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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.

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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2012 Year End Deja vu

2012 Dec 31 Mon 14:29:12 | by Lawrence

2012 started the year with a 20+ points gap to the upside from 2011 close.

And that gap was never filled. It is the first time in S&P history that a gap from the year before not filled in the year right after.

And now a year later, right before the 1st week of January, we have this flushed low into the close (and afterhours) last week. Only to start this week with a huge gap up again. It is not filled yet.

Coincidence or conspiracy?

Something interesting to think about.

2 comments


Essence of Trading: Hunt As A Human

2012 Dec 29 Sat 14:47:45 | by Lawrence

iStock_000012892060XSmallIn trading, younger traders often feel pumped when they have to struggle through many trades during the day in order to come out ahead with a profit. For older traders the same struggle is exhausting and often giving them a headache. Over time if a trader has not moved on from liking the experience, this particular feeling towards the struggle itself will become a major obstacle blocking the trader from achieving better performance.

Animal Instinct

This sense of achievement from a prolonged struggle against something we deem bigger than we are, is originated from our ancient ancestors who hunt for food over a very long period of time. It is part of the animal instinct that we have inherited from them. It is the satisfaction coming from the animal instinct we have at taking out the preys after a dangerous fight.

It is a great tool in training someone to fight better and to survive dangerous situations. After all, it is risky business to hunt for a living. But it may not be such a good idea to be addicted to this gratification in trading.

Many traders perceive trading as a fight against something. In particular, fighting a market that is bigger, stronger, and quite unpredictable. No wonder many traders feel good if they have to struggle through a trading day with many setbacks and eventually coming out ahead with profit to spare. It is definitely a great accomplishment.

When this type of struggle happens too often, however, it is not something to be proud of. In fact, it tells you that your trading is not as efficient as it should be. You could be over trading due to your love of the struggle itself.

Hunter Instinct

Just think about our ancient ancestors – they did not stick to the gruesome battles against the animals for long. The moment they figured out how to do it with lower risk and more efficient method, they went for that. Starting with better weapons and defensive tools, they got to hunt bigger animals by choice. Then they also built traps to capture animals without the need for them to be physically presence at the trap.

Traps that work require expertise in hunting the animals. Otherwise they would not work. In another words, the hunting skill was not abandoned. Instead it was utilized in a higher, abstract level to give the ancient hunters more in return.

These changes in the way animals are hunted allow the ancient hunters to secure food more consistently. Planning ahead with better strategies gave these ancient hunters an edge to capture more preys over the competing predators that were driven to hunt purely out of necessity (i.e. hunger).

Hunt As A Human

There is a striking parallel between these ancient hunters and modern traders.

Our ancestor hunters outgrew their own animal instinct from direct hunting. They developed planning and goal driven thinking. Their hunter instinct took over. They figured out that more food for the family with limited human power was way better than the risky maneuver of hunting large animals directly. The hunting skill was still important and obviously honoured among the tribesmen but it was applied in different ways like building traps. As oppose to be the only tool available, the hunting skill became the foundation of multiple survival tools passed down the generations.

Many traders apply their animal instinct in reading the tapes. They observe the markets for a period of time in front of their screens. It is normal to develop a sense of the rhythm of the market. They sense the potential changes and can enter trades to their advantage. They have developed the tape reading skill.

Relying solely on tape reading skill to make trading decisions at the heat of the moment all the time is an exhausting and demanding process. It requires total focus by the traders just like what the ancient hunters did when they were hunting.

It is a good thing to learn to read the tapes but it can only give you a slight advantage in the trading game. Over time if other trading skills are not developed properly, a trader will be stuck with the only skill they have with limited performance. More struggling every day, more likely the person will focus all the energy with tape reading and forget about developing better trading skills. It is the same as the ancient hunters who were hunting because of hunger and failed to plan for the future.

Learning from the successful ancient hunters, we know they did not always hunt by brute force. They used their cunning and wits to improve their hunting results. Their traps built for catching small animals are like traders who have developed good reliable trading setups that consistently extract small profits from the markets. There is no struggle against the market, just execution of well thought out plans for consistent results.

Just remind yourself, as a trader, that you hunt to make a living, not to engage in fights for satisfaction or gratification.

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Recovering and thoughts for 2013

2012 Dec 27 Thu 19:39:35 | by Lawrence

Better today after my bout with the merciless cold.

Have not been sick for so long,

almost forgotten what it’s like.

A good way to humble someone like me going into new year.

Reminding me that trading is just a small part of our lives.

Can be good at one thing and completely helpless in another.

Just like what my father told me yesterday,

"You are always the weak one in the family."

What can I say?

 

Many asked me if I will provide the indicators and related stuff in the site.

I guess if that’s what everyone is asking for I am getting my guy to work on it.

It is not going to be just NeoTicker. Don’t worry.

As far as I can see, we can host all kinds of indicators, plug-ins, etc. for all common platforms.

I use several platforms myself so are my institutional clients. So it should not be a surprise that I have indicators, tools, etc. build around almost every common (and uncommon) retail and institutional platforms.

The thing I worry most is that people will stuff virus in their uploads. It happened in forums with TS, the other NT, my NT, eSignal, etc. so it will happen. Will try to figure out a way to minimize the risk for our members.

If you have ideas, comments on this topic, just put that in the comment section.

Happy Holidays!

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Pattern Of Sickness

2012 Dec 22 Sat 17:25:00 | by Lawrence

Here we go again.

First day of my year end break and I am sick.

Last time I got sick was way back when -

definitely another holiday break.

Sounds like a pattern, isn’t it?

Was told that I do not have enough sleep or exercise of late.

Or maybe that sudden change of weather.

Could be that I visited hospitals as frequently as others hitting nightclubs.

None work as good as a predictor than a long holiday break for me.

Must be the holiday spirits cursing me.

 

p.s. have to take things slow for a few days until getting better.

4 comments


Others Predictions

There are some interesting predictions I have seen that are worth mentioning.

First, the one for its entertainment value goes to Saxo Bank’s annual "Saxo Bank 10 Outrageous Predictions for 2013"

Second, is John Mauldin’s "We’ve Had A Good Few Years, But It’s Now Time To Prepare For A Huge Drop In Earnings" for its sensible approach.

My Predictions

Many asks for my longer term view going into 2013.

I do not usually do that because I use January as my yardstick to project price levels and directions for the year. So it is quite difficult for me to dish out useful projections this point in time. Since it is good publicity for the site, I will do it for the sake of entertainment only.

Here we go, my predictions for the year 2013:

US Stock Market Will Top Out In First Half Of 2013 If The Top Is Not Already In Place

My cycle work suggests a multiple year market top is due from now to first half of 2013. The US stock market will enter a cyclical decline phase for several years. Somehow it agrees with the article mentioned above (the one by John Mauldin) which uses a completely different approach from mine.

World Stock Markets Going Into Decline for Several Years

As US stock market going south, the rest of the stock markets will go down with it.

Collapse Of Japan Economy And Its Financial System

The redemption of their government bond has already happened. Japanese government bonds have always been supported mainly by their people, especially their older generation. There is no wealth nor cash flow from the younger generations. So net outflow of money for the government when the older generation is cashing out their bonds to survive.

The only route Japanese government can do now is to have Bank of Japan buying all their new issues, just like what the Fed is doing for the US government.

Japan should be one of the first countries forced to reset their financial system.

European Union No More

The people do not want the union any more. It is already over.

Think of it as an ugly divorce in progress.

Acceleration of Faster And Wilder Swings Across All Markets Making It Extremely Difficult To Trade

When structural collapses happening here and there, essentially everywhere, we get many market shocks. So expect very fast and wild price swings in all markets. Market timing and straight money management becoming the most important tools for years to come.

In summary, my long term idea for year 2013 is to short stock markets worldwide, and eyes on short term crazy swing opportunities in forex.

Feel free to submitting your predictions in the comment section!

4 comments


2012 Dec 20
Market Internals 2012-12-19

My monthly update on market internals. The current snapshot of S&P 500 3-Day Advance Issues, Tick16 Short Term + Long Term as of 2012 Dec 19 close. Reading 1. Long Term Tick16 (yellow line) cleared neutral zone and zoomed to straig …

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2012 Dec 19
Essence of Trading: The Three Pillars of Critical Thinking (Part 4)

… continue from part 3 "The only thing more expensive than education is ignorance" – Benjamin Franklin Self-correction is the most difficult part in critical thinking. We may be very logical in analyzing a situation. We can be very obj …

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2012 Dec 18
Since I Have Spare Time

First, I posted a new article on using advance / decline issues the the market breadth primer series. http://www.daytradingbias.com/?p=74518 Second, I also activated the Ignore List feature on comment display as requested by many site members. Ins …

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2012 Dec 17
Market Breadth Primer: Introduction

This is a long due series I promised to cover. I was waiting for a good time to gather my thoughts and summarizing them into drafts. Well there was never a good time and probably never will if I keep stalling. So here it is, first piece on the subjec …

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2012 Dec 14
Bernanke Having Serious Health Issues?

From his speech to the Economic Club of Indiana, Mr. Bernanke made some interesting statements. These statements, coming from someone with such prestigious background in education and credentials, look contradictory to what Mr. Bernanke is capable …

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