Books on trading are very thick, in general. They contain wealth of trading knowledge from some of the best traders out there. They are very expensive as well. I have bought a number of trading books, mostly from Amazon. My latest purchase cost me close to S$300 for 3 books!
I was so astonished to find out that electronic versions (aka e-books) of those books that I've bought are available right on the Internet for download and FOR FREE!!!
What happened?
Nowadays, almost everyone's PCs or laptops are connected to the Internet. We need the Internet. Some of us even run web servers off our PCs or laptops to serve out webpages from our PCs/laptops. Well, of course, there may be cases whereby people are not aware that they had their web servers turned on. When we have our web servers turned on, anyone from the Internet can see the files that we have on our PCs/laptops unless we secure them properly of course!
How can we find these people?
Using what is tauted as the most powerful tool on planet earth that can even potentially support acts of terrorism unknowingly - GOOGLE.
The Secret
Now try to google this:
-inurl:(htm|html|php) intitle:”index of” +”last modified” +”parent directory” +description +size +(pdf|doc) “come into my trading room″
This is how I find all the electronic versions for most of the books that I have bought, for free, with many other trading e-books as well. Give it a try. You will be surprised at what you can find!
But, do get the original copy of the books if you find that they are really good. Give the authors due credit!
Jan 31, 2012
Jan 30, 2012
Follow the Venture Capitalists
Quoted from newswire today:
One would want to track closely the companies that Sequoia Capital is interested in, just like how people track the companies Warren Buffett is interested in :-D
Sequoia Capital provides startup venture capital for very smart people who want to turn ideas into companies. As the “Entrepreneurs Behind the Entrepreneurs”, Sequoia Capital's Partners have worked with innovators such as Steve Jobs of Apple Computer, Larry Ellison of Oracle, Bob Swanson of Linear Technology, Sandy Lerner & Len Bozack of Cisco Systems, Dan Warmenhoven of Network Appliance, Jerry Yang & David Filo of Yahoo!, Jen-Hsun Huang of nVIDIA, Michael Marks of Flextronics, Larry Page & Sergey Brin of Google, Chad Hurley & Steve Chen of YouTube and Steve Goldman & Sujal Patel of Isilon Networks.
One would want to track closely the companies that Sequoia Capital is interested in, just like how people track the companies Warren Buffett is interested in :-D
Jan 29, 2012
Reasons Why I Stop Playing Earnings Gaps Part 2
So is it possible for one tell if a company's actual earnings will beat analysts’ earnings forecast, before the actual earnings result is announced publicly? Allow me to just share some techniques that people that I came across use to try to predict earnings:
I believe one has to be very familiar with the business that the company is in and has to follow the company news very closely in order to guess if the earnings will beat forecast. Frankly speaking, so far I have not came across anyone that has managed to guess correctly consistently.
So if the actual earnings beat earnings forecast, does it mean the stock price will definitely gap up?...
- Estimate the earnings-per-share (EPS) figure from the number of products the company has sold. For instance, there are people who try to correlate past sales figures with historical EPS and predict what the next EPS could be. Or if you find that a particular product is always out-of-stock, good chance that its sales is unexceptionally good, chances of the company beat earnings is higher.
- Look out for unexpected spending during the quarter. For example, unexpected court cases, fines, hefty advertising charges etc. These tend to make the company not being able to meet earnings forecasts.
- Look out for companies whose insiders are buying their own company stocks some time before earnings announcements.
I believe one has to be very familiar with the business that the company is in and has to follow the company news very closely in order to guess if the earnings will beat forecast. Frankly speaking, so far I have not came across anyone that has managed to guess correctly consistently.
So if the actual earnings beat earnings forecast, does it mean the stock price will definitely gap up?...
Jan 28, 2012
Reasons Why I Stop Playing Earnings Gaps Part 1
The first strategy that I started off to trade options was using earnings gaps. Why I trade them in the first place? What are earnings? What are gaps?
Listed companies in the United States are required to announce their profits and revenue to the world every quarter (3-monthly). This is commonly known as "the company announcing earnings". The idea is very simple. Analysts covering the company would have , based on any available information, to forecast the earnings results for the company before the company actually announce their earnings. Generally, when the actual earnings beat the earnings estimates by the analysts, the stock price will move up!
And given the highly-liquid (super big trading volume) nature of the US stock market, stock price gaps are commonly seen, especially after earnings announcements.For instance, AAPL gapped up by more than $14 after they released their earnings results before market opened on Tue 23 Oct 07.
Why trade earnings? Because earnings announcements are about the few events that are predictable in the market! No, I am not saying that I know for sure if a company will report good earnings or not. We know exactly when the companies will release their earnings results. There are earnings calendars that tells us exactly when every company is reporting their earnings.
Now we know when companies are reporting their earnings, next step is to guess if the actual earnings will beat analysts' earnings forecast right? Things are not as simple as it seems...
Listed companies in the United States are required to announce their profits and revenue to the world every quarter (3-monthly). This is commonly known as "the company announcing earnings". The idea is very simple. Analysts covering the company would have , based on any available information, to forecast the earnings results for the company before the company actually announce their earnings. Generally, when the actual earnings beat the earnings estimates by the analysts, the stock price will move up!
And given the highly-liquid (super big trading volume) nature of the US stock market, stock price gaps are commonly seen, especially after earnings announcements.For instance, AAPL gapped up by more than $14 after they released their earnings results before market opened on Tue 23 Oct 07.
Why trade earnings? Because earnings announcements are about the few events that are predictable in the market! No, I am not saying that I know for sure if a company will report good earnings or not. We know exactly when the companies will release their earnings results. There are earnings calendars that tells us exactly when every company is reporting their earnings.
Now we know when companies are reporting their earnings, next step is to guess if the actual earnings will beat analysts' earnings forecast right? Things are not as simple as it seems...
Jan 27, 2012
Chances of a Recession in an Election Year
The US Presidential Election will be held on Nov 2012. According to the "Stock Trader's Almanac 2012", the Dow Jones Industrial Average rose in 33 pre-election years out of the last 44 election cycles. The DJIA rose in 29 election years out of the last 44 election cycles. You decide.
Jan 26, 2012
The Best Times to Put Your Money into the Stock Market
I do not follow this. But I thought it is a good knowledge to have.
Stock investors, people who buy the market and other long-term investors would be interested to find out when is the best time enter the market. Knowing "the right time" will increase the probability of making money as well as the probability of making most money.
Conventional wisdom says to buy stocks during end September and early October period as historically, it is during this period that the market makes new lows within the year. The historical evidence for this is presented at Investopedia. There is also the pre-holiday rally where stocks tend to rally ahead of 3-day holidays in the United States. Then comes the January Effect, that also contributes to the Santa Claus Rally. For those looking for a quick buck, you may consider entering a day after Christmas. The Santa Claus Rally historically ends a few days after New Year's Day.
This article titled "Capitalizing on Seasonal Effects" also presents other useful and interesting market timing research such as:
With the US presidential election up and coming, there are also ways to capitalize on this market-moving event.
Stock investors, people who buy the market and other long-term investors would be interested to find out when is the best time enter the market. Knowing "the right time" will increase the probability of making money as well as the probability of making most money.
Conventional wisdom says to buy stocks during end September and early October period as historically, it is during this period that the market makes new lows within the year. The historical evidence for this is presented at Investopedia. There is also the pre-holiday rally where stocks tend to rally ahead of 3-day holidays in the United States. Then comes the January Effect, that also contributes to the Santa Claus Rally. For those looking for a quick buck, you may consider entering a day after Christmas. The Santa Claus Rally historically ends a few days after New Year's Day.
This article titled "Capitalizing on Seasonal Effects" also presents other useful and interesting market timing research such as:
- Middle of a month is the best time to buy stocks
- Monday is the best day in a week to buy stocks
With the US presidential election up and coming, there are also ways to capitalize on this market-moving event.
a potentially lucrative investment strategy would have included buying on October 1 of the second year of the presidential election term and selling out on December 31 of year four.Well, the above is based on historical data and I see it as more of a guideline. Cycles do adjust themselves and some seasonal effects have been proven to be invalid these few years. For instance, this article from Fundsupermart.com dispels the famous "October Effect" and "January Effect".
Jan 25, 2012
What Makes a Good Trading System?
There isn't one to begin with!
A trading system has clearly defined rules that describe the instruments to trade, when to trade, how to determine entry price, how to determine initial stop loss, how many lots to trade, how to take profit, how to trail profit etc. The trader will stick to the system to the tee in his trading.
Trading is just like that. I believe because of limitations of language, there is so much that successful traders wish to tell us but it just ended up in cliché phrases such as fear and greed, the trend is your friend, triple Ms etc. "Trading system" is one such phrase. There is even this distinction between discretionary trader and system trader which I eventually found to be invalid. Ok, here comes the tough part again - Why?
Beliefs
Believe it or not, one's personal belief is always reflected in his trading. Whether or not he believes in trend, in trailing stop losses, in everything is reflected in the price, in technical analysis, even in the instruments that he trades. I remember vividly that there was this real-life documentary that talked about training people from all walks of life to be traders. One of the trainee happens to be an staunch environment activist. In the documentary, he refused to touch any company stocks which companies' activities are detriment to the environment. This is an extreme case but this is the extent that it can go to. So it is not possible to have THE trading system.
Study of the market
Trading also involves the study of the evolving market. I believe trading involves consistent study of the market to find better entries, better ways to take profit etc. Therefore, how could a system exist? Even if it exists, it will need to include the rules for tuning the system in the evolving market. Then, it would not be a "system" any more, right?
Automated trading and backtesting
I strongly believe the notion of "system trading" came about because of computers in trading. Particularly when they are used in automated trading and backtesting. Computers can be easily programmed to do things for us when the activities can be laid down sequentially, preferably as rules. Trading systems fit the bill. I have got a friend who developed trading programs that yielded couple thousands of percent profits as shown in the backtesting results with very small drawdowns. I have seen it with my own eyes. But still he was careful to not use them in live trading because he said he "doesn't know when they will break".
A trading system has clearly defined rules that describe the instruments to trade, when to trade, how to determine entry price, how to determine initial stop loss, how many lots to trade, how to take profit, how to trail profit etc. The trader will stick to the system to the tee in his trading.
Trading is just like that. I believe because of limitations of language, there is so much that successful traders wish to tell us but it just ended up in cliché phrases such as fear and greed, the trend is your friend, triple Ms etc. "Trading system" is one such phrase. There is even this distinction between discretionary trader and system trader which I eventually found to be invalid. Ok, here comes the tough part again - Why?
Beliefs
Believe it or not, one's personal belief is always reflected in his trading. Whether or not he believes in trend, in trailing stop losses, in everything is reflected in the price, in technical analysis, even in the instruments that he trades. I remember vividly that there was this real-life documentary that talked about training people from all walks of life to be traders. One of the trainee happens to be an staunch environment activist. In the documentary, he refused to touch any company stocks which companies' activities are detriment to the environment. This is an extreme case but this is the extent that it can go to. So it is not possible to have THE trading system.
Study of the market
Trading also involves the study of the evolving market. I believe trading involves consistent study of the market to find better entries, better ways to take profit etc. Therefore, how could a system exist? Even if it exists, it will need to include the rules for tuning the system in the evolving market. Then, it would not be a "system" any more, right?
Automated trading and backtesting
I strongly believe the notion of "system trading" came about because of computers in trading. Particularly when they are used in automated trading and backtesting. Computers can be easily programmed to do things for us when the activities can be laid down sequentially, preferably as rules. Trading systems fit the bill. I have got a friend who developed trading programs that yielded couple thousands of percent profits as shown in the backtesting results with very small drawdowns. I have seen it with my own eyes. But still he was careful to not use them in live trading because he said he "doesn't know when they will break".
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