2016: a year in review

It is almost the end to this earth year. 2016 has been very fruitful. I think it's appropriate to give time for some quiet reflection.

It was Year 1 of being equipped with the ZF system. My immersion is still ongoing. And I do believe it is something that will not end soon. I still learn something new in every trade that I make. Ms Market is a hard mistress, she takes away as much as she gives. And it seems that I entered in a long term relationship with Ms Market, for better or worse. 

With the recent launch of the ZF ORACLE, it has provided me with the perfect time to go back to my trades this year. 

Analyzing my trades, I still have a natural inclination to buy breakouts. It really is my bread and butter setup. Aside from breakouts though, there was a small collection of bounce trades here and there scattered once in a while. Then there are the TF trades. I still have to tighten my stops for those. There are still a lot of profit leaks in my trades and I plan to plug them eventually.

Going over my trades, I found out that my hit rate for the year is still pretty low, about 43%, so there is a still a lot of room for improvement.

I was pleasantly surprised to find out that there were only a handful of stocks that gave me most of my gains. 

Those are some of the trades where in I was able to gain multiple times in a single stock. I think I missed a couple of others but I think I was able to milk these stocks for all they're worth. 

So after looking back on the past year, it's now time for some resolutions or goals for the new year. 

One resolution for the new year is to really ramp up my documentation skills. There were a lot of trades that weren't documented properly, real and paper trades. So much potential learning lost. I hope that Excalibur, a tribe project, can help solve that particular weakness of mine. 

Another resolution is to trade less. Focusing on those perfect setups. I have already started on this and have observed that this trait has been lessened this last quarter of 2016 but in the first two quarters, I had to return some gains/profit due to overtrading. 

One more goal is to get some more badges. Seeing one of these bad boys in the palm of my hand has really stoked the competitive flames in me. 

And lastly, will definitely step up my RAK game and have already discussed this with the Mrs Robot. We are now setting goals for this and identifying the potential beneficiaries for each quarter of 2017. That should be something to watch out for. 

Ok, that's enough reflection for this robot. Here is some ear candy for you guys. Happy holidays and let's get ready for 2017!

Trend Following: LIHC

Trend following. You hear or read it often but ever wonder how it is done? 

Let me try to give a short walk-through on how my neural networks implement a trend following trade. I will be using my latest trade, LIHC as an example. 

The first thing to remember in doing a trend following trade is to watch your entry point or your average price (AEP). The ideal entry is to get in before or right at the start of the trend. How to do that? Read up on the boss's blog about ZS and AOTS. For LIHC, this was easy to spot since it also coincided with a multi year breakout. 

Next comes the hard part. The holding time. 

To get a better idea, watch this. These are the survivor endurance challenges. Where you have to outlast your competition for the chance of a bigger prize. 

For this example, the contestants have to hold their arms up or else they will get splashed with paint. The host can tempt them with some small reward in exchange for stopping out. Or if they get tired, they can just put down their arm. 

To put this in perspective, the rewards or the exhaustion of a person could be compared to someone selling at a certain target price or resistance. 

Or maybe if the chart or price action looks weak. There is nothing wrong with selling at those points. As long as you follow your plan then go ahead. 

For me, I do not set target prices. I'd rather set trail stops. If the price goes down a certain point then that is when I sell. That point could be a previous resistance turned support, the previous close, a MA getting broken. It doesn't matter that I wasn't able to sell at the top. The important thing is I was able to ride the bigger move. 

Another thing to consider when doing trend following trade is fighting the urge to move to the flavor of the day or the week. Like the bear in the GIF below, it's human nature to want to sell and then move to the faster moving stock. For this LIHC trade, there were several missed trades, CPG, BLOOM, FNI, STI, PPC, WEB to list a few. 

But in reviewing my past trades, it was my inactivity that has given me bigger gains. Focusing on just a few trades a month has helped me to reach my quota or targets. My system is not really built for tsupita trades. That mindset or strategy has yielded a bad win/loss ratio over time. The losses negate the wins or just at breakeven. Plus the added mental stress of having to look for good trade setups everyday. 

In reality, I am lazy. I'd rather make just a couple of trades a month then to trade multiple times a day/week. This fits more to my trader profile right now as well since I cannot be in front of the computer the whole day anymore. 

screenshot date was close of 11/25/2016

Not bad for a one month hold don't you think? One trade for the whole of November. Do take note, actual selling was below 1.5 today 12/2/2016. Wasn't paying too much attention to the movement since I was busy doing other things. 

Anatomy of a port snapshot

We've always said that the stock market is a game or contest between yourself and hundreds of thousands and even millions of traders out there. In this dog eat dog world, you will need every advantage to get ahead. And you will need all these little things since they will add up. 

One of the best ways to improve your trades is to document them. This is one of the secrets that differentiate an average trader from a good or even great one. 

Taking port snapshots is one way for us to be able to grade ourselves in this game. Think of it as our report card to check our progress in our trading journey. Like an iceberg, the port snapshot is just the culmination or the result of our hard work. 

What you don't see is the work and difficult times that we had to endure to get to the level of achieving those port snapshots. 

The port snapshot can tell if we did enough preparation and legwork in doing our trade plans and if we were able to execute properly on these said plans. It can tell a lot of things if you only know how to look hard enough. 


Let's take a look at the most common components of a port snapshot:

STOCK NAME/CODE - This shows that out of the 200+ stocks out there in the PSE, a trader is able to identify which one would make a possible move. A port doesn't need to have too many stocks in it to earn. Contrary to popular belief, too much diversification is not good for your investing/trading. 

PORTFOLIO % - Sometimes a 100% allocation does not mean that the trader went 'all in' with no money left to spare. Maybe the trader just saw that this was the only stock or setup worth trading and only used a portion of their port allocation there. 

Nevertheless, the higher the allocation, the higher the conviction of the trader in that stock. 

AVERAGE PRICE - The entry price of the trader to the trade. If all buying was done in one tranch then this should be on an ideal breakout point and easy to trace. If buying was done in tranches, the aep should only be slightly higher than the ideal breakout point.

Having a great AEP shows the precision of the trader's entry. It can also usually show the trade profile of the trader. A bounce player or tsupitero or a position trader. 

CURRENT/MARKET PRICE - The exit price of the trader to the trade. The trader could have set GTCs and sold at this particular price. 

PERCENT GAIN/LOSS - Similar to the current/market price this can be treated as the final grade of the trader for a particular trade. Again, they could have sold here using GTC or sagasa sell. 

BLACKED OUT PORTIONS - This is usually for security reasons to protect the trader. But some traders out there would rather not have any blacked out portions and are secure enough with themselves that they feel it's not necessary. Kudos to them. 

See the many possible stories in one port snapshot? Learn to read between the lines and maybe it can help you to improve in your own trades. 

This is the beauty of people posting port snapshots, it can serve multiple purposes. One is to prove that it is possible to make it in the market. Another is to show that we walk the talk and don't just post analysis on a variety of stocks. First and foremost, we at the tribe are traders. We do this for a living and to earn. We want to prove to others that it is possible to trade full-time. That it is possible to survive without relying on tips and analysis of others. 

Keep this in mind next time you see someone post a port snapshot out there in the world wide web. Don't just admire or be jealous of the gains. Stop and try to dissect it. That might help tremendously in your own trading. 

It is possible to live the dream. You just need to work for it. 

So to all my fellow traders out there, cheers!