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Trading on breadth - Adv/Dec NHNL McClellanSumInd

lorong8
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01-Apr-2013 12:52

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Briyani, Nasi Lemak or Salad?

What if you and your friends decided to eat at golden shoe’s chicken bryani rice (remember to ask for more of the red deep fried corn “fritter”….it’s worth the medusa stare….) and found that the queue too too damn long…or you overheard the fella in front on the phone asking “huh? How many packets? 10? okok… “?

Do you curse and swear? Or do you start logging in to STOMP and start complaing?

Or do you straitaway move over to 2 rows and buy the equally long queue nasi lemak set A?

Do you have an alternative for such an important decision of your life? (Trust me, it is….ask my wife.)

What if the fish soup stall is not opened today? (Hint Goto Phillip Street)

What if the counter you are looking at suddenly lifted off or gapped up and you no longer can “chase it”.

Do you have an alternative?

Where can you find that alternative?

“oei! Can you stop asking so many questions already?”

One way is to find out the sector or industry the foodcounter you are eyeing and look for its peers. You need this too to compare PE or EPS data (if you are into this type….not me man….fish soup with no milk or fried sliced fish please.)

Another good thing is to make sure you are not too overexposed to one single sector.

There are pleanty of sites which can help you sort or filter this. Or, if your broker sends you occasional market level research reports, they often have this data. eg…

Thereafter confirm that the counters move in tandem, price wise. You can manually plot the price chart and comapre visually….or, if your charting software allows, make a compare screen.

Some brokerage have tools which you can use to do this. If you can opt for the log screen (as compared to our normal linear price screen) the better to compare stocks as we are now comparing % movement rather than actual $ movement, which can look skewed when comparing an “expensive” and “cheap” stock of the same sector….

So, next time the chicken bryani store runs out of apalam or the corn “fritters”… have a alternative plan in mind.. or why not just be on diet and head for the salad store huh?

http://cimtr.wordpress.com/2013/04/01/briyani-nasi-lemak-or-salad/

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lorong8
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28-Mar-2013 13:11

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5) Being Right or Making Money – When to Sell (Exits, End of Uptrend) 2/2

So the tool for the selling is the same for the buying…your indicator for your trend. There are many punters who sell when they “feel” that the market is oversold (oh! Dun sell in when an oscillator eg RSI, Stochastic hits oversold an uptrend…), or when ost of us are badly “influenced” by negative headlines that a “correction” is near or the market has gone too hot etc…where the rationale for that oversold or too high etc…

Just let the market and the prevailing trend decide how strong and how long the current move will last, dont try to dictate how much you should earn this window. Let the markets decide. You just focus on your stops and risk management

Let me tell you, it can be pretty boring and you can get impatient keeping still…sitting and holding on to long positions…

“The view is that it is not worth attempting to predict when the next correction might occur. To do so would be to put one’s personal opinion ahead of the market. There are two types of participants. One uses her opinion to try to outthink the “market” and the other tries to emulate the market as much as possible by being a trend follower. While opinions can often be wrong, the market usually isn’t.”

Kevin Marder http://www.marketwatch.com/story/a-few-stock-leaders-show-fissures-2013-01-31

“Men who can be right and sit tight are uncommon. I found it one of the hardest things to learn. In a bull market your game is to buy and hold until you believe that the bull market is near it’s end. To do this you must study general conditions and not tips…” Jesse Livermore

Since I used market breadth to measure trends (or market condition or sentiment), I use it to “time” my exits too. Here the same breadth chart vs the index again.

Remember for buying there is a good time and price to buy? Similiarly here, a good time to sell/exit is when the trend ends, and a good price to sell? Same! Price confirmation!

A good time to exit doesnt mean sell immediately…it must be confirmed by prices falling down. (yes, I buy on the way up and sell on the way down…) So this way, you keep riding the price trend with a close trailing stop. You only exit when both

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lorong8
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26-Mar-2013 10:57

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5) Being Right or Making Money – When to Sell (Exits, End of Uptrend) 1/2

Yeah! Finally! Last step! Now we decide when to sell…

“…eh siao lian eh…what last step? Where were the 1st few steps?…”

Huh!!!???

“..siao lian eh…joking la…i know this one…I not greedy…got profit I run liao…agar agar la…if buy at $1.50, I aim $1.60, then wait for it to come down to $1.50 again, I buy again…simple…”

Not so simple bro. Different trading set ups have different profit or price targets…eg for chart patterns and S/R lines, the initial target is the projected upside…the same size as the chart pattern… or the next up S/R line…confusing? Ah…you can read Magee or Peterbrandt.com, excellent source for chart pattern trading.

See this familiar pic again, the “height” of the Head & Shoulders patter is about 200 points (3315 – 3115) so the target (we are talking about shorting the H& S pattern here) is 200 points down from the “neck line” at 3115, so minus 200 = 2915…bingo…we nearly hit that target din we?

Then there is Elder’s triple screen…the initial target is the upper channel of the moving average channel.

So the price target for now, for example is 3354…the upper line.

Hey…this is another viable price target

hahahaha!

But please please remember….analysts targets are based on 1year projection and will change according to ~~their whimps and fancy~~ the forecasted business outlook.

“..look at the favorite picks of January 2008..S& P 500 plummeted 39%. For anyone trusting the index, it was a total disaster. But if you’d stuck to the analysts’ 10 favorite stocks instead, you’d have only lost, er, 48%..With that caveat, the most-hated stocks that are still in the S& P 500 today fell 51% in 2008—just three percentage points worse than the top picks.

I also checked some of that year’s more-spectacular blowups. Lehman Brothers? At the start of 2008, 17 analysts covered the stock. Of them nine had it as a “hold,” five as a “buy” and two—amazingly—had it as a “strong buy.” Given that one of the smartest things anyone could have done with their money, ever, was to sell Lehman stock at the start of 2008, how many analysts actually issued that recommendation? One. Out of 17.”

http://online.wsj.com/article/SB10001424052748703808704576062033926741952.html

For me personally…price targets and economic forecasting is just like weather and socer results predictions or forecastings….many people and gurus have many views….always popular…always tend to be inaccurate….

“Got black clouds, sure will rain, bring umbrella” My mother to me.

“Got rain so what? No cat 1…still continue outfield!” Me to recruits.

“It would be fruitless to set targets when our process is controlled by the market. If we can participate in most of the uptrends, we will do well. We strive for equity-type returns with lower beta, lower volatility. We don’t set targets” Greg Morris

“..eh siao lian eh…so no targets…then how and when to sell..siao!”

When you (through your trend spotting glasses) determine that there is no more uptrend (provided you are a trend trader), so you sell, hopefully still in the money, if your uptrend has not generated profit yet…you still

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lorong8
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14-Mar-2013 12:47

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4) Being Right or Making Money – When to Sell (Stops) 2/2

For chart pattern trading (I learn and read up particularly a lot from Peter Brandt, peterbrandt.com), near the failure of the chart pattern formation or breakout point will be your stop loss. I like to lump chart patterns eg Head and Shoulders, Cups, Triangles with trading on support and resistance lines… So similarly…the failure for R/S lines will be the stop loss level.

Here is a screen shot of a good H& S initial failure then follow by a good breakout, a double bottom, and a rectangle trading range formation with good examples of whipsawing breakout failures…can you see?

If you like to buy on “dips” or “pullbacks” or “flags” etc during an uptrend (actually, Elder’s Triple Screen is a very good set up for trading this style), then the prior mino low is your stop loss level.

See the below? The 1^st blue circled entry was not stopped out….but the 2^nd one is…can see?

The 5 steps or questions are quite interlinked…stop loss helps me dictate how much to buy too…not just

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lorong8
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09-Mar-2013 00:57

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4) Being Right or Making Money – When to Sell (Stops) 1/2

Stop loss is your pre-determined exit point should your counter start to go awry. When it comes to trend trading, this can mean you can get stopped out even if the trend is still positive. Stop out does not mean the trend has changed. As long as your trend is still up…you can still look for re-entry. Stop out in this sense means an sudden abnormal selling volatility had went down to your stop loss level.

Investing is ridiculously hard to do. You can do all the legwork to check out a company…You will buy that stock on a Monday and on Tuesday everyone in the market will dump it in droves. For no reason at all. Sure, the financial TV shows and pundits will come up with reasons…Some reason out there will fit…in retrospect, seems to prove the folly of buying too soon or too late. The truth is, a bunch of people got up Tuesday morning and decided they needed cash more than your stock, and they sold. Sorry.

http://www.marketriders.com/investing/investing-for-beginners-yes-i-mean-you/

Before we go further..I have another quote… (Yes, Mr Originality strikes again)

Being wrong – not taking the loss – that is what does the damage to the pocket book and to the soul. Jesse Livermore

Marty Schwartz, one of the featured trader in Jack Schwager’s Market Wizrds book, have this so say,in Pit Bull: Lessons from Wall Street’s Champion Day Trader

Trading is a psychological game. Most people think that they’re playing against the market, but the market doesn’t care. You’re really playing against yourself. You have to stop trying to will things to happen in order to prove that you’re right. Listen only to what the market is telling you now. Forget what you thought it was telling you five minutes ago. The sole objective of trading is not to prove you’re right, but to hear the cash register ring…

That’s right. That’s why I like this phrase very much… “Being Right or Making Money”… oh…it’s a book by Ned Davis

Let’s ge back on track again.

There are 2 situations where you sell. One is where you are kicked out (Stops), despite the fact that in your trend trading analysis, the trend is still on…the other is where you walk out (End of uptrend).

When you get stopped out, you sell at a loss. When you exit voluntarily when the trend ends, you sell, either at a profit or loss. We will come to this later, as it is actually the last of this 5 steps. (Yes! There are 5 steps!…have you lost count?!)

“..eh siao lian eh…you sibei long winded leh…I dun like stop…I only play to win….if the stock knn lose money…I dun sell…so no loss at all…i keep till at least it comes back up then I sell… pui!…”

Yup, meanwhile the capital locked up cannot help you make money elsewhere (opportunity loss) while you now can join the majority of people to wallow about this sickening counter which you are still holding…..and not learning….

We have to be mean here…not having stops means having a very real opportunity of financial (trading capital) loss, so deep it may not be possibly recoverable…

Remember this earlier?

Greg Morris, Stadion Funds

And this?

Very briefly, here are some forms of

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lorong8
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08-Mar-2013 12:49

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http://cimtr.wordpress.com/2013/03/08/personal-mail_08mar-cash-and-a-visual-recap/

Hello,

We still in cash, despite a rather extended bullish run in US and a somewhat sputtering bullish tilt locally.

Market breadth is still negative, so there is no proper backing for any rise in prices for the past few days.

Here’s a quick visual recap of the ups and downs of 2012.

We have managed to hitch a ride on all 3 major positive runs in
Jan, Jun and Dec. We have also avoided the 2 big selldowns in Apr and Nov. Of course we were also stuck in the ranging markets in Feb/Mar and Aug/Sep
period, experiencing some whipsaws…a which were mitigated with good risk and money management rules.

So 2012 was good…but

http://cimtr.files.wordpress.com/2013/03/breadth_21feb13.gif

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lorong8
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04-Mar-2013 14:55

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http://cimtr.wordpress.com/2013/03/04/personal-mail_04mar-sold-and-in-cash/

Hi guys, market looks pretty weak...try to stay more to cash ok? :)

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lorong8
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01-Mar-2013 16:47

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http://cimtr.wordpress.com/2013/03/01/3-being-right-or-making-money-when-to-buy-33/

When we are waiting for the trend to confirm...and not trading blindly all the time...we are actually waiting for the lowest risk period to trade or enter the market....now that we have settled buy at the right time…what about the right price?

Have you often heard people mentioning price confirmation? Or wait for confirmation? This should be familiar to chart patterns traders…always wait for confirmation…else, the pending pattern is null and void.

“eh siao lian eh…this one I know….buy low sell high…. Very easy…. U tell me good time to buy? I tell what what is a good and cheap price to buy…confirm right?...”

Wrong.

Too many of us take the price of stocks like it is a material product…buy when there is a sale…cheap then buy…buy low sell high! Too high dun buy!

We often like to queue lower, hopefully the price will come down and hit us....come to think of it, isnt it quite a contradictory action? Look, you buy a counter because you feel/hope/analysed that it will go up...and yet at the point of buying....you are thinking that it will come down?

If you think that Arsenal FC will win a match...just bet win. Why narrow the odds for yourself by betting that Arsenal will lose 2 goals and come back up to win 3-2?

You get what I mean?

There is a way of buying cheap….only when you have thoroughly analysed the valuation, the financials, and the potential of the company…and feel that the current price is traded at much of a discount to it’s true valuation…so you buy. Then….you have to wait patiently for the market to realise that this stock is undervalued and pick it up… Could be 1mth, 1yr, 1 decade…

Buy and hold supporters or long term investors often are presented with a super long term chart of how equities tend to go up in the long term...check out the slide below.

Greg Morris, Stadion Funds

Anyway…most of us when we think cheap…we are not thinking of the valuation (most of us)…most of us are thinking of the relative term of cheap….last week $2.00 now drop to $1.00 …. Cheap! Can buy! Moreover this one is Temasek related counter…sure wont die one….

(Remember your primary school science experiment? Put left hand into cold pail of water, right hand in a hot pail of water. Hold for 1 minute and then put both hands into a room temperature water. Left hand feels hot and right feels cold....)

Those who bought at $2.00 will feel $1.00 is cheap...those who have bought at even lower will think its high....

Let me tell you…when the trend is down…most counters will go down….cheap will get cheaper…. Trend is like a tide…when it’s approaching high tide…almost all the ships will rise….

Price confirmation in general, for trend trading is the price moving in the direction of the prevalent trend. Yes, buy on the way up dude! I buy on the uptick. I advise my clients to do so. All, yes, all think that I am mad when I tell them, “this period is positive...but for this counter...better wait for it to come up then buy....”

Remember, most stocks will follow the prevalent trend...what if the counter you have chosen doesnot follow the trend? Price confirmation will help reduce the risk that you have chosen a black light counter...Yes...risk management again...

I did not know then what I learned later, what made me fifteen years later, wait two long weeks and see a stock on which I was very bullish go up thirty points before I felt that it was safe to buy it. I was broke and was trying to get back, and so I waited. That was in 1915.
Jesse Livermore

We have gone through 1) what to buy (for me liquid counters & close correlation with market, regardless of beta), 2) position sizing (how much to buy, depends on logical stop loss level and maximum drawdown), and 3) when to buy (upon establishment of trend and price confirmation).

Next up is when to

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lorong8
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01-Mar-2013 12:12

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http://cimtr.wordpress.com/2013/03/01/personal-mail_01mar-selling/

STI market breadth continues to dip downwards. So its good to profit take (if any) and exit any short term long holdings.

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lorong8
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22-Feb-2013 12:25

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3) Being Right or Making Money – When to Buy (2/3)

Hello!

For me personally, I use market breadth to measure trend.... and in my own dreamy world, I call it (trend) as sentiment or condition.... :)

There are basically 6 components of market breadth, Advance, Decline, New High, New Low, Up Volume and Down Volume.

One of the best source of learning breadth data for me, is Greg Morris, and the McClellans (not the whiskey) or from Investopedia. The McClellans created the MSI, or the McClellan Summation Index and the Oscillator. You can try google Greg Morris Breadth Data and McClellan etc to find from the large resource avaliable out there.

I collate the breadth data and come up with a simple indicator to measure trend, or sentiment, or condition. So in a way, this indicator is for me a leading “lagging” indicator, not the oscillating type of indicator.

(MA, ADX, OBV etc are lagging indicators…good for measuring certain form of trends….MACD Histogram, RSI, Stochstics are Oscillators….good for triggering entries etc….Do note that you should try to ignore oversold signals during uptrends on the oscillators).

Here below, you can see that my breadth indicator (in blue) helps me see when there is a trend forming when it is ticking up and ends when it is moving down. You can see that there were 5-6 windows of opportunity to go long in 2012…of course with 1-2 whipsaws smacked in too. This is the main drawback of trend trading.

http://cimtr.files.wordpress.com/2012/12/breadth05dec.jpg

I know I am pretty vague here (intentionally), on the formation and the basis of this personalised indicator. We have a chinese saying that your teacher only teaches you 70% (hey, I heard singapore pools gives you 70% as winnings and keep 30%...hahaha...dunno true or not man).

There are many ways to analyse market breadth data or charts. Some use it like a oscillating indicator, with oversold and overbought signals, much like RSI or Stochastics. Some try to lookout for divergences with current market price movements, much like RSI, Stochastics and perhaps MACD-Hist. Some use certain levels as trigger points, much like..erm..maybe ADX etc...

When you read adverts on “Secrets Revealed” on trading, and this and that...c'mon...if the trader is indeed so successful on his/her trading system, why bother to teach and lose his supposedly real trading edge? We cant be all so naive right? It’s either an exaggerated claim, or the trick does not work anymore…and the only way left to make money….is to teach….heheheh.

So now this forms a basis for me entries into the market. You will also see that this

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lorong8
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22-Feb-2013 01:04

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http://cimtr.wordpress.com/2013/02/21/personal-mail_21feb-a-bit-precarious-now/

Hello!

Breadth data is dipping downwards. Unrelatedly, HongKong is already negative and US is still positive…not that this has an immediate impact on us…

If breadth goes negative, we will not take action until

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lorong8
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20-Feb-2013 12:28

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http://cimtr.wordpress.com/2013/02/20/ta-1-0-fa/

Hello!

This is an excellent narrative. I read it from http://ivanhoff.com/2013/02/19/mark-cuban-on-story-stocks/ the originator is here > > http://blogmaverick.com/2013/01/10/the-stock-market-2/

“If the value of a stock is what people will pay for it, then Broadcast.com was fairly valued. We were able to work with Morgan Stanley to create volume around the stock. Volume creates demand. Stocks don’t go up because companies do well or do poorly. Stocks go up and down depending on supply and demand. If a stock is marketed well enough to create more demand from buyers than there are sellers, the stock will go up. What about fundamentals? Fundamentals is a word invented by sellers to find buyers.”

Hahaha, well said...from a company owner IPOing his startup in the dot com era to a present day investor/trader. I'm actually quite biased against buy and hold and fundamentals analysis.

I often read analysts reports to learn more about the company....never about the projected price targets or the forecastings....they never made any sense to me or mean anything to me....

We buy and sell the stock prices...the price action decide if you profited or lost...not the ratios, the earnings, the projections etc.

I prefer to swear by my sti market breadth analysis :)

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iPunter
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19-Feb-2013 09:38

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All must must thank sifu L8 for taking the trouble to give such valuable guidance...

It is good to keep it for reference too... Smiley

GorgeousOng ( Date: 16-Feb-2013 11:20) Posted:

Thank you! Appreciate your post!I am digesting a bit by a bit . Enjoy investing together!:))

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lorong8
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19-Feb-2013 09:31

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You are most welcome! We learn from each other :)

Market is still strong...good to retain long positions :)

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GorgeousOng
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16-Feb-2013 11:20

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Thank you! Appreciate your post!I am digesting a bit by a bit . Enjoy investing together!:))

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lorong8
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16-Feb-2013 01:16

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http://cimtr.wordpress.com/2013/02/14/3-being-right-or-making-money-when-to-buy-13/

Ok, now we have gotten what to buy, and how much to buy…this step of when to buy I think is the most exciting for us… so most definitely, there is quite a lot to comment on.

“eh siao lian eh….gin la gin la…sibei long winded leh…”

There are no shortcuts for successful trading (my opinion). We can’t choose which part of a trading system is our favourite and implement it (stock picking, profit target setting, buying), but choose to ignore the rest of the “package” (risk management, drawdowns, position sizing, stops), which is not interesting.

If you realise, the 1st 2 steps actually helps control risk (liquidity risk in the what to buy, and capital exposure risk in the position sizing….) the 3rd step here for me is also about controlling risk too! Let me get to it later.

The easiest and best odds for us to win and be profitabe in the markets is trade in harmony with the current prevalent trend…unless of course you are a genius and as smart as this guy ….

I believe the very best money is made at the market turns. Everyone says you get killed trying to pick tops and bottoms and you make all your money by playing the trend in the middle. Well for twelve years I have been missing the meat in the middle but I have made a lot of money at tops and bottoms. Paul Tudor Jones

Of course, different traders have different methodology…you can just say who is right or wrong.

One of the most helpful things that anybody can learn is to give up trying to catch the last eight – or the first. These two are the most expensive eights in the world. They have costs stock traders, in the aggregate, enough millions of dollars to build a concrete highway across the continent. Jesse Livermore

Here’s a few more quotes which I find relevant….relevant 100yrs ago, and still do today…

In a bull market your game is to buy and hold until you believe that the bull market is near it’s end. To do this you must study general conditions and not tips or special factors affecting individual stocks.

I have learned to study general conditions, to take a position and stick to it.
Jesse Livermore

Remaining in synch with the trend — no matter one’s personal feelings — is the best assurance of participating in bull markets and protecting precious capital in bear markets by sitting in cash…Of course, there are many strategies, and the one discussed in these reports is just one. It is a good fit for many, but certainly not everyone. Kevin Marder

http://www.marketwatch.com/story/so-far-so-good-for-equities-2013-02-07?link=MW_TD

There is no need to trade all the time. It is best to buy at right time and at the right price. What is the right time? For me, that is when the uptrend has properly established itself. Meaning, we will never be able to buy right at the bottom. We are not bottom fishing here…just looking to capture majority of the swing… The main question now is, how the ~~f**k~~ hell do we know when a trend is on?

There are many ways to determine and measure trends. The most basic

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lorong8
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08-Feb-2013 21:50

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http://cimtr.wordpress.com/2013/02/08/still-long-though-pretty-precarious-now

Hello,

Still long, market still positive (STI Market Breadth), even though start to be more weak now…

personally, still good to stay long ... my opinion ok? :)

http://cimtr.files.wordpress.com/2013/02/pmail-08feb.png

cheers

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lorong8
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08-Feb-2013 12:03

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Being Right or Making Money – Position Sizing

So now after shortlisting the possible candidates of counters. We can move to the next step. Of course you can certainly add on more critera (filters) like spreading across sectors/industries etc...

I definitely do not hunt for hot tips, speculative, pennies, or the lastest and current most fashionable counters to dabble in... anyway..that's my “filter”, not necessarily yours. :)

2) How Much to buy (Position sizing)

Position sizing is a disciplined approach to decide how many quantity of shares to buy. It is close to deciding to how much money to risk, but its not exactly the same thing.

“Eh siao lian eh...this one simple la... I got $50k to play...if I bio 5 counters, I very fair one...each one get $10k...swee right? Eh wait wait...dun think I stupid... I also prefer smaller counters...move more, I make more...and faster!”

Ya, and die faster too.

In my opinion, apportioning equal lots or money across the counters is not actually spreading risk properly. I like to analyse the market as a whole first, and if the conditions is right, enter, and at the same time apportion equal risk exposure equally across all the counters.

Textbooks often measure risk in terms of volatility. Sharpe ratio, Standard Deviations … etc a lot of counters and funds are ranked according to their volatility when it comes to risk.

So, it is not the same if we have the same amount in GSAT (Nasdaq), which moves like 100% of its share price in 2mths, and MMM (Nyse) which moves 10% in 2mths, you can see that it is totally not the same equal weightage.

I favour using volatility to decide my position sizing. Let's use Standard Deviation as an example, you definitely have this indicator in most basic charting software.

“Eh siao lian eh...i checked liao...my chartnexus dun have standard deviation leh...can dun use this chim indicator or not...wa lau eh....”

You can use the bollinger band...the upper and lower band is based on how much standard deviation you want to input.

“Eh siao lian eh...diam la, I also know...testing you only...”

You can use 1.5 or up to 3 as your parameter. 1.5 represents around 85% of the price movement, 2 is 95% and 2.5 or 3 is 99% like that.

So now, incidently, you have also pinpointed your stop loss! For example, if we use the STI Index as an example (sorry, I'm not comfortable showing SG listed tradable counters....dun want compliance chasing me...) you can see that my lower bollinger band is at 3180.5, so the standard deviation is 3260.3 – 3180.5 = 79.8

So if I were to buy now, 3180.5 will be my stop out level. If I wish to risk S$1,000.00 for this trade, then my number of shares to buy is now: $1,000/79.8 = 12.5 shares or units.

(The $1,000.00 is arbitrarily chosen here.... AND, you SHOULD NOT arbitrarily choose this figure too! Most online advisors would recommend 1% - 2% of your capital to risk per trade. Alexander Elder recommends no more than 2% per trade or per counter AND no more than 6% total at risk for all current open positions. I will try to elaborate more in future when I rehash the post on maximum drawdown.)

So there! That's position sizing. Do the same for all your counters....this way now...you have just spread equal risk (measured by volatility) weightage across all counters.

Now what about people who trades using support and resistance, or buying on dips during an uptrend?

See the white line? Now suppose that is the current support line, and it also looks like a prior minor low or dip...so that can be your stop loss level, at 3159.46, so similarly, the number of units to buy is S$1,000.00 / (3260.17 – 3159.46) = 9.9 units or share.

I tend to use this method for attributing stop loss and position sizing when Im using Elder's Triple Screen method (or buying on the dips during bullish uptrend period) to analyse counters.

A good place to train chart pattern trading is here: peterbrandt.com or his book on trading dairy. He also refers extensively to Magee's technical analysis book. (which I have not read as I am totally uncomfortable reading / spotting chart patterns)

Of course we also have chart pattern players....there is many ways to decide the stop loss (set a point where the pattern has failed or fail to breakout etc) and from there use the same calculation.

I think I have bore you enough...disciplined trading is systematic and damn bloody boring...

“zzzz...eh siao lian eh....why never wake me up?!”

….. !!! ….

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lorong8
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07-Feb-2013 12:53

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Being Right or Making Money - Liquidity

Casinos often always win. The house have the advantage of better odds against us. Of course, with the right strategies, you can swings the odds and line them in your favour (abeit somewhat illegally).

Likewise, we are often told the market is right, our opinion isnt. Too often, we are gulity of trying to reason with the markets. But as ~~punters~~ investors or ~~gamblers~~ traders who are ~~addicted~~ actively intuned with the markets...we definitely lose out to institutions or fund managers with their large armies of researchers and network of information. So what can we do?

“A speculator must concern himself with making money out of the market and not with insisting that the tape must agree with him. Never argue with it or ask it for explanations. Stock market post-mortems don’t pay dividends.” Jesse Livermore

Just analyse the price patterns.

Price is the utmost important factor in trading (my opinion). It is the price that we buy and sell...not some derivation of earnings and share price or valuation of future earnings (PE, PB, EPS)

" The concept of paying one-hundred-and-something times earnings for any company for me is just anathema. Having said that, at the end of the day, your job is to buy what goes up and to sell what goes down so really who gives a damn about PE's?" Paul Tudor Jones

Trading profitably and consistently is siding with the higher probability outcome, but of course that does not mean you should expect to win all the time. Better odds does not mean confirm win. You must know when to fold. Better odds doe not mean high accuracy.

“..it's ok to be wrong. Just dun stay wrong.. “Greg Morris

Let me try to share some of the stuffs I have learnt and picked up, and used successfully...and of course, they are all boring steps....no exciting wordy headlines like “How to spot a 10 bagger winner all the time”...”How I predicted the bottom of this stock and took profit right at the top...”, “80% accurate system”, “How I turned 10k in 100k” etc.

This is the1^st of 5 Steps.

1) What market / counters to buy

“Eh siao lian eh, knn, you always repeat the same shit...like niam keng like that”

Because we often repeat the same mistakes and get blinded by greed and hope when trading ma. Read this from another angmo...

“I always ask Nancy to read my memos ... She seems to think being my wife gives her license to be brutally frank. “They’re all the same...They all talk about the importance of ... theneed to avoid losers, and how much there is that no one can know.”The truth is, anyone who reads my memos of the last 23 years will see I return often to a few topics.This is due to the frequency with which themes tend to recur in the investment world. Humans oftenfail to learn. They forget the lessons of history, repeat patterns of behavior and make the samemistakes. As a result, certain themes arise over and over. Mark Twain had it right: “History doesn’trepeat itself, but it does rhyme.” The details of the events may vary greatly from occurrence tooccurrence, but the themes giving rise to the events tend not to change.” http://www.oaktreecapital.com/MemoTree/Ditto.pdf - Howard Marks – Oaktree Capital

Haha, here is where technical analysis seems to agree totally with fundamental analysis. Look for liquid markets or cou nters. Unless you are the portfolio manager of a Ivy League fund...it is best to try to trade liquid counters. Text books will say this is liquidity risk.

If you like to buy an illiquid counter...you may find it difficult to sell if the need arises. Thus incurring unnecessary slippage (spread of the buyers and sellers). So for me, I like to only look at counters with a minimum monthly average of more than 200k or lots traded daily. I have 1 bloody exception in my pseudo portfolio...I use it as a “stabiliser”.

I prefer to add 1 more criteria here....liquid counters that moves well with the market....

“Eh siao lian eh...knn...sibei sian leh.... no tips ah? I wanna make money, fast, now!”

Told you trading is boring liao.

Let me continue tmr ok.

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lorong8
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06-Feb-2013 12:29

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Trade Like a Casino 2 – A Brief History of 2012

…A shameless plug of Stephen Hawking’s excellent book….

okok, now lets bore you further…we continue…

3rd Window Mid Jun12 – Mid Jul12

I know I was pretty long winded and likes to repeat stuffs back on June12… but sometimes it is for good reminder to be pretty long winded and repeat stuffs. It can be at times quite irritating to see someone pretty long winded and repeat stuffs…. oh.

Ok, here’s where I suddenly had amnesia (ow you know why I was pretty long winded an likes to repeat stuffs)…changed our 250k cap into a 200k cap. This also told me one big thing…no one’s reading my mails! Pui!

So let me make an adjustment to all gains or losses from here to year end by multiplying 1.25 to all P& L (*250/200)

This time round, we gained $13.391 (from 10713*1.25)…not bad… 3 cheers for trend trading! Now we have $26,365 “in the bank”

4th Window, Mid Aug12 – Late Aug12 & Mid Sep12 – Early Oct12

A good window to practise and learn about price confirmation and whipsaws, and of course, testing all your risk management “armour”. No positive price confirmation means no trigger, despite market conditions measured as positive.

August experienced a whipsaw, and cumulated with a loss of -$5,050 (from 4040*1.25), and now “bank” has $21,315 for a 250k cap.

Fifth, the Last window for 2012 Early Dec12 – Present (still open as of 05Feb13)

We now have a running paper profit of around $16,516 (based on 250k outlay).

Of course we may not be able to grab it all if it proves to be a real market top…. trend trading is about capturing the main bulk of the big moves, not the absolute top or bottom. You have to give up a bit of the bottom and top…cos we only know that it is trending or stopped trending…after the bottom and top has formed

So for me, 2013 has not opened yet…maybe we will start off with 280k as market cap, lets see how first.

Let you be my auditor. p

cheers

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