Trading Update: 28 February 2015

True Profits Earned in 2015 to date: US$9,546.46
All-time maximum profit earned since 2011: US$143,604.36 (new high water mark!)
Current drawdown from all-time maximum true profit earned: US$1,357.02
Change from last update: Down US$1,215.98
Directional stance: Portfolio is 58.84% bullish

You have been warned!

Not too much action at all this week. It looks like even the US markets are going through some CNY sluggishness. The largest movement this week in the 3x leveraged ETF that I am using to trade was a paltry 1.18%, indicating very little volatility this week. But that's what it is in the heart of a bull leg. You don't see crazy up days, but more of slow grinds up, and after a slow grind up the markets will stall and dip a little bit, ruffle a few feathers, rebuild momentum before resuming the move up. And that's where we seem to be for now, in the stalling part. We take a $1k+ drawdown this week despite hitting new highs earlier in the week, and can only wait patiently for the market to take its own sweet time decide when the bull (or goat?) is to continue. It is telling that I hardly looked at the markets over the course of this week because there was simply no action. So I have to look for action elsewhere ;)

RetailTrader Tries His Hand At Gambling

I just need one good hand.. to wipe the table clean!

During the Chinese New Year festivities, I was playing a card game "In Between" with my friends. For the more inquisitive folks, you can check out the rules here. Very simply, each person will take turns to be dealt with a pair of poker cards. And you decide how much money you want to bet that the next poker card you draw will be a number that is "in between" the first two cards. If you win the bet, the money is yours and if you lose, you have to cough up money into a pot. You lose double your bet if the third card you draw is the same number as any one of the first two cards.

I didn't actually know the game was also called Acey Deucey (what kind of name is that?).

As a retail trader I gamble with a plan in mind just like I approach trading. I do enjoy gambling sessions because some games can actually be good practice for trading. In the case of In Between, it teaches you how to size your positions accordingly with the probability of your hand of cards you receive. In other words, if you get a good pair of cards, you can calculate what your odds of winning money are, and then decide how much you want to bet accordingly. For a set of cards that gave the absolute best odds, I would decide what was the maximum loss I could stomach (in the event of a freak accident) and work backwards in determining what my wager was. The trading equivalent would simply be committing to a larger position for a higher probability trade, and sizing accordingly to your risk management rules.

I also enjoy In Between because I had never lost money playing the game before. Is it down to luck or my amazing system? ;)

Interestingly as the pot of money began to grow larger and larger, the stakes got higher and my friends began to get emotional. Even I began to adjust the maximum loss I was willing to take to take into account the "inflation" of the money pot. Bets began getting bigger and bigger. Even though we started with a minimum bet of just 50 cents, it was not long before the first 2 dollar note appeared in the pot, followed by 10 dollars, then 50 dollars. Some of my friends even started betting in hands that gave less than 50% probability, and even in such cases bet beyond the 50 cent minimum bet. Some of my friends bet based largely on feel and won money. I lost 28 dollars but I had a lot of fun in the process. You should have seen my face for one bet where I plonked 64 dollars for a very high probability hand, and ended up losing double (i.e. 128 dollars)! I will simply view this as a good bonding session and the equivalent of paying to watch a very entertaining movie that was at the same time educational!

What was the moral of the story? Sometimes you can go into a trade or game with best laid plans and execute them to perfection, but still lose money even though you have done your homework and calculated the probabilities, etc. This is because while we can create a system that gives us a positive expectancy (i.e. over a infinite number of games, you will expect to win), the problem with gambling is we don't end up actually playing an infinite of games, and it takes time for the positive expectancy to materialise. And in the meantime, a freak/accidental heavy loss can set you back by a lot. Sounds a bit like trading huh? You can have a best laid plan and execute it to perfection, but still lose money. No choice, you just have to suck it up, play good defence and ensure you are never wiped out in terms of capital, and play the next trade well again. Think like a casino. Casinos win money in some games, and lose money in some games. But they know that they will always win over an infinite number of games and don't lose sleep over losses. That's how it should be for trading (and gambling) as well.

Ah Boys to Men 3: Frogmen - Some Thoughts

*Note: Minor spoilers may follow for the movie Ah Boys to Men 3: Frogmen (2015). 

Having watched and enjoyed the third instalment of Ah Boys to Men, one scene struck a chord in me. In case you don't know, the movie is about a bunch of young Singaporean men who are enlisted to be elite naval divers. The movie details them going through their training phase and the scene I want to talk about involves 2 of the trainees.

Trainee 1 is a Hong Kong gangster (nicknamed Black Dragon after his very conspicuous tattoos) who constantly bullies Trainee 2, a smart alec called Aloysius Jin Sia Lan (vulgarity not intended, so he says) who just can't help rubbing Black Dragon the wrong way with alarming regularity with his unsolicited advice on how to do things the right way. 

Aloysius the peacelover

You don't mess with the Black Dragon

Black Dragon is a bad boy with badass shades and gang connections and a bunch of gang cronies who follow him around (when he is out of the camp), who likes to throw his weight around, intimidate people and treat his parents with disrespect (not all at the same time). Aloysius, for all his irritating traits is really a peace loving, God-fearing boy whose hobby appears to be reading books like Mixed Martial Arts for Dummies and lives by the philosophy "make love, not war". 

Throughout the movie, Black Dragon is constantly scolding and pushing Aloysius or knocking him on the head when they are in the bunkcabin. Aloysius plays peacenik and never retaliates at any provocation from Black Dragon, opting to retreat every time things get physical. Things never get too serious.. until one night where things got a bit more heated. Black Dragon starts giving Aloysius hefty shoves and begins punching Aloysius. Out of self defence, Aloysius starts retaliating which only has the effect of angering Black Dragon further. Before we know it, we have a full blown duel on our hands (with the rest of their platoon mates watching them from a safe distance), and after an robust exchange of blows and kicks and arm locks, Aloysius bests Black Dragon with his superior strength and swiftness of movement. Black Dragon slumps to the floor somewhat dazed and humbled.

Aloysius then reveals that he is actually proficient in all sorts of martial arts imaginable - taekwando, muay thai, karate, jiujitsu, MMA, and some more I think I missed. And he tells Black Dragon that despite the fact that he was obviously more powerful than Black Dragon in a physical confrontation, he never retaliated because he pitied Black Dragon for being such a flawed person who has no real friends or love. Aloysius says this in between sobs because it is not in his peacenik nature to use physical force. Things had escalated to such an extent that force was required. 

Power, in a book.

Somehow this scene hit me because it shows great strength on the part of Aloysius, and I'm not talking about just physical strength, but more of emotional strength. In life, there will be people who will do things that irritate us in our daily lives (whether intentionally or unintentionally). But if we can look at what others are doing from their perspective (perhaps they are operating at a lower level of consciousness like Black Dragon was), we can look at their actions with compassion and opt not to retaliate. After all what good would that do? Instead, is there anything we can do to help them? To be able to see things in such a perspective, is strength.

At the same time, I wonder if what Aloysius did was an act of the highest consciousness. Is there any way he could have acted that would have been even more appropriate? 

Trading Update: 21 February 2015

True Profits Earned in 2015 to date: US$10,762.44
All-time maximum profit earned since 2011: US$143,463.32 (new high water mark!)
Current drawdown from all-time maximum true profit earned: US$0
Change from last update: Up US$822.06
Directional stance: Portfolio is 57.95% bullish

The Chinese New Year rally appears to be in swing as the S&P 500 and the portfolio hit new highs together. As promised, it has proven to be a slow grinding journey up with the S&P 500 putting in a modest little green candlestick this week. In a bull market, the market tends to grind higher in a boring way, and that's exactly what we are getting now. And when the market gets too boring, we'll get a pullback once in a while to spice things up a bit. When the markets are not really moving much, there's nothing much a Singaporean retail trader can do, except eat, drink, and be merry during CNY!

Just one more kueh bangkit, please. I promise I'll go for a run tonight.

I did mention last week that a reset of the portfolio may be necessary if the bullishness level of the portfolio drops below 55%. This is what I expect to happen when the market carries on rising. Well apparently it's risen so slowly that a reset has not been necessary. So we continue to wait.

Stay healthy, stay foolish!

Happy Chinese New Year!

Dear readers, RetailTrader wishes you a Happy Chinese New Year of the Goat! 

Look at those horns! Is it a bull or a goat? One giant leap for the stock market?

The S&P 500 hit new record highs last night, crossing over 2100 for the first time ever. I will speak more of the markets in the weekly trading update this weekend, but in the meantime to all Singaporeans who are hanging around restlessly and waiting to knock off at lunchtime and have some fun before your reunion dinner and countdown to the year of the goat at midnight, 恭喜发财, bring on the ong lai and huat ah!!!

Trading Update: 14 February 2015

True Profits Earned in 2015 to date: US$9,940.38
All-time maximum profit earned since 2011: US$142,641.26 (new high water mark!)
Current drawdown from all-time maximum true profit earned: US$0
Change from last update: Up US$5,303.08
Directional stance: Portfolio is 58.45% bullish

Happy V day to everyone! V also stands for, amongst other things, victory in light of more green shoots! and a nice new green candlestick on our weekly candlestick chart to the right of this blog.

The prognosis is that unless the markets decide to go batshit crazy on us, we are seated on cabin 2015 of the bull train with the ticket saying our destination is this place called "S&P 2200+". We can expect a fairly steady "slow-grind" journey with a few small bumps along the way, without too much scenery to see. But please keep your seatbelts on at all times, just in case.

A bull locomotive train, powered by S&P bull power™, circa 2015.

I hope to bank more coin from this bull leg for what it's worth up to 2200+, but as I bank more profits the portfolio stance (which is currently 58.45% bullish) eventually becomes less and less bullish as the bull and bear components of the portfolio adjust by themselves. This in turn reduces the extent to which the portfolio is able to profit in a bullish market. Hence, the short-term plan is to do a reset of the portfolio when the bullishness of the portfolio drops below 55%, to raise the bullishness levels to about 60+%, and that may happen sometime next week. That means calling up the broker again to scream names of countries down their throat - precisely my idea of fun late on a weeknight. 

You may ask why don't I just set the bullishness stance of the portfolio higher at the outset? That's because there is no free lunch in this world - when the bullishness stance is set too high, I run drawing a large loss in case the market goes bearish. So it's all about getting the risk-reward balance right.

For the folks celebrating V day and/or Chinese New Year, I wish you a fun and enjoyable time and hopefully there has not been too much stress in preparing for these occasions!

Trading Update: 7 February 2015

True Profits Earned in 2015 to date: US$4,637.30
All-time maximum profit earned since 2011: US$137338.18
Current drawdown from all-time maximum true profit earned: US$0
Change from last update: Up US$21,897.78
Directional stance: Portfolio is 60.42% bullish

Lei ho ah! Mo men tai! Hai ya hai ya! Mrs RetailTrader and I are spending a long weekend in Hongkie Land where our plan is to eat and eat and eat, and sleep. Sounds like a plan?

Can't spend too much time on blogging when this awaits you.

What a difference a week makes, and it's good to see some green figures on the weekly update again. As things stand, the downtrend that seemed to go on and on and on finally appears to have ended. The chances are the S&P 500 has finally bottomed in the 1970s and it actually hit the 2070s in the course of last night before correcting to the 2050s. Hopefully, we are finally on the bull train that takes us to the 2200s for good now. 

The drawdown in the markets has been a drawdown for my emotions as well. I have to admit in the course of the correction I have spent some moments at night (away from Mrs RetailTrader) staring at charts and trader sites wondering when the correction would end, staring at trendline after trendline and support level after support level being broken, Fibonnaci retracements to precarious levels, and drawing up exit plans in case the worst happens. Who said money was easy to earn? 

One positive takeaway that has proven itself to be true (empirically) is the way this strategy seems to work out is that each and every time my emotions get tested, it is a sign and clue to me that the markets will be turning around soon. Well while this may be true, it's still important to prepare for the worst, because in trading one blow up is all you need for the game to end. Rule # 1: NEVER BLOW UP.

On another positive note, the markets appeared to have bottomed out together with the recession of my flu (again, at long, long last!). Hmmm am I some kind of market harbinger? Like the World Cup octopus? Perhaps markets will correct whenever I sneeze or cough?

Ok enough from me. I'm out of here now because I have a lot to do in Hongkie Land. I'll see you again when I'm back in Singapore!

Systems of Success

I have been giving a friend gym lessons every weekend. I am not a qualified personal trainer but I have always thought it would be fun to guide someone and watch their physique develop.

It was not so easy to get my friend to get started though. My friend had for goodness knows what reasons signed up for a boxing course with the aim of entering into a competition. He's a skinny guy by nature and had recently been lamenting to me about how he wanted to grow muscle as he was always outmuscled by his sparring partners. But, he said, he did not want to go to a gym because that was beyond his comfort zone. He said that he had been doing bodyweight exercises at home but felt progress was slow. He also had problems motivating himself and would only exercise when he was in the mood for it.

I asked him what exercises he had been doing. Not that I have anything against bodyweight exercises (I used to do them and got a lot out of them), but the nature of the exercises he was doing was like, I told him, trying to box with Manny Pacquiao with one hand tied behind your back. Why do that when you can box with two hands?

I then went into a grand lecture as to how success is a culmination of habits. To achieve success, you must take the necessary actions that cause you to improve. Depending on what you are hoping to achieve, there are many things in life that require constant, habitual actions to bring your goal to fruition - i.e. you create long-term habits in your life that lead you to take actions towards improvement and hence success. And to create habits, you need to have 2 ingredients: 1) knowledge and 2) motivation. This is the road map to success - by accumulating the requisite knowledge and motivate yourself into building long-lasting systems of success. Or so I thought. 

But let's break down this road map again and look at it from the other way round.

Knowledge - My friend did not have knowledge as to the workouts he could do in the gym that would efficiently develop muscle. I gave him a run through verbally on the basic exercises he could do. Problem solved. He could not say anymore that a lack of knowledge was inhibiting him from succeeding in his goal. You now know what you have to do to succeed, I told him.

Motivation - I told him that he had to want to achieve his goal badly enough. There was no point in complaining that his workout regime was not working out if he was someone who exercised in accordance with his moods. I asked him how serious he was about this boxing competition. Did he want it badly enough? Perhaps he was better off pursuing another sport, like chess? He shook his head vehemently and said he wanted it. Then I said ok, then the next thing he has to think about, now that he has the knowledge and the motivation, is to:

Habits - .. is to use the knowledge and motivation to create long-lasting positive habits that would cause him to do things regularly that can help him to succeed. There are ways in which you can make yourself do things on a regular basis for the long term. Taking exercise for example, some people like to have exercise buddies exercise with them every week. Failing to show up would mean letting your buddy down. Some people make a public commitment e.g. on their blog to say they want to exercise every week. That could work as well if social pressure gets you going. I told my friend another way to ensure that he sticks to a routine of exercising every week was to give someone trustworthy a large sum of money that will be forfeited and given to charity if he failed to turn up for the exercise session. But that sum of money had to be big enough so that he feels the pain. I nobly offered myself for this very important role but he rejected my kind offer. Then I offered to help supervise and push him every week if he would come to the gym near my place. He was on for it. That's building a habit for you.

Actions - Then it was just a matter of showing up. First week goes by, second week goes by. You set out to do the things that your habits lead you to do. After a while things become routine and you start to do those actions by autopilot. Any resistance you had towards doing those things start to erode over time and you no longer have to motivate yourself to do those things because they have already become an automatic, habitual action. And over time, the actions accumulate to lead you ultimately towards progress and success.

Until recently I thought progress in life towards your goals is about building enough positive habits that will each take you on autopilot to progress and success in things that you find important. In other words, building systems of success. It's a bit like building dividend streams that will lead you to wealth - here then, I'm talking building smart streams of little habits that will make you a stronger, faster, better person. Habitual progression. I still stand by this but recently I came across a blog entry that has added to my understanding of the path to success - there was another path I had not been thinking about. More on this in a future post.

Expenses Update for January 2015

Here's my inaugural post on my personal monthly expenses. I also wrote a summary of my personal finances (including expenses incurred) for 2014 here.

Breakdown of expenses:

• Clothing: $130.90* - This includes laundry, some of which we outsource to our friendly neighbourhood dhobi.
• Food: $1780.22* - Food is averaging at $30 almost a day with the bulk allocable to dining at restaurants. Yes, it's sinful but we eat out most of the time and at restaurants most of the time, with the occasional splurge on fine dining. If there is some fat that can be weaned from the expenses, this would be it but we are folks who enjoy our food.
• Health Care: $482.98 - This was unexpectedly high because of the stupid flu I have been going on and on about. Four trips to the doctor and one to the pharmacist ended up costing about $200. The rest can be attributed to largely health supplements. I'm a health junkie and am a VIP member at iherb.com - more on that next time, I'm sure!
• Home Office: $11.75 - Purchased some stationery from Popular. Nothing much to see here so move along, folks.
• Household: $283.70* - This covers largely the quarterly aircon maintenance contract we signed for 2015, and housekeeping (which is something we outsource as well to a part-time helper who comes about once a week to clean up).
• Others: $600 - A one-off work-related expense. 
• Parents: $2000 - Because I'm a good boy deep down.
• Personal care: $329 - This covers haircuts, hair treatment and some face serum I bought for my metroself.
• Property: $293.76* - Quarterly maintenance expenses for our house
• Tax: $1108.07 - Death.. and taxes. Certainties in life.
• Travel: $121.60 - This relates to transport actually, so it covers top up of EZ-Link and taxi rides. I don't drive but Mrs RetailTrader does.
• Utilities: $153.57* - Covers electricity, water, internet, cable tv. Yeah some people think we are using a bit too much aircon.
• Mrs RetailTrader: $4 - Erm not going to say too much on what I spent $4 on Mrs RetailTrader ;)

Total: $7,299.55

* - denotes expenses that are shared with Mrs RetailTrader

Top 5 categories: 1) Parents (27%) 2) Food (24%) 3) Taxes (15%) 4) Others (8%) 5) Health Care (7%)

I think amongst the Singapore bloggers who track their expenses, mine must be one of the highest hahaha. Well that just means I have lots of room to improve :) But February's expenses may be higher because it's CNY season and my first time giving out red packets. And furthermore in January I could skip my monthly mortgage payments because we credited excess sums into our mortgage savings account last year. Let's see where we end up. My goal for this year ultimately is to save 50% of all income (including trading income).