Self Development Idea (16): Individual Destiny Enrichment (IDE) Program

Few weeks ago, I had a Chinese New Year gathering session with some old colleagues and friends, and we were talking about the GOOD OLD TIME... of Motorola.

There were many programs and cultures that were great, and I particularly like the Individual Dignity Entitlement (IDE) Program. 

The frist time I saw the six questions (as shown in the following picture) on a notice board while I was a young engineer travelled to Boynton Beach Factory in Florida about 20 years ago.  I got a strange feeling after reading through these questione carefully.  I didn't know if the feeling was FEAR or EXCITEMENT for the heart beat raised while thinking about the answers! 

For the fear part, I thought: What if I were to answer "NO" to some of these questions, then why AM I here with the company?  Would I get fire for that?  And, If I were to answer "Yes" to all the questions, I must be fooling myself or not thinking hard enough.

For the excitement part, I felt that there must be something I can learn and benefit from it as these questions ask something that I'd never seriously thought about.

Yes!  Under the Ex-CEO, Chris Galvin, the IDE program was launched world-wide, including new factories in China down to the operator level.

Of course, this program did not exist in the company for long time already, but the profound impact to many individual still exsit.

Be still, and think.
Why would we need to have an immediate boss to has a dialogue with us every three months in order to discover our very own problems and opportunities for improvement?

Why Not change only a few word*, as shown in the below diagram, and make it a very personal IDE (Individual Destiny Enrichment) Program and do personal review?

The good culture should continue to stay with the individual regardless the company continue to exist or not.

 

"If you don't put in effort to control your own destiny,

someone else will most willingly do it for you."

- unknown

By the way...
I read about some articles long time ago, mainly from WSJ, commented Chris Galvin was not living in a realistic world and took this program as an example.
And, I don't think so.  It must had taken extremely great courage for him to launch and roll out this program world-wide.  For many companies which only main goal is profits, the management would be ashamed to read through the original questions.

And, only until the people are tired of all those scandals, from big financial scandals to the milk powder scandals, and recent horse meat scandals...world-wide, people will eventually realize the vision of such profound program.





-----------------------------------------  Added on 28 Feb 2013  --------------------------------------------

[From the Harvard's Famous Success Principle]
The difference between the success and failure of a person is based on how he uses his after working hours. And his destiny is decided by how he use the time between 8.00pm to 10.00pm.

Every night, take 2 hours to read, study, think or involve in meaningful discussion or debate. You will discover that your life starting to change. Continue to persist this for years..... And Success will wave it's hand to you.













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Self Development Idea (15): The Template for Your Journey

Recently, I have come across a very interesting book with profound insight – “The Hero with a Thousand Faces” – released in 1949, by Joseph Campbell.

Since then, it became the "Bible" of movie script writers.  And, the stages of the hero's journey outlined in the book had influenced a number flimmakers...  Such as George Lucas's Star Wars, Disney's The Lion King, etc...
 






The.
There are many articles on the internet wrote about the details on each step on the template, and I found an excellent short video clip in Youtube that illustrate the points clearly:
Here is the link if you cannot see it below: -> LINK

Now, I AM curious... 
Is there any metaphor that we can learn something from this?

Of course.  Since the Hollywood script writers can use it so successfully over and over, again and again to create movies that can resonate with the audience, meaning that there is something within the viewers even the viewers themselves may not consciously aware of it...

See, I believe that the Author, Joseph Campbell did not write this book to with the intention to inspire filmmakers or story writers.  He wrote this to inspire all his readers and gave them many examples of how Hero in the past had acheive their success and what stages (challenges) they had been through. 

There is a Chinese saying, "人生如戏 戏如人生"  - "A Life is just like a Movie, a Movie is just like a Life."   So true! 
Then, isn't it a good idea to use the template to recognize what stage are we in the journey of life right now, and then continue to write the scripts for our own magnificent journey?

 

 

Life is without meaning.  You bring the

meaning to it.  The meaning of life

is whatever you ascribe it to be. 

Being alive is the meaning.

- Joseph Campbell

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Self Development Idea (14) - There are Pattern of Cycles in Life

A week ago, I attended a Trading Seminar on CFD (a kind of leveraged derivative product).  And, I was surprised to notice something interesting, there is some kind of a pattern, that worth the while to write it down.

Just like the products in the market, everything that lives has a pattern of cycle in their life, and it goes through the phases of birth, growth, fruitage, and decline.

Isn't it true that when a baby is born, he will have to go through some patterns that designed for him.

Such as go through the kindergarten, primary school, secondary school, college and university, then start to work, .... , retire and then die.

So, back to the subject that I want to write about, and here is the "Pattern" that I noticed in the seminar:

It was held in a big lecture theatre.  There are three columns of seats and each column has about 30 rows of seats.  Though it was not full-house, I figured out that there was about 350 participants.  I paid attention on the age of the participants in the recess time.  I can divide them into three age group of participants.

1) The age group of 30-45 (25%) 

2) The age group of 45-55 (50%)

3) The age group of 55-60 (25%)

And, when the seminar start, the speaker asked: "How many of you are the first time to attend such seminar?"  I saw about 50% of the people in the room put up their hands.

Do you noticed that most of the people, at least in this place, wait until they are retired or about to retire, then they start to learn about the stock market.

It was quite a "happy" seminar, because the speaker flipped through a couple of historical charts and showed the audience that how money can be easily made with some very simple strategies.  Also, with the leverage, a few ten of thousands dollars is all you need to make more than the averaged pay worker in the country.  

A few rounds of applause had gone round the theatre when the speakers shown some strategies to handle the historical charts and emphasis that it can be easily done with very little training - where to buy and when to sell.

Since, the speaker had mentioned that no one can take any audio recording nor video, or he will sue the person...

Then... I saw many hard working participants taking tons of notes while the speaker delivering the presentation.

And, me too...  make my own note after the seminar.  Just a few words with a picture, and it is attached below.

Well, this is NOT to make joke of the beginner participants for believing that there is easy money out there for them to pick,  for I'd been there, done that ten over years ago...   RATHER, the intention is to alert all to take time to know about this stuffs... 

 

Personally, I view this as a failure of the public education system (worldwide) that there is no syllabus in educating students on the area of personal finance and stock market in their early stage of life.

 

 

See.  If we can know some kind of challenges (pattern of cycles) that we will have to face years down the road.  Wouldn't it be good to spend time in learning more about it and be prepared first before we need to handle it face-to-face?   As sooner or later, most likely one will come to a point where he need to handle his personal finance as saving in the banks is not getting any yield, and fund managers are not reliable nowadays.

 

"Most people tip-toe through life, hoping

they’ll make it safely to death."

– Bob Proctor

 

 

-----------------------Add on 13 Dec 12----------------------

 

This is a typical chart from advertisement. 

Unfortunately, they do not supply with a time machine to take full advantage of it.

 

 

 

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Project Freedom (10): Trading with the BBC Breadth Indicator

What is a Market Breadth Indicator?
In short, a Market Breadth Indicator is a kind of Technical Analysis(TA) that design with the intention to gauge the direction of the overall market. 

Unlike most indicators in TA, which use only the information from a single stock to workout the indicator, Market Breadth Indicators are generated by analyzing the total number of companies in a given market. 

In general, it compares the advancing and declining issues in the market and uses specific formula to generate the ratio, such as TRIN (Arms Index),  and some use other filtering technique to smooth it out like various kind of McClellan Oscillators and Summation Index.

Actually, think about it, the price chart of SPY(S&P 500) and many other indices can also be viewed as a kind of Market Breadth Indicator too.

If those who want to know more about Market Breadth Indicators, there is an excellent book with good coverage and detail formula on this area: The Complete Guide to Market Breadth Indictors: How to Analyze and Evaluate market Direction and Strength by Gregory L. Morris (Sep 21,2005)


Why using Market Breadth Indicator?
For all classical Technical Analysis text books, they emphasis on buying the strongest stocks in the strongest sectors when the overall market is bullish, and selling the weakest stocks in the weakest sectors when the overall market is bearish. 

So, the very first step is to have a reliable indicator to know how is the overall market is performing. And, the best tool would be the market breath indicators - because they are calculated based on all components in the market.

The following picture using the school of fish as an analogy to illustrate the importance of Market Breadth Indicator...  It would be interesting to note that when the market is bullish, on various time from minute, day, week, to month...  most of the stocks would be up and vice versa in bearish market.  Of course, the market is formed by individual stock anyway. 

So, here are the two key important point for using Market Breadth Indicators:
1) using the Market Breadth Indicators is the very first step that can help traders/investors operations to be in sync with the market movement/ direction and have higher probability in winning!

 2) Market Breadth Indicators are less subected to noise and market manipulation.
In a previous blog entry on BACK TESTING...  The results have CLEARLY shown that Market Breadth Iindicators can withstand the test of time.



Why introducing the BBC Breadth Indicator?
Of all the Market Breadth Indicators in the public domain, all are calculated based on the one period advance and decline issues of the market.

Whereas the BBC (Bullish-Bearish-Consolidation) Breadth Indicator can used more advanced formulas and provide even simpler presentation for the user to understand the states of the market.

Take for examples, it can workout a Multiple-Time-Frames BBC indicators and display in the daily chart (or basically any time frame).



Charting Examples of BBC Indicator:(Note: click on each chart to ZOOM IN)

The following charts show various examples for the BBC Breadth Indicator.
In the following chart:

1) the top pane shows a tri-states (Bull, Bear & Consolidation) momentum indicator of SPY.

2) the second pane shows a tri-states Trend Indicator.(These Tri-states indicators were introduced in the previous blog entries).

3) the third pane shows the price chart of SPY.

4) the forth pane shows the Momentum BBC Breadth Indicator of SPY.  It was workout according the the above attached formula.  It calculates the total number of of Bullish, Bearish and Consolidation ticker, in Momentum wise, for the SPY (in this case, a total of 500).   Then it groups the number into Percentage of  BULL (Green Line), BEAR (Red Line) and Consolidation (Blue Line).

5) the last pane in the bottom shows the Trending BBC Breadth Indicator of SPY.    It calculates the total number of of Bullish, Bearish and Consolidation ticker, in Tredning wise, for the SPY (in this case, a total of 500). Then it groups the number into Percentage of BULL (Green Line), BEAR (Red Line) and Consolidation (Blue Line).

This can provide the user to have the winning probability in mind.  The best opportunities are when both Momentum and Trending Windows are opened and in Sync on one direction!
 
SPY Chart with BBC Indicators:




^STI Chart with BBC Indicators:







Sector Chart (XHB) with BBC Indicators:

China SSE 380 index (000009.SS) with BBC Indicator

QQQ Chart: Using BBC indicators as the Galaxy Chart's Companion: 
One way to use the BBC indicators is to put them in work together with the Galaxy Chart.  For example, the BBC chart can show the overall strength of the market (in this case, the QQQ), while the Galaxy Chart can pinpoint down to which particular stock within the QQQ is leading or lagging the overall ETF perfromance.  This works in ANY TIME FRAME in run-time.

Other Points to Considers:
* Most market breadth indicator are equal-weighted.  BUT, most index are Capital Weigthed.  Some are Dollar Weighted, Dow Jones Industrial Average and Nikkei 225.  And, most ETF are Portfolio Weighted with component changing in quarters.  These are the factors that need to take into consideration when working with Breadth Indicators.

By the way, here is a link for the Typical Market Breadth Indicator and it covers most ETFs that are having USA companies too.



Wish that it has inspired you and good luck.
KH Tang



And, if it doesn't, never mind... the follow quote from "Edgar Cayce Handbook for creating your future" may....

"Are we to live only for ourselves, using others to our advantage, or are we to care

about someone or something beyond ourselves?  The first choice may lead to

greater comfort and convenience, at least temporarily.  The secand calls

for the definite inconvenience of taking on the burdens of others. 

-- Only the second choice leads to happiness!"

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Project Freedom (9): Trading with the Mutiple-Time-Frames Moving Distribution Charts

I had a tug of war in my mind for some time whether it is the right time to post this new concept of trading in the public domain which I'd developed.  I tossed the coins and my subconscious mind replied: "Go Ahead and post it."

Above are few distribution charts that some financial analyists borrow from statisticians.  Usually, it is shown as a monthly, quarterly or yearly chart to describe the market performance over the state periods in terms of it percentage changes.  So, it is purely a statistic chart and has not much meaning for trading purposes.  For example, as shown in the chart, that a stock "WXYZ" is out perform the market over the last period of time, but it does not show the momentum and trending direction it is continue to move.


The following chart with New indicators - The Moving Distribution Curves, show a NEW way to trade the market.  Take for example, the following chart shows the XLE - Energy Sector ETF.  It's short term Momentum, mid-term Swing and long-term Trend are benchmarked within the whole database (in this case, all ETFs except leveraged ETFs). 

The Brownline show the Current Ticker Relative Strength, in this case is XLE, against all other ETFs in the database.  The Blackline shows the Market Reference Relative Strength, in this case is SPY (S&P500).  And, the Greyline shows the unchanged USD1 Cash Reference Relative Strength.

See...  In Bull market, stocks go up and cash reference line move down.  And, in Bear market, stocks go down and cash reference line move up. 

 

Now, here is a better way to interpret the three color lines in the follow chart.  It shows the same chart, and added the distribution chart on the indicators.  View it as the ditribution charts are moving under the price chart over time, the Brownline shows the the ticker percentile in the database at the point of time.  One would like to BUY the ticker with 1, Stronger than the market reference, and 2, above 80 percentile.  Similar interpretation goes with the Blackline and Greyline.

See.  Stocks/ETFs don't move randomly...  if there is no special demand, it would not move above the 80 percentile.   Similarly, if without special supply, it would not move below the 20% either.

 








Attached are just a few more daily chart with Moving Distribution Curve as examples: KOL, SLV, BRK-A, GLD and QQQ.

Attached are some Weekly Chart examples on: QQQ and BAL.

Note: 
* All the Charts can be Zoom to fit in 24 inch monitor for clearer display.

* The distribution shape illustrated here is for explanation purposes only, as the stock distribution over time does not necessary fit into this kind of shapes and varies over time.  And, some one had recommended me to see this article:  http://hanwangquant.blogspot.sg/2011/09/
And, I found that it helps to explain this concept, and also can be easily implemented in the moving distribution curve.

* This is a new kind of Market Breadth Indicator can be applied on single stock or ETF.

* At any one time, there are tickers fill up the full range from 0 to 100.  Choose to long or short according to th reference line position to have the edge.

* A much better way to "occupy the Wall Street" is to have the public to understand exactly how the game is played.

"Man belongs wherever man wants to go. 

He goes where his vision is!"

- Joseph Murphy

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Project Freedom (8): Follow the Money

Follow The Money: When China Stimulates its Economy, Buy Coal!

When the world economy was running into trouble since the beginning of 2008, China announced the 4000Billion RMB Project (四万亿计划) on the 18 Nov 2008. Soon after that, the economy turned around, though it did not last for very long...

Figure 1: The Correlation between FXI and KOL

The above illustration shows the XinHua China 25 index, the Global Coal ETF Charts, and their correlation.

As China is the world Largest Coal Consumer, when they stimulate their economy they need more energy for their power plants, more material to built infrastructures and consumer products, therefore the demand for coal would increase.

Figure 2: One year after the China Economy Stimulation Plan

 

The above chart shows the Result a year after the stimulation.  Though the XinHua China 25 index rose for 85%, there were many other sectors/countries performed much better than that.
 

The Top Ranking was KOL (Global Coal ETF), follow by Metal, China Real Estate and other related material producing countries.

YES…   These are History.

Is there anything that we can learn from it???

Figure 3:  China market bound on 7 Sep 2012 with new stimulation plan

 

Of course!!! 
 

Now…  Let’s look at these news:

1.  分析称我国将投资超1万亿加强基建刺激经济

  (The analyst from China said that the government will invest more than 1000 Billion RMB to strengthen their infrastruture to simulate the economy)

2.  万亿项目获批股市“一阳指”  
   (China market bounds up on the news on new stimulation plan approval)

3.  China approves US$158b in infrastructure

Yes.  The history will repeat itself to high degree (provided there is no major war and natural disaster).

 

Notes:
1)   This is similar worldwide...  It follows the Pareto Principle, since the recorded history, that 80% of the wealth belongs to the 20% of the people (these numbers are just getting bigger in spread - 90% vs 10% or worst).   The more money the governments pour into their economy would only benefits to the minority who know how to get it.   Normal working class would normally working harder to keep their job, and therefore miss the opportunities and suffer from the aftermath through inflation.


2)   Even though the world economy is in deep trouble, and it will reveal the trouble later at a bigger scale when there is not way to cover up.  But, at the moment, these stimulus could help to prolong the grow before the final collapse.  Just like giving another heavy dose of drug to keep the already exhausted sport man to continue the game...  

Therefore, timing it with charting for proper entries and exits to ride the trend is important, never argue with the mass psychology that forms Mr. Market with logic using the conscious mind.

 

"A speculator must concern himself with making money out

of the market and not with insisting that the tape must

agree with him.  Never argue with it or ask for

reasons or explanations."

- Jesse Livermore

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Project Freedom (6): Back to Basics

About 5 years ago, I came across an old and experience trader in a forum...  In asking for advice, he said that "All you need to read and understand about trading is in a few classical theories already exist about a century ago: 

(1).  The market waves in Dow Theory, 
(2).  The Vibration Energy by WD Gann, and
(3).  The philosophy of riding the Leaders by Richard Wyckoff or Jesse Livermore.
All the modern books are more of repeating and re-phrasing what had been said."

That's very true.
And, I find that to add in another guru would be more complete:
(4).  The trading psychology aspect by Mark Douglas.

The following charts are used to illustrate the implementation for these gurus' theories.

(1).  On Dow Theory.
Dow Theory is the grandfather of all Technical Analysis.  It consists of a set of 12 "Basic Tenets" (ref: Technical Analysis of Stock Trends - Edwards & Magee).  
Over here, the follow charts just focus on the implementation on one of the Basic Tenets - "The Three Trends in the Market".

Here is the definition cut and paste from wikipedia on this particular tenet:
-----------------------------------------8<-----------------------------------
The market has three movements

(1) The "main movement", primary movement or major trend may last from less than a year to several years. It can be bullish or bearish. (2) The "medium swing", secondary reaction or intermediate reaction may last from ten days to three months and generally retraces from 33% to 66% of the primary price change since the previous medium swing or start of the main movement. (3) The "short swing" or minor movement (momentum)varies with opinion from hours to a month or more. The three movements may be simultaneous, for instance, a daily minor movement in a bearish secondary reaction in a bullish primary movement.

-----------------------------------------8<-----------------------------------
Now let see how to apply these theories on the following chart.  This is China Shanghai Stock Exchange Index.

On the following diagram, when Zoom in, it can see that there are three indicators below the price chart.  Which are (1.) Momentum, (2.) Medium Swing, and (3) Trend.  These are corresponding to the 3 movements (waves) in the market.

At any one time, these 3 three indicators may run into different direction (up or down), and when the 3 movement are in sync into one direction (either up or down), then usually there will be significant movement on the price.
As shown in the price chart area, it is labeled with green when color when all the three movements are up.  Red when all the three movements are down.  And, yellow when there are moving in different direction - usually at the stage of consolidation or pull back.

If one were to use some kind of multiple moving averages such as, 25,100, 200 to determine buy or sell, then he is also using this theory.  Just that normal MA, EMA are having too much lag that will not produce good result.  It got to be dynamically mapped. (Inspired from reading "Holophany - a New Philosophy and Logic" by Clara Szalai.)

The Multiple-Time-Frame concept using daily and weekly chart is another form of waves analysis.

The JM Hurst Cycle Analysis aims to find the synchronization of shorter cycles within longer cycles is also another form of wave analysis.

Their COMMON goal of these analysesis to LONG when all the waves are moving in the up direction while SHORT when all the waves are moving in the down direction.

(2). On Vibration Energy.
The Law of Vibration in the stock market was introduced by W.D. Gann.  Gann's work is hard to understand as it involves astrology, ancient geometry and mathematics.  But, nevertheless, if one were to study and think about them long enough, he may get something out of it...  Just that if a group of ten persons doing the same research, they might get twenty versions of the interpretation.   And, this is merely my personal interpretation...

If the stock is in its steady state of vibration towards up and down direction, it would has certain amount of vibration energy level pointing in the same direction.  If it is on the sideway, it is pretty much random and will cancel themselves.  Therefore an adaptive filter can designed to capture such energy.  As compare to the previous diagram, the price chart is now built-in a filter to detect the state of trend (up, sideway, and down trend).  Also just below the price chart, there is an Adaptive  Vibration Energy Indicator to indicate the worthwhile trend. 

Adding this filter to the Dow Theory would very much reduce the trading frequency as its goal is to eliminate trading when the stock in it consolidation state.

(3). On the Philosophy of Always Riding the Leading Sectors/Stocks
In reading Richard Wyckoff and Livermore books, one can find that they put emphasis on trading the leading stocks in the leading sectors.  This philosophy itself has the following important implication:

1)  Benchmarking the stocks with their Relative Strength.
In order to find the Relative Strength of a stock among all the other stocks in the market, the indicators used MUST NOT be range-bound to certain value.  For example, many popular indicators are swinging between a certain ranges, such as 0 to 100, -100 to 100, etc.   When one compare APPLE COMPUTER to bond market, these range-bound indicators can't differentiate which is stronger in relative sense. 

2) Rotational Trading.
In rotational trading philosophy, it recommends jump to the faster running horse when it find one (of course, one need to set the period of doing so, say one week or so...  And, very much depends on individual perference time-frame of operation.)

One simple way to achieve these two KEY POINTS is to insert a reference ticker inside the current monitoring stock indicator.  For example, in the following diagram, the Momentum, MediumSwing and Trend indicators are inserted with the SPY (S&P500) as reference ticker. 

Note that there are some circles highlighted in these indicators.  Without the reference, the indicators would have give green signals when they are above "Zero Line", and give red signals when it is below "Zero Line".  Now, with such reference line, they must be greater than both the reference strength and the zero line in order to generate a green signals...  Same idea applies to the downside.  Or it would just generate a yellow signal.

One can use this idea to find the stronger sectors in the market using SPY as reference strength, then find the stronger stocks using that particular sector as reference strength.

To further illustrate the point on Relative Strength Benchmarking....  Below is diagram showing the Strait Time Index (STI) and its 30 components. 

Most Benchmarking methodology is to compare the percent price movement over a period of time.  This could be useful most of the time.  BUT during the transition of changing trend, it would produce a great lag that is not acceptable.

Instead, one can compare their indicators strength in the same pane and rank it... It would definitely produce much timely result.

(4). The Trading Psychology

There are quite some materials on Trading Psychology in the market today.  Recommend to go through the material by Mark Douglas as they are very helpful.  Especially when he talks about the Probability and Edge.   Here has a snapshot:->

http://blessedfool.blogspot.sg/2012/01/project-freedom-3-why-and-how.html

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"Our most valuable possessions are those

which can be shared without lessening;

those which when shared multiply."

I DARE YOU - William H. Danforth

To be continue with  ->The Galaxy Chart.<-

Project Freedom (4): Understanding of the States of Market Trend and Rotational Trading Concept

Attached are a few charts aim to demonstrate the importance of understanding the State of Market Trend and the Rotational Trading Concept which could help one to handle his personal finance.

POINT I: Understanding of the States of Market Trend.

Fig 1.  ^STI Daily Chart (2 years)  (Click on the chart to Zoom in)

The above chart show a daily chart for ^STI from Apr 2010 to Apr 2012.  This particular period is selected to show that money put in the market (so call buy and hold investment) can ended up with zero percent return over years.

In the price chart, there are algorithms built-in to draw the trendlines (also act as dynamic support and resistance lines).  When the bar change color, it signal a possibility of change in trend. 

In the lowest pane, it is an indicator desgined specifically to measure the Vibrational Energy of the stock:

If the Energy is High and moving upwards, it signals a state of UPTREND MARKET.

If the Energy is High and moving downwards, it signals a state of DOWNTREND MARKET.

If the Energy is Low, it signal a state of SIDE WAY MARKET.

It also display the number of bars in the respective state of trend and its percentage over the period.  For example:

Over the two years period, when breakdown into percentage...
The UPTREND is      : 31.39%;
The DOWNTEND is : 18.05%;
The SIDE WAY is     : 50.56%.

Fig.2 ^STI Daily Chart (1997 Jan - 2012 Apr)

So, one may think that two years of data could be too short to make the point.  How about longer period of data? 

So, with the longer term of data, it show that the result is similar with the previous finding. And, lead to some basic understanding of the market trends structure...

Conclusions from Point I:
1) The Speed of UPTREND is SLOWER and DOWNTREND is FASTER.
2) BUY AND HOLD strategy is NOT WORKING in todays market.
3) One must be able to ride on the Trend in order to make profits from the market.

POINT II: Understanding of the Sector Rotational Trading Concept.

As the previous point illustrate that money put in one market/Stock/Fund are really productive about 30% of the time in UPTREND, 20% in DOWNTREND, and wasting time 50% of the time.
So, if one were to only LONG the market, does that mean 70% of the time he must wait???
Not true if he understand the concept of Sector Rational Trading.


Fig 3. State of Trends in S&P500(SPY)
and its 9 sectors(XLB,XLE,XLF,XLI,XLK,XLP,XLV,XLU,XLY) (Apr 2010 to Apr 2012)

See... 
The money in the market are of fix amount.  When the stock market is moving up strongly, people would pull money out of bond market and put into stocks and cause bond market to fall, and vice versa.  Similarly, the professionals would not put their funds in equal distribution into all sectors, they would pull the money out from the weak sectors to put them into the strong sectors.  And the sectors Relative Strength would keep changing over time.  In the picture, you can see the TREND is Out Of Phase from one another.

With the same token, one can then zoom into the individual stocks, in the strongest sector, to ride on the trend with the few strongest stocks

By the way, you may be interested to zoom into the chart and see the respective percentage of trends in various sectors.


Conclusions from Piont II:
1)  It illustrates a VERY IMPORTANT POINT that is IN CONTRADICTION with one of the popluar myth in the investment industry -->  That is DIVERSIFICATION the money into many sectors in equal portions as to reduce RISK.  As sectors trend pretty much follows the market (after all they are the components that create the market).

2)  In order to maximize the profit from the market and reduce risk.  One must always rotate money into the strongest few sectors when there is a trend.

---------------------------------------------------------------------------------------------------------------------
I found a picture on the web and it is Very True. 

There are certain risks in life one can simply choose to avoid it, such as if one don't know how to swim and he choose not to go near the sea... He may miss some fun for that but find more fun somewhere else.

On the other hand, there are some risks one cannot avoid, such as financial crisis... Then, the only logical answer in dealing with it is to master it.  And,

if it is necessary...  Then, it doesn't matter how much time it may take.
Whether it may require 3 years, 6 years, 10 years or more,

something learnt is something gained. 

Time is ticking anyway regardless whatever nice phrases one may come out with. Such as:
"Only IF I have the time..."

With the current state of economy, which is full of potential for turbulences such as:
* Debts in certain countries in EuroZone building up,
* Energy Crisis due to Peak Oil,
* Over Population on earth,
* Aging of the Babyboomer in USA (in fact it is a worldwide problem, and more serious would be in China for its one child policy), and
* Increase in trend on Unethical issues exposed from corporation executives (worldwide)... etc.
I cautious myself not to be negative, but logically, it can only predict more financial crisis in local and global scale to continue happen in the near future...

So.  It is my simple idea that when more people willing to learn about it, then it would make market manipulation task more difficult for the minority and BALANCE IT.  Let's make it so! :-)

Bless You

KH Tang


A more throughout explaination on Sector Roation -> Back to Basics & The Galaxy Chart.

Self Development Idea (13) - Two Worlds of Reality, and the Magic Mirror

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Everyone of us is simultaneously living in two worlds of reality. One is the "Inside world", and the other is the "Outside world".

In the Inside world, it is yourself consist of "Philosophy, Thoughts, Feelings, Emotions, and Attitudes."

In the Outside world, it is your Environment of "People, Place, Things, Events and full of Public Opinions."

And, in between the two worlds, there is a Magic Mirror.
This mirror has the ability to reflect the reality from one side to the other side...


Note: A summary note taken from reading the book "Mind Power by John Kehoe"
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Take for example.

If the person has a stronger faith in his own Internal World, he is able to eventually project it into the Outside World through the help of his own subconscious mind.

On the other hand, the other case is true also, for a person who does not set any goal or does not has any belief of faith that he can make a difference... The Outside World would keep telling him that this is wrong and that is bad ... Eventually, this would reflect into the person Internal World. Which would create stress and harmful to the body.

So. It is a better deal to choose to be happy and have peace of mind, rather than let the Outside World to dictate what they want you to be.

Many may have read that popular phrase "Your are what you think you are...".  Well, that is over simplified and not accurate. A sage puts it, "We aren't what we think we are, but what WE THINK,  WE ARE!"

"All mankind's inner feelings eventually manifest

themselves as an outer reality."

— Stuart Wilde

Personal Finance (7): Realistically, What’s the Yield Rate for Top Traders?

For many beginners  who come to invest/trade in the stock market, they don’t have a realistic idea of how many percent they might gain over a year.  For years, from the trader library and forums, I figured out that the top number was around 28-35%/year.  And, recently, I discovered that these numbers are way too low for benchmarking at all…  and, that could set an invisible barrier of limit in traders mind.

1) Breaking Through from the Limiting Beliefs:

Here is just a short story of how imaginary barrier can limit people performance and may spark some inspiration in the mind…

* The 4 minutes Barrier

Just like once people thought that the world was flat.  Before 6 May 1954, athletes had never able to run a mile under 4 minutes, and some “experts” at the time even commented that it was physically impossible for a human to do so, or the heart would explode under the pressure to run a mile in under 4 minutes.

Roger Bannister was medical students at that time, not even a professional runner, believed it could be done.  He prepared himself with training and he became the first person to ever run a sub four-minute mile (3min 59.6sec) on 6 May 1954.

More interestingly, 56 days after Roger Bannisters breakthrough, John Landy ran the four minute mile in 3 minutes and 57.9 seconds in Finland. Later Bannister and Landy raced in the Mile of the Century where Bannister won in 3 minutes and 58.8 seconds.

As for today, it is no more any surprise for high school athletes to run a mile under 4 minutes, for that mental barrier had been gone.

ONLY after a person breakthrough from his own limiting beliefs, he can then sail into uncharted waters and has experiences he never had before.

2)      Setting the Right Benchmark or Higher

Recently, I have come to know of an old trader who wrote and trade his own system for 30 years and only work for himself.  He does not sell his system or even signals for trade.

On the other hand, he joins some forums and professional groups to share some valueable views and ideas…  He also presents his research paper freely for others who may interest to read.

For those who may get the ideas from his paper would know that his system is for REAL, and not fantasy.

If you are interested to get into the financial market some day, say in the future.  Then it is strongly recommended that, take a look at his website… His papers and his simulation results.

http://alphapowertrading.com/

These are some of the back test results with over 100% return a year:->
On Turtle system:

http://alphapowertrading.com/index.php/tests/turletests/turtles-test-v32-improved
On Modified Jesse Livermore System:

http://alphapowertrading.com/index.php/tests/livermorechallenge/livermorechallenge3rdact

(with permission to post as reference)

ONLY when there is a good Benchmark, then one can know what kind of aim he should set…

OF COURSE, the market cannot give profits from air, when more and more people are aware and able to use such strategies and tactics, the profits would drop according to number of participants are able to develop such systems.  

Many “Conventional Wisdoms”, such as ship must be built by wood in order to be able to float, no machine can fly, and later believe that plane cannot break the sound speed barrier, etc…  are now proven to be wrong ideas that limiting people imagination...

 

"One person with a belief is greater than a force

of ninety-nine who have only interests."
-unknown