Par 5.1 – Process

Every time a new learning comes up, I always found myself feeling like I already uncovered the last missing piece of the puzzle. It feels so good while saying the phrases like:

“I finally got it!”

“I knew it, this is the secret recipe of trading”

“At last, I’ve learned the last thing I needed to really start earning!”

“My “AHA!” moment had finally arrived.”

“If only I had known this before! I might have done this , done that early on!”

A triumphant moment were I feel that I have finally uncovered the secret of becoming profitable in trading. After trading for quite awhile, reality bites! The moment will eventually subside and I will see myself doing the same process of studying and researching to find what went wrong with my trades? The cycle repeats over and over again.

At some point, I’d asked myself:

Am I really moving forward at all?

I’d figured out that there’s nothing wrong with it. It just that I was inside the “Process”. The process of learning.

Started out my journey in stock market with the simplest idea in investing. Never knew what lies ahead nor what danger I may face. Then reality came to slap and woke me up from delusional day dreaming. This is where most of us really had started.

“Warren Buffet, the greatest investor of our time!”

Research after research…

Failure after failure…

Different personalities, status in life, interests, upbringing, etc..

and that one common goal…

to SUCCEED.

With almost nothing in terms of skill and knowledge, the very hard part of getting into the business of trading is to find the path where you head to BUT it’s even gets harder when you don’t even know where to start isn’t it?!

You do your own research, read most of the books you find, go to the seminars, does it sound enough? Not really!

I’ve learned technical indicators and strategies readily available in the web. Still it isn’t enough!

Dissected the port snaps of the good traders in social media still it isn’t enough!

what could be the missing ingredient?

Exposure.

Exposure means, putting what you know in action. Backtest your strategy using historical charts. Collect lots of data about the dynamics of your setup to learn the when to trade and not to. Put a great amount of time in practicing and refining your strategy.

How many charts? 100? 500? 1000?

(1 setup) x (10 years historical data) x (300 stocks) = 3000 charts!

Collect as many as you can!

Get hungry with the information you get in practicing. We have lots of data readily available in many free charting sites right now. Dissect like how you see them in live action. Put yourself as if you were trading that very moment of a certain historical data.

In comparison with the way I collected charts before against now that I fully understood my setup was way different. It’s different when you just:

“Ahh, it broke-out and it should be sold here.”

than when:

“When it broke-out, the volume was this. The formation of the candle where like this. The candlestick had a strong close. The breakout happened during the consolidation on a 52 week high. The behavior of the stock was good and so on.”

If you know what I mean. By increasing the level on how a trader should be looking into a chart will greatly stepped up the game into the next level.

If you are just starting out in trading it’s OKAY. No need to worry on how long you would spend in studying or how far you would need to travel. Would you give yourself time to learn and practices will make the difference.

You won’t get into the next level without getting your hands dirty.

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There’s no shortcut here, everyone goes into the process.

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ZFT: My Sirius Lee’s favorite notes

As one of his avid follower, I’ve been re-reading his blog from time to time just to let the lessons really sink in. I took some of my favorite post which I found very valuable for me to help me further develop my performance. Just sharing my favorite posts from one of the most admirable ZFT trader, Sirius Lee.

Soul Searching (finding your trading profile)
24-Jan-18

It’s true that after you’ve accomplished your “soul-searching” in the market, you will have accelerated progress. Back in 2015-2016, I was still trying to find what kind of trader I am, then 2017 came, all the data I gathered for almost 2 years gave me the insight of what style I should stick to. I knew before that I probably will be a momentum trader but its different when you have data to back it up because it’s probably not a good idea to trust your instinct alone.

Excerpt of last night’s convo w/ Tinnitus:

 

quota10

 

Find who you really are as a trader and accept its strong and weak points!

 

~*~

Objective trading
15-Jun-16

When you’re having a winning streak, you tend to overbet and at times, disregard a few rules. This is what I learned from my behavior when trading. Sometimes I end up at breakeven or at a loss. We were reminded by our mentors that you don’t need to trade every moving stock, we just have to find the stocks that could give us decent rewards, with less stress, easy to analyze that might give us our quota for the month then we can pause, take a breather, rinse, and repeat. Not only it is healthy for the portfolio but also on our mental state.

In light with this lesson, I follow my 10% port quota per month. After I hit this, and see other potential plays, either I enter with minimal allocation or just watch. Sometimes I have added gains, sometimes it lessens but what’s important is you religuously follow your rules.

Why don’t you try it out? It might not be the fastest way to grow your port but at least you have a clear cut objective and not just trade blindly hoping for that 100% gain in just a few trades.

Trust me, it’s easy to say but hard to do. Think of this as discipline training.

~*~

TIPS!
29-Jun-16

Are you the type of trader that can’t seem to pull the trigger because you’re afraid to lose? If you are, then you might be showing signs of having loss aversion.

  1. Always define your trade objective, follow that objective, and don’t change it (if you keep changing your objective, you will get confused, you will overanalyze, and you probably might blame yourself for not sticking to your original plan).
  2. Stick to uptrends. Yes, they might not have 100% hit rate but if you manage your risk properly and have rules that you follow then chances are your net gains on your winning trades will outweight your losing trades. Angkas lng ng angkas 🙂
  3. Avoid Sideways/Downtrending stocks—most basic tip. xD
  4. Personally, if I see 2-3 Bullish signs on a stock, I just wait for the trigger then buy. Don’t overcomplicate things, hindi ka talaga makakaexecute ng trade nyan or makapag execute ka nga kaso late na. xD

~*~

Unlocked: Fulltime trading
05-Oct-16

It started when I read Zee’s blog last January 09, 2015. Curiousity got me and realized that of all the things that I’ve read in the internet about trading, that his is the most sensible one. I got in the program and finished the formal course. I dreamt of freedom just as many others did. This came at a cost and certain sacrifices were made. The thought of delayed gratification is what kept me going. A little over a year later, it paid off. I quit my job, transitioned to full time trading, and now living a simple life.

The thought of leaving a regular-paying job scared me out of my wits. The market is full of uncertainty and randomness but I recognize the risk of this decision and at the same time the potential it offers. That’s why it was best to stay objective, consistent in meeting your targets, and focus on high probability set-ups. This is what I’ve been taught, this is what I’ve been following until now, and that is why I was able to shift careers. This time, to the career that I love doing w/o getting burned out even if I spend hours and hours just looking at my computer screen. This goes to show that the actual will to take, is often the only thing that’s necessary. If you really want something, you can figure out how to make it happen.

When you dedicate yourself to be a full-time trader, you enter a world of 100% accountability. Nobody is making you get out of bed every morning and no one is telling you what to do all day. You are the driver of your own income and you are the only one who cares enough to generate it. But like all careers, you have to be keen and work hard to be successful. Money isn’t just going to fall into your lap because you decided to become a trader. If you have the wrong expectations and aren’t willing to work hard at it, you’ll have problems.

For a person that only has market experience of almost 2 years, until now its hard for me to conceive that I actually let go of the corporate routine that I had, it’s completely different on how I usually operate daily. Now I have more focus, concentration and there’s more time to improve myself. I’m constantly a work in progress and I’m satisfied on what I’ve accomplished, so far. The program has changed things a lot for me. To those that had gotten in, if you’re currently stuck in a rough patch, don’t quit; keep on studying, documenting, and monitoring to find out what areas needs improvement. We’ve all had been there even our mentors. I read this somewhere and somehow was able to relate”One’s overall well-being appears to be related to the proportion of time and effort devoted to activity with a distinct purpose.”

I won’t forget to mention my mentors Zeefreaks & Kidlat for being most influential figures that showed me and my batchmates (Astra) another way. Their guidance has opened many doors of opportunity for the tribe. May we expand and see our dreams to reality. A heartfelt Thank you is in order.

I’ll leave this article with tips from the wise:

zee-tips-on-fulltiem

kidlat

No work, no traffic, & no deadlines…

Fulltime, where the real journey begins.

Thank you all for reading, wish me luck. 🙂

~*~

Tsupitero struggles

16-Feb-2016

The wonders of the ZF system is that you could actually learn and choose what kind of trader you want to be based on your schedule, personality, and preference (See types below).

Day trading – Attempts to profit from the market within the day, leaving no positions open when the market closes, and does not leave positions overnight.

Swing Trading – Attempts to profit from the market holding stocks within at least 2 days to a week.

Position Trading – Attempts to profit from the market holding stocks within a couple of weeks or months.

After much thought, I was leaning towards Day trading / Swing trading since patience is not one of my strong suits. After all, who doesn’t want quick gains, right?

Take note that when day trading, I’m very strict on my volume. I need to get in and out of the trade without much worry on liquidity so I could reap the rewards right away. Hence, I risk only about 10%-30% of my equity, more often than not, I set Target prices / GTC and my trade objective is clear, sell on resistance or first sign of weakness. It’s why most of the time I get ‘iwan’ on certain stocks after selling since I don’t put stops.

Now, there are times when I had consecutive wins, Superman Syndrome kicks in; feeling good about myself and break some of the rules. That’s where all the hard work/analysis, previous gains goes down the drain as I increase my volume and the trades goes south.

BANG! Cutloss in less than 10mins. I end up at break even and sometimes at a loss. When this happens I calm myself down, watch a movie, play basketball, read motivational quotes, probably play video games, accept, and move on (a better option though is to ask Robert Sy and Kidlat Santelmo some of their stashed chick pics or just backread their naughty convos. :3). That’s just how Ms. Market humbles traders.

These are the my common struggles when I activate my day/swing trading mode:

  • More opportunities of over trading since you just might get enticed in trading every moving stock.
  • Since good trades typically yield only 1:1 risk to reward or less, one loss can deplete the gains of several successful trades.
  • Emotional Roller Coaster due to snappy decision making.
  • Prone to whipsaws / chasing since you bank on momentum.
  • Spending a lot on commissions and trading costs.

I’m still in a gradual transition from swing to trend following since that’s usually where the big money comes in and most of the time, that’s how my mentors Zeefreaks/Kidlat make a killing.

See more from his blog here:

https://feekshonull.wordpress.com

P.S.

Even if I don’t know him personally, he has been a good person to talk to and never fails to answer my questions without hesitation even when I wasn’t in the tribe yet. Goodluck for those who will get chosen to be Sirius Special Forces (SSF)! I’m pretty sure you’ll we in good hands. 🙂

Chapter 4 – Light

fantasy_fighter_by_thomascologne-d39a3h9.jpgDiverted my focus in my mental skills as well as diving within the culprits of my erratic performance. I had made a choice to put more attention in my trading without sacrificing my output in my day job. It’s never too late to do the things which I should have done earlier.

Part 4.1 – Embrace the fears

Part 4.2 – Revenge Trading

Part 4.3 – Leap of Fate

Part 4.4 – Spark

Part 4.5 – Randomness

Part 4.6 – Mindfulness

Part 4.7 – Less is more

Part 4.8 – In due time

Part 4.9 – Habits

Essence of cutting losses in trading

Mostly, noobs in stock market don’t even consider cutting their losses small. The idea that the losses incurred in their portfolio were merely “paper losses”. A negative value which will only become real losses once the shares were sold. It’s common to a newcomer to start fundamentally where these kind of strategy of “not cutting losses” due to the “intrinsic” value of the certain stock would eventually correlate to its real market value sooner or later.

In what I see, the problem starts when they shift into “Trading”. In Trading, one of the basics a trader must learn is to cut their losses short once the setup was violated. There where the conflict between “thinking paper loss” against “thinking the setup was violated”. It’s normal for a  newcomer to adjust in this kind conflicting idea. They will hold a falling stock until they incur huge paper losses but because they shifted into Technical analysis sooner or later once the frustration had subsided eventually they would realize that they need to cut the position. Due to the “belief” which they have learned in analyzing the intrinsic value they tend to have faith in the stock they bought. Technical analysis is based in chart patterns and not the value of a certain stock. A technical trader won’t hesitate to buy at a higher price as long as they would see good rewards.

I’m no different to anyone. I struggled much with Hope and Greed which plague my trading performance for quite some time.

Not cutting my losses immediately

Not exiting on sell signals

Not selling on the target price

Not exiting on time stop

Seeing profits in portfolio makes me think that I still have plenty of room to risk. Most of the time, a negated trade usually ends up into a bad trade if I wasn’t able to cut short. Adjusting cut levels and re-planning are signs that a trade would probably end up becoming worst. In the hope of this and that..and so on.

The fight between your subconscious and muscle memory happens the moment price hits your cut loss price. If the muscle memory had enough historical data saved in a trader’s brain bank or have enough discipline to obey the rules the situation would probably be easy to handle but if not, there’s a good chance that “Hope” would take over and get in-charge with the situation. Some of the phrases which indicates that “Hope” have taken over a trader’s consciousness:

“Cut or not to cut? but commission loss would be wasted.”

“Oh, wait! The sellers are few and price might go up!”

“NO! This price drop is still acceptable, I just need to adjust it 2 more flucs below.”

Wait! What’s happening? Why the price is falling? It shouldn’t! (emotionally paralyzed)

Oh F*ck! The price drop was huge maybe it will bounce few flucs from here. I’ll hold on!

I’m already down by -10% and the price may close at -5%. (Price closed -20%!!!)

The moment I found myself hearing these words in my head I start to pack my things up and raise the white flag. I’ll just accept my defeat. These are dangerous signs which could lead into a disastrous damage in my portfolio. Bragging self with the profits on the past trades could easily get wiped out in a single swoosh! Holding on into uncertainty on the downside is even lethal!

Let me show some samples of what I was talking about:

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If happen that a trader wasn’t able to cut their losses at a certain price level at any point in time they are already vulnerable to uncertainties. Uncertainty means Blackswan, Broker lag, Gap down, Huge Sell-down, Power Interruption, Intermittent internet connection, Needed to go somewhere, or any emergency. It may also happen that price would go up of course but that doesn’t happen all the time and doesn’t mean that you have to consider it in your trading plan. You don’t want to succeed just by getting lucky, do you?

Hope is not a strategy.

This is NOT about being “unlucky” in getting caught by an unprecedented price drop rather this is about taking responsibility of your trade. Once you’ve chose to risk or sacrifice a few more price fluctuation then prepare for the worst.

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In just few minutes this could happen.

That day I was just few minutes out before the massive drop happened. Cut loss had saved me. It was shocking like a hurricane of sellers lining up to get out. Panic all across social media. A friend of mine was quite unlucky in that event but I’m happy he’s wasn’t “All in”.

There were a lot of small stories I have in “cutting my losses small” where they turned into overwhelming ugly losses which dragged me down. Nevertheless, without them I could’ve not understand the proper mind setting about it.

Cutting your losses small will keep you in the game and will give you enough room to ride those which could yield you a better profit. If you lose too much in few trades you won’t be able to ride those good ones.

“Protect your capital”

The idea is actually simple and easy to understand but the proper understanding and acceptance of the idea differs in each trader. Some say it reflects the trader’s behavior, personality, upbringing, etc. but at the end of the day it will depend to their own capability on how to perform it effectively.

Marty-Schwartz Trading Quotes.png

If you’re still having trouble in cutting your losses short, this would be a good time to make a good reminder of yourself on how to execute efficiently.

As they say,

“CUT NO MERCY”

Some good references.

Cut Losses with Confidence!

https://feekshonull.wordpress.com/2018/07/13/cut-losses-with-confidence/

Trading 101 : The Art of Cutting Losses

https://zeefreaks.blogspot.com/2014/11/trading-101-art-of-cutting-losses.html

Understanding Bear Market

In bear market, most of the stocks which belong to the stock index falls. Expect that in this season the investors/traders show lack of enthusiasm.

If you haven’t yet experienced what it’s like to be trading in a bear market it’s similar when you try to please someone who doesn’t like you at all.

bear1

Even if you do everything to the utmost of your skill eventually you will notice that mostly you’re merely trading in vain. Expect more “bull traps” and “breakdowns”. As they say, +5% gain is more likely to be good profit target in this season. I know some traders who trim their port allocation down to like 25% to 30%. Some are just trading small to satisfy their love for the game and yet there are still really trades to profit from. Others take this as opportunity to go for a vacation and spend time with their families.

It’s good to understand that the market works in a cycle where bear market isn’t a good season to be trading like a rockstar. Since PSE doesn’t offer the “short” side yet, you might probably consider trading less or better yet DON’T TRADE AT ALL.

“Cash is also a position.”

There’s a huge difference in price action. The momentum will most likely diminished unless the stock is an Outlier. This is the season where prices are being dragged down to 52 week low, multi-year low or even all time low. Sellers are more compare to buyers that’s why prices fall unbearably.

Outliers from Zeefreaks:
https://zeefreaks.blogspot.com/2016/09/outliers.html

Let’s look at the following charts I’ve taken on 27-Mar-18. I use 100MA as my reference to identify the trend though you can use other indicators such as cloud, EMA, etc.Untitled.png

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If you are a trader who isn’t aware yet on how you should be trading in this kind of market better to step back for awhile and assess the current market. Plan carefully and be very selective with your trades. You may still see setups in your territory but the chances would likely be less since most of the traders are “hesitant” to jump in.

If you are a trader who came from a huge loss and trying to regain them back, think again. Perhaps this is a good time for you to purge, review your trade journal and further develop your strategy for when the bull market arrives you will have a better chance to regain what you’d lost.

If you are a trader whose YTD% from the recent rally was up better slow down and protect your profits. Don’t let your guard down because at any point in time market might suck your profits back. The market has its own way on how to overwhelm traders.

When I was new in trading, I was overloaded with all this terms that includes technical indicators. After I learned what technical tools I will use I already knew what bear/bull market and how I should be taking up actions accordingly BUT I fail to do so. There were a lot of psychological factors that I wasn’t able to fully digest and that includes my lack of discipline as well. My thinking was just to trade the setup were I was good at without considering how important is the psychological aspect of the market. With the painful lessons I went through, I was able to accept the fullness of the idea. Failures helped me become more aware of them. This was just about my experience but I knew traders who have very good comprehension in absorbing these ideas just by telling them and right away putting them in action.

There are traders who also loves to trade in this season since the prices fall, bounce setups are in play. My mentor just got generous to share his bounce trades during a falling market.

“Massive drops = Massive Bounces”

Check this out:
http://robotfromalphacentauri.blogspot.com/2018/03/a-trifecta-of-bounces.html

Of course, there are still good trades around but just keep in mind why it’s called Bear market because bears drag their enemy onto the ground, just expect more fake outs and traps.bearbull.png

Some thoughts from my mentor in Bear Market:
“If limiting your trades to protect your capital is your strategy for now, then do it.”
http://robotfromalphacentauri.blogspot.com/2018/06/q-bear-market.html