Aloysius Chan's Blog

Routine You feel content because routine consistently reaffirms a decision you already made. As your body self-regulates, routine becomes the pathway to "flow". When you don't settle into routine, you teach yourself that "fear" is an indicator that you are doing the wrong thing. Socially intelligent person The do not try to elicit a trong emotional response from anyone they are holding a conversation with. They do not speak in definitives about people, politics, or ideas. They don't immediately deny criticism, or have such a strong emotional reaction to it that they become unapproachable or unchangeable. They do not confuse their opinion of someone for being a fact about them. They never overgeneralise other people through their behaviours. They speak with precision. They know how to practice healthy disassociation. They do not try to inform people of their ignorance. They validate other people's feelings. They recognise that their "shadow selves...

Art of trading If the news is good but the stock plummets, buy the crash. Know yourself, know your trade. Revenge is never sweet. Triple your demo twice before trading for real. Don't lose your cool - always use a stop. Protect your capital - protect yourself. Averaging down is for losers, but averaging in can be the difference between success and failure. Tops or bottoms are only evident in hindsight. Turn happens only once but trend is continuous. The last 25% of the position can make a disproportionate contribution to your overall profit. Make your money work for you. Beat computers at their own game by using probative orders. Lessons from Dana  Look for 10 baggers (10x). Stocks have an upside bias. Stops should use time as well as price. Best trade setup is a disconnect between fundamentals and price. Lessons from Bob Booker Fit trading to your personality. Test everything. Don't fall victim to "possum trading". Lessons from Chuck Hays Know if you are better at be...

The longer the time frame the greater the significance of any technical signal. The amount of a security that changed hands in a specific area - the greater the activity, the more signficant the zone. The greater the speed and extent of the previous move, the more significant a support or resistance zone is likely to be. Examine the amount of time elapsed. Signficance of p rice pattern Time frames. Pattern fluctuations. Pattern depth. Diamond is a rare pattern and if formed right it signifies reversal. False reversals detection Low volume Three-bar reversal Pinocchio bar Outside bar More valid breakouts Exhaustion at support or resistance Two-bar reversal at adjacent trend line Strong leading volume

  Branches of technical analysis Sentiment indicators Flow-of-funds indicators Market structure indicators Trend Primary: 9 months - 2 years as a reflection of investors' attitudes. Intermediate: 6 weeks to 9 months. Short term: 2 to 4 weeks. Intraday trend: daily Secular trend: over a very long period. Peak and trough: the high and low over a period (most basic to identify trend) Dow theory The average discount everything The market has 3 movements Lines indicate movement Price/volume relationships provide background Price action determines the trend The averages must confirm False breakouts (whipsaw) Wait for 3% of the boundary to confirm the breakout. Saucer and rounding top ususally will go an complete arc. Outside bar (for reversal), e.g. engulfing Wider the bar, stronger the signal. Sharper the rally, more significant the bar. More bars encompassed, better the signal. The greater the accompanying volume, the strong the signal. The further the close price to opposite direction...

A break of resistance means a close above a resistance area. Reversal Hammer, hanging man, shooting star. Doji, dragonfly doji, gravestone doji, northern doji, southern doji. Spinning top: small real body. High wave: long upper and lower shadow. A doji means the market is in a stalemate and indecision, it become vulnerable to correction. Northern doji are most effective when the market is very overbought and the doji appears at a resistance area. Use doji with support and resistance or channel lines. A bullish or bearish belt-hold is important when they are near support or resistance. 3 white soldier or 3 black crow can be a sign of overbought and oversold.

Diversification has its fair share of rewards and risks which can make or break the company entirely. There are more sourceable examples that diversification benefits a company rather than costing the company. Even with proper calculations and plannings, diversification can be unforeseeable and that contributes extra risk to the company. There will be changes, could even be drastic ones to the already in place corporate strategy, management team, expertise, financial, milestones and many other areas. However, if the corporation is able to adopt and absorb these changes, there will be a long term reward awaiting them especially in this volatile market setting. Nevertheless, the market is always shifting and there are many replacements. The many factors revolving around human needs and wants causes the market to be unpredictable. With technology and more channels to consumers and customers, new businesses are aiming to be disruptive. Such businesses often eat into a huge chunk of the mar...

Market is a zero-sum game, the  $10 you win is the $10 lost from someone else. Slippage is the price difference when you enter or exit the market. Traders are looking for an edge over other traders. The strength of support and resistance increases each time that area is hit, the taller or greater in volume the support or resistance zone, the stronger it is. False breakouts can be seen by divergences between prices and indicators. The longer the time frame, the longer the trendline, the more contacts between prices and trendline = the more important and valid it is. Exhaustion gap is like a sprinter who run away from his pack but once they catch up he know he will lose, it is common for reversal. Major groups of indicators Trend-following indicators: MACD, MACD-histogram, directional system, on-balance volume, accumulation/distribution. Oscillators: Stochastic, rate of change, smoothed rate of change, momentum, relative strength indicator, elder-ray, force index, Willams %R, commodi...

There is no set amount of time to learn to trade. Trade for track record instead of big wins. Look at the chart consistently to look for opportunity instead of catch as catch can or waltz in like a gambler. Paper trading is necessary to test your discipline and if you are persistence to do your homework. Hardware is not as important as the driver of the vehicle. Do not trust daily advisory or blackbox signals. Keep a record of your trading history. Do not waste time with broker with trading system. Commit more time to the field you know than to look for greener passtures. Stay away from commerical tutoring and talk to experts instead. Be exposed to trading buddies or groups. Keep a trading checklist. Anyone can enter a trade but it takes knowledge and experience to manage the exit and risk. The more you trade, the faster you will learn. Create self-imposed limit by using money management. Trader with scientific background have good discipline but they tend to rigidity and arrogance. Ke...

EA automated trading using Martingale and Grid strategy If you have found this it is likely that you already understood what is this trading strategy. Basically the script will decide on a direction using previous high and low with relative strength indicator (RSI). Once the direction is decided, the script will make a order (either buy or sell) at the designated lots. Every time a trade is made, the script will calculate the take profit price point for all open orders to ensure profitability. If the first order hit take profit, the trade ends and the script will restart. Otherwise, once the live price hit the previous price + pip step, it will open a new trade provided if it is not within the same time bar. The newly opened lot will be in an multiplier according to the LotExponent. It will continue to open trade and draw down till the new take profit is hit. There are many variants of this script but I have simplified it to only 50 lines with the following benefits. If your server is ...

Step-by-step guide to install and setup remote MT4 in Ubuntu environment with the most affordable VPS. This post will show you how to install MT4 in Linux computer at a very affordable rate with the minimum steps. MT4 can run in a 10 years old computer meaning you do not have to subscribe to a fanciful VPS. Having said that, it is also important to understand what kind of script you will be running with your expert advisor. If it contains complex procedure and running higher IOPS, you may have to upgrade your VPS accordingly. Always have it tested on your virtual environment (e.g. Virtualbox) before hosting it online. Firstly, we will go through the minimum system requirement for MT4 that is to run in Linux environment: Windows XP (or Wine) 2.0 Ghz 1Gb RAM 10Gb HDD 1024 x 768 screen resolution 512 kbps internet connection 1Gb RAM is enough to run in Windows environment however it would be safer to allocate another Gb when it is requires an emulator which may not be as effective to ...

Moving average, MACD, RSI and Stochastics are all very outdated now. Extremely short horizon trading is more vulnerable to the differences between real-time trade decisions and postmortem evaluations. RSI Bearish divergence occurs when the market forms a new price high on close that is not confirmed by the indicator. It is not the only formula for developing positive reversal signals to reinforce and confirm the trend, but it is the only formula that tracks the ranges. Question before applying the indicator Does the indicator work well for any market in any time horizon? Is the indicator as useful in a rising market as it is in a declining market? Does the signal work equally well in times of low and high volatility? How much time after any signal does the market take to react? Is this a signal that has merit as a trading signal? Why does an indicator work and how do you increase the probability of its accuracy? Gann wheel calculation 45° = (√(x) - 0.25)² 90° = (√(x) - 0.5)² 120° = (√(...

Motive wave (1,2,3,4,5) + corrective wave (a,b,c) = cycle 1,5,21,89 + 1,3,13,55 = 2,8,34,144 Progression Bottom: question of existence, survival, depression, war, recession, "panic", limited wars, "bad news". Rebound: from undervalued levels, recognition of survival. Test of lows: same bad news. Powerful wave: best fundamentals. Surprising disappointment: best part of growth ended. Final advance: market performance improved, psychology creates overvaluation. Top: prosperity and peace appear, "good news". Technical breakdown: viewed as buying opportunity. Narrow, emotional advance: technically weak, selective, euphoria and denial. Worst of bear market: fundamentals.

Triplet of opacity The illusion of understanding. The retrospective distortion. The overvaluation of factual information and the handicap of authoritative and learned people. Blindness from black swan events We focus on preselected segments of the seen and generalize from it to the unseen: the error of confirmation.  We fool ourselves with stories that cater to our Platonic thirst for distinct patterns: the narrative fallacy.  We behave as if the Black Swan does not exist: human nature is not programmed for Black Swans.  What we see is not necessarily all that is there. History hides Black Swans from us and gives us a mistaken idea about the odds of these events: this is the distortion of silent evidence.make a distinction between positive contingencies and negative ones We "tunnel": that is, we focus on a few well-defined sources of uncertainty, on too specific a list of Black Swans (at the expense of the others that do not easily come to mind). "A bird in the hand is...

Key Fibonacci ratios: 1.618, 2.618, 4.236, 0.618, 0.382, 0.236 and 0.146. FIbonacci may be more effective to be used with cycle, Gann, moving average, Stochastic and RSI. Alternate retracement Ratio of cube to sphere: 91.1% & 52.3%. Congestive zone (difficult to break): 44.7% / 41.4%

Optimal trade What is it the state of the market? What is the volatility of the market? What is the equity being traded? What is the system or the trading orientation? What is the risk aversion of the trader or client? Types of error Type I error, also known as an error of the fi rst kind or a false negative, is the error of rejecting something that should have been accepted. Type II error, also known as an error of the second kind or a false positive, is the error of accepting something that should have been rejected. Expectations = Winning Percent x Average Winner - Losing Percent x Average Loser Top 10 hedge fund earners (2005) James Simons, Renaissance Technologies Corp.: $1.5 billion T. Boone Pickens, Jr., BP Capital Management: $1.4 billion George Soros, Soros Fund Management: $840 million Steven Cohen, SAC Capital Advisors: $550 million Paul Tudor Jones II, Tudor Investment Corp.: $500 million Edward Lampert, ESL Investments: $425 million Bruce Kovner, Caxton Associates: $400 mi...

Behaviours to avoid Lack of discipline Impatience No objectivity Greed Refuse to accept the truth Impulsive behaviour Inability to stay in the moment now Stay open-minded Avoid false-parallel

Chart days Wide-ranging day: volatility with events. Outside day: may expected reversal. Inside day: high and low fall within previou day. Continuation: triangles, flags, pennants, wedges. Rounded top/bottom: changed in market force, usually will have longer end. Episodic patterns In bull market: shock > stabilisation > congestion In bear market: shock > sell off > bounce > settle Some charting teehniques Dunnigan and the Thrust method One way formula Square root theory Nofri's congestion-phase system Fibonacci Tubbs' law of proportion DeMark's Sequential Donchian's 4-week rule: long when current price exceeds the previous 4-week high or short when it falls below the previous 4-week low. Using regression Least squares / Sinusoidal Linear correlation Multivariate approximations Autoregressive integrated moving average (ARIMA) Kalman filters Trend calculation Geometric moving average Kaufman's adaptive moving average Drop off effect Exponential smoothin...

Money is never lost in the market, it simply move from one trader to another. "Show me a guy with a system, and I'll show you a guy who is welcome in my casino." Bollinger Band with Kelter Channel: when BB came back to KC, time to trade. Typical setup EMA 8, 21, 200 Slow Stochastic 14, 3, 3 MACD 12, 26, 9 40 trading tips Trading is simple but not easy. No hope, focus on setup and stick to stops. Exit early if the direction is obviously going against yours. Trading is boring. Amateur become pro when they stop hunting for the holy grail technical indicator. You are against the other traders. Watch your emotions. Don't be too overly excited. Don't overtrade. Never have the idea of making big money from a trade. Focus on executing the trade and not the money. Focus on protecting your risk and not the money. Best risk management is not to trade, especially during uncertainty. You will be sharper trading less than more. Do not damage your capital, stick to stop and trad...

Vision Value hypothesis: a product or service really delivers value to customers once they are using it. Growth hypothesis: how new customers will discover a product or service. Customer Do consumers recognize that they have the problem you are trying to solve? If there was a solution, would they buy it? Would they buy it from us? Can we build a solutionfor that problem? Build-measure-learn feedback loop: ideas > build > produce > measure > data > learn. Genchi gembutsu by Toyota: go and see for yourself. 3 A's of metrics: actionable, assessible, auditable. Pivots catalog Zoom-in pivot: from single product to become whole product. Zoom-out pviot: from whole product to single product of a large product. Customer segment pivot: product solves problem for non-intented, non-original customer. Platform pivot: from application to platform and vice versa. Business architecture pivot: switch between high margin low volume or high volume and low margin. Value capture pivot: f...

Baker/baker paradox: people tend to remember the profession more than the person's name as it is more relevant. People only remember 7 digits plus, minus 2. To remember better, chuck or group them. The Major System by Johann Just Winkelmann: to convert strings to numbers for easier memory. Person-Action-Object (PAO) system: applying arbitrary images. You can't learn without memorising, you can't memorise without learning.

Meituan by Wang Xing is not just a copycat but adoptive of AI. Silicon Valley is mission-driven while Chinese companies are market-driven. More advance AI might revolves around ethical issues which could only be saction by the government. OMO: online-merge-offline. 2029, Kurzweil - AI as smart as human. 2045, Kurzweil - singularity. Potential replacement for cognitive and physical labour. 3 Rs: Reduce, Retrain, Redistribution

Anger causes blood flow to the hand for fighting, fear causes blood flow to the leg for fleeing. 5 main domains for elaborated emotional intelligence Knowing one's emotion (self-awareness). Manaing emotions. Motivating oneself. Recognising emotions in others. Handling relationships. Anger builds on anger and will then revolve around revenge and reprisal. To defuse anger is to mitigate the information at the right window. Interpersonal intelligence Organising groups Negotiating solutions Personal connections Social analysis Artful critique Be specific Offer a solution Be present Be sensitive Ingredient of crucial capacity Confidence Curiosity Intentionality Self-control Relatedness Capacity to communicate Cooperativeness Children perform poorly due to Withdrawal or social issues Anxious and depressed Attention or thinking issues Deliquent or aggressive

2006 Merrill merged into BlackRock to form a trillion-asset club. The management were tempted by the huge bonuses and heavily traded the CDOs to hit their target. Public-private partnership fund were formed to buy the toxic assets.

To influence human behaviour: manipulate it or inspire it. Novelty can't stay forever, someone will eventually overtake it. Toyota overtook GM by 100% since 1990. Celebrity endorsement are blindly followed. The golden circle What: everyone knows what you are doing. The result. How: how they do what they do. The senior executive who got inspired. Why: why they do what they do. The vision from the leader. Brain Neocortex: rational and analytical, WHAT. Limbic: trust and loyalty: HOW & WHY. If people don't buy what you do, they buy why you do it. Proposing your company with why: "why I love about our company is becase ... all our staff look forward to working because it is an inspiration to ... it is amazing how serve customer because ..." Celery test: buying M&M and celery at supermarket, but why? (For health) School bus test: if the founder or CEO get hit by a bus. will the organisation still be able to run? Follow your why, and others will follow you.