The Pattern Trader

THE LIFE OF A PROFESSIONAL TRADER. HIS MOTIVES, INSPIRATION AND VISION.

June 2009 In Review

Okay, so June wasn’t such a hot month … at least not in the market anyway … can’t say the same for the weather. Its been scorching here, in Macau, K.L. and in Jakarta. It has been another busy month for me yet again as I ran from capital to capital to cater to hungry traders wanting to learn more and more everytime I meet up with them. I can’t complain because I’ve learned a great deal from them too and I must be the hungriest of all of us.

The most memorable part of June 2009 for me were the two weekends I spent with my family in Macau and in Kuala Lumpur. Although the Malaysian trip was a working one for me (I had a Gathering on Friday 19th, a Preview and Candlestick Workshop on the 20th), I brought my wife and kids up for the weekend and had a real blast going shopping and sight seeing - something I’ve not done since I started teaching in Malaysia!

On the 18th of June, WAT graduated its 29th Batch of students …

… Jakarta got its Technical Analysis Masterclass on 27 and 28 of June … Another blow out session!

Here are some of the comments …

It’s something I’ve never seen before! I’ve been trading like idiot!
~ Stephen Yuwono

I’ve learnt quite a lot during the weekend. It’s an excellent way to remember all the aspects of TA and chart observation. It’s detailed enough though time is limited. Not boring at all.
~ Sunarto Tinor

Learned more than I expected because I got a clearer and clearer understanding about putting TA to work. Also above all, I can see what I did wrongly in my unsuccessful previous trades. Conrad, you did it again! You are my real guru (shi-fu). Two thumbs up! Thank you for your generous tips, advice and lessons!
~ Hans

Wow! It’s mind blowing. Thank you very much for sharing with us. The essence of a successful trader’s journey.
~ Jui Jui

Conrad is an excellent trainer with a broad knowledge on a global scale. He covered all the topics as advertised and provided in-depth analysis of every stock presented.
~ Jokie Sutanto

Conrad is an experienced trader and he understands what he is teaching.
~ Kamaludin

Conrad has good experience and knowledge and transfers this knowledge to his participants in a good and interesting way, with new methods and new ways to think and analyze.
~ Dedy Basri

Thank you Jakarta for a really wonderful weekend and thank you to Jui Jui and my alumni for entertaining me with some of the best food I’ve ever had! Cheers to you all!

Lastly, July saw the release of my most influential report to date; Oil and Energy.

Everything you needed to know to get started trading in this volatile sector is in this report which includes all the Oil, Energy and Coal ETFs, stocks and futures counters plus the usual cycles and trends of the sector and a market analysis. The BONUS! ETFs for the month are also must-haves as they relate to the Asian and China markets.

This report is Part 1 of 2 with Part 2 slated for July’s release. It will be about the other half of this sector; Natural Gas, Utilities and O&G Exploration.

So get your copy now at: www.patterntradertools.com for only US$1.99!

Catch our promo clip on YouTube:

You are going to regret not having this awesome report if you don’t get it soon! *wink*

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Going forward, the biggest event for me in July will be my Commemorative Gathering having completed 40 batches of WAT regionally and completing three happening years of the Pattern Trader Tutorial. This gathering will be the biggest by far and we will be hosting it at M Hotel on the 17th of July starting at 7pm. Don’t ask what time we’ll finish! (Details at a later date so please don’t swamp me yet!!)

July will also see a record 4 batches of WAT starting with Batch 31 in Singapore tomorrow (this batch was sold out more than three weeks ago!), Malaysia’s 8th batch this coming weekend and Jakarta’s 6th on the last weekend of the month. SIngapore’s 32nd batch will start on the 29th. To add to an already packed July schedule, Wealth Academy will birth more than 80 new investors between the 9th and 12th of July. There goes all my weekends again! *sigh!*

The market in June was merciful. Everything that was supposed to happen, happened. The counters that were supposed to move, moved. News that was supposed to meet expectations, met expectations. There were no ugly or pleasant surprises. But the market continues to be funky as expected. I don’t expect that to last … going into this shortened trading week, the pre-earnings season volatility will start kicking in. I’m expecting a pre-4th-of-July rally towards the end of this trading week and after that rally next week … my favorite time of the quarter - Earnings Season for Q3. And then the start of the worst quarter of the year. This is going to be fun!

I will post the Market Preview for July in a couple of days. It’ll be sticking my neck out real far but I think it’s going to be a stinker.

Till then, trade safe and happy hunting as always!

Week In Preview - June 22, 2009 BMO

With a little more than 2 weeks to go till the start of Q3’s Earnings Season, the market is going to see a lot of action between now and then.

This coming week is going to be a bumpy ride with the market anticipating and then reacting to the Fed’s June Monetary Policy meeting which will be due out on Wednesday at about 2:15pm EST. The Tuesday before that, Existing Home Sales will be keenly watched as current inventory levels are expected to decline. Anything less will rock the market. And before the Fed does its thing on Wednesday, New Home Sales will be the market mover.

Thursday’s GDP report will then take over the rocking with Personal Income and Spending taking over the market shaking duty on Friday.

All in all, I am expecting a major downside move this coming week.

Since the start of June, DOW has failed repeatedly to break and hold above 8,770 except for one occasion and then promptly broke back down to 8,500. DOW also failed to hold above the critical 200DSMA for more than 8 days and is not below that MA again.

On weekly candles, DOW is wearing an Evening Star. Level 1 Reversal Patterns have never failed on DOW’s weekly candles.

Although it can be argued that the NASDAQ is well above the 200 and the S&P500 is also holding above the 200, I won’t be convinced about a return to the bull market for many reasons, one of the main reasons being the DOW is not there yet. The true test of the strength of the past three months’ rally will be put forth in two weeks’ time when Earnings Season gets underway. We shall see what kind of results turn out after such a buoyant Q2 earnings season which was, IMO, empty and without guidance. Based on what I saw in Q2, I am expecting much worse to come.

The Fed’s effort in buying up the 10yr has been a waste of money and if the 10yr yield is any indication, Ben & Co should be hiking rates this coming Wednesday. If they don’t, my Oil and Copper are going to be pretty good bets. If they do, the sky will fall and Geithner & Summers will have to have more “tricks” up their filthy sleeves.

Be watchful, be cautious and be ready to take action because if I am right, this week is going to set the tone ahead of earnings season and the tone will be a bearish one.

Plus if you read the previous post, it doesn’t seem much like a joke now, does it?

The Straw That Breaks The Camel’s Back(side)

Have you seen the shape of a camel’s back? It slopes all the way down to its arse.

Have you seen the shape of the DOW? It looks like it’s about to slope all the way down to an arse too. And it’s about to make all of us look like one too … an arse, I mean.

I have been waiting for the market to give me that correction that would vindicate my postings from last year and early this year but it never came. The April Sucker’s Rally drew everyone into its awesome uptrend and I fell for it yet again, as if not learning my lesson from last year. I always knew that the underlying fundamentals were never there to support this rally and I also knew that the outlook for the market is dreary, bleak and anything but bullish in the medium to long term. I held to my analysis that there was always going to be more shit than shine for 2009 and 2010. I kept my faith that the next real rally won’t be till 2012.

Yet the power of this rally would have you abandon your faith for the draw of the trend. And what an attractive trend it has been. The more it ran up, the more you believed that you were missing out on a fabulous opportunity to buy the lows. And the lows kept getting higher. You kept the discipline and waited to buy the dip and the dip never came. You stared at bullish convergence day after day wondering if it wasn’t too late to take an entry and the days went by one by one, getting more and more convergent with each passing minute.

Then as the dream trend becomes more and more surreal, you stare, ponder and your finger gets itchy to take the trade. And before you know it, the market makes a 3% correction and you’re suddenly back from slumberland, returned to a bear market that had you entranced for three months. All the great news that once flooded the headlines are now reading dread and woe. All the bullish talk is suddenly hawkish and reserved. All the hope and hype is now hell and high water.

But in my truth, this 3% is not what I expected …. I expected worse … now that I am back from surreality, I won’t be accepting this uptrend unless we get a 40% pull back and resume the uptrend to a higher high and hold firmly above the 200DSMA for at least two weeks.

For now till the end of Q3, I expect the market to be range bound and very volatile. For the immediate future, I am looking at the market taking a beating in the next two weeks as the Fed brings on the bad news and the economic data takes a turn for the truth; really bad numbers that really reflect the true state of the economy.

The fund managers, meanwhile, will artificially inflate the market with their portfolio pumping at the end of this quarter only to get their portfolios smacked-down properly in July. Commodities will continue to rise as a reflection of the inflationary economy that has been laying low and under the radar in the last three months. The government will continue to buy up 10yr Treasuries in their vain attempt to keep the yield down as a lame excuse to not raise interest rates. Summers and Geithner will continue to screw up the already screwed up economy with more whacked-out plans to cover their screw ups from previous whacked out programs (read: dig a bigger hole to cover a smaller hole).

We have a bubble. It’s not an inflationary bubble, it’s not a credit crisis bubble, it’s also not a commodity bubble and it certainly is not a housing or financial bubble … it is a bubble of messed up plans, whacked out programs, rubbish news reporting and a pile-high collection of crap that won’t stay swept under the proverbial rug anymore. This Bail-&-Stimulus Bubble (BS Bubble) is going to blow up in Geithner’s and Summers’ faces and will turn Obama white. Like Madoff and Stanford before them, this global crisis is going to expose this BS Bubble for all its failures and make us all look like arses for reading into and believing everything we read.

The long and short of it is that I am re-instating my stand that this is going to last a long, long time. We won’t be getting a real rally till 2012 and we should remain within a 14,000 to 6,000 (DOW) range between now and the next 10 years. The credit crisis is going to be bigger than anyone of us can imagine when it truly comes to the fore and then the inflation factor is going to be a global problem that won’t go away quickly even with monetary policy shifts.

So what will be the straw that breaks the camel’s back? Just keep watching Summers and Geithner … the answer is right there in their faces.

In the meantime, I remain a happy puppy … er … contented camel … as long as the market keeps moving in wide ranges like what we have now.

Happy Humping! … er … Hunting!

(Sorry for the shitty post!)

Sooner Rather Than Later

You enter a trade. It goes well for the first few moments. Then without warning, it turns and goes the wrong way! Horror of horrors! Now in the heat of the moment, you battle your wits for the best decision to make as the trade gets worse … cut now? … or wait a while more?

The same thing happened last month. You decided to cut your losses fast. And as soon as you did, the trade turned around and went on to be a big winner had you not cut and run.

• “Why didn’t you wait?”
• “Why were you so hasty?”

Then last week, the same thing happened again and being smarter, you decided to hold out. The trade continued losing. The longer you held it, the more you lost. But you knew then that as soon as you cut your loss, it would have turned around. So you held on and the losses kept mounting.

• “Why didn’t I cut sooner?”
• “Why did I hold on for so long?”

By the time you made that cut, the loss was insurmountable.  And the trade turned around right after the cut.

Let’s resign ourselves to one fact;

Whatever the decision, it will always be the wrong one.

So a simple lesson in this is that if we are going to make a decision, it WILL always be the wrong one. Cutting losses fast will return the trade. Cutting too late will continue the trend. What ever you decide, the market is going to take the mickey out of you.

So to overcome this dilemma, ask yourself a simple question:

“Is it better to make the wrong decision sooner or later?”

The answer is obvious, isn’t it? I don’t know why anyone, in their right mind, would want to prolong an agony. If any decision you make is going to be the wrong one, then get it over and done with it quickly. Here’s another line of logic …

You know that the moment you cut, the trade will return. So why don’t you cut it quickly and be ready for another entry as soon as the trade returns? (okay, that is speculative … but it works for the psychology!) At least it is obviously better than running the losses deeper.

Likewise, you know that you are always going to take profit too early. So what can you do? Answer: Make the wrong decision early because making it too late will surely eat away your profits or could even end up with profits becoming losses.

But in profit taking, you do have the advantage of taking some profit and leaving some to be greedy. It is always a good way to manage your profits. Take it when you have it but do it in stages.

For example, if you have 10 lots long and they’re making some money, take half off the table when you reach your time/profit target. Let the remaining five lots run. The worst that can happen now is you can still get out at break-even if the trade turns against you.

If the 5 remaining lots continue the profitable trend, when the trade hits a resistance, or if it stalls, take three more lots of the table and see what happens to the last two. At this point in time, you’ll have no fear and nothing but greed to manage. Should the remaining two lots reverse, your worst case scenario is that you can still get out at breakeven on those two lots and still get to keep the profits of the first eight lots.

In a best case scenario, you are now in a position to put on a trailing stop and let the profits of the last two run to the sky.

So avoid procrastinating on your trading decision. Make it quick, make it sensible and make it happen … make it sooner and never later.

Moral of the story is that in Trading, it is NOT “better late than never” because in Trading, late is as good as never.

May 2009 In Review

Okay. So we didn’t have that 40% sell-off. Looks like 2007 all over again. And that is even worse news because 2007 tanked in Q4 when it became grossly overbought. May’s rally was even more non-sensical than the March/April run. I don’t want to get into technical details on this posting but I will say this; I am very skeptical about this run and still believe that this is all going to implode very soon.

May was a hectic month which left me with little time to trade. On top of the jam-packed schedule, there were viral problems on the forum and admin issues on this blog. Shopping for property has also thrown up some interesting views but I’ll write about that in another post.

On 22 April, WAT graduated batch number 27 in SIngapore …

… on 10 May, WA 17 (SG) graduated after 4 intensive days …

… 20 May saw WAT 28 graduate …

… then on 25 May, WA 03 (JKT) graduated after 4 exhaustive days …

“Why Teach When You Can Trade?” Epilogue

I would like to thank each and every one of you who commented on;

“Why Teach When You Can Trade?” Part 1 of 3

“Why Teach When You Can Trade?” Part 2 of 3

“Why Teach When You Can Trade?” Part 3 of 3

This was a very special series of postings that I refrained from writing for a long time. As offensive as the title’s question is, the wrong answer can be taken in a worse way. I am glad I’ve got this off my chest because now I know that what I am doing is what others really want. Now I know for sure that I can keep doing what I do because so many have benefitted from it.

I would like to thank all those who sent me emails with regard to these postings and to Aaron, Allan Heng, Dave, Wilson Ong, Lawrence, Andy, Dave, Kevin and Shawn for your kind words and encouragement. I truly appreciate the effort and the thoughts.

And a very special thanks to the man who started it all, my good friend, Zand. If not for your visions, if not for your encouragement, trust and faith in a time when I needed more than words, I would not be doing what I am doing today. Thanks for being a true friend, Zand.

This has really been a lesson in networking for me. Through this teaching journey, I have made many friends and created many money-making opportunities with several “partners” along the way. As the tutorial became more demanding, Henry and Lawrence have helped to ease the schedule and made an opportunity for themselves in the process. They now independently run the only two additional private tuition sessions that I sanction as follow ups to my tutorial. Others like “Duke” Alvin Lim and Ruben Koh look to follow suit and are not far away from doing so.

Alicia Tan helped create the Breakout Pattern Cards and truth be told, it was mostly her work that is in those cards. Today, she continues on two more projects which we expect to roll out later this year and early next year. Gary Cheam in K.L. has worked out a simple training program as a follow up to the Candlestick Patterns Cards and should be available soon. Melvyn Chan, another student, came up with this great idea to put everything I have onto a sales site to reach out to those beyond our shores. He and Lawrence now run the site and this blog from which we all make a pretty penny.

This is a community that was born from a simple idea of getting like-minded people together to learn, share and grow together in the name of wealth building and education. It would not have been possible by me alone. And with the growing strength of this community, I continue to grow. The education is an on-going process and something I could not have achieved if I didn’t teach.

Teaching has also changed me as a person. When once I used to be defensive about what I taught, I now listen and learn from those who query. When once I was impatient and intolerant with indignant students, I now teach them to unlearn what they know before learning what I have to offer. When once I used to dread teaching experienced traders, I now value their input and learn from their experiences. When once I was weak and fell to the temptations of the success that comes with this kind of work, I’ve now rediscovered my humble roots and choose to stay grounded.

In this learning process, I have become a better father and a better role model for my children. I have become a better husband and a more caring friend. I continue to strive to be the best teacher this industry has to offer and will never rest on my laurels. I have learned that giving to receive is a much better way to grow than receiving to give. All I have to do to remain in this rich vein of form is to simply be myself.

The one thing I have noticed about the things that have been posted about me on the internet, all the doubters and those who shoot down what I do, those who doubt my credentials (for which I have none anyway), to those who doubt my sincerity, … one raw fact remains - they have never shot me down for teaching rubbish and producing gamblers. If anything, there have been more copy-cats and pirates of what I do and produce. This is my measure of doing the right thing.

In the end, it is all about my students. It is all about what they gain from my teachings and from benefitting from being in this community. I have been tough with my students and those who took those tough lessons are better because of it. When my students become successful, I am happy for them. When they struggle, I am there for them. It is all about their success and I wouldn’t have it any other way.

As their teacher, I prefer to be the anonymous referee in a good football match. At the end of the match, everybody remembers the goals, the scorers, the tackles, the near-misses and the excitement of the match. The referee who has had a good match, always goes unnoticed.

As a reminder to myself,
I remain, humbly,

Conrad.

“Why Teach When You Can Trade?” Part 3 of 3

“What to teach?”

I have attended many workshops where there was a guru on stage teaching us how to trade in a certain style that was suited to just one security/instrument. Almost all of the time, the style in which we were taught was a “cloned” system in which we had a set of rules to follow and a stringent set of guidelines to qualify our trades. Often these systems depended on either software, on-line subscriptions or “triggers” as indicated on pre-configured charts. These were robotic styles of trading that didn’t suit me. If trading was a personal thing, this was certainly not the way I envisioned it would be. Furthermore, a simple question convinced me that his was not the way; “Do Wall Street professionals trade like this?” … certainly not. So why was I paying to learn something that the pros were not doing?

Wall Street does not rely on software, screeners and subscriptions to make their trades. Wall Street also does not trade simply by charting alone and they certainly don’t ignore economic situations. Almost all the courses I attended barely or never touched on macroeconomics and the relationship between securities and the correlation between the many instruments and economies around the world. We were just taught to trade, for example, Options. And in one Options Trading workshop, little was mentioned of the correlation between the Option Price and the Underlying - we were even told that the underlying move matters little to the Option Pricing! We were even scolded for asking him to teach us Greeks!

This was definitely not what I wanted to do as a teacher. I wanted my students to know EVERYTHING because every true professional in any business must know everything about their business and not be ignorant to external factors. It was important to know what moved your currencies which moved commodities which moved equities which influenced bonds that was monitored by the fed who will adjust interest rates to control inflation which affected currencies … everything comes full circle (rationally or irrationally) and that is why it was important to me to teach everything.

“How to teach?”

When I started teaching at home, it was easy because there were questions. I taught what they wanted to know. They would ask and I would answer. Every question and answer was documented and soon enough, I had enough Q&As to fill a tutorial of about 12 Chapters with each chapter addressing a specific topic like TA, FA, Research, Planning, etc.

This, I figured, is the best way to teach because the student is getting what is expected. As long as I catered to queries, I would have a tutorial that anyone could relate to as these were common questions that almost every student would and should ask. These were the questions that I was asking when there was no one to answer them for me.

Misconceptions were also another approach I took in improving my tutorial. In this business, we read, hear and assume a lot of things and we take what we learn as gospel. When a situation presents itself, we react as we would because we had “learned” and we “knew” what to do. This is the single most effective killer of novices and newbies. One of the most popular examples would be trading on news. More have lost from trading news wrongly than have been overnight millionaires. Another simple and common misconception is being “stock-centric”. And let’s not forget the biggest misconception about the correlation between interest rates and the market.

Another difficulty in teaching is speaking in terms that your students will understand. Many times, teachers who are extremely familiar with their subject matter tend to rattle on while assuming that everyone will understand what is being taught. The jargon, acronyms and terminologies are something experienced traders take for granted and ignorantly assume that most will understand what they’re talking about. Terms like ‘tank’, ‘spike’, ‘dip’, ‘rally’, ‘stops’, ‘trend’, ‘consolidation’, ‘cut’, ‘divergence’, etc, will have quite a different meaning to a layman while it carries a lot more meaning to a seasoned trader. Such terms need teaching and are a lesson in itself. Teachers often assume that their students will understand these terms and almost always fail to detail these things. One of the biggest sins amongst teachers in this business is their complete failure to teach the detailed difference between a Buyer and a Seller. In almost every class, I have students that attended other courses and they, along with the newbies, always fail a simple test of knowing the difference between the Buyer and the Seller.

The biggest misconception has to be that you can make tons of money and become a millionaire by trading. This is a result of the constant bombardment from teachers who sell the dream in order to fill seats. My biggest problem as a teacher is to tell such people that such dreams are only that … a dream. And in that moment of honesty, I have lost a student who believes that there must be a way to rape the market for a quick profit. Testimonials from winning students show that it is possible to make such a massive profit. The ads prove it and testimonials don’t lie. But what is not so obvious is that the ad never changes and the testimonials don’t improve. If that winning trader was consistently making that massive profit every week, I am sure that the ad would change every week because any teacher would be proud to have such a track record amongst his traders. But the testimonial is a one-off, a flash in the pan that is not likely to change, improve or get updated. And we buy the dream. We will pay the big money to learn how to make the big money. But the big money never comes and these are the students that come to me to learn what went wrong.

“Whom to teach?”

In football, learning to trade is like learning how to take a free-kick to score a goal. But the game of football is more than just free-kicks. There are tactics, fitness, skill, discipline, rules, equipment, proper conduct and behavior, strategies and understanding your opponents who are equally, if not better prepared than you. Plus they may take better free-kicks than you too.

Thus I only wanted to teach students who were interested in learning everything rather than buying a dream of taking goal-getting free-kicks. I wanted students who appreciated that there were no free lunches in the world of finance and no easy way to achieve success just as in life, nothing comes easy.

I wanted to teach only those who were serious about this business. I wanted to give the student a financial education which incorporated trading. I needed my students to appreciated that the bigger picture was always more important than being stock-centric. I wanted my students to know that money matters were more important than just learning how to trade and that trading was one small part of a much larger picture.

The irony of whom I teach is that the real value of the lessons are lost on those who are absolute newbies who have never attended other courses before while the ones who have attended and lost from other courses simply treasure and appreciate what I have to offer. I can’t sell the experience to someone who hasn’t experienced.

“Why Teach When You Can Trade?”

If I have to teach, it has to be profitable. This is common sense. I teach because people want to learn and they are willing to pay to learn what I know. I don’t force anyone to do this. I don’t con them, I don’t sell them dreams and I certainly don’t make an obscene amount of money from it. But if I do teach, it has to be profitable otherwise, why bother to teach when I can trade?

But to the person who would ask such a question, allow me to ask you frankly … If you could do what I do, wouldn’t you? If enough people came up to you, willing to pay you for what you know, if you had a chance to make a positive difference in someone’s life, wouldn’t you? And if you could make some money from it along the way, without compromising your integrity, wouldn’t you?

Let’s be totally honest about it … if you had a chance to make it big, rich and famous without giving up your values, integrity, ethics and morals, wouldn’t you take that opportunity if it came knocking? If you had a chance to make something of your future for your family, wouldn’t you?

So why teach when I can trade? My final answer: I teach because I can and I can because I trade well and I trade well because I teach. And I do all these much better than most. So why shouldn’t I?

At the end of the day, it is a thankless job and a personally rewarding one at the same time: if the student becomes a successful trader, it is because the trader is a smart and talented trader … but if a student looses money, it is because his teacher is lousy. If he models his teachings, he is a copy-cat … but if he innovates, he is a risk taker. If he makes money, it’s because he has a big account and high leverage advantage … when he loses, he is not worthy of being a teacher.

One can never win … yet I teach because I love the job regardless of its thanklessness.

“Why Teach When You Can Trade?” Part 2 of 3

Teaching isn’t what a lot of people make it out to be. Especially not at AKLTG. The three main criteria for being a good teacher in the seminar business is;

• You have to be good at what you do (Credibility)
• You have to be good at teaching it in terms that others can grasp (Clarity)
• You have to sell it (Cashibility)

The characteristics of a good teacher are;

• a “people person” who sincerely cares and gives
• a listener and learner who is never too proud to be wrong
• a tolerant and patient educator who who doesn’t mince words
• a tough and disciplined coach who goes the extra mile
• a role model who inspires and motivates

In the business of educating others in the business of finance, one must also have a high level of integrity and most of all, honesty. The ability to understand the business is only one half of the profession. The other half is being able to educate others about what you understand. The is no way to bullshit the subject matter if you don’t know what you’re talking about. There is no way to explain away what you don’t know. There is no excuse to not know your business. You are the educator, the teacher … you are expected to know it all and explain it all. If you don’t, it’s your job and responsibility to admit your short-comings and then find out what you don’t know so that you can teach it well.

The educator is always a student because the learning never ends.

The sacrifices I’ve had to make are another consideration altogether. If anyone told you that teaching for a living is easy and very profitable, that person has no idea what he’s talking about. I have had to overcome a fear of public speaking and give up my life of solitude and peace. When once I was an introvert who treasured his privacy, I now have to endure being in a very public spotlight and having my life exposed like an open book. I was happy trading from home making a small fortune and now I am flying between three countries and finding little time to continue making that small fortune. I have to put up with abuse from people who don’t even know me, people who write nasty things about me on the web, people who judge me before they even know me or know what I do. And I have to constantly answer those unreasonable questions which are so unfair in their query;

Do you make more money from teaching or trading?
If you are such a profitable trader, why do you need to teach?

Those are really one-sided and loaded questions that if not answered honestly, will make any teacher a fake.

I am not complaining about my life now. I love what I do and I do it of my own choosing and I accept the difficulties that come with the job. Is it worth it? Hell, yeah. I wouldn’t change it for anything. As long as I can trade and teach, I know that those who doubt will eventually know my truth and appreciate my efforts.

I have never denied that I teach for the money. I have always maintained that teaching is good money. But so is trading, authoring and consulting. But those are the obvious answers. Why not ask the not-so-obvious questions?

Do I lose more money from trading or teaching?
If you lose money, then why bother teaching or trading?

That’s right … I do lose money from teaching sometimes. If I put up a date for a tutorial, I will run that class even if I don’t meet my numbers in students. And it is easy for me to miss my numbers as I run a small class of less than 30 paying students. Most of the time the average is 18 to 25 as I keep about 10 to 15 seats for my graduates who wish to re-sit the whole tutorial for free. Unlike other workshops/courses that run their classes with no less than 50 to 80 paying students and make much more than I do, I keep my class size small so that I can give better personalized attention to those students who need it more. Those workshops also run a three or four day weekend course which is more profitable than what I offer which stretches over 10 sessions in 5 months plus an infinite number of re-sits, additional personalized attention and monthly gatherings for which I charge nothing. Thus, it’s not all about the money.

I teach because I love it. It keeps me sharp and forces me to be on top of my game all the time. It gives me confidence in my trades. It reminds me of my own discipline everytime I teach a student about risk and money management. It helps me to improve constantly as I learn new things from my own students. It challenges me to always be in the lead and never allows me to simply follow. It stretches me to think outside the box as my traders are never satisfied and ever hungry to learn more.

I teach because if I didn’t, I’ll be bored and jaded by just sitting at home and trading for a living. Teaching and trading has become my life.

Plus if I didn’t teach, how will others learn? Not everyone can pick up a book and learn this business. Not everyone is savvy enough to pick up the skill off the internet. Almost everyone needs to learn from someone else even if its reading a book or the internet - you are learning from someone who is teaching. So if no one teaches, how are we to learn anything? If I don’t teach, who will?

The real challenge about doing what I do is staying grounded and humble. It’s easy to get carried away with the fame and accolades. It’s even easier to let the ego and pride blind you and derail your original objective. What is really tough is keeping your program focused and consistent because to teach such a complex subject matter like finance to newbies can get frustrating. The reason why there are so few who truly teach at the beginner’s level is because it’s not easy. Most workshops will claim to accommodate newbies but end up teaching at an intermediate level and move quickly into complex and inflexible strategies that are not catered to individual needs and wants. The reason for this is efficiency - it is easy to teach like that and keep the business efficiently profitable.

Another problem with such courses is that the business becomes overwhelming and soon, the teacher becomes more of a businessman than an educator. The pressure of making each class more profitable than the last becomes more of a priority than the good of the paying student. It’s easy to get carried away and obsessed with making more money from teaching. There are ample distractions and temptations for the teacher to lose focus. What starts out as a noble cause can quickly become a greedy journey of self-fulfillment. So when credibility begins to get tested, these teachers resort to hyping up their programs. And that is when the eduation becomes a money-minded business.

When teaching alone can’t make more money, the teacher (who now owns the title of “Guru”) will look to leverage on his position and his growing database of students to milk them for more. This is when the “upselling” starts. There will be memberships, additional modules, advanced classes and subscriptions at prices that always seem just-beyond-affordable yet too tempting to reject. After a while, the student finds that the spending never stops but the education has stagnated.

Many financial programs hold the students hostage by “hooking” them to software and subscriptions. Others keep upselling stuff like software updates, modular upgrades and additional hand-holding support. Such devices serve the students no additional value but keep the program viable and profitable from a constant source of income from a steadily growing database. Such programs will keep milking their database for more money and more money.

Most courses even make a business out of their business by getting kick-backs from third party suppliers such as brokerages. When the gurus recommends a certain brokerage and that the students should open a certain type of account with that brokerage, every funded account makes that guru a passive income that will boggle your mind.

Such “value added” services and products and recommendation are only exclusive to their database and never for the general public on the pretense that paying students’ integrity has to be protected. But truth be told, such services and products will never sell well in the general public. Such items need to be upsold and hyped up. If you put these items on the sales shelves in a public store, it will never move. Why? Because in time, the credibility (or lack thereof) of the product will be obvious for all to see.

The really good gurus of the world never have to upsell their products. Such items will always be in hot demand in the stores and online and will sell themselves without hype and advertisement. That is true credibility. And that credibility is only possible with a product that is tested and proven and accepted as useful, reliable and cost-worthy. When you put what you teach into print, that is the true test of credibility because real essence is what makes it sell well. Real credibility needs no hype.

I wrote a posting in September 22, 2008, about picking the right course and the right guru. In that posting, I mentioned;

They say that those who can’t do, teach. But consider this … those who can do, may not be able to teach. And there are most who don’t do but can sell and then pretend to teach.

But I have found that those that can do and can teach, make the best teachers. Simply because there’s always a bigger plan than just teaching!

Here’s an analogy that Adam loves to use with regard to having a mentor;

Does Tiger Woods’ coach play better golf than Tiger?

The best way to learn is to teach. So I teach.

To be continued and concluded in Part 3.

“Why Teach When You Can Trade?” Part 1 of 3

Dear Conrad,

If you are such a successful and profitable trader, why bother teaching? Is it because you make more from teaching than trading?

If I had a dollar for everytime I heard that, I would neither have to teach nor trade … I’d be a very rich man just from those dollars alone! To answer this question once and for all, we have to go back to 2005 to know how it all got started in the first place and then know why I do what I do today …

As a losing trader who had attended many a trading course to learn how to “Make Money!” and “… become a Millionaire!” and so on and so forth, I became jaded and frustrated. It became very apparent that many of the “teachers” out there were simply running a business to make tons of money from batches of students that numbered in the hundreds. The real care, concern and support needed as a follow through after the course was glaringly missing. If there was a post-support program available, you had to pay for it. 

I started teaching because a few friends wanted to know how I overcame my initial difficulties with trading. They wanted to know what I knew and how I turned a losing situation around into a slow and steady and profitable one. I shared what I knew for free at first. More came and I continued to share as I grew and learned more.

It was more like a sudy group than a teacher-student thing at first. But as the demand for my knowledge grew, a friend noticed that some of his peers were coming back week after week asking the same questions as if they didn’t learn anything from the previous weeks. It was suggested that I should start charging a fee for what I was sharing. After all, I was still bankrupt and these people were coming to my home, enjoying my aircon, drinking my drinks and using my internet for free. The idea for charging came about because these people were unconsciously taking me for granted. So I charged for the lessons; S$50 per 4 hour session to learn whatever you wanted.

The demand grew and the repeated questions stopped.

As time went by, more and more came and the price rose to quell demand. Yet they kept coming. By the time I held my last session at home, the “course” had become a 4 session tutorial. $50 had gradually become $700 within a year. Thus was born, The Pattern Trader Tutorial, complete with notes, illustrations and on-going support. 

It was at that time that Adam came up with the proposal that I teach as his center. Adam had been frequenting my home as I was producing several of his videos for his programs at AKLTG. He noticed that I was an avid trader and took interest in this subject as he himself was actively investing. I turned down his offer several times as I didn’t want to become a guru who fell into the classification of which I despise so much. I wanted to offer something that these gurus didn’t; a real education for the benefit of the student, rather than to line my pockets with tons of dough at the expense of my integrity and self respect.

But somehow, Adam, in all his wisedom and vision (and a lot of NLP!), convinced me otherwise. He promised that if I joined his center, I could still continue doing as I pleased without compromising my self worth. I knew Adam as a man of high integrity and related well to him but still I found the proposition daunting.

What if I screwed up? What if what I was teaching was not the right thing? How will people accept me as I am not qualified nor experienced enough? Why would people pay more than $700 to learn from a novice? Why would anyone trust a bankrupt to teach a financial subject? What if I turned out to be the biggest joke in the history of financial gurus?

What if I failed again?

I wanted to teach. I loved sharing and meeting people who wanted to learn how to trade properly. I did my best to learn everything so that I could share it with others. I love seeing their faces week after week as they returned with better results and improved skills. It made me happy that I made others happy. It thrilled me that I was making a difference in other people’s lives. It made me feel good that I was worthy.

It also helped my own trading performance. As their teacher, I was obliged to know more than them and thus, always kept one step ahead of my students. Occasionally, students would provide feedback and this was invaluable information that would either improve my teaching skills or enhance my knowledge of the trading business. It kept me on the cutting edge of my business and still keeps me sharp today. Much of what I know has to be credited to my students who have unselfishly returned the knowledge and shared what they learned with me and other cohort mates. The small study group I had started was becoming more of a community of like-minded goal-getters.

And this alone was inspiration enough for me to accept Adam’s offer, albeit with conditions which were entirely dictated by me. AKLTG accepted my terms unconditionally. This was the measure of the man; my integrity was respected above his business. As long as his business was not undermined and compromised, Adam placed my intergrity above all else and I was able to carry on what I loved doing. This time, it would be in an environment that was professional, managed and organized.

The first batch of 10 students and the second batch of 15 students of the Pattern Trader Tutorial, now carrying the headline name of “Wealth Academy Trader” was held on December 2006 in the back-up/store room of AKLTG’s training center in Tanjong Pagar. For my tutorial, AKLTG had spruced up that room and renamed it TR3.

This was the start of a career that would change my life for better and for worse.

To be continued …

Sell In May?

In my previous blog posting, I mentioned

I am upgrading my trading status to Conservative from Bearish.

That meant that I am no longer convinced that Puts are going to be as profitable as they have been in recent months. But it doesn’t mean than I’m not going to trade Puts anymore nor does it mean I will only be trading Calls.

I am neither bullish nor bearish now. Being Conservative means that I will stick to day trades and stay away from long term investments for a while more. It also means that I am waiting for more signs to tell me that the market is not irrational and is trending in one singular mind. 

All the current confusion in the markets yesterday led me to only one conclusion … there is a lot of psychological divergence prevailing in the markets … and all I need is ONE divergence to tell me not to trade. That is what I mean by conservative.

Let’s take the Sell In May prophecy into conservative consideration. To do that, I am taking the last five years’ April to May charts …

2004

After April, I would likely have thought that the April Rally didn’t work and patterns were changing. My psychology would have been shattered because I would have been long in April and lost out. In the worse case, I would have held on to those losses in the hope that since April didn’t rally, it is likely that May won’t sell off … and when the sell off starts, I find it too much to take so I cut losses as we break below 10,000.

A week later, the market rallies to my April break-even within a month. Damn!

This would have been a major loser if I had been in the market then. I did this analysis as a novice when I started later that year (2005) and came to the conclusion that one must never predict the market, no matter what the statistics say. Stats are only for analysis and drawing an opinion, not a trade.

You may have a different outlook on this. The point of this exercise is to put yourself into a mindset in April and then see whether or not it paid off after May. Charts are always easy to analyze in retrospect but now that we’re in the middle of this situation what is your current mindset? What is the market doing to your psychology right now?

Let us continue …

2005

In April, I’m long again only to get smashed in the second week. I cut my losses and remembering what happened last year (2004), I go short in May. It pays off because the prophecy fulfills itself like it did last year. I’m out with profits because I remember that May rallied (after the tank) last year and I won’t want to get caught in a naked unlimited risk position.

This, by the way, was what really happened to me. What would you have done in April and how would you have responded?

2006

I’m long again in April and it is a profitable ride. I take my money off the table in the last week of April and leave a few small long positions, remembering from the previous two years that the first couple of days in May are usually bullish. Again, the pattern pays off so I take my profit on the third day of May. The market continues its run up. The run is an “empty” one as internals are divergent. There is nothing to support the bull run and volumes are dipping. I go short because the May tanker had worked in 2005 and was what killed me in 2004. It is a solid profit. Once again, the pattern worked.

So now confidence rides high. I have a pattern that works more often than not. Still quite a novice, I go into the next year brimming with confidence knowing I have a damn reliable technique for this period in the market …

2007

In Feb, the market tanked on Shanghai Surprise so by April, I’m long again and I make a killing! I take most of my profits off the table by the end of the month and keep several small positions for the first few days of May. By the third day of May, I clean out my positions and get ready to short the market. Right on cue, the market tanks in the middle of the second week. I go short and put a stop at my bought price by the end of that day. The next day, the market reverses and I’m stopped out at break-even. I get ready to short again by the opportunity never comes. I wait and miss out on the rest of the May rally.

This was a classic case of trading by rules. I stuck to the pattern and stuck to my rules and it paid off. But my confidence took a beating because May didn’t sell down like it was supposed to. Now, I begin doubting the pattern. I shall be cautious in 2008 because I got lucky in 2007.

2008

We are in recession. Jan, Feb and Mar were major losers. Yet I held firm to my belief in the ever reliable April rally - May tank pattern. I go long on the day before April because from past experience, the first day of April tends to be more bullish than bearish. It pays off big time. But then the rally stalls. 

Not wanting to take a chance because of what happened in 2005, I take my profits off the table, leave a few long and place tight stops. By the end of the second week of April, I’m stopped out in profits while the market tanks. Remembering that we are in recession, I take some small long positions after the market recovers to breaks above the 12,700-12,750 resistance. Once more, I profit take on the second day of May and prepare to short the market. 

The market tanks the next day and I go short. At 12,750, I take some profit and leave some short with stops at 12,800. After getting stopped out in profits, I get confused because unlike previous years when May rallied back, this is a recession year - what should I do? Sticking to my rules, I stay away because I don’t know what to do. Lucky I did. If I had been long (like I was in the past), I would have been slaughtered.

Finally, as the market broke below 12,750, I shorted it once more and made another round of profits.

Please note that I am using the market as a reference to real stock trades. I did not trade the index but I used the index as a reference for my stock trades.

And now …

2009

“CAN YOU SMELLLLLLLLLL WHAT THE MARKET IS COOKIN?” 
… sorry, a little WWE joke … 

You all know I was long in late March and all of April. I took off all my positions last week and some of you know I shorted the market already. Could have taken some profits on those shorts on Friday but I stuck to my trading plan. Those shorts are now in the red with stops in place near 8,500. Yesterday completed the two bullish first days of May.

And now I get tons of emails asking me if I am sure that May will sell off. This is exactly why the April rally is sometimes known as the sucker rally - it plays hell with your psychology. We can’t possibly know how much more this rally will go or if it will go at all. Neither can we know if May will sell off because it didn’t happen in 2007. 

Remember folks, the May sell off does not mean that May will finish negatively. It just means that there is a stinker-tanker usually during the second week that I can make money from. 

If I am wrong, I have stops. 
Am I still bearish? No, I’m conservatively unbearish.
Will I reverse my shorts for longs after the tanker? I don’t know yet.
Is this the market bottom? Who the hell knows?!!? Heck, I wanna know too!

“WATCHA GONNA DOOO … WHEN THE MARKET RUNS WILD ON YOUUUUU!!”
… sorry, another WWE joke … 

The best we can do is the best we can do. We’re all vulnerable to the same issues but we can choose to react according to how we translate the information we have at our disposal. My job is to help you by providing one opinion. You have to draw your own conclusions.

I invite everyone of you to comment and sound off your opinions. We can all use some feedback now.

 

OBSERVATION 1:  I’ve noticed that no one bothers me when I give out bullish analysis. No one ever asks if I am sure about an impending bull run. However, when there is an inherent bear in the vicinity, everyone is asking;

• “Are you sure?” …
• “How do you know?” …
• “What if …”  

So I would like to ask any Bulls here;

• “Are you sure about this Bull run?”
• “How do you know this rally has legs?”
• “What if we tank?”

 

3 = Beat + upside guidance
5 = Beat + in-line guidance

10 = Beat + no guidance
7 = Beat + downside guidance

1 = In-line + downside guidance

10 = Miss + no guidance
3 = Miss + in-line guidance
4 = Miss = downside guidance

The market usually reacts badly when companies report anything less than a Beat with upside guidance. Plus, of the 43 companies mentioned, 41 of them had revised their estimates down by an average of 45% from their previous quarter’s target.

Lately, the greater part of Q2’s earnings season has looked like this where more companies are sucking in terms of their results and more importantly, their forward guidance. Yet we believe what we read about the market “recovery”? One report even mentioned the prospects of the equity market’s “Long term growth potential” - growth? when only 3 out of 43 companies provides upside guidance? Mind you, the upside guidance of the three companies are for QonQ and only one mentioned YonY. FYI, about half of those who beat expectations missed on revenues.

Draw your own long term conclusions.

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