Pedro's Evolution

[pedro01]

I have decided to start a log about my journey. This is mostly for myself - the more I learn, the more I have to unlearn and it amuses me that there have been points where I thought I knew what they way forward was and discovered I was well off path.

I think it will be good to record my presumptions & assumptions as I move forward. Also - if I get too bogged down in the minutiae of it all, perhaps someone can give me a reality slap to get back on track.

About me:

My name's Pete, 38 years old, I run a software company for a Japanese multi-national in Bangkok.

1 kid, 1 ex-wife & 1 budding future wife who is very understanding of the hours I spend on this and very good at listening to my explanations of the markets. This helps me immensly as verbalising this helps to me to understand it myself.

Thanks Pla....

 

[pedro01]

OK - first of all - my goals....

:whistling

I wish...

 

[pedro01]

1998-ish

OK - so there I have about $100K sitting in mutual funds sold to me by some 'diamond geezer' in Bangkok.

All legit stuff but he got me into all the wrong things - Guinness Flight Wired Index, internet stocks, biotech...

Then guess what happens - Boom. Actually, I only lost about 30K - could have been a lot worse but I realised that my 'advisor' just advised me to get into everything that had been on the up & up in the past 12 months.

He was a salesman, not an investment specialist. I figured I would need to do this myself....

 

[pedro01]

2002 ish

Ok - so I may not be the fastest guy off the blocks.

I started off with books by Peter Lynch, Warren Buffet etc. I found Buffet largely irrelevant as I couldn't buy a whole company. Lynch however became my hero. I realised that fundamental analysis was where it was at & that technical analysis was just some fantasy that had no basis in reality.

So there I went. I have run a few companies in my time - as a sole trader, partnership & then a 'real' company, so extending my knowledge to understand listed companies wasn't that hard. I learnt about rules & regulations listed companies had to follow, how to read & interpret their balance sheets and P&Ls. I did this by reading a lot of books and stufying a lot of company reports. I soon became pretty good at spotting where companies were making more profit but becoming less healthy. I learnt about asset valuations & the disposal values of various assets in the event of a fire sale. I learnt about PE rations, debt to equity ratios, I even brought books that solely discussed various fundamental ratios & other data that could be used to asses a company.

All of this information was leading me to my 1 ultimate truth. This was that once I could accurately value a company, I could come up with a perceived value of their share price and then all I had to do was to look for companies who's share price was trading at less than my assessed value & BINGO - I'd buy it.

I did a course on valuing a company - I think it was a Morningstar course. Discounted cash flow, future value of the $$$ etc. etc.

What an excellent way to spend your time I can hear you all saying...

So - I did end up buying a few shares - $10K in an airline stock that went to $15K in a few months. $20K in a company I used to work for that went to $25K in a few months. I made money but to be honest, even after all the work I'd put in, I recognised blind luck when I saw it.

I decided to stop for a bit - there was no way I could know that a feeder airline for UAL would be dropped by UAL & that there would be a furore over their plans to go it on their own as a low cost airline. The price shot up for a bit, I cashed in & that company ceased to exist shortly thereafter. When I brought it, it was because they were a solid feeder airline & I thought they had potential for growth as well as good financials.

 

[pedro01]

2003-2007

Sooo - when I say stop for a bit - I mean quite a bit.

In 2003 I started the company for the Japanese multi-national, I continued to read fundamental analysis books but after making a little money by pure chance, I decided to leave it to the professionals. However I still KNEW that fundamental analysis was the game.

I looked at how I could get my mutual funds working better for me,so I studied asset allocation as well as the different markets around the world and the performance of the fund managers/funds that I was allowed to move my funds into with my account type. I got pretty much out of US assets & went into MAN AHL Diversified futures , eastern europe, asian property & Gold. The companies I preferred - Barings, Merril (thanks for their gold fund - wonderful) etc.

That took my mutual funds up to $200K. I rarely re-balanced is as asset allocation says I should - and all is still well with those mutual funds.

Thing is though - I'm an expat and I should have a lot more than $200K in those funds but I am loathe to put new $$$ into them.

I also brought a house in this time, got married & divorced and gave the house to my wife & son. There goes $250K...

 

[pedro01]

Dec 2007

So there I am - living in a 2 bedroom appartment in Bangkok whilst my ex & son are in a lovely 3 bedroom house in a nice gated community.

My jobs is well paid but sadly it's well paid in dollars. When I negotiated the contract, it was 45 Thai Baht to the dollar & at this point it was hovering around 31.

Show me a man who loses almost 30% of his salary & I'll show you someone that's having to cut back on the Foie Gras a little.

So - I decide it's time to get back into investing. If I could just pull in another couple of thousand dollars a month, life would be good.

I have no idea why but i ended up buying Ian Williams "Trading The Easy Way" course. I paid almost $1000 for it. Now - this isn't the worse course in the world and it did turn on a few lights for me. I'd always considered support & resistance to be purely technical concepts but it was a revelation to read that they were as much psychological concepts.

This course espouses the benefits of spread betting & going with breaches of support & resistance levels. It also says that you should never paper trade - just go straight in. Fortunately for me - Finspreads were doing a newbie account where I could bet 20p a point for the first 8 weeks.

Well - needless to say, I lost money on this but not a great deal. I learnt that I would ride out my losers & cut my winners short. The worse thing though was that the more I followed the trading rules, the more these breaches of support & resistance were not following through. Is also became obvious that Ian Williams himself wasn't the guru he made himself out to be. I went back & downloaded all his chart analysis videos (he does them bi-weekly). I noticed the following things...

1 - He'd never make a direct recommendation, he'd say that was because he wanted us to stand on our own 2 feet
2 - He would make predictions such as - if this resistance is breached, it'll more than likely go to point x
3 - I tracked those predictions & it turned out most didn't come true
4 - When one of Ians predictions did come through, he'd show the chart & proundly refer back to the other video and talk about how it was going as predicted. You could hear how proud he was of this. The way this was presented gave me the impression it was a rare event.

I had Sharescope & I paper traded for a while, kept watching the video's until a couple of months ago where I basically gave up on it.

The whole thing is very well presented & perhaps some can make money at it but my feeling is that Ian Williams is not currently trading this system & he seems far too excited about his good calls to be the dispassionate trader that is just playing the odds that he claims to be.

 

[pedro01]

July '08 -> Now

So - I decided that I was interested in technicals but that I needed to learn more of it. I read a couple of books on technical analysis but apart from Lefevre, I read nothing inspiring and certainly nothing that wasn't covered in the Williams course - very basic stuff such as breaks of support & resistance, overbrought, oversold etc with the usual psychology chapter in it. Nothing inspired me and on my analysis on Sharescope, none of the very simple entry points they were recommending were worth following.

Then I heard about Mastering The Trade by John Carter, I think it was Ratchoole on here that recommended it. Now - THIS was the kind of info I needed. What a goldmine this book is for a newbie. I quickly formulated my plan. I would read this book, then make myself an expert in Tradestation & ESL. I would program Johns strategies into Tradestation & walk away leaving that money making machine spinning whilst I chose the colour for the Aston....

 

[Directional]

is the girl in the pic your current Thai lady, or one of your goals? hopefully, its not your ex with your (now her) car.

Interesting Journey by the way, good set of posts.

 

[pedro01]

Sept 08

Of course, each phase of my understanding needs a new post. I have also missed the optionetics course I did in 2004 which promised much but still left me scratching my head because all options strategies I learnt still left me needing to decide if the markets would go up, down or stay still.

I read through Carters book. A few weeks ago I opened a Futures account with Tradestation, not with the intention of trading - just with the intention of getting the platform fees down. I purchased the ESL course & I learnt how to program ESL.

Then I started going through Johns book again and some things hit me. First of all, that most of the entry & exits in the book do not work. This is a good thing in my opinion, had they worked, I would have failed to come to the conclusion that it is likely that nothing will work forever. Also, I now understand that I need to find something that works for me and i need to understand WHY it works. If not, when it stops working, I'll be like a lost little sheep.

Also - that maybe I can't expect the system to do everything for me. Programming Tradestation is VERY useful - just the other day, I started to look at the impact of pre-market volumes on the Dow, I was quickly able to write a script to fo this. I don't think I'll personally worry too much about automating my trading, although once I have a feel for what kind of market we are in - I may leave some automated trades on that suit that type of market. I think some aspect of trading has to be discretionary. I can't program 'that chart look sweet' and I started programming computers at 13...

So here I am...
- Carter has taught me a lot about the workings of the futures markets for a bargain price. Not so much on Forex, but that was also very useful
- I am still looking at Carters strategies to understand more about why they had worked & why they don't work at the moment. I don't hope to fix them but I do think there's more to learn here.
- I do believe that his chapters on assessing the markets direction based on TRIN, TICK, put/call ratios etc. are very good and I am looking at these daily to get a feel for them
- Also his chapter on monthly/weekly/daily/hourly analysis appears to be good way of getting a feel for the markets and is worthy of investigation.

So - I feel I have a lot to go on in studying and I feel under no pressure to start trading BUT I am a little concerned that I may be looking in too much depth at certain things.

For now, I will stick with index futures for my analysis - things on my list to do now are :

- Continued study of various strategies from the viewpoint of why they'd work
- Look into Forex in more detail
- Look into key economic dates & data that sway the markets to see if these need to be part of my trading plan.
- Continued watching of pre-market action & the market open on the DOW - just watching the Ticks as well as TRIN, TIKI, TICK & put/call raios to see if they really are useful for me

Comments are more than welcome.

I am sure that my current 'surefire' conclusions will be replaced with new ones within a month.

 

[pedro01]

is the girl in the pic your current Thai lady, or one of your goals? hopefully, its not your ex with your (now her) car.

Interesting Journey by the way, good set of posts.

:cheesy:

LOL - no the girl is my girlfriend and the car is the goal. She is from Thailand.

In retrospect, as hard as it was to sweep her off her feet, it now seems easy compared with this trading lark.

Thanks for the comment.

 

[swissy]

Good luck Pete - I wish you well in all your goals. I am starting on the journey myself (after a false start) and I have a Thai wife and two kids (no Aston Martin).

I think starting and completing a journal takes guts but will also help keep you honest in your trading and makes you a quick learner from mistakes which we all need. I have in mind to start myself once I develop my knowledge and choose my style of trading.

I look forward to following you - keep it up.

Best,

Swiss

 

[pedro01]

Thanks for the comments Swiss !

Right - this week has been interesting.

For me - when I want to learn something from a book, I'll read it once & then again a second time. On the second pass, I make condensed notes. So for the "Trading the easy way" book - I have about 30 pages of notes.

So - I'm going through those on a daily basis to let them sink it. I also started another book which has been on my shelves for years - I can't remember buying it - but I think it must have been when I was in my Lynch & Buffet phase. It's called 'Trading For a Living' by Dr Alexander Elder.

I'm about 100 pages in & it's starting to go through the usual stuff on head & shoulders, pennants, boxes etc that you see in most tech analysis books. In terms of info, there's a lot of info in this book but I'm going to put it back on the shelf for a while. Whilst it's cool to know about stuff like 'head & shoulders" I really do wonder if such commonly known techniques are really money spinners. Plus - there's only so much you can learn at any time.

Added to this that the Carter book talks more about TRIN, TICKS, put/call ratios and a few other things that help you assess what kind of market you are in before making a trade. For some reason, I'm more attracted to trading on this information, although I admit it's only really useful for US stocks/Futures & not much use for Forex & other Futures.

I'm watching the pre-market volumes of the Dow stocks, the mini DOW and watching what happens to the mini-Dow when the NY markets open. My focus is more on price & volume than anything else. I am also watching monthly/weekly/daily levels with EMA's. I watch this pre-market action up to around 10:30am NY time at which point I go to bed & then I see what actually happened again in the morning when I get up. Thursday & Friday were most interesting on the move off the back of the employment numbers. Carter says that a close on the TRIN closes above 2.0, that there's an 80% chance of a rally the next day. It was nice to see that Friday did indeed see a rally.

One 'interesting' thing this week is that Tradestation was crashing all the time and I ended up re-installing it this morning. I did back up Tradestation before I re-installed it but I lost all of the ESL scripts I wrote. Never mind - I'll write them at work. On the bright side Tradestation has been fine since.

Sadly I can't connect to Tradestation from work - something to do with the Firewall, that's probably a good thing though.

I'm off to LA mid-week,so expect a little disruption to my schedule but I'll be waking up at 4am jet-lagged so will probably be watching the NY markets open from there too.

 

[anandsancheti]

I know how it feels to go from one thing to another,and not knowing whats happening.
but the reality is that today there are so many things that traders are doing and so many things that everyone knows, that at times its bloody obvious.
like for stops.

so my mentor who has over 30 years of experience in trading futures tells me mistakes to avoid what indicators to use to buy and sell and stuff and i dont know many people who even know of it.
its like everyone knows about moving averages and their meanings, the common ones are used by pretty much everyone and the uncommon ones dont work on a back test. thus he gave me MA which work regardless of markets and i saw that if iget a couple of good trades an year i make more than trying to hunt for trade from day to day.

Plus patterns work and you can try lawrence connors and thomas N bulkowski for that. they also mention the reliablity of each pattern.

Now why i am not telling you about my mentor and his system is that i dont want it to be common.

 

[anandsancheti]

In retrospect, as hard as it was to sweep her off her feet, it now seems easy compared with this trading lark.


two things here,
the one thing that you want most is the most difficult, because you are being tested at how much you want it.

if you take on 2 difficult tasks and do better at the less difficult one that doesnt mean its easier.
use the two in congruence.

 

[pedro01]

Thanks for the comments !

I'll try to keep my posts more brief from hereon in.

Monday 8th
==========
Yesterday I took the 1 hour Tradestation seminar, Tradestation Order Bar. I'm not trading yet but it's something I needed to learn at some point.

- I spent some time looking into ema xovers on the mini DOW in various timeframes & spotted a few patterns worth looking into.

- Ordered 3 new books to pick up in the US later this week.

2 books on Fundamentals - not company specific but more general economic indicators:
The Secrets of Economic Indicators: Hidden Clues to Future Economic Trends and Investment Opportunities by Bernard Baumohl
Ahead of the Curve: A Commonsense Guide to Forecasting Business and Market Cycles by Joseph H. Ellis

1 book on candlestick charting:
Japanese Candlestick Charting Techniques by Steve Nison

- Decided to re-read "High Probability Trading" by Marcel Link again, I read it just before John Carters book and feel it may be worthy of a re-read at this point.

Off to LA on Tuesday night, a direct 16 hour flight from Bangkok . Plan for the rest of the week is to continue watching the dow & it's relationship to pre-market action.

Also - I need to find time to re-write some of the ESLs I lost. In the main, the pivot points, the pre-market radar screen (showing last 5 days of pre-market action) & my version of the TTM squeeze.

 

[pedro01]

Sunday 14th
==========
Well - jet lag & boredom sure are a good way to get through a book in a few days whilst still working. LA is nice & cool at the moment so despite the locals complaining they've had no summer, it's a nice break from the heat of Bangkok.

I read Marcel Links book "High Probability Trading" for the second time.

My initial thoughts were that I'd need to become savvy in one particular market before moving to others. Now I think, I'd be better served looking to refine one trading methodology across multiple markets before looking at other types of entry.

My reason for this is simple - initially, I want to use a technique that involves only getting in on trades that are in the direction of the overall trend. If I am looking at intraday entries & the daily/weekly trend is bearish, then I'm only ever going to go short on that instrument. Whilst I'd love to just focus on the mini-Dow - I think it's a bit choppy at the moment, it's still in an overall downtrend on the monthly/weekly charts but choppy on the daily charts, so it's not a good fit for me at this time.

Here then, is my plan:
Develop a trend following trading plan,
Look for trends on the daily and weekly charts but for entry points on the 60, 5 minute charts only in the direction of the overall trend
Be able to recognise when a trend is on & still valid (MA's, trendlines, ADX, Volume)
Be able to identify good pullbacks for entry points (Oscillators, Volume, channels)
Be able to recognise when a trend may be coming to an end

For now - I want to ignore entry & exit points for choppy markets, it's something I can learn later.

For the markets, I will focus on futures as there should always be something that's trending
- Crude Oil
- Mini Dow
- Gold
- Silver
- Soybeans
- 30 Year Bonds
- 10 Year Notes
- Corn
- Wheat

I'm interested in SSFs too but am a little but worried about liquidity.

I still need to brush up on the economics side but I do have some good books for that.

I'll still go ahead & read the Japanese Candlestick book but I don't want to go over the top with reading as opposed to working on the trading plan & executing it on a simulation account on Tradestation.

 

[pedro01]

I dissapointed myself a little this week as I just didn't have the bandwidth to put time into progressing my trading education. Nor my exercise either sadly.

Normally I will put in 15-20 hours a week into my trading education but work got in the way big time.I'm at the end of a software project which I was called from Thailand to US to 'rescue' as it had been going nowhere for 3 months. With 1 month left, I got called in to sort it out. I spent 2 weeks in LA, then 10 days back in Bangkok kicking the work off with the programmers, then back to LA to get the Thai & US software integrated. Of course when you go to HQ, they throw a lot of other stuff at you too.

All was well - until Tuesday when I worked 7 am until 11pm, same again on Thursday. Interesting work - but not good for having free time. I'm back in Bangkok now so will double my efforts this week. On the bright side, I'll be waking up every day at 4am with jet lag, so plenty of time. The project need to be finished this Friday 7 after last weeks efforts, we should be on track !

Incidentally for those with an IT bent - we are an ERP company but we also have our own programming language & it's the development of the programming language we are working on in Thailand at the moment. It's a challenge doing so much in so little time but I wish they'd have given me this to do 3 months ago as opposed to when it got in trouble !

So - Once I have read the Nison book, I'm going to write a trading plan, publish it here & start trading my demo account.

Target 1 - trade the demo account until profitable
Target 2 - trade live with a $10K account, the target being to break even PLUS get my tradestation subscription free (10 futures trades a month or I need to make about $150 profit/month to pay the fees)
Target 3 - make $2000 per month trading live, this will obvioulsy need a larger account but I have $100K I can put in if I am happy I really made target 1 & 2

I was sorely tempted to jump in this week as I do have a futures account so can make live trades any time. The drops & bounces were very predictable BUT - that's not the trading style I want to employ so I simply took a pass.

Over the coming weeks, I'm going to need you guys to comment on my trading plan & trades. My log should be more interesting once I go from theory to practise.

And yeah - my posts may be a little shorter then

Cheers

Pete

 

[pedro01]

Nearly finished with my studying of TA. Whilst I feel I have a head full of both useful & useless stuff I want to complete my study of Nisons candlestick book before progressing.

I will start the demo account trading before I start studying the macro-econimics - which I feel is a necessity as sometimes the fundamentals will be moving the markets (e.g. a day when employment announcements are made) and some days it will be purely technical. I expect the fundamental days to catch me out. Not only do I want to understand when they are, I want to understand their potential impact.

Also - I am more interested in swing trading to start with but all the info I read seems to have a day trading bias, so it will be interesting to see how I can apply this on higher timeframes.

Just one thing - although people say swing trading is easier - there were days earlier this year when I kept getting caught out on UK stocks when the market was drip feeding us bad news about the banks. As such - I am still a bit wary of longer term plays.

 

[pedro01]

OK - I'm pretty much ready to start off with a demo account based on my trading plan.

I'll start with $35K in a margin acount and go from there, this is a comfortable amount for me to start trading with when I go live.

My only stumbling block will be that initially I'm only going to trade the first 2-4 hours of the market because of the time difference between NY & Bangkok and the fact I still have a job to do.

Now - I guess I'd better learn how to order enters in Tradestation... I did do their order entry course but that is long forgotten. :smart:

I met up with another board member over the weekend - Swissy & his lovely wife Nok and their 2 kids. Their 2 boys and my boy seemed to have a lot of fun together.

Good luck with your trading Swissy !

 

[pedro01]

OK - I'm off.

I started last week - 3 evenings but 2 evenings were pretty much a no go in terms of entries so I sat back.

Then on Friday, i got an entry long ESI 200 shares @ 66.47 @ 11:39 am (Eastern)

Closed out 75% of the position - 150 shares @ 68.16 11:48 am

Then just before 1pm, my Tradestation had been playing up all day, so I decided to call it a day & close out the other 25% of the position 50 shares @ 70.40.

This is based on a $25K demo margin account.

For various reasons, this log will now continue in the Technical Trader sub forum. You'll need to join that sub forum to see the rest.