The Two Kinds of Traders

If you were given a million pesos today to trade one stock and were to choose between these two stocks and with only their charts as available data, which one would you pick?

Stock A

Stock B

Remember your answers because today, we'll talk about the two kinds of traders represented by Bob (A) and Carl (B).

Let's start! 

Bob is where majority of traders belong to. He focuses on stock prices and declines, and see these events as buying opportunities. A fire sale that would give him profits in the long term.

But what exactly is long term for Bob?

No one knows exactly how long it is. It could be a year, 5 years, 10,  Indefinite? who knows? For the answer to this question is very subjective. But the most common answer Bob has is this:

Time isn't much of an issue. Price is. Or more accurately, feelings are. Basta feel ni Bob magsell, then he sells. And for this example, he sees the highest price as the reward. "Pag bumili ako ngayon at BUMALIK to sa 16, makakabili na ako ng (insert bucket list item here)"

Most of the time, this is where speculation and fundamentals start to creep in and play a major role in Bob's mind. Because these two things give him the justification for his decision and the hope he needs for his long term dreams. 

A year and several months pass and we check on how Bob is doing...

. . .

"Okay lang kahit hindi na hit yung TP ko. Long term naman ako dito at magandang companya naman tong ininvesan ko, (Insert future company plans here.) Babalik din to sa 16! Buy and forget! #ProudInvestorHere"

These are the most common lines you'll hear when traders of this type end up with a stale or a losing position and do not want to move on. Add to that their collection of quotes and wallpapers from Lolo Warren to give them encouragement and strength for the coming years.

"I am a patient trader. I will hold until thy TP come."

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Let's go to the 2nd type of trader, Carl. Now, unlike Bob, he puts a premium into trends rather than prices and feelings. For him, there is no such thing as an expensive or a cheap stock. Only trending or non-trending stocks. 

Carl understands that even if prices have appreciated significantly but still follows the trend, there is still plenty of room to make money. He doesn't care about buying the stock at a cheaper price like Bob so he could feel good and feed his ego, he cares about feeding his portfolio and managing his time well.

When it comes to trading, understanding trends is as important as breathing in real life. We all know there are 3 types of trends right? 

Uptrend. Downtrend. Sideways.

Trends don't change overnight. OK sometimes it does, but that rarely happens. And Carl understands this fundamental principle : That if a stock came from a long downtrend, it first has to reverse by consolidating into a sideways trend, then slowly transition into an uptrend. Obviously, this takes time - days, weeks, months, years? Who knows?

So instead of buying into sideways or downtrends and waiting for these lengthy transitions to finish, Carl instead focuses on buying a stock that has an established uptrend. He knows that if he does this, he will save a lot more time. And as the popular saying goes: The Trend is Your Friend. 

And in just a few months, here's what happened...

91% in 115 days.

So what are you saying Zee?

I'm saying perspective is everything. If you want to make money the faster way in our market, buy stocks that are already trending up and making new 52-week highs rather than waste your precious time buying downtrends and waiting out the transition period.

Not saying you won't make money with Bob's method. But just saying... a moving train is faster than one that's just starting its engines for the day.

Exhibit 1

ATH Stock. Holding Period : 6 Trading days.

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."

A Technician's Guide To Subjective Trading

There's this thing about us technicians on how we analyze things in the chart and see price action before they happen. It's like we're on NZT or something.

With the surge of people in FB Groups and social media who are now openly sharing their Tech Analysis and Hype Charts, we will try to talk about the popular ways on how we can go into the realm of Subjective Trading. Because sometimes, you just can't help it. The beastly menace within you, urges all your body cells to Hype yourself. And in the process, hype others. This post is part two of The Deadly Trading Mindsets. If you haven't read that post yet, I suggest you do. 


Let's Begin.



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1. Using many indicators 

Don't like a sell signal on your chart? No worries! Just take out that loser that's going against you and leave all the ones that tell you what you want to hear. It's nothing personal really. And besides, you'd look like a pretty bad ass ginyos!

"Good Vibes lang"

Maybe in the future when that indicator gives you that sweet 3-Letter word, then you'll let her join your little group.

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2. Switching to the Line Chart

Wicks are sometimes an eyesore to us technicians. "If not for that lousy shadow, the chart would be PERFECT!" A Wick means Weak. That's why you see some tech traders ignore wicks and just go for body to body analysis. And what better way to remove these darned things by switching to that line chart?

Problem Solved!

Kind of like how makeup does its thing. So when you see a line chart posted somewhere that looks perfect, be careful. Be VERY careful.

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3. Channels and Trendlines

Channels and Trendlines are a universal thing. It can give you a projection or an estimate of where things could go. But just like any other tool, they have limits. 

Channels and Trendlines work on a very subjective level. Their placement will depend on the eyes of the beholder. 

Example : You buy on trendline support then all of a sudden price breaks down from that trendline support. What do you do? Proceed to use the horizontal support instead where it's still a buy. (Thanks Fullmetal Chartist)

If prices go on the border of those two, it's probably a sign to buy or sell right? But what do you do if prices go beyond those levels? What if you like using the LOGarithmic chart instead of the LINear chart?

This is just me, but trendlines and channels are illusions. The Moving Averages along with the Absolute Support and Resistances or Pivot Points are the real deal.

But what the hell? Let's all be subjective right?

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4. Switching Timeframes

You find yourself hopeful on a stock that you have but the short term chart tells you it's gonna fall. So what do you do? Pep talk yourself by looking at the weekly or monthly charts - even if they haven't completed their candles yet.

"Okay lang yan! Long term ako jan."

InvesTraders usually do this. Traders who are forced to become investors because of their long term analysis.

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5. Pattern Modification and Form Fitting

You see a pattern that's awfully popular. But you're not quite sure if you're seeing what you're seeing. You don't confirm the pattern with the internet because, YOLO! "Why isn't anyone posting any charts?" You ask yourself. Of course! Ikaw lang hinihintay magpost. So you go with your ignorant gut and claim the pattern!

And if you accidentally found a pattern that no one else has, and it worked the first time, why else wouldn't it work the next time? So you go on and name your pattern. Even put a trademark. After all, you are now a stock-market ginyos!

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There's a fine line between chart sharing and chart hyping. If you are a good trader and technician, there's no need to hype. What for? But if you do feel like hyping, then by all means hype! But keep it to yourself.

These are the big 5 on Subjective Technical Trading.

Any violent reactions? Did I miss anything? Let me know in comments below.