Settling Down After a Chaotic Week

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Flying from Toronto Canada to Hong Kong is easy. In fact, way easier than traveling to United States. First and foremost, going through US customs takes at least double the amount of time. Anyhow, my hectic schedule started the very next day after I arrived.

Jet Lag and Polyphasic Sleep

I have been asked enough times about jet lag that it is something worth mentioning here.

Ever since I trained myself to sleep in biphasic sleep, jet lag is never an issue. I always get sleepy once I have nothing to do and can fall asleep easily. When I focus my mind, I can continuously work 10 to 15 hours straight. That’s the interesting benefit of training oneself to actually sleep multiple times a day.

One thing to remember though it takes time to modify one’s sleeping pattern. If you are used to sleep at least 8 hours a day and that you cannot easily squeeze out at least 45 minutes during the day for a nap, cutting short your main sleeping time will seriously affect your brain functions.

Meditation as a Sleep Replacement

Sometimes, if actual nap is not possible, there are interesting ways to refresh our mind to peak performance through other means.

If you have practiced meditation long enough and can get yourself to the state of a cleared mind quickly, you can try to induce the sleep like function in your body where it starts to flush out the chemicals generated during the day when your brain has been working hard. Key to this technique is switching to a breathing rhythm closely resemble the one that our body normally does during our sleep.

In other words, one can consciously induce the brain cleaning function without actually going into deep sleep. Your brain will be completely refreshed after a 20 minute practice of sleep breathing under meditation. Interesting isn’t it?

Hong Kong

It is considered being cold in Hong Kong right now but for someone coming from Canada, just T-shirt and jeans are perfect for me. Obviously that attracted many curious stares wondering if this guy is insane. The picture in this post is taken from the famous place in Hong Kong where they make the roasted gooses. I chose to take a picture of the mega bridge connecting the airport to the rest of the region because it is in fact a very cool piece of architecture.

My schedule will continue to be very hectic. Instead of the expected quiet down of my meetings, many more meetings are now scheduled around my original ones. An interesting development indeed since I thought not that many people would be interested in my line of work.

Have a nice weekend all!

Introducing My New Blog Site

imageHere it is, my blog site with its own domain, is now (kind of) ready.

The domain name, TheLawrenceChan.com, was picked because my name has been taken by someone else many years ago. There was an actual website associated with that, based on research by my team through wayback machine until the owner decided to abandon the domain. Since I have chosen to use the name TheLawrenceChan at LinkedIn, I may as well use it as my domain name.

The older content of my blog will still be hosted at DaytradingBias.com because it was a mix of announcements and my random thoughts. I have assigned the task of moving the blog posts from this year into the new site. This process takes time and those older posts will start to appear on the new site slowly.

Travel Schedule

I will be traveling to Asia with multiple stops starting next week into early next year.

This should not affect my newsletter publishing schedule. My real-time commentaries could be affected but I will still try to keep up with the battleplans.

In order to properly assess the current economic situation in Asia, there is no better way than talking to the people there directly. My point is that if Asian countries are heading for a slowdown, the global economy as a whole will not be doing well either. My goal is to shape my overall investment strategy for the next four to five years based on a well rounded review of what is happening now around the world.

One Good Idea Turns Into Reality. What’s Next?

lightbulbi15Earlier this week I prototype an idea called Emini S&P500 Battleplan as suggested by many premium members. It has been very well received. The idea is to post what I see from my charts instead of just describing it in the real-time commentaries before market open. Although it is still very simplistic so far, feedbacks from my members is telling me that they love the idea and it is very helpful for them. Very glad I took the plunge and just made it happen first without worrying about how difficult or how time consuming it can be.

Emini S&P Daily Battleplan

This experience has taught me two things.

First, I need to test out new ideas without worrying too much. I hesitated to do this for months just because I worried too much – like it would take up too much time and that my charts could be too messy to show people. Now that I took a leap of faith to start the project first and see if it can work out, the obstacles are not as big as I first thought. The key is to actually doing it first so that I learn from the process on what the actual requirements are.

Second, listen to my members is very important. They may not know exactly what they need for their trading but when many of them telling me something similar the pattern emerges. My role is to find a way to fulfill what they need and paying attention to what they are asking for is key to achieve this goal.

Having a chart or two makes it much easier to explain what I have in mind. Yes it is actually difficult to post the charts because some of the charts I use actually reside in remote servers. It took some coding magic to allow me to take screenshot from them and now it is as easy as working with charts on my desktop computer.

There are various drawbacks of posting my morning summary before market open in real-time commentaries. For example, people who login after market open may not be able to see my morning summary once many messages have been added.

Now both issues are resolved with the battleplan idea, I have setup a home page for the battleplan posts so that premium members can refer to them when they study the historical charts themselves. This should be very useful in helping traders to understand and develop the thought process in formulating their own plan before the start of a trading day.

Real-Time Custom Market Breadth Chart

Thank you everyone who emailed me to sign up for the alpha testing of the real-time custom market breadth chart. Once it is ready I will email you all with the access information. We are still working out some technical glitches before the alpha release. I will keep you all posted on the progress.

In the meantime, I will write up several articles explaining what these custom market breadth indices can do.

I have already revised the titles to two of my older articles and included them into the Trading with Tick Index series. The two articles, S&P 500 Tick16 and Tick1K and Its Divergence Signals were written long before I started the series hence I never thought of them being part of the series. Now that I am making the custom breadth indices available to our members, it is a good time to add them to the series so that everyone will get a proper introduction on custom tick indices.

Hopefully the real-time custom market breadth chart will be another good idea turning into reality.

Is 2016 Year of Surprises

baby_surprisedWhat a way for the year to start. In Asia, China acted decisively to devalue its currency and then speculators panic selling stocks in response. In Europe, EU looking to establish its own army while talks of Britain leaving EU getting a lot of attention. In America, US dollar continues to strengthen and Canadian dollar just made decade long new low against the US dollar. As if the world has chosen this year to make drastic changes in everything.

Is it all unexpected though that we are getting all these so-called news shocks within a week? I don’t think so.

All the events mentioned above have been developing since last quarter of 2015 if not earlier. The holiday season simply delayed them all and aligned them to happen right after New Year. Some people already blaming this year for being an unlucky year. Well, I am not sure if luck has anything to do with this. But I know for sure that looking at things this way does not help in resolving the matters on hand.

Case in point – the stock market selloff happening this week. Subscribers to my newsletter all know that I am looking for a selloff and that the target price level is now reached today after Non-Farm Payroll report. It is not that difficult to tell a correction is going to happen. It is the timing and magnitude of the drop that caught people by surprise but they shouldn’t be. All signs are on the wall.

Similar things can be said about Canadian dollar. The crushing of crude oil has killed the economy of the oil producing provinces within the country. That in turn affecting the other provinces. The Canadian dollar getting weaker is just a matter of time.

Media, however, cannot tell people that everything is expected. The need of ever increasing readership means exaggeration is part of their job. No wonder we got all these headlines that this week is the worst ever first week for the US stock market in history.

Keep calm and carry on.

2016 New Year’s Resolution

last_one_standingThis is the time of the year to set goals for the rest of the year. Upon reflection, last year was a transition year for me in searching for a more balanced life. I looked into many areas of interest to see what fit me best. I do not have all the answers yet and I hope in coming weeks I will figure out the direction in life for the coming few years.

 

Reflection from Being Depress to Being Too Busy

First thing came to my mind was the thought of retirement early last year. Retirement in the sense that I no longer take on consulting work for institutions or putting in efforts to develop various businesses. I could also limit my trading down to just  a day or two every week. I like trading and I can never imagine not being a trader going forward. The idea was to give myself more quiet time and enjoy life more after going through my life changing experience.

That idea was strike down quickly by family and friends. In fact, it was just an excuse to hide from the world to keep myself in a shell so that I could deal with my emotional issues alone. Thanks to very supportive friends and family, I snapped out of that mindset and got better since. In particular, without the kind-hearted interventions from one close friend, I would not be on my way to recover from depression.

Throughout last year, I have initiated multiple projects. Wrapping up the book Art of Chart Reading is one of them. I am still waiting for the completion of the editing process. I know it is taking longer than usual but I know the result will be a much better version that more people can learn from. Just like any other authors, I secretly hope the book will become one of the all time classics.

And then there was my initiative to mentor / coach retail traders. I see great results with half of them so far. A quarter of them still working on their progress while the rest due to various circumstances cannot really commit to their trading at this time. I am very happy with the results I see so far. It reaffirms what I believe – trading can be taught through a longer term approach as it is more a skill combining knowledge and craftsmanship.

I am contemplating this year to be the last year I will take on more traders to mentor. I have not finalized my decision yet. One reason for this is that it is very time consuming as I tailor my work to fit the individual trader’s need. This personalized approach definitely gives better results and serves the traders better. On the other hand, it puts a constraint on my time to commit to other projects.

In second half of last year, I accepted the requests from several close family friends, who were my backers way back when I first started managing money, to help them invest their money with lower risk and better returns. I ended up offering them 10 to 15 percent fixed interest on their committed capital depending on the duration of their commitment. As oppose to having them to bear the downside risk, I assumed the risk with my own capital. Using proper leverage to day trade Emini, my trading models can generate the desired performance and has been performing as expected so far.

It is nice to see that I can offer my friends an alternative investment that beats putting money in the bank. The effort to structure these arrangements is ongoing and is taking up time. From what I see, it can potentially benefit many more people, especially those who needed interest income. How to approach this in a larger scale is a tough question.

Thus, mentoring and managing money is now completing for a big chunk of my time while my unfinished writing projects over the years are still there gathering dust. I need much better time management going forward so that I can accomplish more in a shorter time span.

 

New Goals

As oppose to writing out a list of exact things I like to accomplish this year, my resolve is simply:

1. To identify and prioritize the tasks on hand

2. To find the direction and focus going forward

3. Have #1 and #2 finalized before middle of February so that I can efficiently execute the plan for the rest of year

On the more personal side,

4. To stay healthy by living a healthy lifestyle

5. To be there for my loved ones

 

First Week of 2016

Trading in first (and second) week of the year is often very confusing. Many people focus heavily on the January Effect for their investment decisions. There are also the Super Bowl indicator crowd waiting for February 7 this year to adjust their portfolios. So many superstitions and misinformation are spread in the beginning of the year to keep the media and financial outlets very busy. Hence, it is often a good idea to wait until after the first week of the year is over before resuming trading.

On the more technical side, or my trusted common sense approach, the first week of the year is the time parents scrambling with their schedules to get their kids back to school, those who went on vacations coming back gradually over the week and people recovering from hangovers and bloated stomachs. Without all the players ready for the game, it makes sense that the game is not going to function properly.

If you have to trade in first week of the year, try doing it with smaller size and ignore all the buzz generated by the media. By the end of the week, having a summary analysis of what happened over the week will be more useful than participation in the madness.

 

Wish Everyone Here a Very Happy New Year!

Mental and Emotional Maturity

taking_selfieI was talking to several beginner traders at my friend’s trading firm the other day. The topic of high probability trades came up several times as these young traders like to get some trading tips from their boss and me. We both told them high probability setups are overrated. You can guess that our point of view confuses these traders a lot. I promised to write about it this week and here is the explanation why one should not obsess with high probability trading setups.

The Psychological Need of High Probability Trades

The reason why traders and in particular, day traders, having the psychological dependency on high probability trades is that it feels good naturally after winning and feels bad after losing. It is normal to have such feelings. But many people do not realize that the accumulation of such emotions are not in equal weighting.

I have posted a video by Shawn Achor earlier this year on exactly this topic. In short, we need about 5 times of happy or feel good events a day to offset one upsetting event in the same day to keep us in a balanced mood. Now think about the number of trades a day trader may make on a single trading day. Just 3 losses, no matter how small they are, as long as upsetting feeling were triggered, the trader will need 15 feel good events to offset the emotional imbalance.

Hence traders tend to look for high probability setups so that they can feel good with their trading. After reading what I wrote above, it should be clear that usual high probability setups at 70 to 80 percent are just not good enough for anyone to really feel good with their trading. Winning rate above 90% is needed to make a normal person to feel comfortable with their trading.

Mental and Emotional Maturity Matters

Even if you have a very high probability trading setup, it is not going to stay at such high level all the time. What if the winning rate dipped down to 70% for several days a month? The emotional upset resulted from the dip can be disastrous as the trader will easily be lured to trade madly. As we all know, one mismanaged trade can wipe out all the gains and more if the trader fails to exercise proper money management. Higher the dependency on high probability trading setups, the more likely the trader will have these very bad trading days from time to time.

Thus depending on high probability trading setups is not as good as learning to deal with the emotional imbalance caused directly by trading. Having the mental maturity to understand that trading is psychologically challenging in nature, a trader can focus on improving their own emotional maturity so that they are not affected as much by their trading activities. In other words, learning to forget about high probability trading setups all together and focus on the better execution of the complete trading plan only.

Same Principle Is Applicable In Life

Not surprisingly, mental maturity and emotional maturity are strong indicators for people who are successful in life and in fields outside of trading. I choose to use the term mental maturity over mental toughness because it is not just toughness one need to do better. Mental toughness can carry you through difficult times but you also need mental maturity to find solutions to solve various kinds of problems with work and in life.

Emotional maturity gives us the ability to better handle relationships in our social circle. It also entails better mental health in general, allowing us to live relatively stress free. But most important of all, it allows us to maximize our ability to utilize our knowledge and skills. If there is something called destiny, emotional maturity is the key to get a better one.