Personal Notes Series 012 : The Trials and Destiny of a High Risk Trader

I remember working my ass off in the corporate world and it was tough. I did many other odd jobs and tasted the business world. I knew deep inside these things weren't for me.

Then I tried trading. It was tough! Trading wasn't easy for me - as some people claim that I had talent for. I had to go through a harsh process. I had to go through much losses in order for me to reach where I am right now. And I'm thankful for all the pain and frustrations that came with it.

It wasn't instant like your favorite 3 minute noodles. 

I'd say it took me 3 years to be finally consistent in winning and keeping my gains. In those 3 years, I had 3 instances of a "Wipe Out" where you incur a loss and a mental block that challenges your will to continue fighting for financial freedom in the markets.

I got depressed, almost quit, and thought of suicide.

But there was hope. I believed God didn't put this passion of trading in me so I'd just die. I knew I was meant for something big. I just didn't know it yet. I prayed and sought God.

I believe if you pray for something, it isn't enough that you invoke faith. It should be accompanied with relative action. Faith without works is dead. Parang tumaya ka lang sa lotto and leave everything to chance.

So cheers to all you traders who are charting this day before the new year. (I was in your shoes before.) 

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I've seen people who have worked their asses off, got good results but in the end, still felt empty inside - that despite their achievements and possessions, there was always something missing. 

And I've witnessed people who were favored in what they did. They also went through the same process of refinement. It wasn't easy. It never will be. There's always pain. But by the end of it all, you see them bringing that special impact to the community that only they could do.

One of the wisest who lived the earth once said..

"Unless the Lord builds a house,

the work of the builders is wasted.

Unless the Lord protects a city,

guarding it with sentries will do no good."

Let this be a reminder to all of us as we transition to the new year. In everything we plan in doing, let us seek God first and ask...

"What is my destiny? What is it that I am called for?"

And when we finally get the answer... we fight for it!

Happy new year everyone!

Merry X-Mas and the Buy Back Program

Several weeks ago some friends, who have a hard time believing in technicals alone, were telling me to buy X (Xurpass) because the company has apparently been buying back their shares at current prices - it was trading between 9.x - 10.x that time.

"Galing sa kinse yan! Umabot pa nga ng Bente. Parang steam games lang, super X-mas sale! Mismong company buma-buy back! Di sila tanga. Bili na tayo!"

"Cheap Valuations" according to my favorite broker.

(Taken from the PSE Edge website)

I'm no fundamentalist and I don't follow brokers. I'm like John Snow, 

All I know is had I bought X at that time based on the company's buy back program, I'd be incurring a loss of at least -10% by now.

If you were in my shoes, what would you tell your friends the next time you meet and talk about X?

"Okay lang. Di sila tanga."

I wonder how long I'll wait before they'll start saying, 
"I told you so."

December 2016 : A thank you message.

2016 is Ending. 

I'm sure there has been much learning especially to those who are still swimming in the red of their losses - trying to find their trading system and their identities in the markets. 

May you remember your "WHY" and continue this fight. May you remember that ZF didn't become ZF if not for his losses. And If all else fails, remember that relationships and life are far more valuable than money. Let not money or your possessions define who you are as a person.

Life with all its hardships and struggles is still beautiful. Don't just survive. Live it. God created you for greater things. Seek out your purpose.

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I would like to thank everyone who has been continually supporting me and the ZFT, those outside the tribe and those within. Those who have been writing and sending us messages of thanks. Those who have been believing and fighting for us, our ideals and principles.

Thank you for giving us more reasons to continue this fight we have started. Of spreading awareness of the realities of the markets. To help the less fortunate. And to help fellow traders become success stories in this field.

To the ZFT family, I thank you. It warms my heart to see this beautiful community grow, continually and unselfishly supporting each other through gains and losses. 

And to those who weren't able to attend the Christmas and year end party, let me just say this :

"Wing chun! Wing chun! Wing chun!"

Hopefully next year you will be able to attend na.

Personal Notes Series 011 : The Dissonance of A High Risk Trader

This word was something that hit me a few years ago when I was starting to rake in those profits from the market.

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I have always made it clear to everyone that I am a firm believer in Technicals and Technicals only. Not to speculation, brokers or Insiders. And most specially not to Fundamentals. I have embraced this truth and will most likely die with it.

I am not saying that believing in Fundamentals or market insiders is wrong and that there is no money in it, because there is. What I am saying is that out of the 3 Truths I experienced, [Fundamentals, Technicals and Funnymentals] only Technicals has proven to be consistent in making me money in EVERY season - be it a bull, sideways, or a dreaded bear market.

(Exhibit A)

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"Cognitive Dissonance"

This might be confusing for those who are new to it. So to further expound on this lovely term, I'd like to introduce Bob. (He's a bit shy)

Bob has been studying and trading the markets for a few years now. He believes that stocks with good fundamentals, when timed with technicals, will yield him a fortune in a relatively short amount of time vs if he only believed in one truth.

"Why not get the best out of both worlds, ya know what I'm sayin?"

So in August of 2015, Bob bought TEL on the grounds that it was fundamentally sound and that techincally, it was at good levels and holding supports.

On the next month however, TEL broke down from it's supports and hit Bob's technical cut points at -5% to -8%. He was faced with a dilemma. It's a good stock and it pays good dividends. In a fundamental perspective if the price goes any lower, Bob will greatly benefit from it because he would be able to buy more shares and that would translate to more dividends. But on the technical side of things, he had to sell because TEL was already showing signs of a downtrend. 

There was dissonance. A chaos and disharmony boiled within Bob. Does he hold or does he cut?

So he starts thinking about the time he spent researching about the company. He computes the tax and the paper losses he'll incur if he sells. And after eating his favorite happy meal, he came to a decision.

"I'll hold and average down. Someday, this will go back up. It is after all, a fundamentally good stock. Ya know what I'm sayin?"

In order for Bob to alleviate his anxiety and find peace within himself, he had to choose to firmly believe in one truth and in this case, it was Fundamentals. A year passed by and he found himself with deeper losses. But that doesn't affect him anymore.

You just cannot serve two contradicting truths. 

If you're still new in the markets, there will come a point in your trades where you will have to decide just like Bob.

"Will I choose Fundamentals? Or will I choose Technicals?"

Remember, there is no middle ground. And now that I think about it, this truth reflects a lot about life and the decisions we make.

"Am I still serving God or am I serving my own interests?"

The Trend Following Astronaut

Of all the technical systems I've encountered, Trend Following [TF] has been the easiest to learn and master. Why? Because unlike other trading setups that require multiple indicators or tools, TF only require that you follow the lines. In the ZFT system we follow only 3 lines : The 20, 50, and 100 Moving Averages.

I'm not claiming that other combinations of moving averages are inferior to ours, but most variations we've tried are just too fast or too slow in reaction time when used in different time frames here in the PH market. The 20-50-100 combination has been our most balanced one. 

Not many understand the simplicity yet effectiveness of this tool. And I guess it's human nature - To have that unnecessary feeling of putting tremendous effort to something in order to make the victory sweeter.

Because why stick to one if you can have many right?

You Infidel.

But to those who have the right mindset, this tool can do wonders. So what are the essentials of Trend Following? 

Let's start!

Having a Trend Following Template

Not many trend followers have trading templates. And by this, I mean different ways to trade stocks under the TF category - because not all TF stocks are equal.

The primary element in trend following are the key positions of the Moving Averages [MAs]. One must first ask, "Which lines are showing bullishness? And are there any that are bullshitting me?" All other factors for your upcoming trade should revolve here. Should you buy on the ZS and sell on the iZS? How about buying on an established AOTS formation? Would it be wise to set your stop on the 20ma or the 50ma?

For example, if two stocks were in AOTS and assuming that both can handle my intended maximum trade volume, I'd put more volume on the one which has broken a higher level of resistance since that would suggest a stronger trend. ATH over 52-week highs, 52-week highs over 6-month breakouts, so on and so forth.

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Anticipating vs. Reacting

Many traders just love to anticipate movements before they happen. To buy before the breakout and to sell before the breakdown. When a trader works to show off that he bought at the lows and sold at the highs rather than show that he followed his trading plan and system, that's his pride and ego talking. Because who can consistently get it right every single time? 

No one.

And what's the point if all you do is anticipate stock breakouts with your holy grail screeners but don't trade them?

But plainly reacting on movements can be equally deadly. Imagine if you buy every breakout without planning ahead, who knows what could happen if the tide suddenly turned against you? Trust me when I say that you wouldn't want to be over committed on a trade, experience a bull trap and have no cut loss strategy.

And how about not selling at the top?

Below is a snapshot of having all my shares intact at it's peak price.

I sold all of my PRMX at an average of 3.52

Do I feel any regret of having lost those potential profits?

None.

So what if you didn't sell at the highs? Don't punish yourself for not being able to control the uncontrollable. Instead, reward yourself for following your trading plan.

Always remember that there should always be balance in anticipation and reaction.

Anticipation is being prepared of what's about to come, but it is the reaction that makes your dreams come to reality.

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Variable Change

When following trends and you bought a stock at a relatively low price, don't be complacent about your trailing stops. How many times have you had a good position mature into wonderful paper profits only to get eaten a few days later just because you failed to adjust your stops? 

"Okay lang. Mababa naman kuha ko."

Many fall into this pit of carelessness just because they bought at the lows. I cannot stress this enough, always account for variable change.

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Post Selling Evaluation

Have I followed the system? Was my volume allocation correct?

How can I improve in following trends?

These are important questions every trader should ask after completing a [TF] trade. I personally take a one or two day trading-break after selling a big position to make sure no lingering emotions remain. One of the worst things that could happen to a trader is to give back to Ms Market all your hard earned profits because of the Superman Syndrome - thinking you're invincible after having experienced a winning streak or a big win.  

Post trade evaluation and analysis gives you a step back and have a good look at the big picture. It not only helps you see the flaws in your system and how you can improve on your next trade, but also gives you that needed "space" to think and digest what you've learned and become a better trader as far as mindset is concerned.

Tag mo yung BF/GF mo na naging astronaut. 



-FIN

PS. Let me know your thoughts on the comments below.

Market Cycles and Outliers

The Philippine Stock Exchange Composite Index (PSEi) tracks the performance of the most representative companies listed on the PSE. When this index is in a bearish cycle and treks down, it means that players who control majority of the money in the market, are fearful. And the thing with fear, as with greed, it's contagious. So expect most of the other stocks to follow this sad cycle as most traders and investors sell their positions in exchange for cash. 

Anything that doesn't follow the major trend and goes the opposite way is an outlier.

According to Merriam-Webster Dictionary, an outlier is a statistical observation that is markedly different in value from the others of the sample.

Let me help you visualize that.

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Now take for example DD (Double Dragon). The PCOMP from Late May of 2015 to early March 2016 was a bear cycle. But this wasn't the case for DD as shown in the lovely chart below. It  even made new 52 week highs during the bear season. If you don't call that strong I don't know what is.

*Market Cycle based on the position of the 100MA.

100MA below prices = Bull

100MA above prices = Bear

This is what market veterans call...

 "A bull, in a bear market." 

And the best thing about outliers? When the bulls return and everything becomes rosy again for the index, outliers can go on a rampage of gains!

But not everyone gets to ride outliers. Majority even stay out of it because...

 "It just doesn't make sense." 

"Why buy a stock that is making a series of new 52-week highs when you can buy a stock that just made a new all time low? Wouldn't that be better since that would translate to bagger gains if it goes back to it's all time highs?" 

-Nakamura San

Sounds familiar? 

It's because Nakamura San is every amateur trader you know - who buys at "cheap" prices para makamura but ends up ipits and nagmumura.

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People fear what they don't understand. But let not fear cripple you to the path of enlightenment. So the next time you see a stock making new 52 week breakouts during a bear market, think very carefully before you ignore it.

Who knows? You might end up with something like this...

As always, Caveat.

After all, I'm just a Fictional Character.

Personal Notes Series 010: The 6 Digits Trader

For which of you, desiring to build a tower, does not first sit down and count the cost, whether he has enough to complete it? Otherwise, when he has laid a foundation and is not able to finish, all who see it begin to mock him, saying, ‘This man began to build and was not able to finish.’ Or what king, going out to encounter another king in war, will not sit down first and deliberate whether he is able with ten thousand to meet him who comes against him with twenty thousand?

Everybody has a dream. But dreams are not without cost.

It was the last quarter of 2010, I remember having the typical Filipino dream of going abroad to work, travel and see the world and then retire at a ripe age and come back to build a nice house somewhere near a beach. I also remember that I haven't really figured out what I wanted to do. It would have been nice to be able to do what you want, have fun and get paid for it. DOTA 2 and eGames wasn't that much of a thing that time.

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After some time observing the markets I understood that making +5% to as much as +50% in a day was very possible. But of course I had to be realistic so +10% every month for a year would do. I then began to imagine the possibilities. For sure I'm not the only crazy bastard right?

I was aware that losses can happen as well, but who cared about losses really? When you look for a job or start a business, do you look at the cost or risks first? No. You look at the potential profits. Kaya nga nag hanap ng trabaho or patayo ng business para kumita diba? I was young and foolish.

One reason why people consider going full time in trading is when they experience gaining profits equal or greater than their salaries with lesser time than they would with their jobs. 

My salary or allowance during my practicum abroad (before graduating college) was around 18-21k php. It was a good amount since I was excellent at saving, but it was barely enough for anything extra I wanted to do or have.

...

And then that day came.

In just two days, I was able to gain 3 months worth of my salary. I felt I could conquer the world. It was at that moment when I decided to go full time after I finish my contract and graduate from college. 

I finally found what I wanted to do.

I decided to go full time into trading with a 6-digit port. I didn't know it was a suicide mission. And by full time trading, I mean not getting a job or business and just dedicating my time and energy to the markets as my sole source of income.

You see, there are many traders out there who would say that paper losses are okay; that it is okay to "sit it out" because eventually it will recover. But you see, pain demands to be felt. It demands your immediate attention. If you let a wound go untreated, it gets worse and could eventually turn lethal.

This is the difference between full time traders and those who are just wannabees. A wannabee can commit a mistake or a loss and stick to that loss. They can be wrong as long as they want, until they eventually become right and say "I told you so." They can afford to feed their egos because they have a backup plan - it could be a job or business or maybe they just have a lot of money - a fallout shelter when everything falls apart. 

A full time 6-digits trader however, doesn't have this luxury. Pride and ego won't put food in his table. Every trade will mean life or death to him. There is no backup plan. If he wishes to survive in the face of a grave mistake, he accepts the loss and cuts to trade another day.


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There's this story I've read somewhere. It was about this King going into war with another from a faraway kingdom. He sent his whole army across the continent with their best ships. When the armada reached shore and finished making camp, the lord commander of the king's army immediately ordered the burning of their ships.

As the fire started to consume the shoreline and lit up the dark night, the lord commander announced to the king's army "We have burnt our finest ships. The only way we are going back home is to win this war!"

This was the kind of situation I found myself in. My ship was burning. There was no turning back. The kingdom was the prize. Home was the dream.

It wasn't easy. There were seasons of battles where I lost. I questioned my will and sanity many times. 

"Have I made the right choice?"  

I ventured into this world with my family's blessing. I had to bring them honor. I had to show them I was a warrior. That I could take care of myself amidst all the uncertainties that the market brings. And I failed. Many times. But every single time I fell down to my knees and started to lose hope, I found myself in the presence of the Lord of Heaven's Armies. 

"Do you believe?" 

"I still do. You didn't send me here to fight for a dream and die."

"Get up!" He said. "I will fight for you and bring you to your destiny!" 

The rest was history.

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To the the full time 6-Digit traders out there who have burnt their ships and are fighting for their first seven and their dreams, you have my mad respect! You aren't alone in this war - seek out the Lord of Heaven's Armies. Believe. Receive.

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Let me end with this story... 

In the beginning God created the heavens - the moon, the sun and the stars. He created the earth and everything that lives in it - the huge beasts and the little creepy shits that crawl. And God saw to it that it was good. 

Then God created Man. And in each and every one of them, in the deepest depths of their hearts, He placed dreams.

A soldier with the initials Z.F. found his dream. Now this soldier asks those who read,

"What are your dreams?"

Bottom Fishing WEB and The Tiny Frog

This stock has been the talk of the town this week. So much money lost in such a short amount of time. You can feel the fear in almost every trading group and even in normal news feeds. It was quite an exciting time for some of us in ZFT who bought the reversal. The tension became greater when it got suspended. 

"See you at the floor."

I would be lying if I said I wasn't affected. We were talking about what we'd be doing if WEB would do a "TAPET." Open ceiling. Close ceiling. Everyone who had WEB in the tribe was mentally preparing for the worst case scenario.

But the thing is... we aren't fundamentalists. Nor are we speculators. We are technicians. Yes we have emotions but rather than guessing and stressing over the things we cannot control, we instead act upon the things we can control.

Of course this post wouldn't be complete without those lovely port snapshots to prove our point. Here's that lovely link (In case you're wondering, we don't do group trades. It's just that we use the same system and usually end up trading the same set of stocks. )

https://www.facebook.com/Zeefreaks/posts/691073001043028 

Because if you're all talk but no show, you're prolly a scam.

Let me end this post with a story... 

The Tiny Frog

“We must stand guard at the doorway of our minds”

Once upon a time there was a bunch of tiny frogs who arranged a climbing competition. The goal was to reach the top of a very high tower.

A big crowd had gathered around the tower to see the race and cheer on the contestants. The race began.

Honestly: No one in the crowd really believed that the tiny frogs would reach the top of the tower. You heard statements such as:  “Oh, way too difficult!” “They will never make it to the top.” “Not a chance that they will succeed.” “The tower is too high!”

The tiny frogs began collapsing one by one – except for those who kept a fresh tempo and kept climbing higher and higher.

The crowd continued to yell, “It is too difficult!  No one will make it!” More tiny frogs got tired and gave up.

But one continued higher and higher and higher. This one wouldn’t give up.

At the end everyone else had given up climbing the tower. Except for the one tiny frog who, after a big effort, was the only one who reached the top.

All of the other tiny frogs naturally wanted to know how this one frog managed to do it. Another contestant asked the tiny frog how he had found the strength to succeed and reach the goal.

It turned out… the winner was deaf.  The wisdom of this story is: Never listen to other people’s tendencies to be negative or pessimistic. They take your most wonderful dreams and wishes away from you if you let them– the ones you have in your heart!

Be deaf to the people who tell you that you cannot fulfil your dreams, goals and aspirations.

Author unknown

Happy weekend everyone!

How to Trade and Travel

A common misconception about trading the markets is that you always have to be on the watch.

Prices trade and react within a certain range during consolidations. And depending on the setup and kind of stock, this consolidation phase could take a few days to several months or even years.

Here's the 1 year chart of ION for example. It has been on a long sideways movement after its explosive 4 week rally.

If you bought the hype of the "Experts" and are still holding and watching the stock day by day, you'd probably look like these fellas...

Timing is everything.

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I travel and take vacations a lot. And I usually trade with huge positions which when I think about it... is scary. This usually would render me unable to check the charts and be on my full battle gear. Unless of course I bring with me my loyal workstation like on this photo below.

But having to monitor minute by minute when trading is a lie. If you have day job, working on a project or travelling, you only need to monitor and trade when the stocks in your watch list or port are on the verge of breaking out or breaking down. 

Sounds impossible huh? 

But let me enlighten you to the 3 steps that have helped me trade while on the go.

1. Creating a trading plan.

Everything should be accounted for. 

A. The kind of setup and play you're going for - where you determine if you're in it for the short swings or the bigger waves and if the stock you plan to enter is volatile or not. 

B. Entry price, cut loss levels and trailing stops - the very fundamentals of trading. 

C. Time stops - where you sell your position if it doesn't move within a given time frame of your trading bias. Nakapag move on na lahat, ikaw nalang hindi. #whogoat.

Many traders fail in this area. Having no regard to any of these elements render trades incomplete and dangerous - a trip to hell if you may. One should also be prepared for every scenario so you won't panic like sell short or buy late when momentum and volatility comes in. 

2. Planning ahead and working with what you have.

You need to be aware of your environment and available resources. If you're working or visiting in an area that has no internet or if you do not have the resources to trade like a laptop or a mobile smart phone that can access the internet, then do not trade!

I usually just use my prepaid smart phone when on the go and register to internet promos to avoid getting billed a fortune. Internet speed is pretty fast and just right for trading depending on your location. For Globe users, here's the code. Thank me later.

If you have a live broker, make sure to give them careful instructions on how to execute your trade. If you have siblings, teach them the basics of buying and selling. If you have a dog, train the mutt to trade.

3. Alerts and Trigger Points.

Now all you have to do is to set your trading alerts. I use a mobile app for it (PSE Watch). I heard Investagrams also has this feature. Thank you app developers for making our trading lives easier!

From here, you have to determine your trigger points for the stocks in your watch list. What is a trigger point you ask?

A Trigger Point is a Darvas concept (Click here for a detailed post) that goes like this : when certain support or resistance levels are reached and breached, rallies happen. Simple right?

Trigger points can be both objective and subjective.

Okay for this blog post to have sense, here's an example of my recent trade while on the go...

IMP 

Type of Play : Sleeper

Time Stop : 1 Month

Entry Points : 13.8-15

Trigger points : 

14.4 - 16.0 (Momentum)

12.9 - 12.8 (Cut loss)

I bought IMP on July 15, 2016 in anticipation of a mini ZS - 50MA.

I was prepared to wait for a month and buy more shares using the GTC feature (buy order valid for 60 days) while setting my trigger points at 14.4 - 16.0 range, which would alert me if momentum has come in and 12.9 - 12.8 levels for me to Cut loss. 

If the price doesn't touch any of these trigger points, I would not be notified. Ever. And to emphasize on the beauty of this simple statement, just imagine those mornings when you were woken up because breakfast was ready vs those mornings when you were woken up and had to wait for your mother to finish cooking while sitting on the table.

So while still on vacation that Monday, I received a message notifying me that my triggers were hit. 

And since momentum has come, all I had to wait for was the day's close before checking my port and planning my next move.

Port looked like this by the end of the day.

Two Sleepers, 3 for TF. No Tsupitas.

With IMP's ceiling move, it was time for me to plan my sells.

Under normal circumstances, you could just use the Off-Hours Order feature to execute your buying or selling for the next trading day. 

But since this stock went ceiling and you can't place sell orders above the ceiling price, I had to execute my sells at the pre-open of the next trading day. For IMP, I had to make sure to sell the next trading day after the ceiling candle as per my trading rules on these kinds of volatility plays.

If it didn't go for a ceiling, I could have opted to use the GTC feature for selling and set them on and near IMP's resistance levels.

 And Viola! A half bagger trade. 

 EZ. GG.

Additional Notes :

I seriously did not expect this to happen while on vacation. ZFTs should ask me when I'll take my next vacation. Alam na.

And I'm sure you trolls are gonna ask... 

...Among other technical questions. 

Please spare me your messages. Don't be lazy and read this blog from cover to cover.

Study. Execute. Reflect.