Aloysius Chan's Blog

VIX Reversal Buy VIX make 15-day high. Close of VIX below open. #1 and #2 met, buy S&P. Hold the position for 3 days. Sell VIX 15-day low. Close of VIX above open. #1 and #2 met, sell S&P. Hold the position for 3 days. TRIN thrust Buy Closing TRIN is >30% below yesterday's closing TRIN, buy close. Sell on the close 2 days later. 1.5% to 2% stop. Sell Closing TRIN is >30% above yesterday's closing TRIN, sell TRIN. Close the position 2 days later. 1.5% to 2% stop. Percent Advance/Decline Indicator (PADI) Add total number of shares traded. Divide the number of advancing issues by the total issues traded (advances + total) to get today's advancing %. Divide the number of declining issues by the total issues traded (declines + total) to get today's declining %. Take the 6-day average of the advancing % and the 6-day average of the declining %. If yesterday's advancing average was 40% or higher and today's advancing average is less than yesterday's a...

The importance of the open to low or high of the day Don't try to buy big dips below the open on expected up close days.  If long and prices fall much below the open on expected big up close days, "get out."  Don't try to sell big rallies above the opening on expected large down days.  If short and prices rally much above opening on expected large down days, "get out." Trend is your friend Most all market highs can be found to occur at or shortly after a market closes right on the high of the day.  Most all market lows can be found at or shortly after a market closes right on the low of the day. Secret to short term trading We only make money on large-range days.  Large-range days usually close at or near the high, if an up day, the low if a down day. What this all means to short-term traders is that, to catch a winning trade, the most profitable strategy is to hold to the close. The truth Losers of any game typically lament that either the game was rigged. ...

Landry's rules Treat trading as a business. Do your homework. Manage yourself. The trend is your friend. Limit losses. No tickie, no tradie. Take partial profits quickly. Take windfall profits. Trade in liquid and active markets. Stack the odds in your favour. Keep position size within reason. Never add to a losing position. Enter the entire position at once. Remain consistent. When in doubt, get out. Know when to say when. Re-read #5. Trend Qualifier Base breakout. Gaps in the direction of trend. Laps in the direction of trend. High level micro double bottom High-level micro cup and handle Swing trading Oscillator Swing System (OSS) Checklist What is the setup? Where is your entry? Where is your protective stop? Where will you look to scale out? What is the overall market doing? Are there any systems that are triggering? Is there momentum? Are there any setups that are triggering? What is the sector doing? Is there momentum? Are there any setups that are triggering?

Dow Theory Market has 3 movements Trends have 3 phases Stock market discounts all news Stock market averages must confirm each other Trends are confirmed by volume Trends exist until definitive signal prove that they have ended otherwise Ichimoku Chart with line names Trend Trend is your friend, don't trade against it. You can only truly know a top or bottom retrospectively. Higher highs and higher lows are what we expect in an uptrend. Lower highs and lower lows are what we expect in a downtrend.It is likely that 3 or more trends are acting on prices at a given time. Always try to identify the key levels, or areas, of support and resistance for prices. Continuation patterns occur more frenquently in line with the trend than reversals. The move in price out of a pattern is often similar in magnitude to the move into the pattern. Prices will revert to the mean during the trend. Volatility in prices after a long period of trending is normally a sign of a trend reversal. Volume is bes...

Trends Can be detected through Linear Least-Squares Regression. Trend develops from supply and demand. Patterns are very identical and they are in fractal irrespective of time. Technical analysis controversies Random walk hypothesis state that one cannot get the current market from past results. The market moves like flipping coins. Efficient market hypothesis state that when new information come into the market, it immediately become the real price that will render technical and fundamental analysis useless. Market To ensure a market is tradable, it must consist of fungiblity across different geographical location. Technical analysis can be applied to any market. Types of contracts Common stock Agricultural commodities Metals commodities Interest rates Foreign exchange Indexes Mutual funds Exchange traded funds Hypothetical player and marketplace A specialist (market maker) to stablise the price. A mutual fund desires to accumulate as the earning should improve. A group of investo...

Technical analysis + quantitvative analysis The price and volume reflect all available and necessary information about the company, fund or market. There are patterns in the records of price and volume that regularly precede profitable opportunities. We can discover those patterns. Those patterns will continue to exist long enough for us to trade them profitably. The markets we model are sufficiently inefficient for us to make a profit trading them. Removing the judgement associated with ambiguous chart patterns. Defining unambiguous, mathematically precise indicators. Requiring that no indicator or signal may change in response to data that is received after it has been initially computed. Making extensive use of mathemaical models, numerical methods, and computer simulations. Applying statistical validation techniquies to the resulting trading models. Metrics to measure success. Net profit $. Net profit %. Exposure %. Net risk adjusted return %. Annual return %.  Risk adjusted re...

School teacher and sumo wrestlers both cheated. One need the students to have high grades for promotions while the other has their matched fixed. Fining parents who collect the children backfired as they rather pay some money to earn more or to compensate for their guilt. Ku Klux Klan and the real estate agents both derive their power from knowledge. Each has a different agenda with their knowledge though. For property listing, such words means there is nothing else to describe the house and therefore is a cheap listing: Fantastic, Spacious, !, Charming, Great Neighborhood Drug dealers still lived with their mum because they aren't making a lot from the drugs actually. Criminals are slowly eliminated because the family they are borned into are decreasing.

Epiphenomena A mental state regarded as a by-product of brain activity. By "watching " your risks, are you effectively reducing them or are you giving yourself the feeling that you are doing your duty? Monte Carlo generator One can generate thousands, perhaps millions, of random sample paths, and look at the prevalent characteristics of some of their features. Randomness constants An overestimation of the accuracy of their beliefs in some measure, either economic (Carlos) or statistical (John). The U.S. dollar was overpriced (i.e., the foreign currencies were undervalued) in the early 1980s. A tendency to get married to positions. The tendency to change their story. No precise game plan ahead of time as to what to do in the event of losses. Absence of critical thinking expressed in absence of revision of their stance with "stop losses." Bullish and Bearish are very subjective The overall ratio should be applied to see its effectiveness Market goes up (probability) 7...

Drummond Geometry Charts have patterns that can be identified and will reoccur.  Similar chart patterns exist in different time frames.  Prices in a given time frame will center on a consensus value, and when price moves away from that consensus, it will tend to revert to a mean. But this mean itself will be moving and changing as the market unfolds. Support and resistance are real phenomena, and can be measured, predicted, and projected. Time frame charts are interrelated, move simultaneously, and can be visualized as existing within each other. Historical price charts of freely traded financial markets are the visual representation of human crowd psychology in action. Support and resistance in different time frames react to price in predictable ways. The shorter time frames will react first, and then progressively longer time frames kick in. Types of Trading Trend  Congestion entrance  Congestion action  Congestion exit  Trend reversal Candles Deconstruct...

Pitchfork The technical indicator known as Andrews Pitchfork is not that well known and is rarely used by novice traders. However, it is a quick and easy way for traders to identify possible levels of support and resistance for an asset's price. It is created by placing three points at the end of previous trends and then drawing a line from the first point that runs through the midpoint of the other two points. The reason this indicator is called a "pitchfork" becomes apparent from the shape that is created in the chart. Mark out its cardinal orientation Where is the price coming from? Where does it seem to be going?  Is the market trending or non-trending?  What is the market’s exact location within the whole context?  How high/low is the morning, afternoon or day’s apogee (highest high)?  What is the slope like, or how did the price reach the current location?  Was there continuous movement, or did the price jump directly towards the high/low of the chart?...

  To make up any losses taken in the stock market, you have to achieve greater percentage gains than such losses entail. It does not matter whether the losses or the gains come first. Gain/Pain Ratios: the sum of all monthly returns divided by the absolute value of the sum of all monthly losses. Changing Your Bets While the Race Is Still Underway Relative Strength Investing Identify the leaders.  Buy the leaders.  Hold the leaders for as long as they lead.  When the leaders slow down, sell them and buy new leaders. Moving averages are used to smooth out the "noise" of shorter-term price fluctuations so as to more readily be able to identify and define significant underlying trends. Rising wedge formation The stock market (or other markets or individual investments) rises in price.  Trendlines drawn that reflect support lines rise at a constant angle.  Trendlines that reflect resistance, where prices turn down, can be drawn at a constant angle as well, ...

Wallstreet has been toying with mortgage lending and rate.

3 great divides Technical vs. fundamental Trend vs. counter-trend Discretionery vs. systematic When a price is too far from the moving average, buy or sell on it The right mentality It is better not to trade when you are in foul mood. If you feel stressed or preoccupied, stand aside from the markets until your personal stress clears up. Successful traders love the game more than the profits. Risk at 2% and max risk of 6% a month. Basic Record-Keeping Spreadsheet Source, group. I always want to know where my picks come from—my own research, the Spike group, mentioned earlier, webinars, etc. Of course I process all input from others through my own system and accept full responsibility for every trade. Source, individual. If the pick came from a group, such as Spike or a webinar, I want to record the name of the individual whose pick I traded. Some people have an excellent track record, while others, seemingly very smart, lead me to losses. I want to track the quality of the tips that com...

Secondary reaction are the most deeeptive movement and will generally retraces 33% to 66% of the primary change of price. Bull Market Buy Signals Market lows. Bounce. Pullback (hold above the lows).  Break up (above the bounce high). Bear Market Sell Signals Market highs.  Pullback.  Bounce (to below the highs).  Break down (below pullback). Phenomenon Volume peak: bull market Inverted yield curve: bear market Consumer confidence: typically rise

Wise lessons Don't compound your losses by averaging down (i.e., don't keep buying additional shares at lower prices). It is tempting to think that a loss "doesn't count" until the position is closed--but it does! Anytime you own a security, ask yourself if you would buy it today. If you wouldn't buy it, you should consider selling it. Don't get distracted by others' investment prowess. Most investors only discuss their successes, threatening your focus and confidence. Wise investments aren't made with Ouija boards, they are made using logical approaches that minimize risks and maximize opportunities. Master the basics. Most investors spend their time looking for easy money (which is not an easy search) instead of learning the key factors to security prices--supply and demand. Indicators Absolute Breath Index (ABI) The ABI shows how much activity, volatility, and change is taking place on the New York Stock Exchange while ignoring the direction pri...