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Stress-Free Trader (The Lawrence Chan Blog)


Full time index & forex trader, occasional consultant to hedge funds / institutions, my work leads to my not so normal view of the financial markets. My blog mostly talks about trading, market behaviours and other musings.

Originally this blog is supposed to be organized in a separate website like what most authors do but I don't think I will maintain it properly that way. So here it is as part of this website.

In case you are curious of what I do outside of blogging here:

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Feasibility Of Security Measures

2014 Apr 12 Sat 23:42:46 | by Lawrence Chan | No comments yet

Another day of hard work with some experts on wordpress security. After analyzing many days of access logs of the website, I’ve learned quite a number of tricks the bots are using. There are actually quite a number of different bots out there ready to exploit any websites and surprisingly not that many site owners are aware of the vulnerabilities of their websites.

Before the latest round of attacks last week, I was a believer that we’ve done a good job protecting it.

I was correct that daytradingbias.com is secure from those bots that are designed to hack the site for client information. Our design has taken into account good security measures thus there was never a problem in this area.

I was also correct that our site is secure from hijack attempts. We’ve done a good job making it very difficult to gain control of the website. Many of these bots do not really care about stealing things. They wanted to control the servers so that they can use them as drones to attack other websites, important websites.

In other words, website owners who are not prepared would cause the servers hosting their websites to be hijacked for malicious purposes.

After patting my back, let’s talk about the part that I was dead wrong. What we failed to address, was the security measures in limiting the content stealing bots. I thought we have done enough but the reality hits me hard. It was these bots that brought down our site from time to time. It is an eye opener learning how they function with all these ways to scan and steal contents from websites.

Not just my website but also the ones belonging to many major companies are being attacked by these bots everyday. I was shown how they work and the fact that they work efficiently on these brick and mortar websites tells me there exists an industry of content stealing. Remember, majority of these looting bots do not even know what they are looting. They just do it in mass scale so that, once in a while, they would hit someone useful or valuable.

For the big companies, many of them have put lots of resources behind their websites. Thus it is not likely their websites will be affect significantly. For websites like daytradingbias.com that are not prepared for heavy traffic, it is a different story. The brute force attack to loot the content can overload the servers quickly.

These bots are not very patient too. They scan for weaknesses, loot at high speed, and then target the next victim.

I make it sounds like real life robberies, isn’t it?

At this point, we’ve added many security measures to safe guard against these attacks. I cannot talk about the security measures taken because they are trade secrets that the security experts prefer to keep under the radar so that the techniques can stay effective.

I feel better, at least for now, after this ordeal.

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Site Repair Progress Report

2014 Apr 10 Thu 21:56:01 | by Lawrence Chan | No comments yet

Since afternoon April 9th, our site was not accessible because of the necessary changes we have to make to our domain name server. We have arranged our website to be guarded by a 3rd party service against the ever escalating attacks of our site. It was supposed to be a simple change and once the information has propagated through the internet the site would return to normal. Well, that was what I thought.

When A Server Goes Haywire, It Becomes An Adventure

Instead, we went through a 30-hour marathon of emergency repair.

One failure from one end point turns into another failure at another part of the server. By midnight we knew the site was beyond repair thus we went for restoration of our website from backup. We managed to piece together a barely running website at around 9 am Eastern Time. Talking about perfect timing there.

The backup of the website we have has posts and other contents up to April 8th in the morning. The rest of the site has to be reconstructed and reconfigured so that the site can run smoothly again. Many thanks to the tech support team from our hosting company servint.net. They pulled us through every obstacle throughout the ordeal.

There Are Two Good Reasons For Going Into So Much Trouble

The way our site being harassed by spam bots, hostile crawlers and pure evil DDoS attacks has been growing quickly since mid 2013. Although we have done a good job in protecting our website through standard measures, they are by no means enough to handle the hostilities at the current level we have witnessed.

We have several choices to deal with the problem. I picked the one that is most scalable. Should there be more attacks, our site will have a much better chance to survive. Since we are offering premium services, it is the least thing we can do to ensure our premium members can access the premium reports and real-time tools.

By having the protection service in place, it also improves the overall efficiency of our server because it is also a CDN (content delivery network) service. It means that the real-time bias reporting tool I’ve planned to release will be able to deliver real-time signals and biases on time even under tough server load conditions. This second reason alone is good enough for me to take the steps we’ve taken to secure the site.

Outstanding Issues

At this point daytradingbias.com is fully functional with a few exceptions due to the outage that happened on and off since April 8th.

The exceptions are:

1. Part of the real-time commentaries transcript from April 8th to 10th are missing. We should be able to pull out the records from another backup and have that restored by this weekend.

2. The posts I made over the past 2 days were missing but I managed to find my local copy. I have them uploaded to the site already.

3. Some forum comments and comments on articles are now gone. Depending on the progress of data recovery over the weekend, we may be able to restore the messages but I do not have high hope on that due to the complexity.

4. Some of the premium reports for April 8th – 10th are missing. The premium reports for April 11th (tomorrow) are all posted properly today.

5. Ad placements are all missing because their database records are destroyed by the server side changes. Obvious the server has a distinct taste of computer records to destroy. All my articles and reviews are intact but the ads were wiped out.

Thank You

Thank you all for being patient with us when the site was down.

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Site Development At A Crossroad

2014 Apr 8 Tue 11:30:51 | by Lawrence Chan | No comments yet

While I was away today I received message from my guys that daytradingbias.com was under attack again. This time, thanks to our effort in beefing up the overall protection of the site, it did not go down and survived the incident. It is something to be proud of. Thousands of hits and the server took it like a great fighter and stood its ground. The problem, however, is that it is affecting my plan to launch our real-time trading tools.

The site was slowed down significantly meaning all visitors accessing the site at the time will feel the impact. I have to study the impact of such slow down in overall server speed to make sure it will not affect the performance of the real-time tools. It is just another challenge to overcome.

Worst case scenario I will rearrange the real-time services through special secure server so that no one can attack the server at all. It will be costly but also guarantee the performance.

I am in talks with some experts on the issue. A decision will be made as soon as I figure out which way is the best option going forward.

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The irrational investors always make the same mistakes again and again because they act on their emotions. The funny thing is, many hedge funds behave exactly the same way, for a completely different set of reasons. Past two weeks, the massive unloading in Google confirms how unreasonable both average investors and hedge funds can be.

What Happened To Google Since Beginning Of March 2014

Following is a simple daily price chart on Google.

image

Below is the sentiment among the Stocktwits members over the past month.

image

Notice how the sentiment among the average joe traders surged in late March to early April while distribution was is progress.

Price pattern anyone? Classic bear flag right there. Bear flag and bull flag are continuation pattern. They are basic patterns any properly trained chart readers would not miss.

The outcome, of course, is further selloff.

As in the classic Wall Street speak, these Google fans are married to their positions.

 

The Cornered Hedge Funds

As reported by various sources, Google is one of the top holdings by the major hedge funds.

image

(Source: Zerohedge, As The Hedge Fund Slaughter Continues, Here Is Who Is Unwinding And What Stocks To Watch)

Notice that it was also one of the few names at the top of the list where these hedge funds are showing a profit.

If you were running a hedge fund, would you make the objective decision to cut losses on your biggest positions even though that could be the correct decisions to make?

Of course not. Cutting losses on size like this will destroy the performance of the funds and in turn trigger redemption from investors. The logical decision is to ignore the risk and pile on more money on the losing positions to hope for the best.

The funds are cornered to make bad decisions because the slim chance to turn around the situation is better than taking the route of sure destruction.

These hedge funds are not married to their losing position by emotion. They are married to them by logical, although not necessary ethical decisions.

 

Sell The Winners To Free Up Cash

In order to sit on the losers, the hedge funds have to find cash somewhere.

They do exactly what the irrational investors usual do by selling the winning positions to get more cash to maintain their margin requirements. If there are extra cash freed up from the winning positions, they average down on their losing positions and hope for the best.

That’s why the top holdings of the major hedge funds that are still profitable are being hammered. Once one of these funds started to unload, the rest of the hedge funds have no choice but to unload too because they need to book a profit on their positions. They do not have a choice.

This is exactly why the bear flag was showing on the Google daily chart in late March to early April.

 

A Repeat of What Happened to Apple

I warned back in end of January about the situation of Google is very similar to that faced by Apple.

I received quite a number of hate messages since. It was obvious to me that many people are investing in Google irrationally and emotionally. It is, by itself, a big warning sign.

Stock trading, especially trading the big names, is no longer a single dimension thing. One cannot look at a single metric like fundamental data and assume the world will behave according to your beliefs. What happened to Apple and Google is a wake up call to all investors.

Money flow matters. What the biggest players are doing to the stocks matters.

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Missed My Schedule Happily

2014 Apr 1 Tue 10:04:50 | by Lawrence Chan | No comments yet

I was talking about the release of the Real-Time Bias Reporting tool for a long time.

I always think that we can make it by the end of the 1st quarter of 2014.

Well, we missed it but I am still happy about it.

Consider what happened to DaytradingBias.com website over the past few weeks:

  • Bot attacks of our site – it is a worldwide phenomenon, cannot blame ourselves
  • Email attacks of our mail server – definitely our fault that our online question and suggestion forms are not protected
  • Site stability challenged as its popularity surges – when our site was first created, it was not built with speed and efficiency in mind. It turns out some of the plugins that was chosen when we first created the site are on the avoid list for majority of web hosting companies.

Talking about Murphy’s Law on steroid!

We scrambled to take care of these security loopholes and weaknesses. I recognize that It is extremely important to make sure daytradingbias.com can run smoothly 5/24 since traders will depends on the trading tools we are going to deploy. There were so many things we have to do we have to suspend work on everything else to focus on resolving these issues.

Our effort has now paid off:

  • Popular articles is back without slowing down our site at all. We can now track both the current trending ones and the long term ones too.
  • Related articles is back with better display and reduced server load
  • All known techniques to defend our website are put in place. Several mid-size attacks on the site were fended off without causing any downtime.

It was difficult over the past few weeks to get all these things done.

But isn’t it better to have these issues taken care of before it is too late? I think so.

We can now focus on our regular schedule, finally.

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The One Character Trait That Predicts Trading Failure

2014 Mar 24 Mon 23:54:09 | by Lawrence Chan | 1 comment

Story At A Busy Pharmacy

imageI went to this hospital pharmacy to pick up some special prescription. There were many people there. The place was jam packed. I thought it would be a very long wait. I was planning in my mind immediately on how to better spend the next 30 minutes to an hour.

Should I get a coffee?

Maybe I could find a spot to sit down?

I passed by this huge machine for people to obtain a ticket to secure their places in the queue. I did not take a ticket because it was designed for people to wait for their turn to drop off their prescriptions. When the medications were ready, they would join the other queue for medication pick up afterwards.

By the time it was my turn to talk to the cashier, I provided the information voluntarily. The nice lady at the cashier knew me for years and we chitchatted a bit. She found the medications quickly as it was prepared some time ago. She asked me to wait for a pharmacist to confirm the order before I leave. I said yes and relented my place to the next person in line.

Note: Having a pharmacist to double check the drugs first is not something out of the ordinary, it is a safety measure to ensure the correct medication is dispensed.

The Start Of A Fuss

Right after I settled at a corner in the packed waiting area, I heard this man complaining loudly why some people skipped the "queue" and got to see a pharmacist to pick up their drugs quickly and leave. Specifically, he was not happy that some people did not grab a ticket for their proper position in the queue. He was looking for the others to agree with him and obviously seeking a way to stir up the complain. Majority of the people ignored him. Yet some others who waited for a long time started to talk to him. They complained to each other and started their conspiracy theories on the reason why some people are taken care of first.

From their conversations, it was obvious to me that this old gentleman was a self-righteous person. He probably took pride in his life in following rules squarely and expected the others to do the same. Those people like me who did not get a ticket from the machine were labelled bad people. When things did not happen the way he expected to be, he could not control himself with frustrations and anger.

What he, and those who agreed with his complains, did not understand that there was the existence of two queues, not one.

My Turn And The Start Of An Episode

As expected, my turn has arrived quickly for me to see one of the pharmacists to pick up the medications.

Then all hell broke loose.

This old guy walked towards the booth I went to and started a very vocal complain. He made a speech of at least five minutes long. My guess was that he must be very proud of his comprehension skills. Clearly he spent at least 10 minutes to construct the speech in his head. Surprising to him, a very frustrated and borderline angry man, at every turn and twist he stopped, expecting the pharmacist and I to argue, we provided no feedback at all.

The non-response to his carefully crafted speech pushed him to his limit. He could not handle the blank stares and silence he was treated with. He started shouting. Security immediately arrived at the scene. That stopped this man. After all, he was a person with a self-righteous mind. A fight with the security guard probably would cross the line in his mind.

Learning The Truth

The pharmacist asked this man one question, "What’s the name on the prescription?"

This man was too angry at this point he replied with his own name. Only after the pharmacist asked again if the prescription was for him, then he realized his mistake and provided his wife’s name. The pharmacist asked him to wait there while he went to check if the prescription was filled.

The pharmacist returned with the status, "You walk in an hour ago dropping off the prescription. There are 10 more prescriptions to be filled before your wife’s. As you can see we are very busy here. We processed at least 50 prescriptions while you are here. If you call in with the prescription several days ago, you can pick up the medications like this gentleman here too."

The man was speechless. He was embarrassed. But more importantly, he could not accept the fact that he was wrong all along. The pharmacist told him to calm down and wait for his turn. The man walked back to the waiting area silently.

Security guard figured it was alright to get back to his normal post so he signalled us and left.

After the pharmacist double checked the drugs, I took the medications I was waiting for and left.

I did not try to find out what happened afterwards. I do not need to know.

What you may want to know, however, is the reason why the pharmacists and I were so calm in front of that man.

It is because we have seen it before, many times. I have my fair share of this kind of experience at the pharmacy, although not every encounter was as dramatic as this one. My guess is that the pharmacists must have seen this many many times.

Sometimes Ignorance Is Not A Bliss

The combination of ignorance and self-righteousness is bad for many situations. It is extremely bad for trading.

Take the example of the man I met in the pharmacy. That very small issue of people not taking the ticket from the queue machine ticked him off. His self-righteous mind took over. He could not even think logically to understand why that was the case. If he were more observant, he would be able to deduce that there were two queues. But he couldn’t because he felt he was wronged.

If there were one character trait I have to name that definitely kill the chance for a person in becoming a successful trader, self-righteousness is the one.

Being self-righteous will make a person takes pride in their acts. Pride stops logical thinking. Pride induces slack in discipline against adverse scenarios.

Countless traders thought that they understand the market fully and in total control of their trades. None of the traders whom I have met with this kind of mentality can survive beyond a few years of trading. Not only they lost enough money to stop them from trading, they are also broken mentally by the markets as they could not accept the fact that the markets were behaving in ways not agreeing with their beliefs.

Being self-righteous also induces anger and frustrations when things not happening in the way you think they should have. Negative emotions cloud one’s judgement. The more distress induced, the more likely mistakes would be made.

We all have our moment feeling being cheated by the markets. Countless times I stomped the ground (I was standing on the trading floor of the local exchange and trust me, only seniority gets you a spot to sit) and banged my screens. Maybe I am getting wiser. Maybe I just aged. Anyhow, I outgrew this phase long time ago.

Blaming the market for your losses would not help you get your money back. Learn to deal with the market and accept its probabilistic nature will.

Choose To Fail

The most interesting effect of self-righteous thinking is that it stops the traders from profiting in the markets because they cannot pull the trigger when the markets behaved in a way contradictory to their beliefs. I cannot remember how many times I have heard people saying the stock market should have crashed and the Fed should not push the market higher. It is a great conversion piece in a party but there is no room for such beliefs in one’s trading decisions.

When I questioned why, on one hand, they believe in the Fed is pushing the market higher; yet, on the other hand, they are not going long the stock market indices, I got back many interesting replies. Many do not have an answer to my question. For those who answered, some say it is wrong to do so. Some insist that staying short is the right thing to do. That is the sign of having self-righteous beliefs.

I don’t mind sharing my trading techniques and helping others to trade profitably. While trading, however, I have no problem taking money from people who place the comfort of feeling righteous on top of logical reasoning. They expressed their opinions and they chose to lose money.

Since I am trading to make money, I have no argument with them.

Summary

It is always the individual’s responsibility to learn to trade properly. In this case, however, the character weaknesses of some people stop them from applying common sense to trading. It is not possible to help them trade profitably until they realize their psychological issues.

Even if these individuals realize their beliefs are not good for trading, it will be a very difficult, if not impossible, journey to correct their minds. The reason lies in the fact that self-righteousness, by definition, means anyone suggesting self-righteousness is a problem is wrong. A barrier of this nature is not something that can be undone by simple interventional counselling or over-the-counter self-help materials.

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Website Under Attack Update 2

2014 Mar 19 Wed 21:00:35 | by Lawrence Chan | No comments yet

Since I posted the original news about our site being attacked, there are many more attempts in bring down our site.

We’ve been in touch with our web hosting company and extra measures are taken to help us defending the site. All the work done these two days should be sufficient for now to keep our website in good shape even under the same kind of attack. Hopefully this waves of attacks will end soon.

The attack is not limited to our site only as a large scale attack on all wordpress based websites has started since the beginning of year 2014. Early this month, several websites belonging to large companies were taken down from hours to several days.

Our original defense mechanism was able to fend off many attacks (every day more than a few thousand tries). But the problem has escalated to burst of several thousand hits within minutes many times lately. That stalled our server to not accessible to regular users and members from time to time.

We’ve done all we can within such a short time period. Should we find that these attacks continue to affect our website we will expand our resolution to include more sophisticated technology to deal with the problem.

Sorry for the inconvenience.

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Web Site Under Attack Update

2014 Mar 18 Tue 17:04:51 | by Lawrence Chan | 1 comment

So far there is no report of Internet wide attack on websites powered by WordPress today.

We’ve done enough basic measures for now to protect the website. However, we have to dig deeper to beef up the security measures so that the attackers cannot slow our site to a crawl again.

If we are going to install server-side software, it will be done after 11 pm Eastern time. It should not last more than an hour or two.

Sorry for the inconvenience.

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Happy St. Patrick’s Day

2014 Mar 17 Mon 9:17:36 | by Lawrence Chan | 1 comment

Don’t get too drunk, the markets are open today!

image

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Website New Look Update

2014 Mar 14 Fri 15:04:08 | by Lawrence Chan | No comments yet

We’ve got a partial update on the research and article section today.

It is not fully updated yet because I have not spent enough time to browse through the several hundreds of articles with proper tagging.

The partial update at least made more articles easier to access at this point.

Check it out yourself – Research section.

Will keep you all posted when I complete my part of the update.

p.s. I was told that I am slowing their work down … can’t help feeling old among a bunch of young adults.

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