Monday, October 1, 2018

Allegory of the Cave

There was once a gathering of people who have lived chained to the wall of a cave all of their lives, facing a blank wall. The people watch shadows projected on the wall by things passing in front of a fire behind them and begin to designate names to these shadows. When they see the shadow of an object, they assign a word to call it. Let's say it's a book. They see the shadow of it and assign the word "book!" But it's not really the actual book that they are calling book, it's just the shadow of the book. The shadows are as close as the prisoners get to viewing reality. The prisoners are unable to see these real objects that pass behind them. What the prisoners see and hear are shadows and echoes cast by objects that they do not see.

Every day, these people in the caves watched shadows projected on the blank wall. They created a game of guessing which shadow would appear next. If one of the prisoners were to correctly guess, the others would praise him as clever and say that he's the master.

Then one day, one of the prisoners, let's call him prisoner Z, got away and leaves the cave. He walks outside into the sunshine for the first time. He is immediately blinded by the sun but his eyes began to adjust.

For the first time in his life, he is exposed to sunshine and light. He is shocked at the world he discovers outside the cave and does not believe it can be real. He sees actual flowers, the colors of birds, the nuances on the bark of trees. When told that the things around him are real while the shadows were mere reflections, he could not believe it. The shadows appeared much clearer to him. As he becomes used to his new surroundings, he realizes that his former view of reality was wrong. He can now finally see the true forms, shapes and reality of the shadows he thought were real. He begins to understand his new world and sees that his former life and the guessing game they played is useless.

Now, what would Z think of his companions back in the cave?
He felt sorry for them and their limited reality.

Immediately, he came back to the cave to try to help out his companions who are still mired in confusion and error. But he is no longer used to the darkness and had a hard time seeing the shadows on the wall. Because he's become used to the sunshine and light, he can hardly see anything under the ground and looked confused. To the prisoners in the cave, he looked like he's lost. He eventually finds them and urged them to escape the cave and venture forth to the outside. But they laughed at him and thought he was crazy.

The other prisoners thought that the journey has made him stupid and blind. They threatened to kill him if he tries to set them free. Most people are not just comfortable in their ignorance but hostile to anyone who points it out. When you tell people they're wrong, you get nowhere. You offend them.

Human understanding of truth is limited by our experiences. We can never fully understand reality because we can only know about the things we have experienced. So our perception of reality is based upon this -- that we must transcend this by expanding our knowledge.

I know you've been wondering. What does this have to do with trading?

Last month, on the 15th, there was a gathering..

..of people who have lived chained to the wall of a cave all of their lives, facing a blank wall, and some people who got away and left the cave, walked outside into the sunshine and discovered what it's like outside the cave. Some of these people shared what they found when they stepped outside their comfort zone. Their own journey to discovery. The lessons they had to learn the hard way. Their trials and tribulations.

Think of the people trapped inside the cave as majority of the people who entered the stock market world. We symbolically represent the prisoners in the cave, all of whom are stuck perceiving reality in a fixed and specific manner. We are all prisoners in the cave. No one chooses to be in the cave. It's just where we all happen to begin.

What about prisoner Z, the person who escaped the cave?

This represents the small handful of people who dare to think and act in a different way from the crowd. It's not because they're better than everyone else that they've "escaped the cave." It's simply because they've made a decision to consistently step outside their comfort zone, face their fears, and think differently.

So how can you escape this cave?

We all have the capacity to learn. But not everyone has the desire to learn.

The process of progressing out of the cave is about getting educated and it is a difficult process. If you want to leave the cave, you need to question your beliefs. When getting an education, there is a struggle involved. We want to resist because knowing the truth can be a painful experience, to a point that it's easier to be ignorant. It takes courage to step outside your comfort zone and think different than before. Not everyone will understand and be happy for you. Just like how the other prisoners responded to prisoner Z's return, you can expect friends and family to laugh and ridicule you. It's normal to face criticism once you leave the cave.

We all start in that cave. But we don't have to stay there. Perhaps on  that day, a glimmer of light punched a hole in your most basic assumptions. Will you break free to struggle towards the light even if it costs you your friends and family? Or will you stick with comfortable familiar illusions?

Remember, it's not enough to leave the cave. It's more important to stay outside of the cave.

Thursday, October 6, 2016

Trade Review: WEB

As the title suggests..

Let's start with the set-up.

I have been eyeing this stock ever since it held that 76.4% Fibonacci Retracement Level.
But I never bought because there were no signs of strength.
I was waiting for it to breakout of the 20MA.

Yesterday came, and it closed above the 20MA.

I bought. With a cutpoint below the 20MA.

Right after the close, news came out that Ongpin sold his shares at 2.60. That's less than half of the current price. 

As much as I'd like to stay away from news and rumours, things like this are bound to appear on your news feed (somehow). It's up to you how to deal with it. I didn't do anything.

I just monitored my position the following day, ready to cut. The stock gapped up at the open and rallied strongly. I did not sell when it reached the 7.00 levels during the first hour of the trading day. Because hey, let your profits run right? And as I saw that things were looking good, I averaged up at 7.15 only to sell it at 7.00 because my cutpoint was hit. That was yesterday's position + today's. I profited some.

But I was still watching it. Waiting for a re-entry.
I saw it go back to AOTS at a price point that offers a really good Risk-Reward Ratio.
I hesitated. I didn't buy.
Instead I bought at a higher price (7.25) only to be shaken out a few flucs down.
I did not follow my cutpoint. I sold a few minutes before lunch. I lost some.

Right after lunch, it broke out and rallied to my target price (9.10) and closed far above all of my entry prices.

Here are what I believe to be my errors on this trade:

1st error - My initial position was bought using the Daily Chart. My 2nd position was bought using the intraday chart. When my intraday cutpoint was hit, I sold everything. An option could be selling only the 2nd position and leaving the initial position and deciding what to do with it at the close.

2nd error - When I tried to trade it again, I hesitated on a good Risk-Reward Ratio set-up. And although I could only say this now, I had recency bias back then. I was afraid that this position, too, would be cut. So I did not buy.

3rd error - When it rallied right after I passed on it, I chased. Making my average entry price, higher than if I didn't hesitate a few minutes back. And because I didn't like my entry, I was easily shaken out.

4th error - OR NOT - The stock broke out of its previous high and rallied strongly to my set target price. During this time, I was in transit. I could have checked it thru mobile. I know the breakout point. But I didn't have the willingness to do it. I just waited for the close.

Overall, I made money but I also made a lot of mistakes.

Don't stop learning.

Wednesday, September 14, 2016

10 Hard Things About Trading

It is hard not to trade too big and go all in when you really believe in a trade but it is even harder to take a big loss if it goes against you.

It is hard to keep taking your entry signals when you are on a losing streak and it is also hard to miss a signal and watch it go on to be a big winner.

It is hard not to add to a losing trade when the price keeps looking better as it falls lower and lower but it is also hard to be on the wrong side of a trend.

It is hard to buy a breakout because it looks too high and it is also hard to miss out on the beginning of a big uptrend.

It is hard to cut a loss early with the ego wanting to be right about the trade.

It is hard to let a winning trade run when you would prefer a quick gain rather than a bigger long term gain.

It is hard to buy when everyone is fearful and hard to sell when everyone is greedy.

It is hard to trade through different types of markets, bull markets, bear markets, volatile, trending, and range bound markets because the rules keep changing.

It is hard to ever quit trading after you have tasted how sweet a big winning streak is and how life-changing it can be.

It is hard to convince your friends and family that there is a process to your trading and that you are not a degenerate gambler.

Wednesday, August 24, 2016

Take a Knee, Bastard

"With a steel sword like that, you can't even add a scratch to this ultimate shield." - Greed

Earlier this week, I had a conversation with my mentor.

And with a fellow bastard.

But despite the motivations, the guidance, I was too stubborn, too greedy, too foolish.

I was all in on MCP at 4.18.

I sold a few minutes after the open.
My cutpoint has not been hit yet. I just sold.
Why? Because I wanted to daytrade again.
"I can just make a quick profit from here and roll it over to there. EZ panizi."
So I daytraded WEB and IMI thinking I could replicate what I did last week.
But I was wrong. The situation has changed. The chart has changed. The market has changed.
I lost in both trades. MCP went up. Told myself that it's fine.

This time, I was all in on ARA from yesterday's close.
After a few minutes, I sold 2/3 and daytraded, you've guessed it. WEB. F*cking WEB.
Lost again. At closing, I bought TECH because it broke out of 24.00, a really significant resistance.
I also bought CAL at 3.55.

I sold half of CAL at 4.00.
"Good work. That somehow covered our losses in ARA and WEB." I told myself.
"Maybe I can make more." So instead of waiting for the breakout of 4.15
I averaged up at 4.03. Then at 4.06. 4.02 Until I was all in. It didn't break out. It broke down.
I sold when it went below the opening price. I gave back what I made. And then some.

But I didn't stop there. "It just takes one trade to get it all back."
I was revenge trading. I was f*cking revenge f*cking trading!
I bought IMP at 22.40. "This stock is capable of making big upmoves." I'm good with this.
Then I saw ARA. It was back to 3.20 levels. "At 3.45 this will be a borg." I said.
I sold IMP at 22.25 and bought ARA at 3.25.
I bought TECH at 24.90 and went on commute to work.
When I got to the office, ARA was 3.05. I sold.
TECH was 24.80. I sold.

It has only been three days and I have already made 15 trades.
That's right. Fifteen f*cking trades.
Out of fifteen f*cking trades, only two were winners. Only two.

Please bear with me.
Because now I'm going to delve deeper into myself.
I need to know the reasons why I made these terrible decisions.
What got me thinking the way I was.
Sometimes, the only way out is through.

Bought 4:18, Sold 4.10
Error: Fear of Missing Out on ARA.

Bought 6:22, Sold 6.16, 5.88
Error: The urge to daytrade even if the set-ups are not that good.

Bought 3.02, Sold 2.98 (bottom, whipsawed)
Error: No conviction. Sold after 18 minutes even if daytrading was not the plan.

Bought 4.25, Sold 4.25, 4.28
Error: Fear of Missing out on ARA. (ARA closed 3.18, I was right. Need to go all in.)

Bought 6.89, Sold 6.85
Error: NONE

Bought 3.18, Sold 3.18, 3.10
Error: The urge to daytrade WEB even if there was nothing good with the chart.

Bought 4.85, Sold 4.71
Error: This shouldn't have been traded. There was nothing in it.

Bought 24.20, Sold 24.35
Error: Breakout of 24.00 but still sold so I can buy more CAL for daytrading.

Bought 3.55, Sold 4.08
Error: Should have sold everything. It was supposed to be a quick trade.

Bought 4.03, 4.06, 4.02, Sold 3.85, 3.81
Error: Did not wait for the best entry. A breakout to 4.14. Hope.

Bought 4.10, Sold 3.94
Error: Chased

Bought 22.40, Sold 22.25
Error: Revenge trade.

Bought 3.25, Sold 3.05
Error: Fear of Missing Out. Chased. Best entry was a breakout of 3.29.

Bought 24.90, Sold 24.80
Error: Fear of Missing Out. Just wanting to have something where I was right in hindsight.


I lost money.
And I was lost.


Sir Lance and Ms Akio, they were right. But I was too stubborn. I thought I was invincible. I thought I could just make money that fast. And when I lost, I felt I had to gain it all back faster and make more than I lost. How stupid could I be?

I'm sorry Sir Lance.
I know you never failed to remind me of my past mistakes and what I should do.
I broke the rules.
I ignored the lessons.
I jumped from stock to stock.
I traded without plans.
I'm probably one, if not, the worst student the tribe has ever had.

Friday, August 19, 2016

Testing Daytrading

I kind of lack motivation to write lately so forgive me for this post will be quite short.

I've been in a trading yoyo and I want to focus my energy on studying my errors.

Here are my trades for the last ten days four days of which were spent on purging.

And that's it.

Monday, July 18, 2016

July Quota Achieved

I'm still thinking of what my monthly quota should be.
I thought of starting with 10% but I'd like to challenge myself to see if I could make 20% this July.
Here's my ONLY trade for the past 3 (close to 4) weeks.

As you can see, this was an all in trade.
There are some things I considered before I entered with volume.
I asked myself these questions. (credits to Sir Lancelot for this very important lesson)

1. Will I be able to execute my plan with huge volume and not panic if it goes the other way?
- Because I did a test buy at 2.73, buying more on 3.20 levels won't make my Average Entry Price that high which means I can handle the swings in price. I won't panic if it goes down. Aside from that, the stock is in AOTS.

2. Am I willing to wait X number of days for the play to materialize?
- Yes. This was a trend following trade for me. I challenged myself if I could hold this for a month. Because if I do, I could nail future set-ups like this. I used the previous box top as trail stop which is why I sold yesterday.

3. Will I not be tempted if I see other stocks start to fly?
- Hardest part for me. You have SPH, NOW, IMP, ALT, APO, APX and other stocks that went up while my pick was consolidating. But I had conviction on this trade and of equal importance, I have a plan. All I have to do is follow it.

I sold yesterday when the previous box's top, which also happens to be a psychological support, failed to hold.

Gained +25% overall on this trade.

Monday, July 11, 2016

The Chartist's Offering

"The test of our progress is not whether we add more 
to the abandunce of those who have much;
it is whether we provide enough 
for those who have too little."
- Franklin D. Roosevelt


Before commencement of the Bastard Program, 
I was asked about my RAK (Random Act of Kindness).
I told Sir Lancelot that my RAK isn't really "random" because it won't be for strangers.
My RAK is for my nieces and nephew.

But first, let me tell you a bit about myself which is the reason why I chose this RAK..

I came from a poor family. My mother raised me all by herself. When I was in elementary, it was my aunts and uncles who supported and financed my studies. I was a scholar since Grade 1 and the monthly allowance of 150 pesos from the city government was a big help.

Then came high school. I transferred to a different scholarship program and the only reason is because it gave more "support". Yet it was still the same. It wasn't enough. Even if I was in public school. I remember that one time a classmate of mine approached me and gave me 50 pesos.
"Eto yung baon mo pinabibigay ni Nanang ****. Nagpunta sa bahay kanina. Iabot ko daw 'to sayo."
That was when I realized, my mother didn't have anything in her pocket. Zero. She had to ask her siblings again for help. I graduated and went to college.

This time. I had no more scholarship grants. It was one of my relatives who is a staff at school who paid for my tuition fee - as salary deduction. And so it went on like that for two years until I was able to get a scholarship from a politician's foundation. I became an Academic Scholar and was included in the Dean's List. I was able finish college.

But this post is not about me.
This is about three little kids who have big dreams.
Let me introduce them to you.
Forgive me for blocking their faces.
These kids are my relatives.
I don't have a troll account and I'd like to keep my identity anonymous.

This is Kiddo #1.
The big sister.
She's in Grade 4.
Very polite and courteous.
Always taking care of her siblings.

Kiddo #2.
Grade 2.
Very playful and energetic as it is with all little boys.
This is the kid whom I give cars and toy soldiers as gifts.

This is Kiddo #3.
The youngest of the three.
She's in kindergarten.
Very timid but has a really cute smile.
Tell her you'll take a picture and she'll pose right away.

It pains me to say this, these kids were abandoned by their parents and were left to my cousin's care. My cousin who just got unemployed three months ago. But he's the kind of guy who never gives up. His persistence paid off and he's just started on his new job last month.

I'm glad I was able to buy the kids' school supplies for this school year in the nick of time.
Their classes started June 6 and we were only able to buy them June 5.
There's a National Book Store branch just a stone's throw away from their house.
It is very accessible to them.
It's just that they didn't have the finances to buy what they need.

These are some of the notebooks.
There are a lot more of these things.
My cousin failed on taking pictures of all of them.

Kiddo #2 wanted the Iron Man bag.
Kiddo #3 likes Hello Kitty.
Kiddo #1 just wanted a pink and simple one.

Treated them to Jollibee right after.
Bida ang saya.

Just like what my aunts and uncles did for me, I'm extending my blessings to these kids. I plan to help these kids graduate college so they can make a better course in their lives. Right now, I can only afford to help them with their school supplies and the occasional expenses that will come along as they go through school life. But someday, these kids will be our family's next generation of professionals. I haven't asked Kiddo #3 yet but Kiddo #1 wants to be a teacher and Kiddo #2 wants to be a policeman.

One important thing that I've learned in life is this.
The more I gave, the more I was given.
So when God blesses you financially, don't raise your standard of living.
Raise your standard of giving.