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.
Schedule – Regular blog post every Friday with occasional additional posts when I feel like ranting.
In case you are curious of what I do outside of blogging here:
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Rogers I Hate You
2012 Oct 23 Tue 21:34:10 | by
Okay. You said you are going to upgrade my internet access speed during the day.
I asked, "How long would it take?"
The other side, "5 to 10 minutes, then you will experience a boost in performance."
I said, "Okay. Let’s do it then."
My biggest f$#king mistake so far in all the things I remember that I screwed up over the past 2 months.
My internet was gone. Then it never came back.
Waited 30 minutes. Nothing back online. I called and waited forever. Finally got someone on the phone and then switched me to at least 3 other places before I landed to the right place. Struggled with the tech staff forever and no cigar.
Was told that I have to wait for another 30 minutes or so. They will escalate the issue and have it resolved quickly.
I am a very patient person so I waited. Hours passed and nothing back online.
Market closed and I already called my brokerage to make sure all orders are cancelled and my day trade position is stopped out. I told myself, "At least one thing settled and not messed up."
More calls made. No results.
Was asked to replace my perfectly working cable modem (at least right before they disconnected me) at a nearby Rogers store. Their computer system at the store is not functional and the replacement cable modem has to be activated by phone …
At least 8 hours wasted, a trip to their store, and finally I have internet access again.
At this point I am very curious – the supposed top of their line internet access speed of 150 Mbps … is it really what I am getting?
The answer is no.
I checked the speed and I am not getting the speed boost I thought I am getting at all. I am not getting even close to HALF the claimed speed. I am very disappointed.
So those of you living in Canada who have no choice but forced to use Rogers Cable Internet – you are now warned.
A Solution to My Dilemma
2012 Oct 14 Sun 16:42:36 | by
When is Time Map 2 for Forex coming?
Will there be ebook on trading system design?
Still waiting for your work on how to trade gaps.
My writing to-do list has grown so long that if I print it out it is taller than me. Too many topics I want to cover and I have only limited time for writing outside of my other obligations.
Last week I think I figured out a solution – as oppose to writing complete ebooks and going through the editing process first, which takes a minimum of several months per ebook, I can publish the materials piecewise in premium member area. This way, I can push out more work quickly and I do not need to stay focus on a single subject for several months. For those of you who cannot wait for an organized version of my research, one more reason to upgrade your membership.
Frankly, it is very difficult for me to stay focus on a single subject for more than a few days. Hence pushing out a short piece of report at a time allows me to work faster. After completing enough number of short pieces on the same topic, I can then decide which one to go into my ebooks. That means some of the premium articles will stay as exclusive content for the premium members.
I just posted 2 new articles on Nonfarm Payroll bias last week, Nonfarm Payroll Report Bias is made available to all members and Nonfarm Payroll Week Trading Models is made exclusive to premium members. The one made exclusive for premium members is the one that I think the materials is going to be included in one of my future ebooks.
I think it is going to have positive impact on my writing speed as I am no longer stressed out on a single topic for months.
What a Simple Bingo Game Can Teach Us?
2012 Oct 9 Tue 12:35:18 | by
Kids playing with a MMORPG (in case you do not know what that is – it is the kind of game Wikipedia founder Jimmy Wales played and probably obsessed with many years ago) found a mini-game within the game that essentially plays like bingo.
Each player can get a game board with 5X5 grid filled with numbers from 1 to 25. All cells are unique. Boards are generated by random so it is not likely two players are getting the same number arrangement on their boards.
To play the mini-game, a player has to stay online connected to the game where every 30 minutes 1 token will be given. Another way to get a token is to explore around the virtual environment and hunt the monsters for a small chance per kill to get an extra token. One token is required per lucky draw for a number to be matched in the bingo board. If you get a row or a column completely matched, you will be rewarded with a special prize. Matching all numbers on the board will earn you a very special grand prize.
The problem – kids just discovered that it is very frustrating to get the board filled.
Somehow they feel like the game is cheating on them and not letting them to get that very special prize at all. Draw after draw that very last number on the bingo board just refuses to be filled. Why?
Statistics vs. How We Feel
Following is a table showing the number of draws needed on average to get at least one more number filled based on how many numbers are left at the moment. For example, when the board is new (all numbers are still there), the expectation is that you have 100% chance of getting one of the numbers there with just 1 draw. By the time the board has only 5 numbers left, it takes at least 5 draws on average to get one of them filled.
This table helped the kids realizing the truth – even though the goal of matching another number looks the same, the conditions keep changing. In fact, to fill the last 4 numbers to get the grand prize means double the number of tokens needed! So instead of complaining, off they go happy grinding (to mindlessly killing monsters within a game to gain something). Issue resolved.
We Cannot Control Our Own Swings in Winning Probability
Our performance seldom happens in a straight line. It is not like 30 trades taken you get 70% winning rate and then the next 30 trades you get 70% winning rate again.
One of the things that setback many traders is that when their overall performance is sitting at about 60% to 65%. It is the usual zone where traders start to become profitable. It is also the most vulnerable time in their trading skill development.
Think about the emotional swings they have to deal with. At times, they are "in the zone" and performing at 70% or better winning rate so every 4 trades 3 are winners. Sometimes, however, they swing to 50% or maybe a bit lower in winning rate, which implies every 3 trades 1 to 2 of them are losers. It is very difficult to deal with, especially when they think they have it figured out finally.
How to maintain a healthy attitude with proper perspective of the trading results is very important. Making a connection between your performance swings and how that affect the outcomes you are experiencing should help building your confidence in yourself without the unnecessary emotional trouble.
Counter-Trend Methods vs. Strong Trend Development
In our premium report Hot n Cold, a number of classic trading models are tracked. Those ones with style "CT" are the counter-trend trading models. Those having the style "TF" are trend following models.
Counter-trend trading models tend to have higher winning percentage (the WP column in the report tables) during sideway markets. Then as the market develops into trending mode, counter-trend models will have lower winning rate but still healthy readings. Once a market started to go into strong trend mode, counter-trend models will suffer and winning rate will easily dip below 50%.
The bingo statistics above is equally applicable to winning percentage of a trading model. It gives you a good reason to pay attention when you know CT models in general are dipping below 55%. First, you will likely get more losers than winners if you trade counter-trend. Second, isn’t it better to join the strong trend in the making?
By knowing that a particular CT model is weakening, you know what to avoid in your own trading. For example, if the 90 days rolling performance of Bollinger Band OB/OS model is in a declining phase, then you know using range based (and confirmation based) counter-trend methods will be less reliable. If Relative Strength Index is still going strong, that implies you should instead focus on time based (and extreme fading) methods if you like trading counter-trend.
I do not track the Hot n Cold report everyday. Instead, I review them once a week spotting for subtle changes in the performance of the trading models. If I suspect that we are witnessing something big coming in the underlying market, I will go back to the chart to confirm what I found out from the report. It is like my insurance policy against my own personal bias. For example, if the objective statistics on the models confirm the trend is weakening, then my swing trade directional bet should focus on taking profit at target zone as oppose to holding for more.
Upgraded our hosting service plan again
2012 Oct 9 Tue 11:34:46 | by
Can rookies think themselves into becoming better traders?
2012 Oct 3 Wed 20:20:10 | by
I was talking to a friend today about training some new firm traders. He thinks he is having a hard time in making sure these new traders understand the basics properly before sending them over to their floor manager. I asked why. After all, he is well experienced in training new traders.
The shocking answer is that this batch of rookies are not the usual aggressive type who think they are ready for anything with no understanding whatsoever they are going to face. This time, I was told that it is the exact opposite. These new traders wanted their jobs badly and they are risk-averse. My friend thinks that they properly will not perform well and be kicked out soon.
This reminded me of a short presentation at TED called Your body language shapes who you are by Amy Cuddy. It is a short presentation on the fact that by changing a person’s posture can temporarily change what is going on in the mind of the person.
Here is the video below,
I told my friend to watch this video. After watching this video, he said this is exactly what he sensed from these new traders – insecurity, fear, etc.
Maybe, what Ms. Cuddy suggests in the video would help?
Today I have to attend to some personal matters in the afternoon and the preparation work used most of my time last night and this morning. What I missed was that I did not check my timing models where Emini S&P is due to go north today as the bea …
We often hear our peers learning a new trading technique here, finding a new reliable trading setup there, etc. We seldom hear anyone saying that they refined their techniques and reduced the workload. I have to wonder why because having more tools i …
The current snapshot of 3-Day Advance Issues, Tick16 Short Term + Long Term as of 2012 Sep 18 close. Yes, am posting the chart 1 day late. Reading 1. Long term Tick16 (yellow line) in bearish zone 2. Short term Tick16 (red line) recovered to a …
US Federal Reserve Open Market Committee (FOMC) made the announcement last Thursday that it is going to buy $40 billion MBS (mortgage backed securities) every month with no expiration date and that the low interest rate will be kept until at least 20 …
Several days ago while Facebook was selling below $18, I was calling in my real-time chat that $17.50 should be the floor for the stock and that the goal is to print at least $20 and possibly $22 before option expiration. I also mentioned that Mark Z …
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