Breathe of Fire

Breathe of Fire represents a technique performed within meditation to sustain, and in some cases, increase your natural body temperature keeping you immune to the effects of cold climate. This technique is ancient, going back nearly 900 years in Tibet. There are monks sitting outside in very cold conditions, often with snow on the ground, be shirtless and stay within a harmonized state of meditation. I would also see people dumping freezing cold water inside a bucket on them and they would remain in meditation completely unharmed by it.

My Trading Method (Part 4)

The following is the final part of an article series which details my method of operating in the stock market. Click here for the first part (on selection), here for the second part (on initial entry and its sizing) and here for the third part (on taking profits). In the final part of this series, it deals with pyramiding.

My Trading Method (Part 3)

The following is the third part of an article series which details my method of operating in the stock market. Click here for the first part (on selection) and here for the second part (on initial entry and its sizing). In the third part of this series, it deals with taking profits.

My Trading Method (Part 2)

The following is the second part of an article series which details my method of operating in the stock market. Click here for the first part, which deals with the selection of possible candidates in the watchlist. In the second part of the series, it discusses initial entry, position sizing, and portfolio allocation.

My Trading Method (Part 1)

My purpose of writing this series of posts is to lay out my method of operating in the stock market. This process outlined here is by no mean an original creation of my own. Rather, it is a synthesis of many different ideas which I have learnt from other great investors in the past, after many painful years of trial and error. For this reason, I have decided to release the information contained herein for free.

The Great Paradox

It is an adage in the stock market that you should “buy low, sell high”. It sounds very logical to most people. After all, the most natural way to make money is to purchase a good at the moderate price and sell it to someone else at a margin. However, what everyone knows isn’t worth knowing and what everyone does isn’t worth doing. Some experienced investors do not consider it the best way to make money in the stock market, and even think that it could be a recipe for disaster.

On Charting

When it comes to technical analysis, there are two extreme schools of thoughts. The first group are the pure technicians, who regard fundamentals as unnecessary information that is ultimately discounted in a stock’s share price. The other group are the pure fundamentalists who only believe in data in the balance sheet and disdain chart analysis as something akin to reading tea leaves. In my opinion, price charts are very useful, but they are not as magically predictive as some chartists claim.

Lucky Becky

When it comes to being lucky, many people have had the experience of gaining something for nothing in their lives. It could be winning a little lottery in the company’s annual dinner, making a staggering sum in a casino, or just picking up money on the street. While most of them attribute these kinds of things to sheer coincidence, there was a woman who proved that luck is more than just random chance.

Cutting Losses

Itzhak Ben-David is a prominent economist in the United States. In 2012, he co-authored a ground-breaking paper, which was titled “Are Investors Really Reluctant to Realize their Losses? Trading responses to past returns and the disposition effect” (Ben-David & Hirshleifer, 2012). As the title suggests, it studies how retail investors to enter and exit as their positions develop.

The Right Moment

The Second Punic War (218 BC – 201 BC) was a major conflict in Europe from 218 to 201 BC. It was fought between Carthage and the Roman Republic, the two superpowers of that time. At the beginning of the war, Carthage had the advantage because their general, Hannibal, was a military genius. It began when Hannibal surprised the enemy by crossing of the Alps and attacked the Romans where he was the least expected. He crushed the Roman armies in the Battle of the Trebia and the ambush at Trasimene. 

The Price Cycle

Richard Wyckoff is one of the most famous traders and analysts in the stock market. He invented many ground-breaking concepts in technical analysis which still remain valid today. One of his greatest contributions is his analysis in the different stages of the market. According to his work (e.g. Wyckoff, 1931), the share price of a company usually goes through four stages. Each stage has different characteristics in terms of fundamental and technical behaviours, and should be handled differently as a result.

Seeing the Unseen

Abraham Wald was a Jewish mathematician in the early twentieth century who was born in Austria-Hungary (now Romania). He later immigrated to the United States and started a new life there. One of his greatest contributions to the United States was helping the U.S. military to design their planes. During the Second World War, the B-29 bombers of the Allied were being shot down from time to time. They would like to fortify their aircraft, but if they did, it would sacrifice the mobility of the planes by adding weight to them. Therefore, the additional armour must be added to only the most fatal areas so that they could keep the increase in weight to a minimum.

Magic T Theory

The T Theory is a method of analysis in the stock market. It was developed by former U.S. Marine Corps Terrence H. Laundry, and is highly endorsed by famous trader Martin S. Schwartz. The basic premise of the theory is that, if the market just spent six months going sideways before hitting a low, then the theory predicts that it will go up from there for 6 months. Therefore, if you can measure the time of the previous correction, you will have a good idea when the current trend will end.

Fixing Window 10 Wifi

It could be stated, without exaggeration, that Window 10 is one of the most disturbing operation systems in computer history. Almost every update that comes with it brings problem to the user. One of the most recent update is reported to have messed up the WiFi drivers in thousands of computers. Even though the company has responded to the situation, and urged the affected users to update their drivers as soon as possible, they do not elaborate on how the users are supposed to download the driver when they cannot use their WiFi in the first place.

Meditate for Profit

Vishen Lakhiani is a successful businessman, philanthropist and expert in meditation. He owes much of his success to his ability to communicate with his subconscious mind and tap into his unknown potential. His new book shares a very interesting story about his early career when he was working in telesales (Lakhiani, 2015). With the use of meditation, he tripled his productivity by just changing one simple thing in his habit.

The “Recovery Oil”

Cryotherapy, or “cold bath therapy”, is a popular recovery method among athletes. According to experts, coldness constricts blood vessels and decreases metabolic activity, which reduces swelling and tissue breakdown. “Ice baths don't only suppress inflammation, but help to flush harmful metabolic debris out of your muscles,” says David Terry, M.D., a runner who has finished both the Western States 100-Mile Endurance Run and the Wasatch Front 100-Mile Endurance Run 10 consecutive times.

Macro Always Wins

In the early twentieth century, there was a very large global conglomerate in the United States. It had various businesses in a number of countries, including coffee plantations in Guatemala, hydroelectric plants in Bolivia, banks in Peru, steamship lines around the world plus a large export business. This conglomerate was a favourite company of many investors because of a number of things. Firstly, it had a fine diversification of business around the world; secondly, its directors were some of the wealthiest and ablest financiers in the United States; and most importantly, the company always paid its quarterly dividends.

The Young Lincoln

Abraham Lincoln was the 16ᵗʰ President of the United States, and arguably one of the greatest leaders of all time. He was well-known for his leniency towards his opposition and his patience with his subordinates. For example, during the Civil War, many of Lincoln’s generals did their jobs horribly, and half the nation condemned their incompetency, but Lincoln showed no malice towards them. In another instance, when others spoke harshly of the southern people, Lincoln replied: “Don’t criticise them; they are just what we would be under similar circumstances.”

Investigate Later

The Legendary George Soros famously describes his approach to the market as “Invest first, Investigate later” (Soros, 2003). Many investors are not unable to understand this quote. Is it not much logical to do a thorough research about a company first and only then decide to invest in it or not? Why does Soros say something which completely reverses the process?

To understand the reasoning behind Soros’ famous quote, it is useful to consider a little anecdote by another famous investor, Nicholas Darvas (1960).

The Perfect Speculator

There are many books in the investing literature which do not get their deserved attention, usually due to awful writing and poor presentation. The Perfect Speculator by Brad Koteshwar (2005) is exactly a case like this, in which many great ideas are buried by the clumsiness of the author. That being said, if you look beyond the messy surface, you can find a lot of useful points for speculating in the stock market, especially if you are a fan of Nicholas Darvas (1960), William O’Neil (2009) or Mark Minervini (2013). Below are key messages from the book―

True Breakouts

Most traders have experience drawing trend lines on a chart to identify support and resistance, but they usually do not draw those lines with an objective method, much less to employ them scientifically in a trading decision. To tackle this problem, Thomas DeMark (DeMark 1994, 1997; DeMark & DeMark, 1997, 1999) laid out a set of rules to determine not only how trend lines are drawn, but also how to qualify a breakout, and how to project a price target in case of such a move.

Bullish or Bearish?

Nassim Nicholas Taleb is a famous writer and statistician as well as a former financial trader and hedge fund manager. Many of his books are bestsellers which are praised by well-known figures in the business world (e.g. Gladwell, 2002), and one of them was even picked by the Sunday Times as “one of the best twelve books since the Second World War” (Appleyard, 2009). In the first book, Fooled by Randomness (Taleb, 2005), Taleb shared a story which shaped his entire philosophy of investing.

Investing the Poké Way

The recent virtual reality game Pokémon Go has taken the world by storm. Lots of people, from early twenties to late thirties, are staring at their phone on the streets like zombies in order to catch Pokémon. In addition to the creation of numerous business opportunities, there are a few things that an investor would like to learn from a Pokémon trainer. In the following, the commonalities between catching Pokémon’s and investing in the markets will be explored in details.

Know Your Rules

It is often said that the best traders often have a well-researched system. Famous trading psychologist Brett Steenbarger (2003) wrote, “One unexpected finding from our survey, however, was that a disproportionate number of the successful traders—about half—reported utilising mechanical trading systems.  Of the unsuccessful traders, none were mechanical traders.  When I subsequently interviewed the successful traders, it turned out that even the ones that were not systems traders were basing their trades on patterns that they had carefully researched.  Conversely, almost to a person, the unsuccessful traders lacked such grounding in patterns and research.”

Pseudo Profiles

This post is a collection of online resources which allows you to create fake personal info and network location on the Internet. The purpose of this post is to help system and website developers to perfect their websites or databases. Using such tools for illegal purposes is not encouraged by this article, and the readers are responsible for the consequences of their actions.

The Immovable Trains

It was the year of 1922 when one of the greatest railway strikes in the United States swept across the country. The American economy was haunted by a sharp deflation as well as an oversupply of workforce, because of the return of surviving soldiers from the First World War. In the face of a horrible economy, the government approved successive wage cuts that enraged many workers. After a failed attempt of negotiation by the National Civic Union in late 1921, the tension between the workers and the employers escalated to an uncontrollable level.

Longstreet’s Viewpoints

[The following is an old article written by me, which was published in SelfGrowth.com many years ago.]

Viewpoints of a Commodity Trader is a little known book written by futures trader Roy W. Longstreet (1968). It is a good book in the sense that it contains a lot of wisdom on the psychological aspect of trading. However, the content was put together in a casual manner which might be perceived as unorganised by critics. This is perhaps the reason why it was not very popular and you cannot easily find a copy today. Since it is a waste to let the wisdom of Mr. Longstreet fade away without getting noticed, here is my attempt to summarise his ideas in a organised manner.

The Donchian Rules

The influence of Richard Donchian in the managed future industry cannot be neglected. He is known as the father of mechanical trading systems, as well as the originator of the managed money industry. Despite his earlier effort to promote his modern approach of trading, it was only his mid-sixties when he started to gather fame and make a real fortune for himself. It is a remarkable example that when you set your mind on doing something, you can eventually do it.

The Cheetah and the Sparrow

Legendary trader Mark Weinstein, who was one of the best traders of our time (Schwager, 1989), is well-known for the stunning accuracy of his trades. He described himself as a picky trader who always insists on waiting for a high probability setup. Despite his conservatism, he is fabulously profitable. In an option trading contest, he turned one hundred thousand dollars into nine hundred in just three months, and he did not have one losing trade in that contest. More impressively, he did it without pyramiding, i.e. no additional bets in a winning position, so that his amazing result was solely due to his unbelievable market timing.

Expect the Unexpected

In the world of speculation, there is no should-be. No matter how well you plan your trade, there is always something out there that can prove you wrong. The following experience of Jesse Livermore  (Lefèvre, 1923) affirms the Murphy’s Law, “Whatever that can go wrong, it will.”

After the First World War broke out in Europe, the commodities prices went up as a result of wartime inflation. Over the course of the prolonged conflict, the prices of many commodities doubled, tripled or even quadrupled to their pre-war levels. The great commodity bull market was well underway, and everyone was busy buying commodities. However, there was one notable exception that did not go up with the rest of the market, and it was coffee.

The Turtle System

In 1983, famous fund manager Richard Dennis and his partner William Eckhardt had a disagreement. Dennis thought that great traders could be made through systematic mentorship, while Eckhardt disagreed and believed that great traders were simply born. In order to settle the difference, they decided to hire a group of people with little to no trading experience, and see if they could the students to manage real money and trade successfully.

Watch What People Do

A great investor does not only have to know about finance, but must also understand psychology and be good at observation. Legendary speculator Jesse Livermore once told a story of successful investor known by the nickname “Pennsylvania Dutchman” (in Lefèvre, 1923). According to Livermore, the Pennsylvania Dutchman was an “indefatigable Missourian”. He was a great investor who believed in hearing answers with his own ears and seeing things with his own eyes. He valued the information that others gave him, but he would not believe it until it was personally verified by him.

Manipulation of a Stock

A company may be listed in the stock market for many reasons, but the most important of all, invariably, is to make money for the large shareholders. The shares of a company are usually worth a certain value, but until someone is willing and able to buy them from the holder, they remain a paper asset that cannot be converted into actual cash. By listing the company in the market, it provides a channel for the shareholders to openly distribute their shares to the public. In other words, a large shareholder of a newly-listed company is not very different from a shopkeeper with a full house of inventory: they both want people to come and buy their stock as soon as possible.

Defence is the Best Offence

Mark Minervini is one of the best traders in the stock market. From 1994 to 2000, he achieved a super performance of 33,500 percent of compounded total return, averaging 220 percent per annum, during which time he won an U.S. Investing Championship title in 1997 with a 155 percent return. He was also one of the selected traders who were featured in Stock Market Wizards (Schwager, 2001), which is a collection of interviews with America’s top traders in the stock market. But return is only half the story: during that time, he had only one down quarter, with a bare loss of a fraction of 1 percent.

Zen in the Art of Archery

The German professor Eugen Herrigel (1884-1955) was one of the first people who brought the Oriental philosophy of Zen to public attention in the West. Inspired by his love of Eastern philosophy, he travelled to Japan and taught at Tohoku Imperial University in Sendai. Under the mentorship of master archer Awa Kenzô, Herrigel studied traditional Japanese archery, or “kyudo”, from 1924 to 1929 before returning to Germany. After the conclusion of the Second World War, he published a book called Zen in the Art of Archery (Herrigel, 1948), which recounts his enlightenment through the process of learning kyudo, and it soon became one of the most famous works on Zen Buddhism of all time.

The Master Key Exercises

American businessman, philosopher and visionary Charles F. Haanel (1866-1949) is the most well-known thinker in the field of New Thought movement. His most famous book, The Master Key System (Haanel, 1916), had allegedly sold over twenty hundred thousand copies worldwide fifteen years since its publication. The book is rumoured to be the source which encouraged Bill Gates to drop out of Harvard and began his company known as Microsoft. It is also the origin of inspiration of many other famous classics of later generations, like Think and Grow Rich by Napoleon Hill (1937) and The Secret by Rhonda Byrne (2006).

On Chart Patterns

The study of patterns on price charts is one of the most time-tested tools in technical analysis. Many successful traders of shares and commodities see chart patterns as an invaluable aid, including Peter L. Brandt (1990), William J. O’Neil (2009) and Mark Minervini (2013). It is commonly believed that the price chart reflects the aggregate psychology, and it often forms repetitive and statistically reliable patterns when an imbalance of demand and supply is about to occur, hence an analysis of price charts could give a probabilistic estimate of the future market direction.

The Cycles of History

There is never a more mysterious and controversial market forecaster as William Delbert Gann (1878-1955). An independent representative of Ticker and Investment Digest, a famous financial magazine of Gann’s time, verified his amazing ability of financial forecasting, “I once saw him take $130, and in less than one month run it up to over $12,000. He can compound money faster than any man I ever met.” In addition to this, Gann had also predicted many events outside of the stock market, like one World War and the elections of many presidents like Wilson and Harding.

The Mozart of Speculation

If there was ever a Mozart in financial speculation, it had to be Jesse Lauriston Livermore (1877-1940). For those who do not know him, Livermore was an illustrious figure whom Time Magazine described as “the most fabulous living U.S. stock trader” of his time. Unwilling to pursue a humble life as a farmer, he ran away from home at fourteen and got a job in a stockbroker, in which he learnt a method to predict the behaviours of the market, and profited from it immensely. His biography (Lefèvre, 1923) was recommended by many great investors like Kenneth Fisher and William O’Neil, and even former Federal Reserve chairman Alan Greenspan praised it as “a font of investing wisdom”.

The “CAN SLIM” System

American businessman William J. O’Neil is one of the greatest investors of our generation. He made a fortune in the market in his twenties, enough for him to buy a seat on the New York Stock Exchange at thirty―the youngest ever to do so at that time. Later, he made even more so that he could quit his job and start his own business. In 1984, O’Neil launched a national business newspaper, Investor’s Business Daily, which competed directly against the formidable Wall Street Journal right from its inception, and had remained a favourite of many investors ever since. His investing strategy, known as “CAN SLIM”, is a top performer according to the American Association of Individual Investors.

As a Man Thinketh So Is He

“We ourselves are the makers of ourselves,” wrote British philosophical writer James Allen more than a hundred years ago. Allen was a successful publisher during his time, and also one of the earliest exponents of positive psychology. His most famous work, As a Man Thinketh (Allen, 1903) is a pioneering work on the personal growth genre. The title of the book was borrowed from Proverbs 23:7 of the Bible, “For as a man thinketh in his heart, so is he.” Just as the bible quote suggests, the circumstances experienced by a man is highly dependent on the beliefs and attitudes he holds in his mind.

The Secret of “The Iceman”

When it comes to defying the limit of the human body, the Dutch world record holder Wim Hof immediately springs to mind. Hof has earned himself the nickname “The Iceman” because of his immunity to extreme environments. Wearing only shorts, he climbed onto Mount Everest under harsh coldness and scarce oxygen in 2007. Two years later, again only in shorts, he completed a marathon in five and a half hours above the polar circle in Finland. In 2011, he proved that he was as good against extreme heat by completing a full marathon in the Namib Desert without drinking any water at all.

Pick Up the Gauntlet

American steel magnate Charles M. Schwab (1862-1939) was renowned for his brilliant skills of management. He was in charge of Bethlehem Shipbuilding and Steel Company, which became one of the most important heavy manufacturers in the world under his leadership. One of Schwab’s greatest stories involved a steel mill of his which was always seriously under-producing. Although Schwab had already switched a couple of managers of the mill, there wasn’t any sign of improvement. Therefore, Schwab decided to visit the plant personally to see what could be done to turn the situation around. According to How to Win Friends and Influence People (Carnegie, 1936), the episode went like this:

Brainwashing to Win

A large part of success does not come from your skills or knowledge, but from your psychology. Tom Gullikson is an American tennis player who has won sixteen top-level doubles titles in his professional life. At one point in his career, Gullikson had great trouble playing in tie-breakers. For those who have no idea, a tie-breaker in a tennis match is a kind of “sudden-death” play-off when the score is tied, and Gullikson always did poorly because of the tension it brings, which costed him many important matches. Practising tie-breakers does not help, because it can’t simulate the pressure in a real competition.

Phone Call Robbery

It is ironic that the greatest bank heist in history was accomplished without using a single weapon. Stanley Mark Rifkin was a computer contractor who worked for the Security Pacific National Bank in Los Angeles, which gave him access to the transfer procedures inside the bank. He learnt that bank officers who were authorised to order wire transfers would be given a daily code each morning for their orders, but to save the trouble of remembering it, they would write down the code on a slip of paper and posted it where they could see it easily. This serious loophole in security let Rifkin run away with a large sum of money, which he later recalled that he felt “as if he had just won the lottery”.

Trading the Darvas Box

The story of Nicolas Darvas (1920-1977) is a Cinderella tale in which a world-touring professional dancer grew an initial capital of $36,000 into $2,450,000 in the 1957-58 bull market. After taking inflation into account, it would be more than $20,000,000 in 2016. More impressively, he did this while he was travelling cross the globe, which means he was heavily handicapped by delayed information from Wall Street, as well as limited communication with his brokers. Remember, it was a time without the internet or any mobile communication. In his book, How I made $2,000,000 in the Stock Market (Darvas, 1960), he gave a detailed account of how he made this possible.

Profit First

Mike Michalowicz is one of the most colourful businessmen in the world. By his thirty-fifth birthday, he had sold two companies and became a multi-millionaire. Confident to continue his success, he became an angel investor, but only proceeded to lose his entire fortune. Then he started all over again, not only managed to get back on his feet, but also became a best-selling business writer. His latest book, Profit First: A Simple System to Transform Any Business from a Cash-Eating Monster to a Money-Making Machine (Michalowicz, 2014), aims to help small businesses to generate reliable and consistent profits, and get out of the depressing cycle of living from payment to payment.

Scientific Forecasting

When it comes to the science of making predictions, no one could ignore the brilliant studies conducted by Canadian-American political scientist Philip E. Tetlock. His book, Superforecasting: The Art and Science of Prediction (Tetlock & Gardner, 2015),  is one of the best books on decision-making that I have ever read. It studies our mental process in making predictions of various events in sports, economics, international affairs, climates, etcetera. It was recommended by many biggest names in finance and economics like Eurasia Group founder Ian Bremmer, Deutsche Bank Chief U.S. Economist Joe LaVorgna, and Citigroup Vice Chairman Peter Orszag.