2016 Already? New Year Delayed Updates

There’s a reason for a absence of blog activity. Shortly after the year started, I managed to catch some “bug” that’s been going around the area. This caught me off guard since it’s been years since I’ve caught a cold in Cali.

This put a monkey wrench in activity this month with having little energy for anything – although I did muster the strength to get some lottery tix for that $1.6 billion jackpot.

Thanks to the new tech advancements of special cameras and time lapse photography I was able to capture the area of initial infection as the virus entered the body, and the corresponding battle with a the body’s fighter cells:

 

Now I’m in catch-up mode, but blogging will be resuming shortly.

 

Man Engages in High Risk Shorting, Loses His Shirt, makes a “Go Fund Me” Page to Recoup Loss

A tale of woe and caution against excessive risk taking.

Most traders/investors are well acquainted with the warnings against shorting stocks, and many choose not to do so. Those that do, should obviously employ judicious risk management, which seems to be MIA in this case.

Before I provide the link to the story- here’s a primer of some of the dos and don’ts of short selling that were not heeded:

  1. Avoid penny stocks
  2. Don’t short in the hole
  3. Don’t over leverage
  4. Overnight positions carry much more risk
  5. Respect the market

 

Explanations:

 

  1. Penny stocks- stocks that are very low in value such as a few bucks or less are typically pretty volatile as they are avoided by institutional buyers and therefore typically lack volume and is subject to being manipulated by buying/selling spikes. Risky to be long, but much risker to be short since gains are limited as the stock is already near the floor.
  2. This refers to shorting a stock after it has already dropped precipitously. Much higher risk of a reversal move at this point.
  3. One can typically buy on margin, meaning the brokerage will loan you money based on the amount in your account. In order to short you must be on margin as you are selling stock you don’t own and must repurchase. As such, taking on too many shares can result in being over leveraged and at risk for bigger losses. People sometimes forget that leverage works two ways, but they only focus on the potential  gains rather than losses.
  4. Once the market closes, anything can happen news wise that can affect the price of the stock. Day trading minimizes risk of exposure by having positions closed at the end of the day. A good rule of thumb is market = risk, so shorting overnight = more risk.
  5. The market has more firepower than your account by a wide margin and can vaporize it if you allow it to. As such, you have to manage risk.

 

So what did this guy do:

He shorted over 5700 shares of a penny stock at $2, thinking it would go to $0, and left it on past the market trading session.

……and this is what ensued:

 

http://www.marketwatch.com/story/help-my-short-position-got-crushed-and-now-i-owe-e-trade-10644556-2015-11-19

 

 

Trading Chart Analysis Enlightenment – Achievement Unlocked!

enlightenment

 

I’ve once again fallen behind providing updates on my trading, but events that occurred this week provided my most significant milestone to date.

When it comes to investments and trading, my main tool of the trade is chart analysis, that is analyzing price and volume movements over time as an indicator of future market moves. As prices tend to be pretty volatile and jumpy, trying to see the order in the seeming chaos is no easy task. Like looking at cloud formations, it’s easy to see what you “want” to see rather than what is actually happening.

So my focus over the months and years was to develop a system approach to interpreting prices moves, which are a collection of reactions of support (buying) and resistance (selling).

Going back in time to my banner year in 2012, I had a great intuitive feel for market price movement using trendline analysis, but over time lost that intuitive focus the following year. This is the problem with just using intuition or gut instincts- they come from the sub conscious and as such can be elusive to hold on to since you can’t evaluate on a conscious level. One is basically doing things without knowing the details of how and why certain actions are taking place.  My focus then shifted into making that intuitive subconscious knowledge into conscious knowledge.

Last year I made a big discovery that helped me lock in some conscious mapping of resistance and support price action and improved trendline drawing and analysis. This helped immensely with helping to refine my system to make it a better predictor of future price action. My last posted performance results were the fruit of that work.

Despite the major progress, there was still one significant problem- while I had developed a system of chart trendline analysis to predict moves, I couldn’t explain the action it was doing. I could tell where the price was going to go by chart constructs, buy it didn’t make sense to me logically. So I would place trades that my analysis told me would succeed, but I felt would fail, because the movement didn’t “look” right. The trades succeeded, but that disconnect between my trendline analysis and intuition eventually led to problems and my search for more clarity.

More grind work and chart analysis R&D ensued with a healthy amount of trial and error over the next several weeks which culminated in yet a new breakthrough discovery this week.

The discovery came as I was analyzing my failed trades after market – which is where most of my big breakthroughs occur. I realized that my assumptions made for constructing trendlines were not all correct. In some cases the rules of behavior I had made were incorrect. In other cases, the rules were correct, but my application of them was off.

I did some recalibrating, refining, and adjusting of my trendlines and price behavior assumptions when a new level of enlightenment started seeping in. I was now able to do chart analysis that perfectly captured price moves based on support and resistance. The key difference with this new modified analysis was that I now understood the market movement and there was no longer a disconnect between my intuition and analysis.

I could now look back on the market moves of 2012 and understand the behavior by both intuition and reason, which is what I did when I tested my new understanding on past years data to verify consistency.

Long story short, I’m as about as close to achieving the holy grail of creating a system of both high precision and high probability trades as I think I will get.

Now as usual, I write this ahead of fully implementing my system as this discovery is hot off the press. I also know that seasoned traders would take what I said with a grain of salt as we’ve all heard bold claims before on trading forums that came up short. Performance results going forward will show the reality. But I’m stating my discovery and assessment now because that’s how confident I am based on back testing and preliminary results.

 

 

 

Back to the Future Day – The Future has Arrived!

bttf2-main

The movie time setting was “1985”, and  “future” date the Doc and Marty went to visit was “October 21, 2015”.

Back to the future

 

That date has finally arrived!

Back to the Future II was released in 1989, and many movie theaters are celebrating with a special showing of the film today only.

Hmm, the future doesn’t look quite like it was imagined all those years ago. Where are the flying cars?? Here are the hits and misses:

 

 

 

Xanga 2.0 Celebrates its “2.0” Anniversary With Eerie Silence

Xanga undead

 

It’s now been two years since Xanga converted to the WordPress based system with the help of about $70K from their supporters:

Xanga_Crowdhoster

 

So what is the status of the site at the 2+ year mark? Well, you won’t find it from any official Xanga update from their site– there have been no updates provided since Feb  11, 2015:

Here is the list of the previous number of official updates from Xanga since the switch to “2.0”:

(September 6 2013 – September 30, 2014) – Over a YEAR of silence

(This update was more of a blurb than something to justify a year in a vacuum. My complete thoughts here.)

(More of the same back office updates)

That’s just 5 updates for a span of over two years.

At no time do they provide any CUSTOMER DRIVEN updates such as:

  1. When will the front page be restored?
  2. What is the schedule for community feature restoration?
  3. Why are features promised “out of the box” not yet available?
  4. How can I contact a user on followers lock?
  5. When will we get the “Xanga” we enjoyed back?

The lack of updates would raise eyebrows even if it were still a free blogging site. As Xanga took close to $70K in pledge money and is now charging $48/yr for their service, the situation stands out glaringly- especially knowing they’ve been told numerous times that regular communication is most desired by their customers.

Broken-Friendship-Quotes-apihyayan

In terms of current status the review I wrote at the 1 year mark will suffice since not much has changed since then.

The “Community Based” Xanga that everyone enjoyed and appreciated ended with the shutdown of Xanga 1.0 and has yet to be reinstated on Xanga 2.0, despite all the promises made.

It should be abundantly clear to all that any hope to restore the old community is long past. Many People who would have continued to blog on Xanga have stopped altogether and those who still blog have moved on to other free platforms. Any excitement or momentum from the conversion to “2.0” has been lost long ago. The site now being “promoted” for latest member updates is facebook as Xanga has lost its front page since the conversion to 2.0.

The thing that bothers me most is the sense of injustice that Xanga has done for all the people that worked so hard for them to be able to update to Xanga 2.0. So many people were disappointed and have moved on- and all the while Xanga makes no apologies or updates on what their completion schedule is. To take money from people as well as charge them for services that are available on other sites for free, and still feel they don’t need to provide any type of regular updates is beyond the pale of customer disrespect.

custsrv

So when the official appointed liaison  EdLives (Joel) blogged about Xanga on August 12, which turned into another defense of Xanga’s current condition despite being into two years of this mess, I felt compelled to set the record straight with the true reality of the situation. That led to my original posted comment being “held for review”, my accusation of being censored, and all the brouhaha that followed.

Some may have the opinion that I’ve been overly harsh in my critique and response to EdLives’ posts. I believe he has confused his job responsibilities. As a liaison, you mutually represent two or more parties in their communication. However, he wasn’t doing this. Instead, as mentioned by Kamikaze_Zealot, he was really taking on the role as Xanga’s “PR” person in standing up for and defending Xanga’s shortfalls. Taking on the role of a PR person will of course be in direct conflict with being a neutral liaison and will likely land you in the crossfire. If you look at our exchanges he is definitely picking up and defending the Xanga flag as opposed to also representing the needs of the community.

I would like to see accountability and ownership of Xanga’s failure to deliver what they advertised in a timely manner and no explanation to justify it. Both Xanga and EdLives heavily promoted the switch to “2.0” but It seems to me neither will open up and just state what the true situation is.

Here’s a short blog walk down “Xanga” memory lane:

Walk on “Classic” Xanga:

May 17, 2012Xanga offers “Lifetime Memberships” for a limited time.

That was just a year before they announced the impending shutdown of “1.0” I would think the fair/ethical thing would be to refund anyone who bought memberships at that time. Selling folks “lifetime” memberships that only last for a year is highly suspect.

June 4, 2013Edlives  argues the case that the “ad based” revenue model won’t work in support of fee based blogging.

June 11, 2013 – Edlives Compares free blogging sites to Xanga 2.0

EdLives argues that Xanga 2.0 will be superior to free blogging sites.

June 15, 2013 Edlives posts a blog on the Rise and Fall of Ad Revenue Websites

Here, he argues that the ad revenue model is flawed and destined to fail over time. I counter argue that his assessment is wrong and success depends of the company’s ability to market themselves to keep and grow their user base.

Of course the gigantic sustained success of Facebook, Google, Youtube, Tumblr, WordPress, BlogSpot, etc, clearly prove that the ad based revenue model is not only alive and well, but growing and providing new opportunities for individuals who can grow a sizable subscriber base. Facebook recently announced a milestone of having one billion users online in one day.

June 24, 2013– Edlives compares Free WordPress to Xanga 2.0 fee based WordPress

Of course we know that the current features of Free WordPress still greatly surpass “Fee based” Xanga 2.0 for 2+ years and counting…

Free WordPress provides regular updates, constant feature upgrades like themes, fonts, viewcounters (stats), likes, etc…, and I’m able to automatically cross post to other social network sites like Tumblr, Google+, Twitter, LinkedIn, Path, or Facebook- one post is pushed out to the other sites if desired. Most media sites like Time, News (both local and national), Variety, Fortune, etc,.. are now in WordPress RSS format allowing you to subscribe to their sites and get direct updates in your feed. Of course all this comes with being able to cross communicate with other folks on many other social network platforms like BlogSpot/Tumblr, using your just your WordPress or Disqus login account. Unfortunately, none of these features are currently available on WordPress based Xanga 2.0, which is still lacking even the most basic search function to find/contact users.

The irony is it appears to be much easier to make free WordPress Xanga-like than “paywall” Xanga 2.0.

July 1, 2013 – Transcript of Interview of Xanga CEO John Hiler by Alex

July 8, 2013Xanga 2.0 Vision is presented

Reading this will let you know the difference between what was envisioned versus current reality.

July 18, 2013 – EdLives Posts about Improving Communication

The lack of communication between Xanga and the community is addressed yet again. It’s not as if Xanga is “in the dark” about the issue with their lack of communication – they’ve been told more than once, and while they apologize, their behavior remains the same.

Walk On “Xanga 2.0”:

September 20, 2013 – EdLives posts updates on the Xanga 2.0 switch

It’s been about three weeks since the launch to “2.0” and the blogging site is in a sorry state with no updates from XangaCorp. The crowd is starting to get restless. The major 1st sign of trouble was Xanga’s Facebook account was going to be used to update people rather than Xanga. If you think my criticism is harsh, PrincessPowers makes me look quite tame by comparison.

October 10, 2013 – EdLives posts Looking at the Positive

Edlives states Xanga is just in a “transition period” and that things will get better. Many are not buying it with Xanga’s continued lack of updates.

November 11,2013EdLives Does another Update in the Wake of Xanga’s continued Silence

More of the same – people wondering about progress and restoration of community features like the frontpage and EdLives doing his best to provide some assurances. All this- TWO YEARS AGO.

So it should be clear as day that both Xanga and Edlives were quite involved in advertising Xanga 2.0. Based on this I tend to get irritated when Edlives now responds to questions about the problems of Xanga 2.0 along the lines of “Hey, I’m just a volunteer, I don’t work for Xanga”, or “That’s up for John or someone from Xanga to answer” instead of twisting arms to get Xanga to honor their commitments to provide regular updates.

The defense that really gets to me is when he states “What are YOU doing to improve things?”. Can you imagine reporting a problem with a company and they try to turn it around on you as if it’s your responsibility? Bizarre! Makes absolutely no sense.

Customer: Hi power company, my service is out- when will it be restored? Your technicians haven’t arrived when you said they would

Power Company: What are YOU doing to help the situation?

Customer: ???

As I told him, people have every right to complain about services that were promised and not rendered and should NOT be the targets of reverse blaming. The victim blaming has to stop.

The truth is Xanga is basically having EdLives twist in the wind so their lack of promise fulfillment and customer contact makes him look like a bad guy as well. At least now he is being “somewhat” more neutral in his responses, although there is still ongoing defending of Xanga  such as stating they are taking what we say seriously, but just not responding. The reality is not responding is action that shows they are NOT taking the concerns of the customer seriously at all.

If I were the liaison – I would be pushing John to do a live Q&A on Google hangouts  or ask Alex to host to field user complaints and concerns. You can’t keep telling folks “You understand their anger or concerns” without pushing for the other side (ie, Xanga/John) to respond. Otherwise, you become the defacto “wall” that Xanga is hiding behind.

The complaints are far fewer these days as the majority of folks that had issues have long since moved on and stopped caring. In fact, it seems that of  the remaining trickle of people still blogging there, most must be quite content with the current “alpha-beta” state of Xanga based on their silence or words of support to counter my noted areas of concern.

According to Xanga’s “Splash Page” update last year:

We are now officially in phase 2 (of four) of the Xanga 2.0 launch!

Phase 1: Data Migration
Phase 2: Site Tuning  <—
Phase 3: Feature Prioritization
Phase 4: Building Together

They state they are in “Site Tuning”. The Feb 11 update states they are now “starting” to move into features, which is typically the hardest and longest part of software development. At their current rate it looks like at least 3 –  5 more years to cover phases 3 and 4, making the likely “completion” no earlier than 2019.

cobwebs_thinkstock_2

I hope the remaining customers are Zen masters of patience- as they will certainly be given much time to practice it in the solitude and quiet of Xanga non updates.

(PS to EdLives, who has reviewed my blogs in the past – if you think I’m not being fair or correct in my comments or assessment of the situation, you’re more than welcome to post your side of the issue and state where I am in error.)

keep-calm-and-enjoy-the-silence-30

Trading Update: July Performance Stats – The Ugly, The Bad, and The Good Part 4 of 4

good-bad-ugly

 

After what seemed like uncountable days of being in the loop of getting stopped out of trades, analyzing what went wrong, making adjustments to my trading system and placing new trades, I experienced new illumination on how to fit the pieces of the puzzle together.

My newfound enlightenment helped me make the necessary adjustments to correctly capture the action/reaction moves I had been focusing on. I’ve said before that understanding market moves is all about correctly reading its nuances. The problem is these “nuanced” moves can be extremely difficult to detect even when you’ve managed to narrow down the area of focus. It’s at the point of being non intuitive so it comes down to being able to figure out the action/reaction by recognizing the repeating pattern that doesn’t “repeat” identically in terms of extent or frequency, but in behavior of sequence of events. Even using the best analytical methods, making the leap to finding a true solution may not be possible via just direct application/brute force in trying varied adjustments until you meet with success- this is what makes finding the holy grail of consistent trading so difficult.

My solution didn’t come from “brute force” analysis, but rather a mental subconscious to conscious leap in interpreting the data. The brain is a great computing device that can work on processing problems even when we are not consciously focused on them. This is why it’s recommended that you should break up concentrated study with less strenuous mental endeavors/pastimes. Blogging is one such activity for me. Taking breaks gives your mind a chance to regroup and process data. Since trading solutions are mostly non intuitive, you’re far more likely to find solutions from your subconscious mind processing data than a direct conscious approach because of built in “past data” contamination- we try to apply what we already know rather than learn and understand things from new perspectives.

Once I made the connection, I was able to employ a method of precise entries and targets with a level of consistency and accuracy not experienced before (The Good).

 

July 2015 Performance

July 2015 Perf

This is easily my best monthly return since my banner year in 2012, but a key difference is 2012 was by intuition and general approximation versus much more exacting methods used today.

Trading for the month seemed surreal in its consistent accuracy. I would place trade entries that my gut would scream as being absolutely wrong but would wind up matching the plan and being correct. My conscious mind did not trust the solution provided by my unconscious and it made me doubt trade after trade, and market drift prior to the move had me feel sure I would get stopped out time and time again, but successful results proved my conscious mind wrong.

 

July 2015 Performance Vs Indices

 

I’m happy to see that all my research efforts and time commitment into learning to trade are continuing to progress and show highly promising results. Once fully mastered, my methods should be able to be applied to any type of market, ranging or trending with the same consistent results.

 

Mathematics and Sex

Dr Clio Cresswell provides a Tedx Talk on how complex mathematics can be used to describe all facets of our lives and isn’t just relegated to the hard sciences like math or physics. It really comes down to innate pattern recognition, and then coming up with equations that can explain that type of behavior.

What I find surprising is that in our modern age of mathematics branching out into more and more areas, when it comes to  short term trading, the prevailing consensus is the short term market is random with no discernible order and therefore can’t be “timed”, or “predicted”. The irony is a good portion of these folks who say the market isn’t predictable in the short term will then try to make the case that the market becomes predictable in the long term, which is contradictory when you think about it. The whole is comprised of the sum of its parts, so if the market has a structure for the long term, it should have one for the short term. Conversely, if the market is random in the short term, extending it out won’t change anything and it will remain random in the long term as well.

The key to successful Day Trading lies in finding these elusive complex market patterns and understanding them so one can project future movement, which is the essence of market timing.

Market Takes a Breather and Drops over 9% in 4 Days

Dow_Jones_week_aug_24

What a difference a week makes! Last Tuesday, the Dow closed around 17500. Today the Dow closed at 15781, about 9.3% lower – erasing all its gains for the year.

Of course all the market talking heads have plenty to say about it after the fact, but what were they saying before it happened? If they don’t have the ability to warn of impending market reversals, then how much weight should you put in their “after market” analysis?

Mega moves like this is a great illustration of why one should always employ stop losses and risk management when in the market. The only absolute control you have is when you enter the market and when you exit.

It’s a guaranteed fact that there were traders who were long in this market without employing any stop losses. It’s also a near guarantee that those traders had their accounts wiped out.

It’s also likely that there are traders who were short without using stops, and those who didn’t blow up their accounts with the market’s move up during this year likely made a killing these last few days, but these type of traders are doomed to give their returns back to the market because eventually they will be on the wrong side of a massive move and suffer the same fate as the traders who wiped out their accounts. Trading without using stop losses is equivalent to engaging in Russian Roulette on a continual basis- it’s not a question of if you will suffer devastating losses, but when.

The true professionals love downdrafts like this as they look for some good bargains that were oversold due to excessive fear. Of course low prices can head even lower, so risk management and stop losses are still needed.

Those like myself, analyzing market price behavior, have been given a golden year of data. The market spent several months in a pretty narrow trading range that heavily favored a delta neutral style of trading. The big drops now favor trending and momentum players. Seeing how the market behaves in both a tight range and trending environment provides great insight opportunities.

 

Trading Update: 2nd Qtr Performance Stats – The Ugly, The Bad, and The Good Part 3 of 4

good-bad-ugly

More humble pie was to be served during the second quarter. Results were still in the dumpster (Bad), just not as ugly as the 1st quarter…

 

April 2015 Performance

Apr 2015 Perf

April 2015 Performance Vs Indices

 

May 2015 Performance

May 2015 perf

May 2015 Performance Vs Indices

June 2015 Performance

June 2015 perf

June 2015 Performance Vs Indices

As you can see, it’s been a tough slog with working on my trading system. Working with relatively narrow stop losses  leaves little room for  error. Either my entry is accurate or I’m getting stopped out.

With month after month of bad results during this time, the question may arise as to why not trade on a sim during this time until the trading “kinks” are worked out? The answer is I am switching back and forth between the two. I test my refinements on the sim and also via back test tracing, then try it on my real account. I likely should stay on the sim account longer, but even though the sim is identical to the real account, the critical difference is risk of loss. It’s very hard to duplicate the fear of loss on a sim account. That fear of loss, when correctly channeled can give you a much higher level of clarity during a real trade – it’s similar to “battle awareness” where your focus becomes extra sharp.

Nuance is everything in trading- all the seemingly minor moves or zig zags add up in setting up for bigger moves, and clarity of insight is key in how to properly group and interpret market price action. Being able to identify, prepare, and act on trading set ups is the separator between gains and losses. Understanding proper nuance can only come with time, practice, and after trade analysis. This is where perseverance comes in  – to keep refining the process to account for these nuances inside one’s trading system.

The charts don’t show it, but R&D is telling me my system is almost there, save for these minor nuances. The tight stops are forcing me to come to terms with resolving the issues rather than try to guess with wider stops. Allowing those unknown nuances to remain in my system only increases uncertainty and risk of loss. Every trading loss gives me another opportunity to locate and resolve these errors with proper post trade analysis.

 

2nd Quarter 2015 Performance

 

2015 2nd Qtr

2nd Quarter 2015 Performance Vs Indices

 

Looking at these results makes me long for the days of 2012 when I was posting all those months of double digit gains, haha! =)  One of the key differences between now and then is it was more “instinct” and a rough trading model than precision back then and I wasn’t using stops. My instincts proved to be correct, but there were times when I had to also endure gut wrenching negative double digit swings in volatility due to a bad entry with no stops.

I knew that to establish long term consistency, instinct would have to be replaced by more precision and a better mastery of market entries and my trading model would need to be updated accordingly.  July’s results begin to show the fruition of the improvements made.