(Malaysia)

Discussion Topic: IS THIS THE RECOVERY WE’VE BEEN WAITING FOR ?

The market has taken massive swings up and down in unprecedented fashion. Is the recent upswing the real deal or is this leading into another major dip? Have you been shorting the market only to get caught in a Short Squeeze or have you been buying only to cut losses on the next dip?

You’ve attended trading courses. You’ve read the best best-selling books on investing. You’ve invested thousands of dollars on the best trading software.You’ve spent hundreds more on some of the best subscriptions. You’ve made a few winning trades. But you’re still not realizing that million-dollar dream that was promised to you by those workshops, books and software. Worse, you’re losing more than you’re winning. And the current volatility and wild swings in the market is killing you …

If you’re reading this and thinking that it’s talking about you, then you really need to join a REALLY successful On-line Trader to find out what he does and how he does it. You are not going to be lied to. You are not going to get hyped up. You are not going to get hard-sold. Most importantly, you are going to get a wake up call on the reality of Online Trading and what it takes to survive it before you can even dream of making it. You will learn how tough it really is at the start but how simple it gets later. You will appreciate why it is so important to know everything from Bonds to Currencies to Commodities to Equities to Derivatives. You are going to find out how he has changed the lives of so many individuals by giving them an education on finance and economics instead of learning how to trade.

No amount of advertising is going to convince you otherwise.

Come and find out that the Pros do and what they know and why you are always going to get beaten by these elite group that make up the smaller percentage of winners. Or would you rather remain amongst the larger percentage of losers?

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The Pattern Trader K.L. Tutorial

Kuala Lumpur, West Malaysia - Next Class:
WATMY18 between 23 March to 26 March, 2012
Tutorial Venue: See address below.

Next K.L. Preview will be:
Saturday, 18 February, 2012 @ 14:00 to 17:00 hours
Preview Venue: See address below.

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For more information on Preview dates, Schedules, Costs, or to make a reservation,
please send your query to: watmy@akltg.com (For classes in Malaysia)

MALAYSIA
Malaysia Office B-2-12 TTDI Plaza Jalan Wan Kadir 3,
Taman Tun Dr. Ismail 60000 Kuala Lumpur, Malaysia
Office : (60) (03) 7725 0212 Fax : (60) (03) 7725 8212

Reserve your seat for the next session now!

Click here for Course details: Pattern Trader Weekend Edition 2012

*LIMITED SEATS, SO BOOK EARLY!!

3 HOUR BREAKOUT PATTERNS WORKSHOP

4 HOUR CANDLESTICK PATTERNS WORKSHOP

• Next Workshops in Kuala Lumpur, Malaysia will be:
• Sunday 19 February 2012 at 10:00 hours to 18:30 hours
• Venue: AKLTG Malaysia Office (See address below)

MALAYSIA
Malaysia Office B-1-12 TTDI Plaza Jalan Wan Kadir 3,
Taman Tun Dr. Ismail 60000 Kuala Lumpur, Malaysia
Office : (60) (03) 7725 0212 Fax : (60) (03) 7725 8212

Reserve your seat for the next session now!
Drop an email to: watmy@akltg.com (For classes in Malaysia)

*LIMITED SEATS, SO BOOK EARLY!!

PATTERN TRADER TUTORIAL PREVIEW

(Singapore)

Next Preview in Singapore will be on:

Thursday, 09 February, 2012 @ 19:00

TOPIC: “WHAT DOES TRADING REALLY MEAN TO YOU?”

You’ve attended trading courses. You’ve read the best best-selling books on investing. You’ve invested thousands of dollars on the best trading software. You’ve spent hundreds more on some of the best subscriptions. You’ve made a few winning trades. But you’re still not realizing that million-dollar dream that was promised to you by those workshops, books and software. Worse, you’re losing more than you’re winning. And the current volatility isn’t helping either.

If you’re wondering what it takes to be the few who are profiting from the current volatility instead of suffering it, you’ve obviously been reading the wrong books, you definitely attended the wrong courses and you are in desperate need of a really good mentor.

If you’re reading this and thinking that it’s talking about you, then you ABSOLUTELY need to join a TRULY successful On-line Trader and a REALLY highly recommended Mentor this Thursday and find out what he does and how he does it.

You are not going to be wasting your time.

You are not going to be lied to.

You are not going to get hyped up.

You are not going to get hard-sold.

Most importantly, you are going to get a wake up call on the reality of Online Trading and what it takes to survive it before you can even dream of making it. You will learn how tough it really is at the start but how simple it gets later. You will appreciate why it is so important to know everything from Bonds to Currencies to Commodities to Equities to Derivatives. You are going to find out how he has changed the lives of so many individuals by giving them an education on finance and economics instead of learning how to trade.

No amount of advertising is going to convince you otherwise.

Come and find out that the Pros do and what they know and why you are always going to get beaten by these elite group that make up the smaller percentage of winners. Or would you rather remain amongst the larger percentage of losers?

Venue:
Adam Khoo Learning Technologies Group Pte Ltd
10 Hoe Chiang Rd #01-01 Keppel Towers Singapore 089315
Tel: (65) 6274-0105 Fax: (65) 62742105

Reserve your seat for the next session now!
Drop an email to: watrader@akltg.com (For classes in Singapore)

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Tutorial times will be Tuesdays between 19:00 to 23:30.

December came and went like a whirlwind and before I knew it, I was celebrating the new year. In fact, the whole year came and went like a light! Life just zoomed by and just like that, we’re doing it all over again in a new year.

Nine WAT batches in Singapore, five in K.L. and one in Penang plus I lost count on how may WA batches Adam and I did and between all that, countless public sessions, seminars, events and two surgeries made sure that my 2011 whizzed by in a flash. And as a result of the surgeries, my year-end schedule became so congested that December 2011 hardly existed for me.

WATMY17 graduated on Monday 5 December after an intensive weekend of mind-stuffing finance and economics in Kuala Lumpur. They still have another 10 hours to go over another 2 boosters in the coming months.

The following weekend of 8 to 11 December, Adam and I completed the 31st and final batch of WA for the year.

(Sorry, no picture yet)

WAT54 then graduated in the wee hours of Wednesday 14 morning after completing the eight week tutorial in Singapore.

And to close out the year with a bang, we had the biggest gathering of the year with more than 350 attendees at the Rock auditorium at Suntec on Friday 16 December for our annual Christmas Gathering. The event was kindly sponsored by CMC Markets and featured my good buddy, G.M. Teoh.

It was a very busy year but I have enjoyed every moment of it. Looking at my 2012 schedule, it looks very much like more of the same.

MARKET MATTERS

What an anti-climatic end to an otherwise flat but extremely volatile year. Really, this was the flattest year since 2005 but the ranges were amazing! We even had the most bullish October in 72 years when everyone was expecting a tanker – 1,200 points in five sessions … unbelievable. I think we also had the most 200 point sessions on the DOW in the past decade. At the end of it all, the DOW closed up, the S&P closed very flat and the NASDAQ was down. Talk about divergence

And the clincher is that it is not over just because the year ended. I reckon we’re in for more in 2012.

The DOW close to the upside by +640.13 (+5.53%) points and stayed well above all its major moving averages. On Friday, DOW closed to the downside creating the possibility of another DFDM (although the market opens on Tuesday). That will make it two DFDMs in three weeks.

The S&P also closed to the downside but barely though. At 1,257.60 -0.02% (-0.0016%), it closed above all its major moving averages and barely maintained some headroom above its critical 200DSMA. On yearly candles, SPX is wearing a perfect Doji which suggests that 2012 could either reverse or consolidate in volatile fashion.

The NASDAQ was pathetic. It started the year out with a bang and led everyone on to believe that strength in 2011 would be in tech. By mid year, it was evident that this was not going to be the case. By the last quarter, tech was a major drag on the market. NASDAQ closed out the year with a loss of -71.50 points (-2.67%) for the year. On yearly candles, NASDAQ is wearing a Spinning Top Doji just under the 5-year old 2,700 resistance. Like SPX, this suggests that 2012 could reverse to the downside or consolidate violently. NASDAQ is still below its 50 and 200 DSMAs.

Although 2011 was a flat year, less than 50% of the approximately 8,000 stocks actually registered gains for the year.

But all things considered, with the triple catastrophe in Japan, Europe’s on-going saga with debt and Pan-Asia’s two-year decline, I am actually surprised we haven’t crashed! Resilience or delaying the inevitable?

JANUARY TRIVIA

2012 is an election year which typically ends well. According to the Stock Trader’s Almanac, since 1952, the first four months suffered losses eight out of the fifteen of these election years. To make matter more bearish, of the seven bullish years, four of them were followed by bearish years in 1956, 1968, 1973 and 1976.

January’s first five days are also a very good indicator of the market’s direction for the whole year. In the last 38 up First Five Days, 33 of those years finished with full year gains.

The January Barometer is another indicator to watch for. As the saying goes, “As January goes, so goes the year.” This means that if January is bullish, so will be the year. Since 1950, the January Barometer has had major failures only seven times. In the last 20 years, it failed only three major times and two minor times. Each failure was a result of central bank intervention. In 2003 and 2009, stimulus rallied the market into a bullish close against a bearish January and in 2010, QE2 gave the year a bullish reprieve after spending more than nine months in the red.

Another interesting statistic to note; 11 of the last 15 presidential election years followed January’s direction.

January 2012 has a total of 20 trading days and two trading holidays. It starts out poorly but ends very well. January is also the last month of the best three consecutive months in the trading year.

• Monday 2 January 2012 is a trading holiday
• The first week of January is weak
• The first trading session of the year is typically bearish
• The second trading day of the year is very bullish with the DOW up 13 of the last 18
• 4th January marks the end of the Santa Claus Rally
• The second week of January is typically bullish
• Expiration week is horribly bearish with the DOW down 9 of the last 13
• Monday 16 January is Martin Luther King Day – Markets are closed
• First trading day of expiration week, DOW up 14 of the last 19
• Expiration Friday of January is bearish with the DOW down 10 of the last 13 with big losses
• The last Monday of the (economic) month is typically bearish ahead of the FOMC meeting
• FOMC minutes due at 14:15 EST on Wednesday 25 January
• January ends well with the last three session often rallying into the close of the month

For traders in SIngapore and Malaysia, Monday 23 and Tuesday 24 January is Chinese New Year – SG and MY markets are closed.

SUMMARY

So much happened in 2011. But what left the deepest impression on you? Which event will burn into your memory as the icon of 2011?

• The March 11 Earthquake/Tsunami/Meldown,
• Greece Defaulting,
• Euro Debt Crisis,
• Downgrade of U.S. from AAA,
• the slaying of Osama,
• the North African, Mid East and Yemeni uprisings,
• the ousting of Mubarak,
• the slaying of Gaddafi,
• MF Global’s demise,
• Kim Jong Il’s passing,
• Occupy Wall Street,
• the loss of Steve Jobs,
• Amy Winehouse’s untimely passing,
• flooding in Thailand,
• Chinese kid getting run over and no one gave a f**k,
• Worker’s Party winning in Aljunied,
• Suicides in Bedok Reservoir,
• the end of the Tg Pagar railroad,
• the MRT breakdowns,
• Orchard Road flooding again after “50 years”,

… what a year!

For me, 2011 will always be the year I came of age as an oil trader. It also represented my fifth year as a teacher and the year I took on two surgeries in two months. I have a lot to be thankful for this year more than any other year.

But most of all, 2011 was the year I was vindicated and recognized as a serious analyst and economist. Everything came full circle with almost all of my major forecasts over the last 4 years coming to fruition.

Originally Posted by Conrad on Monday 21 January, 2008

(In late 2006 and early 2007) I mentioned that the end of 2007 was going to be soft and this softness would carry into the middle of 2008. The longer term future, if you think all this is bad news, is that we are going to be soft for the long term … how long? I suspect till 2010. Any sort of recovery will probably be around mid to late 2011 to mid 2012.

Given the state of the global economy, I am going to hold firm to that four-year old analysis. I am expecting the first half of 2012 to be really rough and we should be revisiting some scary depths in the market till mid 2012. Its happened in each of the past two times that the market was in a decade long consolidation …

After the 10-year low (red area) of 1914, DOW lost 40% between the high of Nov ‘16 and the low of Dec ‘17 (blue area).

After rallying from the decade long 1974 low, DOW lost 28% between the high of Sep ‘76 and the low of Feb ‘78.

Now that DOW seems to have found its 10 year low in March 2009, the pattern looks set to repeat itself yet again after attaining 12,537 in May 2011. A 28% drop as a repeat of the ’70s will see the DOW get down to 9,026 while a 1917 style 40% drop will get it down to 7,522.

What is scary is the duration of the drops. It took 13 months to drop 40% between Nov ‘16 and Dec ‘17. It took 18 months to lose 28% from Sep ‘76 to Feb ‘78. If the current drop started in May 2011, then this drop would be 7 months old with anything between 6 to 11 months left to go.

But why should that worry me? In fact, I have been looking forward to it not just because of an opportunity to short the market but because every time the market bottomed on a year ending with “2”, it was followed by a four year rally!

From the bottom of 1932 to the top of 1937, DOW made a 350% profit …

From the bottom of 1942 to 1946, DOW gained more than 250% …

From the bottom of 1962 to 1966, it fell just shy of making 100% …

From the bottom of 1982 to 1987, there was more than 160% to be made …

From the bottom of 2002 to 2007, DOW managed to eke out 88%.

So if history were to repeat itself, it may not be such a bad thing after all! And with that silver lining to look forward to, I bid “Adieu” to 2011 and thanks for the memories, the new friends and thanks for a profitable year.

Hello 2012 … I’ve been waiting for this for a long time so bring it on!!

The young and impressionable shopper doesn’t give much, if any, consideration to market timing and will buy on impulse without thinking of the long-term consequences. In short, they buy for the “now”.

The old and wise shopper is particular about the timing of their purchases knowing that a well-timed purchase could save some money that can be used for other purchases in the future. They buy for the future.

The young and impressionable shopper doesn’t consider the price as long as they can have possession as quickly as they can get it.

The old and wise shopper is particular about the price even if it is affordable as long as they can have the best price no matter how long it takes to get that bargain.

The young and impressionable shopper is easily influenced by marketing, advertising and peer pressure and will buy on public sentiment. (Herd instinct)

The old and wise shopper is not easily moved by hype, will be extremely skeptical about marketing gimmicks and will be deterred by pressure. (Contrarian)

The young and impressionable shopper has a budget based on a monthly income and how much their credit card can stretch.

The old and wise shopper has a budget based on prudence, frugality and need.

The young and impressionable shopper will buy unnecessary things they can’t afford to impress people that don’t matter and only impress them for a very short time.

The old and wise shoppers buy things they need with what they can afford.

The novice trader is exactly like the young and impressionable shopper in every way. They will always get caught up in the hype, they will always buy the rumor and sell the news, they will always regret pulling the trigger too early and they almost always spend more than they can afford.

The book is due out by March 2012.

This is another extract from my upcoming book. It is part of the opening chapter and I thought it would be worth sharing it here first. This is a condensed version as each topic actually takes up several pages in detail. I hope to shed some light about what trading is REALLY about and not what is widely being conceived. Happy reading!

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Ten Truths About On-Line Trading

Since I started teaching about six years ago, I have come to realize that there are many people out there who have no idea or the wrong idea about on-line trading as a source of income or even as an alternative job. Many who have come to my Previews seem to already have a pre-conceived notion about this business and are surprised when I tell them the truth. And in spite of the truth being so obvious, they would still choose to believe in their idea about what trading is about and will not accept that I am offering nothing but the truth about it. They want to continue believing that there must be another way and that I am just bullshitting them into signing up for my class. Many walk away unconvinced only to come back months and even years later, acknowledging that what I said before was true.

Where do these people get the concept that trading is going to make them rich? How do they get the idea that it’s as easy as reading a book, attending a workshop or learning off the Internet? Why do they believe that they are the lucky ones that will become the next Buffet, Sorros or Peter Lim? And what is it about trading that draws these disillusioned people into getting slaughtered like flies to a flame?

The answer can be found everywhere. It’s called Media. It’s in the advertising, in books, on the Internet and it’s being sold at every workshop, with every software and in every website. It is a sales pitch and you can’t sell anything if you don’t hype it up. And you can’t hype anything up if you don’t sell a dream. And you can’t sell a dream without lying or hiding the ugly truth.

I should know. I am in the business of trading and selling.

But I have always been at odds with selling the dream. This has been the case since I started selling a class. It was tough at the start. No one wanted to sign up for the class because I was too brutally honest. The first truth I ever sold was that you will lose money. (Now, is there anything about that statement that you can’t believe?) And unless you banished any and all ideas of easy and quick wealth, you were likely to lose everything first before you wake up and discover, accept and learn from my first truth.

It was also a painful start as the naysayers and disbelievers questioned and grilled me about my credibility. I was even labeled as one of those gurus I despise for selling dreams. Such labels came from people who hardly knew me or knew what I stood for and why I wanted to teach … a topic that has been discussed in great detail in several series of posts on this blog including; Why I teach what I teach (2 parts), Why teach then you can trade (4 parts) and Why Traders Fail (3 parts).

I didn’t care. And I still don’t care for those who won’t believe or accept. I do what I do because there are many others who want to learn and many more others who want to unlearn. And the only way for me to teach them is by being honest and brutally truthful. For those who want to buy dreams, I can’t do much for them and I am sure they are not interested in my help.

The second truth I want to share with everyone is that on-line trading is tough. Thus, it is also about the mindset. It’s the toughest thing I have ever done in my very tough life. (Now, why won’t anyone believe that to begin with?) There is so much that need to be learned, so much more to do after learning and even more work before you can begin trading. It will take a toll on your life-style. It will eat up your time. It will force you to manage your time better or lose sleep over it. It will take its toll on your family and those closest to you. It will change your mood, your appetite and your hairstyle. I will change your life for better or for worse. In most cases, for worse.

The market is not a black and white place. It’s not even a grey area. It is a manipulated hellhole filled with crime and lies. It is a money-laundering machine where big money wins and small money loses. Those with the wrong mindset thinking that trading is all about looking at charts will be in for a huge surprise. Those who believe they are doing everything “the right way” will find out that the wrong way can be more profitable … and sometimes not. (read “Novice vs Seasoned” for an idea about what this is about.) Those in the wrong mindset will not accept that you can make money by losing money. The wrong mindset will also not allow a trader to make money more often by shorting the market because most dreamers are only of a bullish mindset while the market is never bullish for more than 70% of the time. (Now, is that hard to believe? If you want proof, you should come to my Preview.)

It is a place where small minds with little knowledge or experience will suffer against those who know that will prosper from those who suffer. It’s mean, it’s rough, it’s irrational, it’s unreasonable, it’s unforgiving, it’s thankless and it’s damn tough. And I mean it.

The third truth is the most obvious one. (And yet many believe otherwise.) There are more losers than winners. It’s around 8 to 9 losers for every single winner. Amongst the very few winners are an even smaller number of highly successful traders. And amongst the minute number of highly successful traders are even fewer successful traders that have made millions.

One of the possible reasons for this lopsided ratio could be that most of the market are bulls when the market is not bullish more than 70% of the time, as previously mentioned. The reason there are so many bulls is, once again, because of the hype, the sales pitches and the media. What they don’t tell you is that most professional traders make more in a bear run that a bull run. Why do you think we have that age-old joke in the market that goes, “The bull ran up the stairs and then bear jumped out the window“?

What makes everyone think that they will be good enough to be amongst the elite few if they don’t even accept my first two truths? And there are the extreme dreamers that believe that they can make a million by trading. A very good, very experienced trader friend of mine once said that he could make a million from trading in a very short time. I asked him how and he answered without batting an eye, “By starting with two million.” Which leads me to the fourth truth.

The fourth truth is another obvious one – it takes money to make money. (Now, is there anything you would like to differ to?) Therefore if you don’t have much to start with, don’t trade. You are likely to lose it all first because a small amount of money doesn’t last at all in this business in which you are likely to lose money (1st truth). If a very experienced and profitable trader can admit to how difficult it is to make a million, then you have to wonder why there are so many that believe that trading is the answer to becoming a millionaire quickly.

I should know. I started with almost nothing and lost almost all of it. It was a mighty struggle to trade on a tiny account to make any money at all. For a while, I was trading to make a mere $10 per scalp with no room for error because one mistake would take me five trades to make it back. Looking back, I could have done it differently but with no one to mentor me, I did what I could and knew. I wouldn’t wish it on anyone and I will definitely not encourage anyone to believe that it can be done.

If you don’t have the money for it, start saving first. Build a reserve of no less than US$5,000 on top of an already available cash amount of another US$5,000 if you want to consider trading. Anything less will severely test your psychological endurance especially if you have poor financial management. This should be money that you are willing to lose and never see again. And it should not change your life if you lose it all.

If you can’t save it, then don’t trade. Saving is the first good habit every trader must have. It is the first lesson in good financial management.

The fifth truth is that it takes a long time to become a good trader. The minimum by any outstanding measure is three years. (Now, why would I bullshit about that if I wanted to sell you a dream of quick easy money?) With so much to do, there is no damn way anyone can rush the process and be expected to be a profitable trader within a year. Some even believe that a weekend workshop is going to help them become millionaires! (When I started, I was one of those naive ones!)

It takes a lot of experience to be a good trader and experience means that it takes a long time. You can’t rush time therefore you can’t fast-forward the learning experience in any way. The minimum learning time is already one year because a trader needs to know the market cycle of a complete trading year, its seasons, cycles and rotations. They have to get intimately acquainted with all its self-fulfilling prophecies, economic data, earnings, money flows, sector leadership, etc. And you cannot rush the process that takes at least one year with so much to learn and apply. Which is why …

… the sixth truth demands that you must learn everything instead of only learning how to trade. It is very obvious that in order to learn anything in any professional field, you need to learn everything that the professional learned. (Now, isn’t that common sense?) And just who are these pros? They are graduates from Princeton and Harvard. They become fund managers, bankers, analysts and institutional traders from some of the finest financial institutions in the world who were mentored by some of the best traders in the world.

Now consider those ignorant victims who were sold a dream in a weekend workshop that trading is as easy as watching for blue and red arrows. Consider that they don’t know who’s on the other side or exactly how disadvantaged they are when going up against the best, the most knowledgeable, the most influential and the most manipulative professionals in the business. It took them three to five years to learn their craft from the best universities in the world, another two to three years in mentorship under the very best and experienced professionals in the world and then another two years on the floor of one of the worst dog-eat-dog places on the planet to hone their skills and experience.

Trading is a profession, a very serious profession. So are being a surgeon, a lawyer, an accountant, an engineer and even a soldier. If it takes these professionals years of study, years of practice and a lot of experience to become good at what they do, then why do some dream that trading is any different? A soldier takes years of training, mental preparation, physical fitness, weapons knowledge, field experience and even leadership management in order to operate in the battle field. Anything less will surely get him killed. Anything more doesn’t guarantee he’ll become a General.

In spite of this obvious truth, there will still be those who believe that a book or a workshop or something off the internet will make them good enough to beat these professional traders.

I don’t know of any soldier who became a high-ranking hero just by reading a book. Do you?

Having said that, the seventh truth is about training. (Now, Can you get good at anything without practice?) It takes endless hours of training and practice. It takes a lot of dedication to learn this craft. It takes even longer to understand its form. And it takes forever to apply what you think you’ve learnt.

Trading is not an academic subject and demands that you put into practice what you’ve learnt. That is not easy for most. Singaporeans are largely academia based meaning that they are academically intelligent but severely challenged in a practical sense. You can’t argue with me about it because I train plenty of them. Knowledge alone is never going to be enough because, as previously mentioned, it takes experience and experience means practicing and that means training will be required.

Part of this training is about being flexible and adaptable. Taking trading as an academic subject will not allow the learner to be either. Academia is rigid, static and theoretical. The market and the economy are not. If one is not ready to be flexible then when the market becomes irrational, nothing will make sense. If one is not adaptable then such irrational changes will hurt the trader and worse, opportunities will be missed. Academics need to quantify and justify everything – something the market will not allow you to do all the time. And most of the time, you are going to have to wait for the market to tell you what to do.

Thus, the eighth truth is that you need a lot of patience. (Now, there a serious problem … most of us are not patient at all!) You’ll need patience to learn so much stuff, patience to paper trade out your first year to get that minimum one year’s experience, patience to learn to control your losses, patience to wait for the market to present its opportunities, patience to wait for your profit, patience to tolerate how irrational the market can get, patience to control your emotions and patience to continue the learning process even when you become a good and profitable trader.

Anything done in haste never lasts and good things come to those who wait.

The ninth truth is that this is a very emotional business. (Now, this is one that you won’t appreciate until you’ve clocked up a few losses.) Even with rules, strategies and and the best technical knowledge, you will still lose money. And it won’t be because of the wrong kind of rules, the inflexibility of strategies or the unreliability of technical analysis. Even when those things do work, you will still fall victim to your own uncontrolled greed and irrational fear.

Your trading psychology can either be your best ally or your worst enemy. The market will do what it will do. It will give you what it wants to give you but it will take away whatever it wants too. You have no control over what it will give you thus you can never demand from it. Yet there are traders who plan their trades based on what they want to make instead of planning on how much they are likely to lose first. You are the one variable you can control thus you can control how much you lose to the market … but you are the most difficult element to control because you will be emotional. And when you are emotional, you have no control over your financial management. And then you will realize my first truth.

The tenth truth is …

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I guess I’ll keep the best for the release of the book. Are you still skeptical about what you just read? If one thing changes after reading this, it will be the way you look at the market from now on.

Happy Hunting!

This is an extract from my next book on Trading Psychology which I shared with Batches 53 and 54 this morning in an email in reference to GRPN’s IPO launch and why seasoned traders tend to stay away from such events.

In life, we have two kinds of shoppers – the young and impressionable shopper with not a lot of money (in trading, they known as novices) and the old and wise shopper with obviously more wealth (in trading, they known as seasoned traders).

The young and impressionable buy on impulse the moment they see something new and attractive. This puts them in the hip and fashionable light. But the hipness doesn’t last and they will continue to spend lavishly to stay hip and fashionable by always shopping for things that don’t have an intrinsic value.

The old and wise shopper with obviously more wealth will shop for things that are necessary and will always look for the best bargains, lowest deals and cost efficiency. This ensures that what they buy will last and save them money in the long term. They shop for an intrinsic value.

The young and impressionable buy properties on impulse without much care for the total value (quantum value) and will be focused instead on the ability to make the monthly instalments. They often shop for properties that are too large for their needs and in locations that are most convenient and hip.

The old and wise property hunter will buy a property with the quantum in mind and will scope out the deal with the best resale value that their nest egg can afford. They will stick to properties that meet their needs and won’t mind locations that are slightly out of the way as long as there is a promise of future developments and expansions that will guarantee a rise in their property’s value.

The novice trader is exactly like the young and impressionable shopper in every way. They will always get caught up in the hype, they will always buy the rumor and sell the news, they will always regret pulling the trigger too early and they almost always spend more than they can afford.

This extract is from a chapter that compares Novice behavior against Seasoned behavior and vindicates my theory that the market makes us do things that are not normal in life. In the weeks to come, I will share a few more gems from this chapter that will lead up into the launch of this next book.

Happy Hunting!

In early 2008, six months after the market started falling as a result of the Sub-Prime debacle, our then new forum (www.wealthacademyinvestor.com/forum) crashed and much of the data was lost forever. But thanks to our dedicated and selfless community, many traders re-posted whatever they had saved to revive the forum again. Many had backed-up certain parts of the forum for personal reasons and were able to restore up to 70% of what was lost. I was also able to retrieve some of the data from the old proboards forum and all these combined efforts brought our forum back online in no time at all. It was like it never crashed.

The forum has since migrated and it is almost one year to the day that this PatternTraderTools forum was born. This was to facilitate the ever-growing number of graduates from the Pattern Trader Tutorial and to make it absolutely private and exclusive. Looking back through all those forums is like a going back in a time machine to see its evolution and the growth of the success of what we’ve built. It also reveals how each and everyone of us has evolved from amateur traders to savvy financiers in the way we asked and answered questions.

And one truly amazing fact is that it has captured our outlooks on the market to vindicate the accuracy of our analyses since 2006 through to the current situation. It sends a chill down my spine that we could have been this accurate during a time when we were simple, unsophisticated and used simple common sense analysis to prepare us for the worst to come.

In October of 2007, before the market started sliding, I mentioned in the WA forum that the market was going to take a huge slide and that it wouldn’t be far-fetched to imagine getting from from 14,000 to 9,500 within the coming year. Of course I was slammed and ridiculed. But I kept my focus regardless if that analysis turned out right or wrong.

Then the forum crashed before the market tanked in January of 2008.

Upon restoration, after the market made its spectacular drop from 14,000 to 12,000, I made this first posting …

Originally Posted by Conrad on Monday 21 January, 2008

Its a pity the forum got slammed because at the start of October last year, this is exactly what I said was going to happen. Going back further (in my old forum) I mentioned that the end of 2007 was going to be soft and this softness would carry into the middle of 2008. The longer term future, if you think all this is bad news, is that we are going to be soft for the long term … how long? I suspect till 2010. Any sort of recovery will probably be around mid to late 2011 to mid 2012.

Visionary or smart analysis? … Or blind luck?

Either way, every one of my analyses have panned out accurately in the last five years. My only regret is that I wish I wasn’t so damn accurate.

Going forward, I am still keeping the view that this pain is going to get worse before it gets better. This will drag into next year and will probably find a bottom by the middle of 2012, give or take a quarter. And the low? … well, its a long shot but the call in 2007 was also a long shot – 9,500 on the DOW. And if the world doesn’t end by 21 December 2012, we should get into a massive rally that will go all the way into 2016.

I am not a fortune teller and there is no way I can guarantee that this will be the actual outcome. This analysis, as with all my analysis, is based on macroeconomics, technical analysis, historical patterns and economic models, market time-lines and plain ol’ common sense.

And just to scare the living shit out of everyone, I will leave you with these two charts from 2008 and the current one.

Sweet Dreams, Have a lovely weekend and Happy Hunting!

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Comments are moderated and spams will automatically be deleted.

This could turn out to be a great lesson in technical analysis for one and egg in the face for the other. Both technicians wrote a report each on 6 September 2011 in which they analyzed the Dow Jones Industrial Average. On CNBC.com, Guppy is rooting for Dow to get up to 12,400 while on MarketWatch, Kahn says Dow is headed below 10,000. I want to put both men on record on my blog and watch as the drama plays itself out over the next few months.

From Guppy’s report (read the original here) …

The report features one particular sector or industry every month with break-downs of individual stocks and ETFs relative to the sector. Occasionally, there is even a surprise BONUS! ticker to boot.

If you have no idea of how to start your trading from a Sectorial approach, this report will surely get you started on the right foot. Learn how to research and plan your trades by getting the back-dated reports and start collecting your monthly editions now.

This month’s report features the Truckers & Freighters ahead of the year-end surge of orders for the holiday season.

Get over to www.patterntradertools.com and get your copy today!

This is about the time your Black Box system fails and you start copping intolerable losses. Your sell signals start popping up all over the place in conflict with buy signals. Your MACD or RSI starts looking funky and you start doubting your indicators.

Those who don’t believe in stops are now regretting not putting one on sooner. Your guru will be at a lost for words to explain why his system is not working. Some gurus will also start advocating “SELL!” now … when it’s too late. Worse still, others will tell you to buy dips.

If your portfolio is awash with red, it is because you were directional in a market that was not favorable for directional trading or investing. It is all red because you were not hedged. You were not hedged because no one taught you how to hedge.

If you are staring at losses, that is because you still haven’t cut your losses when you should have done it at the start of the week. You were living in denial. You were hoping. Now you’re praying.

If you are all of the above, you are obviously not my student or graduate. You ought to be. But it’s too late now … or is it?

That was the good news … now for the really bad news ….

It will get worse. And what will make it worse are the fools who buy dips. We will get the occasional bounce from hereon in and every bounce will bring in the bargain hunters who are ignoring the macroeconomic circumstances for this drop. Their buying is going to bring in the short sellers and force the market down further as naturally long investors are forced to sell. The market makers are going to have a field day popping stocks up at the open and scalping stops with a limit down at the close.

The shit hasn’t hit the fan yet … its only on the way up.

This place looks so different in Winter. It is almost unrecognizable after the whole place become white with powder. It also becomes a skiing haven. I love Hokkaido because it is one of those places where time had almost stood still. The old charm of the original Japan still exists in many parts of this place.

About the only thing that has changed since I was last there is the sad state of economic affairs especially after March 11. The whole north island was perpetually void of tourists. I observed no more than three tour buses everywhere we went. There were so few visitors that we practically recognized which group was from which tour organizer. We had the whole island to ourselves without the bustle and rush that normally accompanies a tour itinerary.

We were very blessed at being there just when Sakura season was ending and Summer blooms were beginning. We got the best of both seasons. The weather was very pleasant – between 16°C to 23°C – a permanent aricon where ever we went. The hotel was so void of visitors that the family and I had the hot spring spa to ourselves on almost every night.

All that rubbish talk about contamination and radiation has really damaged the country’s economy and Hokkaido is really not deserving of the punishment that is being dished out as a result of all this careless and ignorant rumors. I was there. I ate the seafood. I breathed the fresh air and the only thing I suffered was a massive bout of sneezing from reacting to all the pollen flying around.

Japan is a beautiful place. Go visit it. If you haven’t been to Hokkaido and Sapporo, now is as good a time to go because you are never going to get better prices than now. You won’t regret it.

It was the break I needed. And it was a good one.

On the Friday before that magnificent holiday, 3 June 2011, Batch49 graduated in the wee hours of the morning after enduring the eight week mind-bending tutorial. Well done folks! Now the hard work really begins!

Apart from that, June has been a nice slow month that has given me a little breather after April and May’s hectic schedule. How comes July … and the madness begins again.

Between 1st to 4th July, the 15th Batch of WAT gets their tutorial in MY followed by another WA weekend in SG between 7th and 10th. On the 15th, the Pattern Trader Tutorial celebrates its 5th year of educating traders while hosting the July Gathering. On the weekend of 23rd and 24th, Adam and I will be busy at two events; Investfair KL and AICE Fair for SIAS. The month ends with a Candlestick & Breakout Patterns Workshop in SG on the 30th.

Between all those dates, I’ll have the usual tutorials on Tuesdays and Wednesday, Previews, Boosters, Follow-up sessions in KL and Penang and Coaching Tutelage on Tuesdays and Thursdays.

Yup, the madness begins again.

MARKET MATTERS

A month ago on Friday 29 May 2011, I wrote;

If last year is any indication of what June may present, then I am afraid that things may not look so rosy. Going on the common sense assumption that last year’s economic status was not much better than this year’s situation, that earnings last year and this year were equally woeful after the end of the second quarter’s earnings season and that we have hardly a hope for a third round of easing as inflation is higher than last year … I reckon the market will give us more downside in the month to come as growth contracts more than expected and may even threaten to go into negative.

At the point of that posting, the DOW closed at 12,441.58 … one month later, we’re exactly where I said we’d be – in a worse economic position, higher inflation and unemployment than a month ago and lower in the market and on the dollar.

Where to now? Here’s the good news – July sometimes bounces and gives us a gain … the bad news? – July is damn unpredictable and volatile as a result of the most disappointing earnings season on the calendar. Given the global economic climate, I am not hopeful for a bounce and neither am I hopeful for a dovish earnings season. This leaves us with little choice … I’d rather see it as; it leaves me with no bullish appetite.

TRIVIA FOR JULY
July starts the second half of the year and Quarter Three – the worst quarter of the year. It also traditionally serves up the most disappointing earnings season of the year. July has exactly 20 trading days.

• July is the most bullish of the three months in Q3
• The first day of July is one of the most bullish first days in the year, up 18 of the last 21 on the Dow
• July starts the worst four months on the NASDAQ
• Monday, 4th July is a public holiday in observance of Independence Day
• The day after Independence Day often sees an increase in volatility
• The first week of July often ends bullishly
• Monday (11 July) before Expiration Friday in July has been up 6 of the last 7 on the Dow
• Expiration week in July is often bullish … but …
• July Expiration Friday has been down 6 of the last 10 on the Dow.
• The week after Expiration Friday has been down for Dow 7 of the last 12
• July ends well but …
• The last trading day of July has been bearish for NASDAQ for the last straight 5 years

Commodities;

• Go long on Natural Gas after July Expiration Friday (Exit by October)
• Oil stays stable with a bit of volatility
• Gold, Silver and Copper tend to top out and become volatile
• Corn and Soya are weak in July
• Start accumulating Wheat between mid July and August
• Sugar tops out in July and corrects in August
• Cocoa dips in July all the way to October
• Accumulate Coffee for a small rally in August and September

SUMMARY

Just like that, half the year is gone and we’re all half a year older now. I can’t complain too much because the market has been good to me so far. May and June tanked very predictably but now July presents the greatest challenge of the year. it is traditionally the most unpredictable of quarter three and has been bullish in the two previous years. But going back further, it is a very volatile month that often finishes flat or unchanged.

I usually stick to cyclicals and seasonal trades during July and August. Anything else tends to get gyrated too much for me to stomach. My focus will shift to commodities, in particular, wheat and coffee in July and Nat Gas before August.

With so much going on in Europe and China, I’d rather not take any risks in the equity space for the next two months and stick to the safe stuff.

I will be cautiously bullish as the weeks wear on. If conditions improve on the American economic front and if Europe shows more signs of stabilizing and fixing their debt problems this quarter, I may consider throwing more into risk trades by quarter four.

Till then, stay safe and happy hunting!

Based on the modern modified version of calculating P/E Ratios, this current market is way overvalued but the traditionalists are deeming it at fair value which is why you are getting so many fools buying every dip that the market presents these day.

Fundamentals and price valuations just don’t do it for me and in my opinion, are more speculative (on a buy and wait and hope attitude) than technical analysis. Stocks that are “undervalued” will still be subjected to market gyrations, in the long and short term.

I prefer good old Macroeconomics, Sector Rotation, Seasons and Cycles to boost my investments. Interest Rates and Cycles are way more reliable as a money maker than the speculative buy-wait-and-hold valuation method. Personally, I trust my charts and the dollar value that it represents relative to its price history.

After all, many a good trader will tell you, “Everything is in the Price”.