Wednesday, October 3, 2018

Personal Notes Series 018 : Prisoner of Truths

"No tips. No news. No rumors.
Just the charts and you!"

I'm sure you've heard me say this before. 

I still do.

Let me just say this for the Records.
Fundamentals work. It just isn't for me. Not yet at least.

Allow me to explain.

A few months ago, I was able to read Alexander Elder's Trading For a Living and Momentum Masters by Super Traders in the US. I got to hear and read about my peer's trading strategies - JC Bisnar (Imbang Klase) and Javi Medina (Taylor). I also had a series of conversations with COLFinancial's chairman Sir Edward Lee. And all of them had a common belief in one Fundamental Concept:

Company Earnings

Let me give you something to visualize on.

On May 16, 2018, FOOD released their earnings report for the 1st Quarter of 2018. The results were astounding! But not much movement happened, until 3-4 months later!

There's a lot more of these examples as I did my research. But I'll let you discover them on your own.

These events led me to re-evaluate my trading system. 

"With my current port size, do I now have to introduce fundamentals into my system? Should I start to look for youtube vids explaining funda for dummies? Where should I start?"

"Where do my beliefs come from?"

When I started out my trading journey, It wasn't a smooth road. The very first trading group I joined was a good support group. But it was not the best influence in terms of learning. We were all trying to learn from each other. But to be completely honest, it was just another case of The blind leading The blind.

We got linked and joined with "BIG" names in the stock market community. And eventually, we learned about the art of speculation, the power of rumors and of course, the dark world of Insider Trading.

"Rumors are good! Disclosures are bad! That's why it's called Sell on News!"

It was exciting.

Every time we got a fresh tip or bits of insider info, we felt that we were a part of the Big Boys Club! Before everyone else, we get to witness the details of these so-called game changers. We felt powerful. We felt like gods!

But I was wrong.

Even first-hand information from Company Owners themselves turned out to be curses for us. We held on to false hopes that turned our ports and dreams into nightmares. But that wasn't so bad - because we had each other. What turned me 180 degrees was the moment a few of our own in our group spun a story. It was all out of their heads. And we believed them. 

That fantasy cost me my 2nd [psychological] wipeout and my first trek to more than half a million pesos worth of losses. And after recovering from that Psychological trauma, I decided to purge some beliefs and stick to what I can control and understand.

"No tips. No news. No rumors.
Just the charts and you!"

Here are my other personal beliefs:

In the Philippine markets, there's a delay in price action towards "Good" Fundamentals and Earnings. I think Fundamentals work better in other liquid Markets like the New York Stock Exchange (NYSE) where there's a big chunk of market participants, who have significant buying-power, that believe in the power of Fundamentals and Investing.

I plan to trade US markets next year. By then, I think I would have integrated some fundamentals into my trading system. Techs would still have the final say in my trading decisions.


"Hindi ba magiging ineffective yung isang strategy if marami nang nakakaalam?"

This is a half-truth. 

Imagine a room with 100 traders. 99 of which believe that buying PXP on the next breakout would make them money - they all have P10,000 each. The last remaining trader, however, believes he should sell all his remaining PXP shares at the breakout levels for it is already overbought. He only has 100 million worth of PXP shares.

With this setup where there's an overwhelming belief in favor of the breakout, and only one person believing it is a sell, which side do you think is right?

Except for universal laws and truths, beliefs with people who have more power and influence get to decide over-all direction.

You may not agree with me. And that is OKAY.

For we are all prisoners of our own truths.

Now tell me, What are your truths?