt and act accordingly.

Human by nature ARE inflexibly RIGID and takes a long time to accept the DUAL state, more so act swiftly when things change.

It is the unseen and soft metal inner self that one need to polish to enable a smoother ride 

Sunday, June 27, 2021

Money the BAIT ....

Everyone who participates in the financial markets irrespective of which products or instruments will have ONE and only objective ... i.e ENORMOUS capital gains or profits.

When probe further, how will one achieve this goal?

What about capital required?

How about the time required?

Yes $$$$$ is the bait, the motivation BUT one need to seriously sit down think over, how one is going to achieve all this.

Do you have what it take? Do you believe you have all the soft skills needed?

The Game or Business demands much more out from a person. It is not about Financial knowledge. This transcends beyond what we learn in school.

It is a demanding and punishing "work" at least for the first few years until one has a grip of what the market demands and expect from you.

 

The road to ROME are many but can you persist and last through the journey     

Sunday, June 20, 2021

Chart Analysis ...abused!!!!

Over the years, chart analysis "evolve" like car technology. The chart analysis objective end result remain the same but the approach changes. The objective of using a car is to move to a destination. Over the years cars has transformed into technology driven.

There are roles that chart analysis can contribute in daily business operations but the truth is many view this approach as some VOODOO black magic. A lot of this problems are attributed to over promising without being able to explain the different methodology.  

There are some basic rules or principles when comes to chart analysis. Human nature desiring to read and hear some complexities to a recommendations do not blend well into chart analysis. Sophistication and complexities are deemed to be credible especially when there are mathematics involved. This is why financial economic analysis will be seen more favorable than chart analysis.

The correct way to utilize chart analysis is to make it simple and keep it simple. When one add salt n spices to chart analysis, one might end up with a chart analysis that is too spicy and greasy.

It is not easy for someone who believe Financial Economic Analysis as the truth to accept chart analysis such people encounter chart users to have abused the analysis with predictions which is exactly the financial analysts are doing.

Isn't market about prediction and forecasting? Yes and NO. 

Yes, almost everyone wants to know the future but knowing the future NEED not translate into profitability. 

The other factor which chart analyst supposedly has advantage over others is trend direction as long keep this simple. This about what happen to the market trend between NOW till the predicted event.

How does one swim, walk, run, jog or fly to the prediction? In my opinion this is the GOLDEN rule of all chart analysis. TO FOLLOW THE TREND. Predictions are meaningless if one FAILS to follow the trend.

The trend is the path to $$$$

Wednesday, June 16, 2021

FEAR - - - - - The MOTIVATION

Why do people act and behave? It is people reaction to something .... or event DUE to FEAR

Fear as the driving FORCE and MOTIVATION pushes people to the edge to act and behave either rationally or irrationally.

When FEAR of MISSING OUT of the action controls the mind of the people or crowd this develops into a strong force.

When Fear of prices going higher exceeds the Fear of going lower, the force and direction tilts in the favor and direction UP

When Fear of prices going lower exceeds the FEAR of going higher, the directional force tilts in the DOWN direction.

When the motivations is not decisive who is in the driver seat, the trend will remain horizontal range.

Is GREED the bigger motivation than FEAR, I do not think so. I believe FEAR is the mother of all motivation.

 

 


Saturday, June 12, 2021

Calendar Spread - Futures Outright

 There are different "SPREADS"

1. Within the same product but different months (Intra-commodity)

2. Different products pair but same exchange (Inter-commodity)

3.Different exchanges (CBOT/CME/NYMEX vs LONDON or FRANKFURT)   

 

To make simple, we keep to Calendar Spread for the same product/instrument which we engage in BUYING ONE TRADING month and SELLING A DIFFERENT month. 

 

The challenge is one has to decide if one should remain trading calendar spread only or a hybrid of calendar spread with outright futures.

 

INVESTIGATE ...... ANALYZE ........ OBSERVE .... CONCLUSION




Tuesday, June 8, 2021

Calendar Spreads - The Fundamental QUESTIONS

 Assuming one manage to identify the "pair" to trade. The next questions 

1. WHEN DOES ONE LONG THE SPREAD ?

2. WHEN DOES ONE SHORT THE SPREAD ?

3. WHEN DOES ONE DOES NOTHING/NO POSITION ?

4. WHEN DO YOU EXIT THE LONG?

5. WHEN DO YOU EXIT THE SHORT?

 Is the relatively low margin for spread the reason to trade ? or 

Is it something more challenging that one need to explore ?

Is spread a piece of cake versus open outright futures? 

What are the challenges that one face trading outright futures versus calendar spread?

While the lower margin is one of the reasons to consider calendar spread, one should consider the risk reward profile for both instruments.

Personally, I find calendar spread more challenging as it is NOT about trading a particular month contract but rather trading TWO months.

The relationship between 2 months is "RELATIVE". This "relative" is the basis for LONG or SHORT or DO NOTHING.

1. WHEN DO THE SPREAD RISES and WHAT DOES IT MEAN?

2.WHEN DO THE SPREAD FALLS and WHAT DOES IT MEAN?

What is the correlation between Calendar spread and outright futures? Is there any correlation?

HOW many spread contracts should one take to strike an equivalent of ONE outright futures "effect" if there is correlation?

How does one optimize and balance Calendar spread trade with Futures? 

 

There is NO FREE LUNCH and one need to do detail homework before the adventure!!!  ///

 

 

 

 

Sunday, June 6, 2021

Cpo 2 - CPO 3 - Cpo 4 - Cpo 5 historical comparison


The last super bull run for CPO was 2008 with no abnormal movements and all peaks about nearly same level. This is translated into  minimal calendar spread deviation. 

This round the bull has the PEAKS are individually different resulting in abnormal wide spread values.

I am not going to dwell into the reasons to explain such anomalies. 

Question is what do we do with such situations. How do we benefit from them?


Saturday, June 5, 2021

CPO Calendar spread vs CPO Futures - LAST 200 days traded

 


                                           JULY _ AUG

                                        AUG _SEP    

                                    CPO3 - AUG

To look at the numbers without graphical chart displays, one need to be a special breed to have such quality gift. Unfortunately, I do not have special gift but to do it the "traditional" method of plotting the charts and visual analysis 

I am leaving to the readers to make their own observations and conclusions the directions of the Calendar Spread vs the Outright Futures. 

 

https://www.investopedia.com/terms/c/calendarspread.asp

 

Margin for Calendar spread is Rm1700 per contract

Margin for Futures outright is RM7000 per contract (x4 approx Spread margin)


The other question remains is what calendar spread pair is the optimal choice. Will it be

1. Cpo-3 (Active) vs Cpo-4 (NEXT) or Cpo-3 vs Cpo-5 or Cpo-3 vs Cpo-6

2. Cpo-2 vs Cpo-3 or Cpo-2 vs Cpo-4 or Cpo-2 vs Cpo-5 

3. Cpo-4 vs Cpo-5 or Cpo-4 vs Cpo-6 or Cpo-4 vs Cpo-7

or other month combinations?

 

I leave it to the readers to investigate for themselves as I have lay the basic for you to think.

 

Trading Education is about Investigation and Observation and finally the Calculations

 

 

 

 

 


 





Sunday, May 2, 2021

Did the chart fails or the user's failure?

"failures" or "errors" are like GEMS and they are the most precious things in the learning process or upgrading your skills and knowledge. While many looks at these NEGATIVELY, I see them positively. Without mistakes and errors, we can fall into the over-confident mind trap. We become complacent. We don't see the need and desire to learn or try to understand if things can go wrong.

How about charts? Let open the statement by saying that the chart has NEVER fail. It is the failure of the user to interpret the chart correctly and properly that results in failure. Unfortunately human will deflect and shift the blame to the chart!!! Unless your chart system has the AI ability to read out the analysis and interpretation plus recommendations, it is the USER himself or herself that analyze, interpret and decide the next course of actions.

The price chart display what has happened. The user has to decide the next course of action.

The indicators are "normally" tabulated with panel windows either above or below the price chart. Almost all indicators will have either 50 or 0 in the middle of the indicator window.

There are many ways to read, analyze and interpret the indicators. Some of the indicators will have 100 on the upper highest and 0 on the lower lowest. with 50 in the mid-level. Some will have NO upper and lower limit levels but 0 in the middle.

Irrespective of the 2 different type of indicator displays, the key is to about interpretations. There are "standard" analysis per "textbook" and there are many other interpretations not documented and published but personal observations due to some mistakes/errors. This is what I call hands-on experience. 

My personal opinion is whatever published materials that we read, at best it is only 50-75% of the truths. The other 25-50% will depends on your ability to observe what are not written and published. 

The most important question we should be asking is what are we trying or want to achieve with charts? What are readily available tools and How do we use them to help us achieve our objectives?

What is the "relationship" between the price and the indicators? When are the price and indicators "sync" and when they do not "sync"? What do all this represents? 

Are we using the charts to "predict" the future? Or are we using the charts to help us understand the overall market pulse?

The things we can and want to achieve is long list. Forget the numeric and enjoy the chart flexible beauty.

 Let your observation lead your imaginations

Sunday, April 25, 2021

F-KLCI ... lifeless ... listless ... Zzzzzzz


As long as the KLCI remains cruising at this level 1600 + - ... we will continue to see rotational random stocks taking the lime lights.

This is the excitement of the penny stocks .. when will this music end? It will depend if all the buyers are already in and waiting to exit.

As long as there are still buyers coming in willing to pay more or higher, than the prices will remain lofty.

Just basic commonsense.

 

The musical chairs will be removed when the buyers refuse to buy higher than you can see vertical dive down.

 

It is all a matter of time when this will explode 

Sunday, April 18, 2021

Sit back ... Reflect and Ponder ....

Prior to the availability of real-time intra-day charting platforms, the whole process involve daily, weekly, monthly or quarterly maybe yearly chart.

Probably sometime around 15-20 years online trading in Asia is the advance of intra-day real time charting. 

The question that came to my mind WAS and IS ...does intra day charting improve my profitability? Sometime ago, during the initial or early years on intra day platform availability, I use to think that this is the road or the path to profitability. After years of trading, I come to the conclusion it is NOT 101% true.

We should sit back think over what our objectives and the time horizon we are interested when you decided to put our money on the table. 

What is our realistic return during the period? 

How do we handle volatility during this time horizon with respect to mental and financial? 

What are the criteria we use to ENTER and EXIT?

Do we have some simple rule(s) to implement all the above?

 

Yes the list of questions above are not complete but they should serve as a starting point. 

 

Are we trading volatility? or Are we following trend?

 

Which time frame charts are we comfortable using?

 

Do we act on WHEN (TIME)? or WHERE (PRICE)?  

  

Tuesday, April 6, 2021

The Price - Time chart .... the miracle or ?????

The only thing that the Price chart CANNOT do is Financial Analysis!!!

The chart records what has happened. This include insiders and outsiders. The hopefuls and the despairs.

We are suppose to try understand what has evolved, what is most likely to happen next and beyond.

Yes, it is the best tool for me to guide me as I tread the water. 

What we need to understand and accept is that market move NOT in a linear straight line that makes perfect predictions into the future very very very difficult. Market move wildly at times swinging at different speed or tangent and at time it is resilient range side way. Since we know these are the only 2 behavior of the market trend, than it is easier to anticipate the trend cycle. The only greatest challenge to the cycle trend is to pin point which stage the current state versus the overall.

Once you have the ability, capability, skills and experience to locate the status of the cycle the rest will be easy.

Instead of wasting time wandering in the wilderness, going directly to the source or the center of all trend, one will avoid making mistakes and wasting time contaminating your mind with rubbish      

 

Wednesday, March 31, 2021

Understanding or Misunderstanding the Market ... Misbehavior

 Many people struggle trying to understand the market. The behavior at times are in congruent with your opinion and your opinion is a result of your analysis. So when the market perform in accordance with your anticipation than you are happy and feel greatly delighted. When market behave contradicting your analytical opinion you will either end up frustrated and dejected. This is what I can the "MISBEHAVING" market. 

So we got a behaving and misbehaving market situation. Actually it is about the direction where it is going. 

Market is more than merely about textbook analysis. Market is actually a very simple creature that goes it own way or DIRECTION independently. That is why at time it goes in the direction we anticipate and at times it goes against us!

The reason why it is difficult to understand market is due to US ... our inner software that process in the realm of the LINEAR path. Almost everyone tread this path due to our educational system and our personal experience.

If we are looking at trying to MAP the market direction, we should adulterate and mix it up with other "contaminants". 

The key word is DIRECTION and we just need to find the appropriate tools to define the market direction. 

Do not mix "VALUATION" with "DIRECTION". They are 2 different and separate matter completely.

At time market direction will be in sync with valuation and at times the market direction will not sync with valuation. 

Valuation can be "fixed" but direction is NOT fixed as it is MOVING and changes direction anytime the CONSENSUS changes.

 

So what tools are you going to use to map ... track ... market direction. This has nothing to do with finance ... not a single bit .... so don't waste your time trying to use financial analysis.

After you have selected your tool(s) than you need to define what is the directional CHANGE and what are the parameter(s) to confirm this change. Again let me repeat... THIS HAS NOTHING TO DO WITH FINANCE.

 

Lastly... do back testing on your set system above.

 

Simple .... straight forward  

    

Tuesday, March 16, 2021

F-KLCI


 KLCI Futures weekly chart shows the range with the side-way mode.

The daily tells the tight range with mix signals from the Oscillators 

The weekly also display the same mix signals.

 

WHAT IS NEW? NOTHING ...

 

The occasional and rotational play .... reminds me of the election rumors of 1990s thro 2000s with selective stocks rammed up and distributed.

 

This can only happen with the players greed seeking quick kill or be killed  

 

Saturday, January 30, 2021

The dilemma of the chart trader or the non chart trader

 I will classify the existing analysis used by traders/investors/speculators into 2 approaches namely the charts and the non-charts methods.

The non-charts method include the Financial analysis and any other methods that do not use chart technique.

The chart technique is suppose to be simple straight forward without too many "justifications or confirmations" to rationalize or substantiate the actions taken.

The history of chart began with the records of price actions - Open-High-Low-Close. Such exists prior the invention of computers. Chart is about trend and trend is a collection of price actions. Obviously someone decided to infiltrate price analysis to include volume behavior into the equation.

This brings me back to the basic lessons in physics when we refer to directional motion or directional path. When we analyze the motion of the object from the start to the end of the motion, we only record the changes in velocity along the path. The acceleration, the deceleration, the steady state and the end. Does it mean that the changes to the mass or weight is needed to confirm the object motion state?

Adding more variable(s) into the analysis do(es) not translate into accuracy or reliability. More likely it is going to add more confusion(s).

We will need to define what the trend is and anything not within the parameters is automatically classify otherwise. The oldest approach that I am aware is the TRENDLINE and later the popular Moving Averages.

The next step is to classify what is accepted as the trend change for the end of the existing trend and automatically is the start of a new trend.

The final step is to develop a plan how u manage the bumpiness or volatility between the start to end of the trend.

      

FKLCI .... update


 What I can see is 1540 ....if broken ,,,,,,, what if .. what is next?

Saturday, January 16, 2021

Sunday, January 3, 2021

F-KLi .... 2020 Closing - The chart and the truth


If one looks at... looks for ... all the so-called considerations of the financial economics, well it does not make any sense why the markets are at this levels globally????


If one just ignore the stories we read in the media and go with the chart ... this is not easy ... a personal challenge when we realize the discord or decouple between the charts and the economics .... which one do we follow?

 

The human bias is we tend and will follow the brick and mortar economic news.

 

The truth .... BITE YOUR TONGUE PULL YOUR PANTS and SOCKS ... follow the charts 

Wednesday, December 9, 2020

The Independent Market ....

 As I sit back, take stock of my venture and experience since 1987 walking this journey in the financial markets, I have seen ... experience ... all sorts of things trying to link how market behave to financial analysis ... charts ...and what not.

Does having opinion(s) or views after getting all sort of reports and inputs ENHANCE your profitability? Or will it do more harm than good?

This creature called MARKET is a unique independent force. Human are mentally brought up to think having more knowledge means you have an edge of profitability!!! 

Well this creature market is very unique because IT IS INDEPENDENT and we need to think how to make best what it presents.

We can be right about ALL and everything about the facts and figures but that do not directly translate into successful investment and profitability. We can be wrong about facts and figures yet we can make money all the way!!! 

One of the first thing I keep asking myself .. HOW MUCH DO I NEED TO KNOW and NOT OVERLOAD!!! Or maybe the least I know ... the better off I m!!!!

We are all human and the biggest danger that we face is the INNER Mental Enemy and the is called the OPINION enemy ...This enemy called OPINION is the biggest inhibitor to one's mental and paralyze your ability to see things differently. It has a TWIN brother called RIGID mind. The twins is the worst combination for everyone.

Over the years .. I know and I vouch that .. my profitable periods are the time when I trade without the presence of the TWINs. The worst draw will be the season.. I am busy entertaining the TWIN visitors.

The most objective strategy for the markets is not how much facts one know but how much one does not need to know!!! All you need to know and understand is WHAT DO YOU THINK THE MARKET WILL BE DOING NEXT and I can guarantee that your facts might or might not agree with the market next actions!!! Sometime it may be in unison .. sometime it does not!! Since it is NOT always in agreement.. do you want to emphasis on this!!!

What we seriously and really want to do is to draw and list down the things/action steps that we need to adopt and internalize which have proven to be reliable and consistently accurate.

FACTS and FIGURES are for academic intellectual discussions!

 


 

  

Tuesday, December 8, 2020

CYCLE - Trend and Volatility

 The term  CYCLE is often wrongly interpreted by many who use the word and hear the word. 

cycle[ sahy-kuhl ]


noun

1. any complete round or series of occurrences that repeats or is repeated.
2. a round of years or a recurring period of time, especially one in which certain events or phenomena repeat themselves in the same order and at the same intervals.
3. any long period of years; age.
4. a bicycle, motorcycle, tricycle, etc.
 
When we refer cycle in economic activities and financial markets, we are looking at (1) and (2).
 
Often and I dare to say that human in general do not have the ability to visualize and understand the details of things said.
 
When someone come up and tell us ,.. WE ARE in DOWN CYCLE ...
 
A) Does that mean it is down all the way directional without any sort of ups till the bottom? or 
 
B) There will be sporadic ups in the down direction until the bottom is attained?      
 
Majority will think of (A) but in actual fact (B) is the truth.
 
The worst part is during (B) the process of anti-reaction can be so confusing and convincing that we are not in a down cycle but and up cycle!!!
 
In a business economic activities, the sudden surge in spending can be either stimulus or maybe consumers decided to spent after holding back or maybe there are other incentives to encourage spending.
 
In a financial markets such rise during a down trend can be attributed to short covering or even the decision to re-balance portfolio and sometime the rise is unimaginable.
 
Sometime it takes a long time for the cycle to complete and with intermittent contradictory reactions that catches everyone by surprise. 
 
Yes, cycle exist. Cycle is a dynamic state and it is not a static ONE phase. Cycle is a combination of both actions and reactions state. It is about oscillations.
 
The best example is watching the SEA Tide. When it is high tide, the tide level does not rise like filling a bathtub. The level rises over time with occasional retreat and rising overtime.
 
Market is not about filling the bathtub with water or draining the water away where the water levels go one way UP or one way DOWN. It is about understanding the SEA tide. The ebbs and waves.
 
In my opinion, price Charts trend is the best way to track the trend within a cycle. There will always be opposing force within a cycle.