End of a Chapter

Dearest friends, bloggers and passer-bys,
Its been two months since I started this blog and with great sadness, I am closing this blogging chapter of my trading journey. I sincerely thank everyone for their support either by participation or just reading the articles posted here. I noticed its even a breakout - 10,000 hits :).

After meeting the masters over the weekend, I realised the disparity is great, so great that I am left with no choice but to close this blog to find time. Time to strengthen my foundation, time to relearn what I have learned, time to unlearn what I have learned, time to get in tune with Nature.

Final Notes of My Stand
Luck
I do not know about luck but I know this - Luck is when Preparation meets with Opportunity. Yes, I have emphasized a lot about Preparations over and over again in my blog. Without proper preparation, one cannot capitalise on opportunities that arise. What is the will to win, if there is no will to prepare?

Continuous Learning
I have yet to meet with a master that thinks that no more learning is needed. A true master would never stop learning. The three masters I met have such high level of skill and yet, they are discovering new things each day. They have yet to stop learning, they knew one thing - when they took on this path, this trader's path, they have made the market their best teacher and vowed to continuously learn from it.
I have always correct anyone who tried to call me sifu. I know that they only meant respect or maybe out of politeness but seriously, I am unworthy. I have yet to attain such level of skill. I have yet to achieve anything that is worth shouting about. I have to decline the title.

Trading Plan
Before a trade is even made, a trading plan MUST, I repeat, MUST be drawn up. Else, one would be at serious disadvantage. In the market, we are up against people with more money than we have, more skill than we have. How can we possibly stand a chance if we do not even have a plan?

Stop Loss and Trailing Stops
To me, this is imperative, irregardless whether one is a trader or an investor. Perhaps the stop point would be different, but nonetheless, this is a life saver. Anyone who lived through the recession periods would understand this concept. Or they better do.
Even the most fundamentally strong company would not be spared. To watch your investment decline 80% of its value is not an easy sight. And it tests every bone of your body as an investor. Yes, the stock is undervalued but it may remain so. Yes, it will rebound - some day but you may need the cash. You may get retrenched, your children may need to further their studies, there could be other emergencies, countless and endless possibilities. In recession, Cash is King.

Average Down
I have not recommended anyone to average down. Its like compounding the initial error. Now, what about investors, should they average down? I do not know about shoulds or shouldn'ts but I know this - you may average down SUBJECTED TO identification of critical points where beyond would render the average down and the initial entry wrong and stop loss MUST be executed - this means an impeccable discipline and emotional control.

Feel the Market
Several months earlier, I was chatting with booffett - who draws chart with pen and graph paper. It was my lack of understanding that computers could replace this function. I am beginning to appreciate drawing charts by hand. I am drawing 50 charts per day by hand and I hope to increase this number. ;)

Nature
I speak about Nature. It may be too complicated to explain but remember the most important indicators where all are derived from - Price, Volume and Time.
Price, Volume and Time. Master this and the world will be your oyster.

Moving forward
For Fusion Picks - which I must add was not really successful, remember to place stops and trade according to initial plan.
Market - From what I see, the general KLSE is weak, while KLCI is strong. Bullish uptrend is expected to continue despite May Factor etc. However, remember your stops. Never forget them.
Stocks - KLCI or related should perform and give a better chance of success.
Futures - Well, doubt futures traders would find any comment from me useful. See you in battlefield :P.

Resources
There are many resources around on the net - this means tremendous savings in money - rather than buy books or attending seminars, one could read and learn by themselves. The money would be better spent paying for tuition to the market.

Kenneth Factor
Just in case anyone thought this is for Kenneth Factor, do visit this link - under the comments section. I take this as a peace treaty signed between Kenneth and myself. I have nothing further to add.

Steps
Brian McKnight has this song - Back At One. For trading there are steps too:
1) Learn
2) Analyse
3) Backtest
4) Foreward Test
5) Trade
6) Post Mortem
7) Back to (1)

And to Make Money from Trading
All that is needed is this -
1) Trading System
2) Emotional Control
3) Money Management and Discipline

Oh, if anyone is looking for me
I ll be around in forums, or you could mail me directly. :)


Once again, thank you everyone for your kind support and patronage.

Good Luck and Happy Trading!

Meeting the Masters

Dearest bloggers,

For the past few days, there have been a lack of updates in this blog.
I would like to take this opportunity to thank everyone who still come and visit daily and also apologize for the lack of updates. Reason is I have been making some preparations to meet with three master traders during the weekend. I believe that the visits would be fruitful and I may be able to advance another level in TA.
Of course, once I am back, I will be updating the blog.
Stay tuned :)

Comment Moderation

And so, most of you would have known about this Kenneth character.
And regretfully, due to this, I must enable comment moderation.
Only Kenneth's spam of same message over and over again using multiple names will be filtered.
This applies to both Fusion Trader and Fusion Pick blogs.
What this comment moderation means is that each time a comment is posted, I would need to allow the comment to be published. So there would be delay in seeing comments published.

So what is with this Kenneth character?
Well, the summary of chronology is this:
In a Google group called Bursamaster, the owner made a buy call from 0.26.
By end of the day, it shot up to 0.33.
He maintained his buy call, but the following day, it closed 0.305 followed by the next day 0.325 followed by 0.31. With these consolidation signals and supposingly some news that this counter would not be moving soon, the owner Bursamaster issued a sell call.
Come another commenter Sunny to ask everyone to hold the stock. And average down if price falls any further. Prices continue to fall. And when the people there asks about Infotec, came several other comments to ask to hold. Prices will not fall beyond 0.25 was the comment.
But it did. And when questioned about it, the answer was buying support comes from below 0.25.
I pointed out the simple trading rules - Never Average Down. Cut your losses.
Kenneth disregard, and question the practical usage of the trading rules I ve mentioned.
Thereafter he continued to encourage everyone to hold, and average down.
Today it close 0.22.

Someone by the name of Kaza, found out that the comments to ask to hold and to average down - Sunny, Kenneth, and many others, was in fact the same person - by virtue of using the same IP Address.
Kenneth tried to divert the attention and allege that Bursamaster, Kaza and myself are the same person - by virtue of Bursamaster suggested stop loss - which I supported as best course of action - and the fact that Kaza exposed him. So it must be same person, or so he claims.

Subsequently, he came over to spam my blog and continued to spam in Ben's chatbox as well.
Sample of his spam (which are all the same, so I deleted most of it) could be seen in 2 previous posts before this one.

For those who are interested of the Bursamaster's Google Group, the link is here
http://groups.google.com/group/bursamaster

Thank you guys for all your support and jumping to my defence.
I sincerely appreciate it and would do my best to share more of what little TA knowledge I have.

Once again, thank you. :)

PS: Thank you Kenneth to you as well, for without you, my traffic counter would not have broken the 9,000 mark today :)

Fusion Pick Launched

OK, so finally I decided to blog about my picks. :P
Yeah, slightly overdue but oh well...
Enjoy and don't forget to read my disclaimers.
I ll post the disclaimer all around Fusion Pick when I find the time.

Why do I Trade? Part 4: The Trader's Path

I am a trader. I realised that I ve always been a trader - only that I did not realise until I was tested. And someone once said, "Man are like teabags, you will never know how strong he is until he gets into hot water". How true this is. Without being tested as I had (as mentioned in my previous post), I would never have known that I am a trader.

Money is not the main objective for me now. I know for a fact that I could trade for a living. I know that once I ve conquered the pain that I endured. I know that the experience though painful was there for a reason - to serve as a reminder not to be complacent and disregard the trading rules. To follow my own trading plan. To give me the strength that I need each and every time, that I must execute the inevitable stops. I ve grown and became wiser, though I ve yet to attain the wisdom that many readers of this blog has. I ve still much to learn.

One may wonder, could I have avoided the disaster should I have met with the wise people I met on the net? Whose wisdom I ve always revered? If previously, I ve met people like Ben, Lsb, Theng and Csong? To be frank, I doubted very much. Some lessons have to learned the hard way. Some mistakes need to be learned in order for one not to forget. Some experience is needed for one to advance to another level.

Today, when I trade, I look at points, I look at percentage. I really do not have much idea how much profit or loss I ve made until I close the books. I find by looking at points or percentage, I trade better. Perhaps there is less connection with the $$$, perhaps, I really do not know. But this is the manner I trade now.

But why do I still trade - Money? Freedom? Well, I ll be honest with you, they have bearings, and weightage to it. Its like once you ve tasted the money, you re tainted. Its most difficult not to be addicted. But there is considerable risks with a mere trading for money mentality, as evidenced by my horrifying experience.

Freedom? Well, I ve long know that I cannot work for others. I m a perfectionist. Perhaps the word is too strong but consider this - when I make a decision, I placed the highest importance for the betterment of the organisation. One may think, yeah this should be the way. But then, in reality, this is not the way. When top management makes a decision, the number one consideration is being placed in satisfaction of certain parties. Yes, I am referring to office politics. I, for one, when given the authority to make decision, does not bow to these inefficient, ineffective practices. When traveling, I do not buy wine for bosses, I do not lick boots, though my crime would involved laughing at boss' stale jokes during meetings, lunches or dinners.

Therefore, with such mentality and holding such principles, I am really not suited in the corporate world, particularly MNCs. However, I am not looking at trading merely as a means to be free from what I am not suited for. While I may be unsuitable for the corporate world, it does not automatically mean that I am suitable for trading.

Some of you may have heard me mentioning about "the charts talk to me". While I do not want to give an impression that I am a mad person, or I am talking bullshit, I feel a "certain connection" when I look at charts. And it is a feeling which I could not describe other than saying that the charts speak to me. I could as if hear the charts telling me the direction of where it is heading. OK, I realised I am beginning to sound like a lunatic. So I shall not continue about it.

But the long and short, I enjoy looking at charts, deciphering the hidden meanings. While doing something I enjoy, what's more, I could actually make some money out of it. Isn't it just perfect? Doing something you enjoy while able to make money out of it? To the end, why do I trade? Its the love of the game - love of trading itself. :)

And why is this important? Otherwise, when met with huge profits, I would be overly excited while when met with huge losses, I would be overly depressed. To which, both is detrimental to trading. There should be another motive behind the money making objective to trade. That said,

Good Luck and Happy Trading!



EDIT: For MTV - Told you its Youtube Mania here :)
This one by Clay Aiken, supposingly an American Idol (sorry, I don't watch :P)

Why do I Trade? Part 3: Pain

I watched Grey's Anatomy the other day (I seldom watch the television by the way), and it was this one episode about a little girl who thought she was a superhero. She could feel no pain no matter the seriousness of the injury. Of course, she was not a superhero, it was some scientific disease or something where one could not feel pain. I could not remember what symptom it was called (Hehe, I m a trader, not a doctor).
But due to this illness, the girl kept asking everyone to punch her in the stomach to prove that she has superpowers (hence no pain). And the doctors found out that she was suffering from internal bleeding.
At the end of the episode, the narrator said something to the effect of,
"We all want to live a life without pain, but we forget the very reason why we feel pain"


In my previous post, I described the euphoria of making money - of feeling like I am some sort of genius in trading. However, this was far from the truth. Very far. While I have discovered knowledge, I have yet to acquire wisdom. I was ready to make big money but I was not worthy of keeping it. I sinned.

No, not the typical sin - but trading sins. I overtraded. Would the concept of trading one lot be the same as trading 10 lots? Or 100 lots? Logically, it would appear so. However, we know its not true. Yet, when you ve just discovered your own holy grail, you feel invincible. I mean, why wouldn't you? Out of 10 trades, 9 trades are big wins, while there's one minuscule trade is stopped. What could go wrong with a superb system like that?

The trader, unfortunately. It always boils down to either the people or the system. When something goes wrong, look no further, its either the system or the people. Often, its the people. Afterall, people are the ones who set the system anyway. This is true for trading, this is true for all things in life.


The phenomenal rise, ended with a phenomenal fall.

Once I overtraded and things did not go as what I foresee, I could not be my usual self. While my system says, stop, I went on to commit another trading sin - averaging down. As I average down further, the more I could not execute stop loss. I then risk even more funds into a losing position - this is in direct violation again to not commit more than 20% of trading capital into one trade. Ultimately, when things still did not go my way, I plunged into the worst sin - revenge trade. At the end of the day, I lost much. I was barely saved from being a bankrupt. But what was worse, was that I lost my confidence to trade.


I could not look at the market. I could not see the screen. A mere mention of anything remotely similar to stock market would be tantamount to taking a knife and cutting a part of me. The pain was excruciating. I could not sleep. I could not sit. I could not eat. I could not do anything. When I talk, my voice was quivering. My knees were weak, my hands shivering. I became a living zombie. No one could console me as I could not concentrate on what they were talking. In my mind, the whole scene just repeat itself in a neverending loop. The torture of living the mistake over and over again was just too much. How? Why? How and why could this happen to me?

It was a difficult time for myself. Perhaps it was a difficult for others but it was not my concern. I wasn't capable of being concerned of anything during that time anyway. The story could have ended here, indeed, for many it would have, but this is not how the story ends. It continues...

~to be continued...

And here's a little music video from a band called Simple Plan to add to the drama. Enjoy!

Will HOT Commodities stay as the world economy slows?

In 2006, the world economy grew 5.4%, the fourth consecutive year of above 4% growth and thus the strongest in more than 3 decades. Inflation remains low despite continued headwinds from HOT commodities. In the past five years, oil has risen about 170% to USD60-65 a barrel while the global inflation declined a little to 3.8%. Some say we have entered uncharted waters and the commodities will remain hot going into, at least, the next decade.

But, let me just take you through the bulls’ case for commodities and global growth by drawing on the case of crude oil.

The past three global recessions were all triggered by high oil prices due to oil supply disruptions: the OPEC oil embargo in 1973-74; the Iranian revolution in 1979; and Iraq's invasion of Kuwait in 1990 (figure 1). Since mid-1990s, however, the oil price-GDP relationship has reversed. An increase in oil price does not cause GDP to fall, instead it reflects strong demand growth, notably in China, Asia ex-China and the US. In 2005, oil price surged 35% after a lag-effect coming from the previous year’s consumption growth of 3.5% - the highest since 1978 - despite a 4% supply growth during the same year. The kind of increase we are seeing now is less damaging as it is driven by the demand-side equation which tends to be more sustainable. Unlike in the past, a surge in oil price reduced consumption and dragged the global economy into recession, which later led to a price decline when supply returned to normal.

These have led me to believe that a commodities super cycle is underway. A super cycle is a prolonged (decade or more) trend rise in real commodity prices, driven by urbanization and industrialisation of a major economy (according to Citigroup’s Report: China - The Engine of a Commodities Super Cycle - 31 March, 2005. The current case simply refers to China.

According to the IMF World Economic Outlook, September 2006, China accounted for at least half of the increased demand for industrial metals - Zinc (113%), Lead (110%), Nickel (87%), Tin (86%), Steel (54%), Copper (51%), Aluminium (48%) - between 2002 and 2005. In 2004, China overtook the US in the consumption of basic agricultural and industrial goods. Among the five basic food, energy, and industrial commodities—grain and meat, oil and coal, and steel—consumption in China eclipsed that of the US in all but oil. She is now the fourth largest economy in the world, and is expected to be the largest by, as early as, 2026 – The Economist. Of course, this is not going to be easy, a host of factors, namely limited supplies of energy and raw materials, questions over its innovation capability, inequality and corruption, risks to social stability and the environment and choice of political system will be a real test to her. But, it’s not just the demand-side equation that has the say. Supplies of most commodities are very tight that they cannot rise fast enough to meet additional demand. There has been no discovery of significantly large oil fields in the past 30 years, only one lead mine open in the world for the past 20 years, planted acreage of wheat has declined steadily since the early 1980s and the list goes on and on.

Jim Rogers, the best known advocate of HOT commodities, laid out that a secular bull market in commodities is underway, in as early as 2004, when his HOT Commodities was published in 2004. He observes that the 20th century has seen three secular bull markets in commodities (1906-1923, 1933-1955, and 1968-1982). Each of those secular bull markets has lasted a little more than 17 years. If his view holds, we are currently in the middle of yet another secular bull market in commodities that began in 1999.

So, will the boom continue as the world economy slows? US, being the largest importer of China and the world, just reported that it grew at a worse-than-expected 1.3 percent rate in the first quarter of this year, marking the slowest period of growth in four years. If the above case for oil holds, the demand for commodities should decline when the world economy slows, thus commodities prices should fall. More worryingly, we are struggling with issues like China’s overheating economy, US housing slump, the end of asset allocation into commodities (increasing demand for commodities-related investments as an asset class by non-commercial users), the unwinding of Yen carry trade (please refer to my earlier post) and a broad-based increase across all asset classes since 2002 (All the World’s a Bubble). It seemed that the end of commodities boom was near when they succumbed to the ripple effects from the global stocks rout on 27 February. However, commodities rebounded early last month. The much-awaited corrections for commodities market did not come as yet. Consolidations are inevitable during a secular bull market but they could still increase much higher before going into the consolidation phase.

Table 1: Selected Commodities Price Increase
change since January 1999 (%)
	Nominal	Real
Nickel	1,093	856
Uranium	954	745
Crude oil	436	329
Copper	338	251
Lead	281	206
Rubber	239	172
Zinc	239	171
Tin	162	110
Gold	125	89
Aluminium	121	77
Corn	75	41
Hard logs	66	33
Wheat	59	27
Soybeans	41	13
Soyoil	41	13
Coffee beans	26	2
Cotton	4	-16
Palm oil	-2	-22
Sugar	-6	-25

Perhaps it’s good to draw some inference from the historical prices of commodities – gold, tin, lead, copper, cotton, hard logs, crude oil, uranium, zinc, aluminium, nickel, soybeans, soyoil, corn, wheat, palm oil, rubber, sugar and coffee beans – in real (adjusted for inflation) and current prices. From January 1999 to Mar 2007, nickel increased the most, by a stunning 1093%, uranium 954% and crude oil 436% in nominal terms (see table 1).

Although we have always thought that copper is very expensive, it has only risen by 338% over the same period and a 251% increase in real prices. Interestingly, the figures suggest why Jim Rogers are so bullish on agricultural commodities. After adjusting for inflation, they are ranked at the bottom of the table, showing the least increase or decline (cotton, palm oil and sugar) in the past few years. Palm oil looks really cheap, down 2% from 1999’s level at current prices and 22% in real terms. Figure 2 suggests palm oil should go up to USD1,600 to surpass its previous high recorded in May 1984. At current price of RM2,300 (USD673) per tonne, it is 55-60% off from the previous high or equivalent to 1.3 times of its current price.

Another important thing to note is that copper, nickel, zinc and uranium are at or close to their historic highs. One common characteristic among them is that they are in tight supply despite rising prices (but the world sees IPOs everyday). In the mining industry, it takes years of exploration before one can bring the metals out of the ground and most mining companies are not willing to spend hugely in an investment that might not result in any tangible output for at least a decade. The same goes for other commodities. For example, it takes 5 years for a coffee tree to mature. It is still very much a fundamental play in commodities markets. Some commodities are not cheap but some are. Commodities do not move in tandem. Each commodity has its own supply-demand equation, though some may be directly correlated with other commodities, e.g. a palm oil might be related to soybeans, soyoil, ethanol and crude oil. One needs to study the fundamentals driving the supply and demand of a commodity before investing in commodities.

Lastly, my personal guess is that commodities should correct if the economy slows. Don’t have to worry about the corrections if you are in for long-term. Historically, markets consolidate in a big way during the secular bull-run. They are still the best long-term investment. As to what degree the correction will be, one need to look into the supply-demand equation of a specific commodity. A slowdown in the economy might be bad for metals but it might not be so for agricultural commodities. Do your homework before investing in commodities or commodities-related stocks.

This article is posted on behalf of Vola due to technicalities in posting, I think.

Why do I Trade? Part 2: The Best Business

I was chatting with Mr CS Ong the other day and he mentioned that Trading is the Best Business. And I am inclined to agree. Trading should be viewed and conducted in a businesslike manner. But unlike conventional businesses, there is nothing one could just pack the bags and leave should one decides to. And once the skill is mastered, one could trade in any market. You need not be at a fixed location as like what a conventional business would require you to. And as Mr Lsb mentioned in the original post of Why Bother to Trade?, unlike conventional businesses, there is no need to manage assets and other people, etc.

And business, as we know, is somewhat synonymous to freedom. Mr Kiyosaki of Rich Dad and Poor Dad fame, has an interesting audio (Freedom or Security) which you could hear to demonstrate the point of freedom.
Somewhere in the 14th minute, the excerpt is as follows:

People who tries to find security are actually selling their freedom down the tube. Because the people that found this country, who fought the revolutionary war did not fight for job security. They fought for the right to be free. And freedom is a very, very high state...
How in the world can you say you have freedom when somebody tells you when you can eat lunch? How in the world can you say you have freedom when somebody tells you when you go to work and when you get off work? How in the world can you say you have freedom when somebody tells you when somebody have the right to fire you because they need to downsize?
when somebody has the right to tell you how much you can make? That is not what we fought for. Too many people has sold their freedom...

Of which, I am sure Mr Zewt would be inclined to agree with Mr Kiyosaki with his numerous postings on Modern Slavery.


And the key point as earlier mentioned was the mastery of trading.

When I first traded, I was mostly breaking even. There was not much gain nor loss at end of each month. Couple of hundreds gain this month only to lose a couple of hundreds in the next month. Then, I began to see the light. Somehow, they all began to fit and come together. I began to make money.

I felt like a money making machine for quite some time. I began to make the same amount that I was earning from my full time job. Then, it grew to twice the amount, thrice and on the peak of it, was five times more what my full time job was paying me. I was churning out an ROI of more than 20% per month. Yes, per month. No doubt, it was still a small capital base but the feeling was great. My trading funds just grew and grew.

You could feel the euphoria, when you finally found your own holy grail - a method that works for yourself. A method which promises you financial freedom. Finally, I see the promises of the treasures of the seven seas is realizing before me.

But then, our story has yet to end. I shall continue in the next article. Stay tuned. Hey, you! Yes you! Don't play with the remote. Haha. :)
(Marcus, yes, I m keeping the suspense alive :P)

~ to be continued...

As usual, you are advised to download the ebook(s) soonest possible before the link expires or removed. I m not responsible of providing fresh links if they are no longer working.