June 20-24, 2016 – FX Trading Plan for Yen Pairs

Last Thursday night, we mentioned in Faceless Trader Ground Zero facebook group that there was a strong reversal that called for all the bears to cover their shorts.

$SPX500 staged a fierce rebound such as V reversal from 2050 to 2070 and we closed all shorts and went long oil as well.  It bounced from 46 and is currently at 48.80;  I need to just hold on to my trades longer.  I keep taking small gains!  It’s a wrong habit! Even if it’s a gain, I need to hold longer and trail.

spx risk on.png

The oil rally coincided with the very strong reversal in SPX500.  The sentiment really shifted into risk on mode last Thursday evening 😀

oil rallyNevertheless, The good thing is we have a trading setup.  Let’s look at USDJPY 😀

I went long as well last Friday, and closed all positions for the weekend.  Day trade lang kasi iniisip ko pero maganda risk reward nitong usdjpy ngayon.

Look at Weekly pattern.

weekly range.png

usdjpy daily.png

I love trading gaps.  This is a nice confirmation of strength on the gap up and will go long on the gap fill residing between 104-104.33

gap en.png

We enter some daily longs.

104.30 preferred entry though if within one hour I don’t get hit, I’ll move it to 104.50; doesn’t matter since risk reward pay off is nice.

My stop loss at 103.5 (the 886 fibo identified on weekly and the fibo extension on the daily -I didn’t draw it here but its a 1.382 extension to the downside move which I believe is an exhaustion.)

If I get really lucky this week, I’ll modify my reward from 106.50 to a higher Target Price. 😀

See you guys!

enter daily long.png

  • Faceless Trader

To consistent trading!

Advertisements
Posted in Others | Leave a comment

June 13-17 2016 – FX Trading Plan for SPX500

I’m expecting the Philippines and the rest of the world to consolidate into a box.  From a weekly perspective – SPX 500 stopped at 2120.7 intraday high last week and fell down.  This week it also followed through the downturn and went as low as 2063.6.

In the short term, you’re better off siding with the bears this week.

In what can be assumed as a large trading box pattern with a range resistance at the 2110 above zones, you can largely assume many traders are on a risk-off mode in equities.

I’m betting we’ll retest the May 15 2016 low point of 2025 this month or on July so take some profits off your stocks.

 

spx w.png

SPX is a box.  We are at the top end of the range and I believe we’re seeing a distribution at this area.  Best to be safe than sorry.  We use rallies as selling opportunities.

box spx.png

Keep selling SPX.  Don’t hold back.  Use rallies to keep on selling S&P 500.  You’ve got tons of reward at 2030.  Just place a stoploss at 2110

spx keep sell.png

Looking further at the hourly chart shows us plenty of breakdowns to confirm our bearish views.  Just keep selling and selling SPX.  Don’t hold back.

spx seller.png

Here’s to hoping we get our sell limit orders done.  None of our stoplosses hit and mostly rewards for the week.

 

Have a good trading time.

 

  • Faceless Trader
Posted in Others | Leave a comment

June 13-17,2016 – FX Trading Plan for Oil

Just like all traders, when I trade with a plan, I’m less emotional and I end up winning.  So I told myself since my logic in analyzing charts work well on a historical backtest, I just simply need to lessen my “rodeo ways” of trading when I see a candlestick pattern in a 15 minute chart, and simply stick to my carefully analyzed charts – just like how the USDCAD trades last week went.

You can check my pre-meditated trades on USDCAD last week and it’s essentially easier to trade when you meditate and have already planned your trade.  Next thing I just need to learn is to hold on to my trades as long as I can via better use of trail stops.

usdcad trade 2usdcad trade june

*****

My trade analyses this week will focus on US Oil.

We first look at the weekly structure:

weekly.png

On a weekly note, We can see that Oil has rallied from a low of 26 this year to a recent high of 51.63.  Essentially a 100% upmove in a span of 6 months.

Note that oil weekly had a breakdown of an important support line of 76.96= This is a multi year support in 2010, 2012, 2014 that was broken down and will now be a multidecade resistance.  For any oil bulls out there – I will not dare think that 26 can rally to 76 just without a fight.

Superb for the bulls to rally to the midpoint.  However, it’s a wonderful place for a trader and a position trader to sell into.  I actually sold oil last week at 51 but since I wasn’t trading with a plan, I covered with a 50 cent gain.  I’ll try to reenter this week with more oil shorts.  The reason is simply risk reward.  Here’s a daily chart.

You can see that Oil bears dominated the entire week.  5/5 days were bearish candles.  there’s a temporary doji at the 0.236 zone of 47.95 but I’m betting this will get smashed this week and still drop all the way down to midpoint range of 44.35-43.15

oil bear

I am super bearish on oil such that any rallies within this week 49.16-49.52 ; I will gladly take it and keep selling this commodity.  Risk of stoploss at 50.25/50.61 but reward is 44.35 or a 5 dollar gain versus only 50cent or 1 dollar loss shows me this really passes my risk reward position trade.

bear oil

 

Basically keep on selling oil all day long.  Sell oil. Sell oil.  Sell oil as high as you can.  I hope my sell order limits get done within the week 🙂

basically keep.png

Wednesday Event for Oil – 830pm we have CAD Manufacturing sales

 

  • Faceless Trader
Posted in Others | Leave a comment

June 8, 2016 – Citihub is Expanding. Do you want to Invest in a Citihub?

p1 a.png

This is Citihub.

http://www.citihub.com.ph/

p2 a

p3 a.png

p4 a.png

 

The most updated rates now as of June 2016 is 1700 for Fan rooms and 2500 for Aircon Rooms for a month.  This means for less than P60/day, we cover everything from bed space, to free wifi, to their water and electricity.  Meanwhile the aircon rooms cost P80/day.

p5 a

p6a.png

p7a.png

p8a.png

If you own land in the metro that’s 1,000 sqm at least and you’re willing to lease it to us to create half way houses ala Citihub, please message us through our email addresses and we will get back to you ASAP. Let’s schedule a meeting and negotiate as we have funds ready to deploy and are only looking for the right locations to place them. We prefer the sickpoint areas of Metro Manila.  The more congested, the more busy, the more the need for Citihub to be there to help our migrant workers have a place to stay that’s affordable during the week instead of the grueling commuting process which also is a lot of money to them in proportion to their wages.

p9a.png

p10a.png

p11.png

p12.png

p132.png

p14.png

Watch some videos about Citihub below:

 

*****

We are looking for :

1.) Interns – Preferably Marketing background

2.) Landowners – Preferably within Metro Manila – We’d like to propose leasing or joint venture partnerships

3.) Tenants:

a.) We’ve currently secured sites in Sta. Ana Makati (170 bed space addition) – Estimated Opening Dates January – March 2017

b.) and are planning to expand in a site near Sm Sucat Paranaque (350 bed space addition)

If you’d like a Citihub near your place, please check out our facebook page where we’ll make polls and share insights on how to grow and live with Citihub.

 

– Faceless Trader is a happy cofounder of Citihub.  It is a for-profit social enterprise that can generate predictable returns with minimal risks while helping and allowing many Filipino migrant workers an affordable and dignified housing for a small portion of their funds.  Please help us expand by giving us potential locations to invest and grow a Citihub.  It is our vision to have a Citihub in major metropolis areas to help people go back home only on weekends (lessen traffic, better life, higher savings too)

 

Contact details for those interested:

Email us

Panya Boonsirithum <panya_boonsirithum@yahoo.com>,
Kenneth Stern <kstern11@gmail.com>, Nikki Yu <yu.nikki@gmail.com>
Posted in Others | 2 Comments

June 6-10 2016 – FX Trading Plan for USDCAD

USDCAD

Daily Downtrend Bias

Daily (From swing high of 1.4695 to swing low of 1.2464) = 38.2 Resistance = 1.3306USDCADDaily

Shorter horizon:

USDCAD (1.33-1.2460 swing high swing low distance) – 886 Resistance at 1.3195

USDCADDaily886

In summary:

R2: 38.2 Resistance = 1.3306

R1:  .886 Resistance = 1.3195

Given bearish engulfing candles – trade idea is to continue shorting USDCAD given wedge type nature.

Use recent 764 resistance high of 1.31 as your stoploss and respect that as a resistance

H4 Entrypoints = Post sell limit orders

USDCADH4.png

Sell Limit at 0.618-0.50 Retracement Area or 1.3008-1.3034

Sell Stop Adds on breakdown of 1.2900

Stoploss at 1.3100

Target Profit Zone = 1.2773 (50% or half of the distance from the 1.2445-1.31 (bearish engulfing candle after the NFP report)

Duration – Entire Week.  Employ Trail stop when in favor.

USDCADH4

News Catalysts this week:

Tuesday 12:30am – FED Yellen Speaks

Wednesday: 10:30pm Crude oil inventories

Thursday: CAD 11:15pm – Governor Poloz speaks

Friday:CAD 8:30pm – Unemployment Rate, Employment changes

Posted in Others | Leave a comment

June 5,2016- Book Review of Ichimoku’s Fibonacci and Clouds 

Initially; people who first learn that the ebook is only 89 pages but retails at $75 are aghast about how a short piece of work will cost so much. However ; I have to caution that thinking given that it took me 2 weeks to digest and to study the book with second rereadings on certain parts.

The reason is substance. While the book’s length in pages will pale in comparison to some trading books’ page count of over hundreds of pages; they lack in depth.

This book is insightful; succinct and has lots of depth.  While others would normally just draw a swing high and a swing low to Understand the Fibonacci retracements; this book takes into great painful detail the differences of the pullback intricacies of a 38.2% pullback versus a 61.8% pullback and the likelihood of the extensions that would pan out.

In fact instead of using trend lines ; he uses a tool called Fibonacci Fan lines to help people see that stock prices correct not merely in price but also in time. When you consider the fact that a stock can do nothing for 3 months – that in itself tells you that a stock correcting in magnitude whether in a 90 degree angle or steeper than that requires a longer time before reversing. Those can be helped through fan lines.  See a snapshot below.


Fibonacci as a tool can be explored in many ways and this book discusses in the Philippine context how Fibonacci is his preferred method because it can project price supports and resistances without waiting. It is thus a leading indicator to him and which traders can benefit even before prices start to move.

In chapter 6 entitled “When do we make money?”; he mentions The ABCD pattern first highlighted by HM Gartley in 1935. Due to the parallelism of a “lightning bolt” pattern ; some people call it as such.


In projecting the future price targets; a man named Scott carney wrote a very good guide from his book “Harmonic Trading volume one : profiting from the natural order of the financial markets”; here based on how a stock price corrects and retraces ; the extension will vary. In this guide; the less the retrace (example 38.2 versus 78.6) ; the higher the projection ( 224 or 261.8 versus 127%)
See the guide below and memorize it if you want. Ichimoku believes this has been working quite effectively and showed how the PSEI has in fact corrected to the 61.8% during the Yolanda 2013 correction and has extended to the 127.2% before correcting yet again.
While this is not a perfect guide ; it remains useful (the 61.8 pattern usually coincides with the 161.8 as a projection but in this case – 127 acted as the initial resistance.) 
In this example; he tells us the potential reversal zone (PRZ) ; once you’ve seen the BC leg ; forecasting the D is as easy as using the “natural order guide” in the 78.6; the next potential zone is 127%; your drawing will show 5746 and indeed looking at the PSEI ; the markets indeed reversed from there like magic.

As Ichi said below, it works voila. Of course he doesnt guarantee this 100% but it’s worth noting that you can make your trading more profitable simply by knowing after a drop where the potential bounces could be.

Ichimoku then discusses the more intricate variations of the ABCD patterns. He didn’t invent this. It’s called the Alt 1.27AB=CD and the 1.618AB=CD pattern. Although you can make your own nicknames for these patterns; he sticks to his methods and simply coins what the harmonic practitioners calls them.

The 127 AB=CD means what it means. It only means that a 127% length of AB became the CD. So notice when a price makes a new low and you’re looking for a potential reversal zone of that pattern? You check the 127-161.8 of the AB length to check where the D point is.

Ichimoku shows more examples and the chapter 6 is I believe worth rereading upon;)

What else do I like? Chapter 7.

In chapter 7 called Beyond ABCD; he talks in depth what happens when the C is so strong that it moves above your AB. He calls this the Reciprocal AB=CD pattern. Can you recall when the stock makes a new high and then newer highs and you find yourself wondering where will you place your buys ? – you’re essentially going to wait for retracements after the new highs or new extensions have been made. A case study of FGEN is cited below as example.



Here fgen makes a huge V reversal above the previous resistance and manages to extend as high as 140% ; our table shows us 70% as the next probably pullback point where we can enter. True enough after correction to 70%; fgen continues its price path upward. There’s a natural order to things indeed.

I suggest you Read that chapter again 🙂

In chapter 8; Ichimoku discusses convergences and confluences.

He painstakingly details that when a lot of Fibonacci levels all cluster within a price zone; it acts as an important price support or price resistance. You don’t want to bet for a huge breakdown when there are strong support confluences not a strong price breakout when it’s hovering at huge resistances.

Here’s his example snapshot below ; he mentioned how difficult 7200 was. They both resided as resistances in the daily and weekly time frames. Hence the ability for PSEI to move above 7200 took a lot of time money and effort from many traders before advancing.


*****

Before I fully share almost all of the insights Ichimoku placed in his book ; let me share a table of contents for you to realize what he wrote and how strongly I recommend traders to take advantage of his book.

Perhaps we can make a group discount for all Bookaka members who’d buy Ichimoku’s book as I strongly recommend everyone get well versed about the many details in Fibonacci which they can take advantage of in the markets.


These are the contents of his book.

I suggest people take a good look of this book.

Study this.

Spend time with this.

Use this for your trading in stocks and currencies.

Use the natural order of things to determine where you buy; set stops; sell; target and it will greatly help probabilities of trading success.

All tools he mentions are part and parcel of every charting program.  You can freely chart these through your normal charting softwares whether provided by your brokerage firms or thru the usual free complentary trading sites in the Philippines.

Thanks 🙂

Bookaka incorporates tradingview.com softwares where you can easily plot the Fibonacci tools (retracements; extensions; fans and so forth)

So does amibroker; chart nexus; TradeApp; investagrams – end of day/ Fibonacci is a bread and butter tool for most traders as all default trading softwares around.

I’d still be rereading many parts.

Don’t mistake length with depth.

This is short but warrants further rereading and memorizing upon.

– Faceless Trader

Posted in Others | Leave a comment

May 22,2016- How to Navigate the Philippine Stockmarket Through Bookaka

Traders love to share their sentiments about stocks.  Did you know that you can earn from these sentiments? 

Bookaka (Open Book Open Opportunities)  is an open-sourced community available in desktop and mobile (both android and iOS) which champions and empowers traders to transform their sentiments into action oriented trading ideas. 


With several people sharing and reflecting profitable trading strategies, we showcase a breed of traders and investors that thrive in this fast paced socially connected world which users can follow for free or for a small fee. 

With Bookaka; anyone can tap into the community and design simple products that can help others make money; and thus provide a small business platform for the content providers as well. As more people Give and serve the traders and make things that matter; rewards go to them. 

Bookaka has always been at the heart of providing information as fast and as real time as possible.  We’ve also reached out to several premium contributors with street credibility to help users identify trading ideas and setups they can generate money from. 

Everyone today uses their mobile for information. Using Bookaka allows you to stay up to date with your stocks for free. 

Let’s give as an example $pxp just for reference 

In the free sentiments column ; you can see several traders’ ideas about the stock by simply keying the ticker symbol 

You can also go to news; tweets and disclosures and you’d find the following very easily 

In the news tab; everything is curated specific to your needs which is just Philippine stocks. You’d see it sorted chronologically. 

If you want to find out just news for $PXP;type it and the following will appear 


Sometimes traders are correlating $PXP with Duterte’s West Philippine sea talks- you can only know that through sentiments and tweets such as the following. All these are available freely to any trader in the Philippines. 


 Go to the disclosures section which is realtime updated the moment PSE disclosures are released on edge so that you never have to consider leaving the website. 

Charting section is available currently through the website (not yet though on mobile- but we suggest you download TradeApp which has one of the best realtime charting features over through mobile and top of the line indicators from foreign flows; trending indicators that will help facilitate your ways to wealth.) 

We wrote an article about TradeApp as well (Uncovering Duterte’s strongest stocks thru TradeApp.) 

We definitely are advocates of providing as many ways as possible to help fellow Filipinos in advancing their tools to trade the markets better. 

We hope you’d use Bookaka and find it an essential partner on your  trading day. 

Here’s how things look over at premium sentiments – just a few snapshots-

Trading is never easy but it can also be less hard with Bookaka as your teammate in trading 

We hope you’d agree 🙂

– FacelessTrader on behalf of Bookaka

Posted in Others | Leave a comment

May 15,2016- Uncovering the Strongest Stocks of Duterte’s Presidency via TradeApp 

I use trading apps to facilitate my time. 

Today I will show you charts; graphs; and everything a trader needs to help him on his or her trading without needing any other software except TradeApp version 2

The first thing I do is to go to the monitor to give me an overview of what were the leading stocks that I should be taking notice of. 2D versus 5D suits me for my short term taste while the 5D v 20D is also something I look at for the swing trades that I plan to incorporate in my own portfolio. 

Here’s how they look like: 


We see ALT and UPM both as outliers easily as well as FOOD DD PXP ACR. 

Zooming in further ; we see JGS MEG BLOOM BRN WIN PNX

Do this on and on and keep zooming in to see the specific details that largely contributed to this rally. 
The logic when you’re trying to take advantage of the strong stocks is to check those green stocks that have not yet firmly gone ahead into the right hand side. Note how Ayala Corp; Xurpas first clustered on the left hand side – before zooming further up. 

Note too that SMPH from a strong green has gone yellow which means many traders have taken profits and that the 2 day run up was good enough for it to cycle again. 

So the trick here is to find out the blue stock that is about to go to the green hemisphere such that you’re able to maximize and ride with the strong stocks before they advance completely. You can see SMC starting to move to the right side 

One of the tricks that I use is to check the 5day versus 20 day. It’s a very good filter to check which are advancing ahead but not super strong to make it too overbought; notice DNL MPI EDC BDO CEB SM JFC also getting a lift to the right side. Thus I’d set these stocks in my shopping list especially if their charts are also breaking to the upside. 


One of my favorite filters as well are the foreign flows which are comfortably and easily seen through the Trends Tab using Foreign as the filter. Here’s how it looks. 

I check the largest foreign bought for the past 5 days giving me PGOLD JGS AC URC MBT SMPH 

I also look at the largest bought in the past 50 days to gauge what all the large funds have accumulated and will protect in case of any sell off which are JGS URC SMPH AP SECB AEV. 

Given that these stocks are very much liked by the foreigners – I make sure to put them on my watchlist tab and compare their price performances to see whether there’s some stocks that I can still buy given their foreign flow bias. 


It is very clear that foreigners have favored buying the JGS conglomerate versus URC by simply checking the price performance of the two. 


More importantly we are aware that holding companies were the first to rise and led the market upward. The laggards were the service and industrial. Property firms also advanced a lot. If we are assuming that the markets will eventually cycle and rotate; perhaps some traders will look at which companies in the services sector as well as industrial sector – that they can choose to buy given an overall strong market. Notable to see that mining has also been crossing upward (particularly the oil sector led by PCOR.) 


Given the things that we know ; here’s how my research using the app helped me with the following 

CEB appeared in my watchlist after technicals and fundamentals aligned. 

Volumes went up last Friday. 


Foreign flows reversed from negative to positive showing there could be a strong reversal that can help kick up the momentum. Note that the 52.49m peso bought last Friday was larger than the last 5 days. Given that foreigners generally buy 300mil peso worth of flows when they like a stock; it’s something I will generally look at.


Recent resistance stands at 99.5. Recent lows at 85.50/86.10. 

Given Fibonacci ; there’s a confluence of sellers at the 99-101 distance while a strong level of support at 88.5



Of course we have a better risk reward ratio if we wait for the market to pullback first. However that also assumes that the stock can fall first before advancing to our target of 100. See below the scenarios. 


We try to investigate a laggard such as URC In comparison with its conglomerate JGS given that URC is still a foreign flow top5 both in the 5 day and 50 day list. 

215 high; 199 low. What are the extensions?  We assume an extension of 1.618 or 240 as our estimated target profit while hoping for an entry near the 38.2% of the length of the last two days which stands at 208.80

Cutloss at the 78.6 retracement or 202.4



Due to the relatively low cutloss price ; URC is actually giving a high reward versus the risk ratio. I advise traders to compute this first before they attempt to enter the stock. 


A final check as well is the 1 year resistance at 219.8 so when placing targets – just be mindful of where the supplies are. 


What if I wish to search for a stock given the candlestick patterns? I wish to use as a filter the Bullish Engulfing pattern/ here are the results 


So there’s an improvement in these blue ticker symbols but they aren’t leaders yet. Maybe we can catch them before they get to the leader space.  With these 4; we choose MPI. 



Chart is clean. We go to the foreign flows and highs and lows. We do everything the same. 

High of 6.15; low of 5.57

Foreign flows rising as well.  We notice after an onslaught of 1b foreign sell for MPI In the cumulative 50 days past; it has had a 3 day consecutive foreign buy reducing the cumulative net foreign flow in the last 5 days to 8.5m

Basic logic here is we are looking to buy stocks where recent flows are foreign buy and larger than the last 5-20 days to assume that a continuation of foreign buying will lift this higher. 

We are on the verge of a possible breakout on MPI where advanced target extensions could lead to at least 6.50

The only way to make this work for the risk reward ratio however is to tighten the stop loss to the 5.80 level given that we are assuming a breakout. 

End of day , watch out for PSEI levels 

– sell near 7720 if we can get an extension move to that 1.618 level as well as buying near 7182 if we are trading short term as that can be the most oversold zone given the run up this past week. 


Cheers. 

-Facelesstrader 

Posted in Others | 4 Comments

May 9, 2016 – The Many Ways of Analyzing Price Movements (Newbie Series)

In our previous post entitled “For Anyone Who Hasn’t Heard of the Markets”,we learned that charts are visual representations of price movements for the sole purpose of convenience of whether the price change is going up, down or sideways.  We will tackle that question more in-depth.

If it is not yet any clear, the ability to determine whether the prices are going to go up, down or sideways will help you determine as well whether you should buy today, later in the day, or tomorrow or next week.  The ability to know where the prices are going to head towards will make you a successful trader and that’s how money can be made in the markets.  People have devoted their lives in the pursuit of simply knowing about price movement because if they can assure themselves that the price of oil will go up tomorrow by a dollar, then they will buy today and sell tomorrow assuming that it will be worth more than the cost of doing so.  Most forex firms allow you to trade commodities for a 5 centavos spread.  As long as you can hit your target of 100 centavos within a day, then you’d be willing to pay that 5 centavos spread to your currency broker.  Do this consistently and you can call yourself a profitable oil futures trader.

What Affects Price Movements? 

We know already that roses go up in price during mother’s day because of a simple concept that there are many buyers all buying on that day.  However, what if it wasn’t flowers and what if it wasn’t Mother’s day?

Does it matter what affects it or not or that it happens?   For the purpose of answering that question – people will say that what affects price movements is simply supply and demand.  What affects the supply and demand can be about the historical weather patterns collectively known by some as Fundamentals.

For others, it matters to them mainly because they think that the prices will move based on a historical past and will continue to happen in the future.  For instance, if people love buying roses during Mother’s day, isn’t that a behavior that can always repeat every single time?  We call that a habit.  In market lingo, we call it a cycle.   We will not delve in this post what causes the price movements.  We will cover here however the fact that cycles exist in the market place.  

Concept 1:  A cycle is a price movement that is expected to occur within a specific time frame.  This expectation can be rooted from our historical evidences of what prices have done in the past.  It is based on an empirical observation spanning millions of information (price data) and spanning different market conditions.  

Any trader must first accept that prices move in cycles.  There are many reasons on the exact nature of cycles but we will not explain this.  (Fundamentals are on a different article.)  For now, it is only important that there are REPETITIONS.  People collectively believe that traders have an emotional cycle.  There are waves of optimism followed by down waves of pessimism.

We’ll define Market Condition first.

A Market Condition is anything that alters or influences your decision to buy or sell that specific good.  Maybe you’re in a festive mood.  Maybe you’re just euphoric today and decided to buy a lot of roses to surprise your loved ones. While people would generally classify your mood swings as sentiment indicators (another technical indicator) – anything that we can observe empirically – can be charted.  Your voting preferences can be charted – and so forth.

Expanding on our examples that many things influence a transaction – just think of yourself for a minute or two – even in a Mother’s day event, do you expect to sell ten million roses on that day if there were only ten people in the area?  Are they wholesale buyers who can afford buying one million roses each?   If it was Mother’s day but we were at war, do you think any transaction among roses will ever happen?  If it were Mother’s day but we were living in a desert where cacti are the only ones that are available, would the price of roses remain the same?  That’s what market conditions ultimately mean.

Once upon a time, properties in Hong Kong were always expensive – however SARS happened  in 2005 and it spurred panic and fear in the hearts of the people.  The Market Condition = Fearful.  People were afraid of living in Hong Kong because they feared for their lives.  There were SARS masks everywhere and the contagion of the disease affected the perception of the people that it was safe to live in Hong Kong.

Safety is an important criteria when people buy properties.  That’s a market condition.

Why is political climate important when some people assess buying stocks?  Why do you think?  Because it influences the market condition.  When everyone fears for their safety , they would not have any good reason to invest their money buying properties in the area.  Which do you believe is a more expensive property?  The developed market in Manila or the undeveloped forests in Mindanao.

The markets are pretty much the same way.

We may believe that a cycle is as simple as day and night.  The sun is expected to rise approximately 5am Philippine time every single day while it is expected to set approximately 5pm Philippine time.  Although these things have a tendency to not always happen every 5am, we can surmise that the discrepancy will be one hour early or one hour late – approximately 95% of the time.  Weather can be forecasted because it has a habit.  Just like the weather, prices are “forecasted” because each stock has a habit when you evaluate it with many price observations.

5pm and 5am are your average rising of the sun and setting of the sun times.  This refers to the VWAP or volume weighted average price that people are expecting the price to settle for that day.  The 1 hour discrepancy is called the range of the high and the low of that day’s price.  You can call that standard deviation or average true range or a band.  It has more importance the more frequent this observation is.  If Filipinos can forecast the time that the sun rises with perfect accuracy, perhaps it means nothing.  However, for traders – price accuracy can lead to millions.  However, the reason why Filipinos and everyone in the world forecast the weather is for such larger reasons – calamities.  Too many Filipinos died during the Ondoy and the Yolanda.  Disaster Risk Management council places hundreds of millions of pesos just to prevent a life from dying due to ill preparation to fighting a calamity.    You realize that it is a life and death situation for the Kidapawan farmers to prepare for the El Nino.  Forecasting weather conditions is studied because it affects millions of lives.  Although you will not die physically for not understanding the market cycle, you will die financially.

Concept 2: Price Movements Can Be Forecasted Based on Behavior or Patterns.  Standard Deviations and Average True Ranges are simply a few of the many examples of how a price movement can be studied.  This is actually called a ranging indicator.  There are indicators that measure how strong an uptrend can last, how high historically the stock can move before it retraces and where it will stop .  The important concept to understand is that price movements have habits and patterns and the best we can do is to use these odds as our edge in defining what to do with the present situation. 

Concept 3:  Historical Pattern Recognition and Backtesting Price Movements Are Important Tools To Forecast Prices

How can a person know that he needs to bring an umbrella during the month of September?

We know because we’ve had 20 occurrences for the past 20 years or a 100% hit ratio that it rains during the month of September at least 10 times in Manila, Philippines

I know this because I’ve never had a rainless birthday.  (September 10 is my birthday and it rains every time.  I only observed the weather when I was 7 years old because I had a birthday party and we had to be indoors else everyone will get wet.)  This is backtesting.  You simply evaluate what has happened in the past.  You don’t have to be a genius in the market to know that Seasonality Exists.

Concept 4:  Seasons affect the stock market and should be studied when trading because they help provide you an edge over others who are not actively monitoring price movements. 

Some studies have shown a strong seasonal tendency for Philippine stocks to rise in the six month period from October till March or November till April for the past 30 years.  Without having to go through the cliche and jargon that “Sell in May and Go Away” – essentially meant stocks drop in May or the monikers “Chinese Ghost Month  – Stocks Fall”, the observance has led to the urban legends.  Until these observations prove worthless, people will continue to trade their beliefs based on these occurrences because it is a pattern that provides an edge.  In fact, some traders use the Supermoon effect.  They opine that the phases of the moon have such a strong historical tendency to pinpoint the imbalance in trading emotions that most of the extremes in prices all around the world can be explained by the lunar tendencies of human behavior.  Just google them. The point is that if there is an observable phenomenon – people will use that edge to trade until the edge is gone.

Concept 5:  Throughout time, Charts Have Shown Repetitive Visual Representations of Market Emotions – and Can Thus be Reliably Traded Profitably Upon Knowing the Edges of Price Patterns. 

There are people who trade primarily looking at charts.  They call themselves technicians.  They believe that based on empirical evidence spanning hundreds, thousands or even millions of information – that their backtested data shows a positive expected value (a profitable trading system) when they buy a stock that is trading above major moving averages (50 day, 100 day) and if the price just crossed significantly above the 20 day moving average. This is an example of a trading system of a Moving Average Cross Over.

It’s kind of like a weather analyst saying that if the clouds are significantly hovering above the sky, and if the barometer crosses a certain atmospheric pressure, then we should expect rain coming within the next six or seven hours.  That’s all that this means.  People can use technical price indicators to confirm a bias, just as people use the barometer to measure the weather.  It’s the same.

the barometer.png

Many people can attest to using moving averages all their life and predict the price movement.  Trading the stock market is really almost about predicting the weather tomorrow.

We’ll give an example of a popular technical indicator (think of it as the scientific instrument – barometer.)

Below is a screenshot of the USDCHF 1 hour time frame chart.   The red, blue, yellow lines are the 14/20/100 day Exponential moving averages.  Below that is the ATR(20) or average true range of the past 20 hourly candles.

This is an ongoing trade.  I placed a SHORT USDCHF position at 0.9700 seeing a resistance in the daily chart and a downtrend channel, many years of backtested data shows me that USDCHF habitually declines when it cannot move past its channel.  I placed my stoploss at 0.9740 (a 40 pip cutloss to stop me out if I’m wrong – and a 0.25unit position shows that my risk is limited to $100.)

My target for this trade is initially 0.9590 or 110 pips with a time span for the entire week since the USDCHF has a Weekly ATR(20) of 200 pips. This means that we can expect USDCHF to move 200 pips in an upward or downward direction from high of the week to low of the week in that range.   If my words are beginning to sound like garbage, I’ll explain and define all these things in my next series of articles.   What’s important today is you know that we are trading based on a price pattern probability, we use indicators and backtest that trading system and then we make a bet based on that historical tendency.

usdchf trade example.png

  • I’ll tell you in my next article how the trade went 😀

Thanks!

– Faceless Trader (or BookAKA)

You can check these educational articles and more over at http://www.bookaka.com as well

We hope to invite all those who have difficulty understanding the stock markets to visit BookAKA.com and get to meet several traders contributing many free sentiments about their knowledge of the stock markets – and like weather analysts, practice predicting the price movement of specific goods (roses, tulips, stock prices) in the coming days. 😀

 

 

 

 

 

Posted in Sharpening the Mind | Leave a comment

May 9, 2016 -For Anyone Who Hasnt Heard of the Markets (Newbie Series)

I, Faceless Trader, was asked to make an article for newbies – to anyone who has never heard about the stock market in the first place.  To me, this is a very difficult thing to do as I might not be able to relate well but I will do my best to give you a big picture understanding of the markets without boring you nor assuming too much.

*****

The concept of trading is not hard to understand.  Number One Rule: Every transaction involves a buyer and a seller.  You can easily see that whenever you’re going to a supermarket ( a modern day public market) or simply a wet market.  You’re the buyer.  Someone else is the seller.  The shop keeper gives you a price.  You haggle if there’s tawaran.  (That’s called bidding – since you’re trying to get the lowest price).  She’s also making tawaran (since she’s asking if you can pay a certain price as well).  Both of you haggle onto each other until you both decide – deal.  That transaction is a perfect example of TRADING.  A Transaction between a buyer and a seller.  🙂  Perfect.

Bid- Buyer Side

Ask – Seller Side

palengke.jpg

Concept Number 2:  Prices Don’t Stay The Same.  It Changes.

flower shop 

Did you notice that whenever it’s Valentines day or Mother’s day that the prices of flowers significantly goes up?  I know you know why.  It’s simple isn’t it?  We all decide to buy flowers for our special loved ones all at the same time so the increased demand allows the seller (the flower shop keeper) to raise the prices and we will still buy until it’s so expensive that we cannot afford any longer – and we resist. 

This concept that we know in real life is the same thing in Trading.  You will notice that there are days when a significant number of buyers wants to buy roses (in the trading world, we call these roses as stocks in general) all at the same time and those who have the roses can easily make a profit by simply placing a 5% profit spread.  Sometimes 10%, sometimes 20%, 30%, 50% and so forth.  The Regulations committee however in the Philippines rules that the owners cannot raise prices beyond 50% at least for the day.  In other markets, there are no such things as limits to how high or how low the prices can become.  In the Philippines, it’s a maximum drop of 50% or a maximum rise of 50% only in a given day no matter how many wants to buy or sell.

The concept of “RESIST” is something I need to expound upon.  We “RESIST”  We fight!.  We Hate.  This is the “ceiling” price.  This is a price where nobody wants to buy any longer.  After some time, no matter how much we want to buy roses for our loved ones, if the seller is absurd and will only sell us roses for a hundred thousand pesos, we will not buy.

You would be surprised that in history, a different flower called “TULIPS” actually fetched a price as high as TEN TIMES your salary as a skilled craftsmen.  Amazing fact!  If you wish to learn more, I think you should check out these damn interesting things that happened in our history.  In fact, even after 400 years, we are still experiencing these “market manias” that inspired plenty of crashes afterwards.  Whether you’re new or not, you need to understand that there are times when EVERYONE WANTS TO BUY ROSES or TULIPS during 1637.

Here’s an excerpt from Damn Interesting Facts. http://www.damninteresting.com/the-dutch-tulip-bubble-of-1637/

One particularly amusing exchange showed the goods traded for one bulb – the lengthy list includes among other things: a bed, a complete suit of clothes, and a thousand pounds of cheese. At the height of the mania, in what seems a complete loss of sanity, the bulbs were deemed too valuable to risk planting by their (formerly) wealthy purchasers, and it became popular to display the plain ungrown bulbs. In at least one instance the plan for safety backfired when a visiting sailor mistook a tulip bulb for an onion, and proceeded to eat it for breakfast.

The height of the bubble was reached in the winter of 1636-37. Tulip traders were making (and losing) fortunes regularly. A good trader could earn up to 60,000 florins in a month— approximately $61,710 adjusted to current U.S. dollars. With profits like those to be had, nothing local governments could do stopped the frenzy of trading. Then one day in Haarlem a buyer failed to show up and pay for his bulb purchase. The ensuing panic spread across Holland, and within days tulip bulbs were worth only a hundredth of their former prices. The tulip bubble had burst.

 

tulip mania.png

You learn plenty of concepts here.

Concept Number 2:  People Buying Goods ALL AT THE SAME TIME increases demand for the good and hence the seller can raise the prices.  Prices for these goods rise.  However at some point, there is a price where everyone RESISTS and stops buying.  We call that price a RESISTANCE.  That’s the TOP.  That’s the highest price it can go.

Concept Number 3: Rising Prices Begets Mania and Generations Show Absurdity ALWAYS Happens.

When people buy all at the same time, prices rise and it can all happen in a sudden causing extraordinary rises in prices further inducing the mania.  People in 1637 have traded tulip bulbs to as high as $60,000 so there’s no such thing as too high a price UNTIL no one else buys – and you see a CRASH.  It’s important to note that as long as there is a buyer, no matter if the price of a tulip bulb may be EXTRAORDINARILY absurd, there’s no such thing as an absurd price when there’s a buyer.  Intiendes? 😀

*****

Because people are always trading goods every day and the prices change every day, some people felt it was tedious to write in a blackboard the prices and came up with a more visually appealing manner.  You’d learn that the point and figure charting history was Xs and Os because it became quite a task to take note of the prices of so many things  all at the same time.  Basically Charts were created FOR CONVENIENCE sake.  Obviously a visual representation of data makes it easy to see if the prices are going up or going down or staying constant.   Now you learn Concept 4: Charts are Used Simply to Check if Price Goes Up, Down or Sideways.  

History shows many visual representations of price movements.  Some use a timeframe of how the prices moved in a day, in a week, in a month or in a year.  However, some people put a great deal of time in looking at how prices move in a single minute, in five minutes, fifteen minutes, an hour and so forth.  Concept 5: A Chart is a Visual Representation of Price Changes and Must be Evaluated in Different Time Frames. 

Perhaps people also realized that if there were millions of people buying roses for 10 pesos a piece, that this transaction volume is worth analyzing versus one person buying a tulip bulb for P2.5 million apiece.

Concept 6:  A Transaction Between MANY BUYERS AND SELLERS (Volume) is a more believable transaction versus a transaction between One Buyer and Many Sellers.  Analyzing Prices without Analyzing Volume is useless unless the market for that good is ALWAYS trading at very high volumes such as the currency market.  You’d realize that if the average trading volume for a certain rose is always just 40,000 versus other roses that trade in millions that it’s difficult to find a buyer when you’re selling.  When it’s difficult to find a buyer, you’re forced to sell low.   However, when there’s scarcity and only 40,000 of you who have that rose and there are millions who’d like to buy those roses, you can easily sell it extraordinarily high because you’re the only person amongst the other 40,000 who’d like to lose the rose for a price of a hundred thousand pesos.

We touched on Concept 7: Liquidity Refers to the Abundance of Volume for the Transactions Taking Place.  The More Liquid – The More Difficult to Cause an Extraordinary Rise and Fall in Price. 

The stock market is your normal neighborhood.  In our day and age, you don’t need to haggle with your shopkeeper.  The shopkeeper is Philippine Stock Exchange.  Every buyer and seller can trade goods online.  To protect the integrity of the market, the shop keeper makes complete transparency of the volume of transactions done and the prices they are bought and sold.  You won’t know if Aling Nena sold you the stock.  You won’t know if Aling Nena bought your stocks.  All you’d know is a transaction takes place.  These things happen fast.  There’s an average of 5-6 Billion pesos traded in a single day in the stock exchange comprising of multiple goods *stocks of companies*.  Everyone has to pay the shop keeper the SCCT Tax when they buy or sell, they also need to pay VAT during selling.  The lowest transaction rate in the Philippines for buying and selling any good is 1.09% no matter which tindero (brokerage firm) you go to.

Hope a newbie learned something ,

I’ll explain more stock market concepts soon as I’m going to do this for BookAKA to help illumine how the stock market works that will be easily understood by all our kababayans.

-FacelessTrader (for BookAKA)

 

Posted in Others | Leave a comment