Self Development Idea (17): Working Harder On Yourself than Your Job


Here is a simple idea from Jim Rohn: 
"You should work harder on yourself than on your job. Because... If you work hard on your job, you can make a living. If you work harder on yourself than you do on your job, you can make a FORTUNE."
And, Jim Rohn also said that this is a simple idea and simple to carry out. But, on the other hand, it is simple not to do it... Simple thing accumulated over years is your current result.


The attached diagram is a pictorial illustration of my understanding and experience with the idea over the past ten over years...











"Success is one thing we can't pay for,
we buy it on the installment plan
and make payments everyday."
- Zig Ziglar


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Trap for Investor (9) - Awareness of the Dark Pools in the US Market that Distort the Accuracy of Tape Reading

For those well trained traders and trading professional, they know that trading volume is a very important indicator to judge the state of the trend for the stocks - as it is a measure of money flow.

And, the classical books on Jesse Livermore and Richard D. Wyckoff emphasis on the importance of volume through Tape Reading....

Now here is a video clip from CNN showing that the trading volume of the Dark Pool is up to 40% of the total trading... Which means that there is a Change in Rule on Technical Analysis as on How to Interpret the Volume.  Be aware!

.


So, what’s the Impact???
Though the above video trying to project an idea that these activities does not affect the public...Yes, it is true for the untrained traders that don't use volume indicators and mass public who don' trade.
Actually, it shows that “Volume” information is distorted (US Market).  So, even if the historical speculation king like Jesse Livermore and Wyckoff methodology would lose their accuracy in selecting stocks if they were re-incarnated with full knowledge of their past live, as their method is heavily based on price-volume relationship (money flow direction) – The Fundamental Rule had Changed.   So... Higher weightage in judging the trade should be based on Price dynamic, and that is the Multiple-Time-Frame Relative Price Strength.

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Here is another excellent short video illustrate how the dark pools work in more detail:-

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Games that People Play (5) - Fueling a Giant Stock Market Bubble

This post is self-explanatory...
Click on the link for more details...




Deutsche Bank "Raises The Warning Flag": 
What The Most Important Chart For The Market Reveals






Is the Fed Fueling a Giant Stock Market Bubble?
(Yes, of course)


.



Other Games that People Play


HOME





Trap for Investor (8) - The Most Popular Trading Indicators in the World

I remember...

While I was working in the corporation more than a decade ago, I started some investment through hearsay, then studied some fundamental analysis on companies...  It just did not workout.

Then, I studied some Technical Analysis and learn some technique on trend line, resistance, and support with some Moving Averages...  It did not help much.

Then, someone told me that I needed to attend some professional course... And, I said Yes.

I happened to come across a course advertised by "Business Wxxk" for about USD3000 for a day course that come with internet-based Technical Analysis Tools Box with annual subscription of USD600.  It promised (or I should use the word advertise, and reader perceive as promise) that after the training, the student would only need 5 minutes a day to successfully manage his portfolio for success!

What's made me more convincing was that, IF I don't satisfy with the course after the day, I can get my full refund!  

The set up was great... More than 300 participants...  At the end of the day, I didn't see anyone ask for refund!  That's was a very positive sign (my thought at that time...)

So, what did I got to learn from the course in one day?
1.  Some Fundamental Analysis Skill...  Such as P/E, PEG, etc... (Things that you can find in Yahoo, and countless trading sites for free.)

2. Basic Technical Analysis - Trend line, Resistance Line, Support Line, etc.. (Any basic Technical Analysis books or website has this.)

3.  MACD Indicator - Moving Average Convergence/Divergence with arrows firing at the crossing points telling people when to buy and sell...  (Any first timer to come across this would be impress with it.  And, it indicator is SO POPULAR that it is freely available in any trading website.)

4. Stochstics Indicator - A kind of momentum indicator that with arrows firing at some boundary saying buy on oversold and sell on overbought.. (Available in any trading website.)
  
And... The course comes with Video CDs for revision, and Self Study Course that cover Options.
That was basically ALL!

And, more importantly...  It does not produce Result as stated...  At least to far far majority of them...

Now. Looking back...
That's funny, but to any person who don't have any background or know someone who can share the knowledge, that's probably the path he needs to go through and price to pay.
----------------------------------------------------------------------------------------------------------

Recently, I come across a new book - New Frontiers in Technical Analysis.  It is a compilation book with many authors with each author wrote a chapter.

What's interesting is that... In Chapter one, the author provide a statistics on what's the most popular indicators, charts, tools that used by the trader across the global at different regions from East to West.

And, I find the attached information worth THINKING!!!

Anyone who do some research know that, in long run, at least more than 95% of the public lost money in the stock market.  YET, those trading courses out there are mainly consist of these few indicators for the beginners... Doesn't it sound more than Interesting???









..

.





 "It Ain't the Things You Don't Know That Hurt You, 
It's the Things You Know That Ain't So."
- Mark Twain




HOME 

Games that People Play (4): Push "RESET" Button on World

Good day,

I came across this very strange news about few weeks ago...
It was talking about Pushing the Reset Button or World Economy!

And here are the sources:
1)  World Economic Forum website: IMF Director, Christine Lagarde, Publicly Talks About Global Financial Reset and Recovery

2)  USA Today


.
..

..
So, what does it mean by the term RESET when these people discussing about it?!

In the first link above, World Economic Forum Website:
In the video, 05:40min to 11:15min
Chirstine Lagarde, Managing Director of International Money Fund, was talking about the 3 Rs of global economy, which stands for  1) RISK,  2)RECOVERY & 3) RESET.
And, she further described there are three aspects of RESET:
A) Monetary Policy need to be reformulated
B) Financial Sector Reform 
C) Global Structure Reform 

In the second link above, USA Today Link:
-------------------------------------------  Cut and Paste  ---------------------------------------------------
Klaus Schwab (Founder of World Economic Forum) said: "We need to push the reset button. The world is still much too much caught in a crisis-management mode. We should look at our future in a much more constructive and strategic way. That is what Davos is about."
------------------------------------------  Cut and Paste  ----------------------------------------------------


As usual, these people in the financial world always creates term that the meaning are so confusing to the public, such as Subprime Mortgage for substandard investment fund, and Quantitative Easing for "printing more fiat US Dollar", etc...


As I did more research... I found that these documentaries, "Hidden Secrets of Money Episode 1 to 5"  by Mike Maloney,  seem to bridge the gap and explain what the term RESET is...


Hidden Secret of Money Ep 1 - Currency vs Money

Here are the links for the 4 sub-sequence Episodes:

Hidden Secret of Money Ep2 - Seven Stages of Empire

Hidden Secrets of Money Ep3 - Death of the US Dollar

Hidden Secrets of Money Ep4 - The Biggest Scam In The History of Mankind

Hidden Secrets of Money Ep5 - When Money is Corrupted

Well, though these videos do contain some sale speech (you may ignore that), the contains of the video are very educational!










...


--------------------------------------- Added on 24 Mar 2014 -------------------------------------------------

In fact, there are some reset activities going on.

Venezuela sharply devalues its currency...  start with 50%.  and now... 88% as shown:




Relevant Info:

Site:
There is a interesting site,   GLOBAL CURRENCY RESET.NET  , that put these information together.

Books:

Code Red: How to Protect Your Savings From the Coming Crisis

The Big Reset: War on Gold and the Financial Endgame

The Money Bubble

The Death of Money: The Coming Collapse of the International Monetary System



Well, it is 100% sure all currencies will be reset like the kingdoms and dynasties changes in the history... Just that NO ONE would be able to predict EXACTLY WHEN.  So, it give the Gurus a chance to continue to predict until it comes. :-)

Nevertheless, awareness is good.

-----------------------------------------  Added on 19 Apr 2014 ----------------------------------------
Some relevant books on this topic:


---------------------------------       Add on 16 May 2014        --------------------------
Yet another perspective:

















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Stock Market Tools (13) - Using Correlation as Pattern Recognition



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The above slide shows the concept of correlation formula of two set of data.  In application wise, it can use for pattern recognition.  Such as image or voice recognition, etc.

In his latest book, "Cycle Analytics for Traders", John F. Ehlers even uses it to calculate the dominant cycle in the stock chart.

So, in broad term, Correlation can be used to find the similar patterns in stock market charts.
There are various usages:

* Such as using one index or ticker to confirm another - like Dow Jones Transport Index to confirm the bull or bear state of Dow Jones Industrial Average in the past (may be not so valuable now as internet age taken over, and many software products can be download online.)

* Find some current patterns that highly correlated with historical patterns, and use it for prediction that it will follow through in the short future.  - Such as head and shoulders, scourers, etc.

* Correlation of season in the year for commodity trading, etc...

* And, correlation would work for even more complex type of waveform, as it can use as the engine for image recognition algorithm...  And, here comes the story...

Well, I suddenly think of posting this article because, just a moment ago,  I come across another article - "SCARY PARALLEL" that could be of high interest to others and would like to see how it develops over the next few months.























The link of the original article is Here "Scary 1929 market chart gains traction".

From the chart patterns, though I don't have the access to the raw data to compute the correlation value, but experience would tell me that the correlation value would surely be higher than 0.8.  So, in theory wise, it has the Prediction Value until Proven Wrong!


On the other hand, when applying this concept...
This short video clip is an excellent example of illustrating the concept of pattern recognition - One can only confirm the actual answer after thing happen.




Will come back here in 2 months time to see the outcome. :-)


Bless you
KH Tang


(HOME)

Stock Market Tools (12) - A Better OBV and Time Segmented Money Flow

Part 1: A Better OBV

In the classical OBV (On-Balance Volume) indicator, it simply takes the idea from traditional tape reading - treat the "up tick" as Buy, "down tick" as Sell, and it assumes no change in price as neutral* (*which is not the case in tape reading).

When it comes to interpret the daily volume as such, errors will add up cumulatively.  For example, there are days when a Doji Star with high volume just merely one cent higher than yesterday price and the whole day volume would be taken as a BUY Volume....


Here is a gentlemen, William C. Garrett, attempted to break down the daily volume into two parts in his book - "Torque Analysis of Stock Market Cycle".   And, I think it makes sense.



.


William showed his method in Fig. 4.3 in his book, and we can derive the formula from it as follows:
He made the assumption that the trading volume is about linear over the trading hour, and thus it can derive how the paths the stock was traveled and workout the Buy Volume and Sell Volume accordingly as shown in the below chart:


.
Now a better OBV formula can be written as the cumulative number of  (Buy Volume - Sell Volume).
It should named as Garrett OBV.
And, it can multiply the daily average price to it and named as Garrett Money Flow.

The following chart shows the plot of it and the comparison to Classical OBV.

(Click on the Chart to Zoom in)












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Part 2: Time Segmented Money Flow

There is a proprietary volume indicator known as Time Segmented Volume (TSV).  Since it is proprietary, probably the public would not know about the exact formula.  But the concept is not difficult.

Let say for the Classical way of plotting of OBV, there is no clear sign for both entry and exit.  We can then fix a look back period to compare it accumulation/distribution over it's own historical value.  One simple way is to perform a MACD operation on the Garrett Money Flow.  

Now we can compare the Garrett Money Flow Indicator to the Classic MACD indicator.  In the above chart, they are using the same look back period for short MA, long MA and Signal.
From the chart, there are some very interesting point to take note.
Since the Volume Action is taken into account in this new indicator together with price.  The Time Segmented Money Flow behave differently at couple of  place on the above chart.
For examples:  On March, April and July, the RED Line maintain above the Zero line to prevent any short trades - this happened as a result of  more Buying Volume than Selling Volume.

Note on Divergence:
When using a indicator as Time Segmented Money Flow, divergence would surely occur on and off.  This is where Wyckoff 3rd principle comes into play - "Effort vs Result" that is not matching.  Meaning that the cumulation of shares goes in one direction while the price goes another direction.









"It ain't what you don't know that gets you 
into trouble.  It's what you know 
for sure that just ain't so." 
- Mark Twain



I have uploaded a copy of the coding in WiseTrader Forum.  



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Trap for Investors (7) - Bitcoin - modern Tulip



Source:   https://blockchain.info/charts/market-cap  (Click here for latest price update)


Market Capitalization of Bitcoin as of 1 Feb 2014.






http://en.wikipedia.org/wiki/File:Tulip_price_index1.svg




-------------------------------------------------------------------------------------------------------------------------------
Isaac Newton Loses A Big Fortune in the South Sea Bubble:

Even Sir Isaac Newton (4 Jan 1643 - 31 Mar 1727), the well known English physicist, mathematician, astronomer, natural philosopher, and theologian, got caught up in the South Sea mania and invested a big chunk of his fortune. Interestingly, he pulled out early (after making a respectable 7,000 pounds) then went back in after the bubble continued to inflate. The inevitable bust happened and he lost 20,000 pounds - a considerable sum at the time.

As a result of this crisis, he stated "I can calculate the motions of heavenly bodies, but not the madness of people".
-----------------------------------------------------------------------------------------------------------------------------


-----------------  Follow Up: Bitcoin Price Chart as of 24 Apr 2014  -------------------



--------------- Follow Up: Bitcoin Price Chart as of 06 Oct 2014 ----------------------



Stock Market Tools (11) - Download Amibroker Historical Data 10 x Faster or More...

Generally, it takes only a couple of minutes to download the current data for the Amibroker database with Amiquote.  But, if one were to miss a day without doing the current update, he would need to do a historical update to back fill the database.  Which can last a couple of hours if the database is huge, let say a database with 5,000 tickers or more.

This video here presents is a trick to speed up the download up to 10 times faster or even more, making the complete back-fill of historical data within  a tea break time.

(Added on 16 Jan 2014 morning - you may save your time in watching the video by reading the comment by Anonymous, which is attached below.)

(Added on 16 Jan 2014 afternoon - you may still watch the video and combine it with the method as Anonymous suggested, it can literally speed up the Historical Download up to 10 x 10 => 100 times!!!  Just tested working.  The CPU multi-task does not depends on the number of core, but i7 Chips does help to make the operation smoother.)


.
If it is not clear, you might want to go to YouTube Link to watch it in HD Mode:  Link

By the way, if you do come across other easier or faster method, please comment/share. :-)


Bless You
KH Tang


HOME

Great! Just posted one day, and some one gives a better solution!
--------------------------------------------------------------------------------------------------
Added on 16 Jan 2014
Anonymous said...
I do it in the following way to achieve similar result (I guess):

go to amiQuote->Settings-> change the "Number of simultaneous downloads" to say 8 since i7 provides 8 threads simultaneously.
--------------------------------------------------------------------------------------------------

Thanks "Anonymous"!
I was not aware of this feature and it definitely works better than my old manual way of doing.  And, it works for "current update" too!
It just speed up all download up to 10x when I set the "Number of simultaneous downloads" to 10.

--------------------------------------------------------------------------------------------------

抛砖引玉
Throw a Brick to Attract a Jade


抛砖引玉,出自《传灯录》。相传唐代诗人常建,听说赵嘏要去游览苏州的灵岩寺。为了请赵嘏作诗,常建先在庙壁上题写了两句,赵嘏见到后,立刻提笔续写了两句,而且比前两句写得好。后来文人称常建的这种作法为“抛砖引玉”。

In Tang dynasty, there was a poet JianChang. Once he heard that another poet GuZhao was going to visit LinYan Temple in ShuZhou province, and wanted to get GuZhao to write a poem.  So, JianChang went to the Temple first and wrote half a poem on the wall.  When GuZhao arrived, by his nature, he immediately took a pen and finished the poem.  And, the second half is much better!  And, people call this “Throw a brick to attract a jade.”





-------------------------------------- Added on 16 Jan 2014 afternoon --------------------------------
I  combined both methods mentioned above, and I was able to download more than 5000 historical data (1 week back-fill) within 5 minutes!

Cheers!
KH Tang



------------------------------------------------- Added on 16 Jan 2014 Evening -----------------------------------------------------
Amibroker Said:

Be careful with that. While using 10 simultaneous downloads is relatively safe,
using more than that will sooner or later result in Yahoo blocking your IP for abuse.

In the past Yahoo already blocked people who were using too many simultaneous downloads
and it was one of the reasons why default in AmiQuote has been changed from 10 to 1 (fail-safe).



Stock Market Tools (10) - Visual Global Relative Price Strength Ranking System

The Big guys, Hedge funds and other institutions, have always use relative price strength investing to rack up big returns, yet the concept has rarely presented to the public -- except that I saw one in the Amazon book shop but out of print (Smarter Investing in Any Economy: The Definitive Guide to Relative Strength Investing by Michael J. Carr.)

Attached video - Visual Global Relative Price Strength Ranking System - is an integrated concept based on Asset Class Rotational Trading and Multiple-Time-Frame Analysis.  Though the system is proprietary, It presents the core concept in a easy to understand manner that most people have some trading experience would understand it, and even DIY.

(NOTE: Video is deleted to protect proprietary information. 24 Apr 2014)




As there is a saying, out of sight out of mind.  Here is an example chart to demonstrate that it is the information of Relative Strength Ranking with Multiple Time Frame is always on the chart...
In this case, it shows the QQQ was in uptrend since the beginning of 2013 till July.  But, it was pretty much under-perform the reference ticker SPY.  So, it is a clear choice to pick the better one, SPY, during that period.  And the condition changed on the second half of the year.
And... as the ranking is range from 1 to 100, there are plenty more Stocks/ETFs performing better than SPY that can be using the exploration feature as explained in the video...






.













.

As of today, not just Wall Street is a Jungle, the whole world market is a huge jungle.  And, the only way to have peace in mind is to know how it really works.



Bless You
KH Tang




----------------- Added on 6 Jan 2014 ------------------

By the way, there is an EXCELLENT documentary - INSIDE JOB on how the late-2000s financial crisis.  IF you have not watch this, may be you can find it on YouTube or Vimeo.




Project Freedom (13): Multiple-Time-Frame Analysis

Attached video and chart are self-explanatory.
Understand this concept would help traders/investors to insist in using Multiple-Time-Frames when analysing their charts.

(Click to Zoom-in for Full Screen Video)
Dow Theory Three Movements need Multiple-Time-Frame Analysis


.

The chart shows that:
1) Stock move the fastest when the three waves move in same direction.
2) Always trade in-sync with the direction of the Primary Wave.
3) Good Entry points with highest Reward/Risk Ratio are when the Primary Trend is UP while shorter terms have came down, Pull-Back Entry.


Relevant article on Multiple-Time-Frame Analysis <- p="">



 

Personal Finance (14): A Multiple-Time-Frame BBC Indicators on STI


Attached shows the Multiple-Time-Frame BBC indicator on Straits Time Index, with the FTSE industries grouping of Singapore Market as components.
 
This is the time as Monthly Wave, Weekly Wave, and Daily Wave (Click on the chart to zoom in) are in sync.  and therefore make this post as social service.
 
The description for all indicators were published in previous entry.
 
Monthly Wave
 
 
 
Weekly Wave
 
Daily Wave
 


Run when you should run, stay when you should stay.
 
 
 
(Link of the BBC Indicator)

 

Personal Finance (13): A Confession of a Public Fund Manager In China

Good day,

Attached, ---8<  Cut and Paste >8---- , is the last portion of an article by a public fund manager in China confessing why he can never beat he "super wealth transfer machine"(stock market system) and decided to quit his job.  And, after all, in his 10 years of career as fund manager, he already made more than 10million RMB as a salary despite losing money for his clients...  

The full article, in Chinese, can be read from the link attached:

---------------------------------------Cut and Paste---------------------------------------------
一个公募基金经理的忏悔书
我无法对抗这个制度、我彻底投降、我准备辞职,我对我管理的基金的投资者表示深深的忏悔!我真的无能为力在这个市场中帮助你们赚钱!
  中国XX基金管理公司 XXX基金经理
  (恕我在此不公布老东家的名字,毕竟服务多年,领取了千万元的薪水!)
--------------------------------End of Cut and Pate ---------------------------------------------
http://bbs.hexun.com/stock/post_5_5961685_1_d.html




Any way, here is a very very brief summary with the KEY FACTOR of why he can't win:
"The author, 10 years fund manager in China, described that the stock market is a wealth transfer machine.... Due to the fact that the fund managers, by Law and software system, must keep at least 60% of the money in the market. Even if the fund manager want to get out of the stock and keep cash when the market is clearly in down trend or even crashing, the software would not allow them to sell...."


Here are some points of ponder:
* FACT
Now, the above chart showng the China Shanghai and ShenZhen 300 index (SSE300).  There is clearly more down trend than up trend for the past 5 over years.  And, if one were not only can't short the market, but also must spend at least 60% of the fund to purchase stocks at any point of the time.  As a Public Fund Manager, how can they make money as the calculated probability seriously against them?

Anyway, this is  the rules and regultion for fund managers world-wide.  Imagine IF there is no such rule, what would happen, if most fund managers try to find exits for cash?


* OPPORTUNITY
Now, what would you do IF you are a fund manager under such rule?
The manager would at least want to beat the overall market index by selling the worse sectors/stocks and get a ride on the better sectors/stocks.

So, in order to sell 10% worth of weak stocks in his portfolio, the fund manager MUST FIRST purchase at least 10% of the equal value of stronger stocks before the software system allow him to sell the weak one.

This would result in lot of money rushing into relatively handful of sectors/stocks and result in sharp rally!

For Example:  Some Internet/Games companies are the current percieved "safe harbour" and the money is rushing in at this point of time:(QIHU,DATE,GAME,YY)


















..the above are just a few, can include the famous BIDU (but the up side is may not be that great as high price stock generally move slower... but safer).


*CONCLUSION:
It is better off spend your resources (time and money) to learn and DIY.  The chances is very much higher. 

AND, off course... don't do this:  Dash into the market without going throuh a proper stock market training, withot going through adequate paper practice, and without a reliable trading system.  It is like the message from the following cartoon I found in facebook. :-)





Thank you for your time, and

Bless You
KH Tang


NOTE: THIS ARTICLE IS MERELY FOR AWARENESS ONLY!



Personal Finance (12): Guru Rotation in the Financial Market

There are many famous Gurus in the financial market, and their philosophies are pretty well accepted by their followers (subscribers).

Take for examples:
1. Jim Rogers is the icon represents long term investment in the commodities market.



2
2. Marc Faber, also known as Dr. Doom, advocates that the market is collapsing, collapsing, and collapsing...


3.
3. Stephen Leeb is using the "Peak Oil" as a backgroud and focus on Energy Sector.



4.
4.  Peter Schiff is singing about the collapsing US Dollar and Accumulates physical gold or GLD (ETFs).


.
And, when they are correct, they will occupy everywhere in the media and get more followers.

Now... As shown in the charts, they were ALL CORRECT at certain point of time in a "Rotational Manner".

So...  Don't you think that having a "market neutral mentality", doing your study, understand and follow the market actions with the charts, and perform asset class rotation is a better deal?


Now...
See what the successful Trader and Trainer in the Stock Market, Richard D. Wyckoff, had to say:


Very true!  In my view, most of the publication on financial advices and news are just like Coke or  genetic modified foods.  They are are produced for the public consumption with the intention of making a profits out of it.  The earlier one chooses to stop taking them, the earlier he gets healthier.


In a Nutshell : Why Market Rotation?
The stock market, as of today, is working like a Giant Ponzi Scheme as a Whole, which is formed by Multiple Smaller Ponzi Schemes as Sectors, Countries and Individual Stocks.  The Public Media would help to Rotate in Bubbling few Sectors/Countries//Stocks at a time for profiteering and dump the shares to the public, let them burst, and then ROTATE the operation to Other Sectors/Stocks.


"What information consumes is rather obvious:
it consumes the attention of the recipents. 
Hence a wealth of information creates
a poverty of attention." 
- Herbert Simon 



<Go to Home>

Project Freedom (12): Livermore Secret Market Key on Price Chart


Jesse Livermore (July 26, 1877 – November 28, 1940) is one of the most famous legendary traders in stock market.  His intriguing hero’s journey in the Wall Street was well recorded in the book – “Reminiscences of a Stock Operator” by American author Edwin Lefèvre.   And, this book is widely quoted in many trading books and recommended in many trading classes.

But, not many people know about his “Livermore Secret Market Key” which was written by himself and published in 1940.  This book can now being found in Wikipedia Link for free download.
Jesse Livermore spent up to 40% of his book in explaining the technical details of his operation in the stock market.  The challenge is for the reader to understand and implement it.
Unfortunately, it is not a simple task to understand the method in table form.  For there was no programming flow-chart during his time, he used a table and long procedures to go through how to fill it up.  Most beginners will lost his way in their first few attempts.
The objective of this article is to demonstrate that the 6-columns table can be programmed into 6-levels of band in modern price chart, and it would faciliate the readers to visualize the interaction of Jesse Livermore Secret Key and the stocks. 

Fig 1.  Transformation of Livermore Secret Market Key from Table to Price Chart. 


Fig 2. The Livermore  Secret Market Key in Action.

One of the famous quote from Jesse Liver more is:
"Wall Street never changes, the pockets change, the suckers change, the stocks change, but Wall Street never changes, because human nature never changes".


So, What do you think?   IF he is still around today and using the same method, written 70+ years ago, can he still make money?

The following are various charts using Livermore Secret Market Key and they clearly demonstrate that he is right.  For this method is advocating Trend Trading and ignore minor noise (which means do not run in and out of a stock too frequently).


A Minor Change in the Rule:

During his time, Jesse Livermore used fixed amount of dollar to define the "Levels of Band" as filter, similar to Point and Figure charting method using 3 point change.  But as of today, there are stocks trade more than hundreds or thousands of dollar, so two types of changes can be applied to the original method to see the effect.  The first change in the method is, logically, using the fixed percentage change, and second, using the fixed amount of Average True Range(ATR) for the band's level.


Fig 3. Livermoare Secret Market Key applied on SnP500 ETF(SPY) (Weekly)
In Figure 3, the upper chart shows the "Fix Percent Band" while the lower chart shows the "ATR Band".




Fig 4. Livermoare Secret Market Key applied on SnP Financial Sector ETF(SPY) (Weekly)


There are two points to be made in Figure 4 (Click and Zoom In).
1) It is Crystal Clear that if one were to follow the weekly chart religiously, he will not suffer from the 2008 financial crisis. For the chart shows a clear down trend.

2) Using "ATR Method"  is superior than "Fix Percentage Method", for every stock/commodity/ETF has its own characteristics in terms of Volatility.  Using ATR method help to adjust the band-level automatically for all vehicles.

So, from here on, the following charts will ONLY use ATR band (Dynamic Band that self-adjust to the stock volatility) as demonstration.



Fig 5. Some Hot stocks - Apple and Google (Weekly).







Yes.  Due to whatever reason, even till today, there are still people using "Buy and Hold" method in the market.  From the above Chart, there are two points we can learn:
1)  IF the Goal is to make profit from the market, follows the trend.  NEVER EVER ARGUE with the price chart.  IF the Goal is to PROVE he is right that the stock will eventually go up again some time in the future while the chart moving down, by all means, let him hold on as long as he like.

2) IF the market is on side-way, using Trend Trading Method would incur in lost, therefore, one need to learn to learn the master the skill of CUTTING LOST.  It would be so much better to acknowledge that was only a small error made in the market rather than let it continue to grow and eventually becomes a BIG MISTAKE.


The following are more charts to illustrate the points mentioned above.

Fig 6. Commodity - Silver and Gold ETFs (Weekly)
.
Fig 7. Commodity - Argriculture and Commodity Index (Weekly)

NOTE: If Argiculture commodity is moving down or in a side way, chances that those related companies are not performing too, even if whatever fundamental data of the stock are strong.  Use the money to invest someway else, and wait untill the relevant commodity to move up, then buy the related stocks.


.
Fig 8. Malaysia KLSE Index and Singapore STI (Weekly)


..
Fig 9. Hong Kong HSI and Japan Nikkei 225 Index (Weekly)

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It is very interesting to note that Malaysia market has performed so much better among her few Aisa peers since the 2008 global finacial crisis.  My guess is that the DID NOT lose so much money in that crisis in the US Banks as compare to the others. :-)




"There are many times when I have been completely in cash, especially when I was unsure of the direction of the
market and waiting for a confirmation
of the next move...."
Jesse Livermore



------------------  Additional Information  Added on 11 Aug 2014 -----------------------

Excerpt from the book - Jesse Livermore's Methods of Trading in Stocks - written by Richard D. Wyckoff
//--------------------------------------------------------------------------------------------------// 
HIS OFFICE EQUIPMENT

He arrives at his office ,which is on one of the upper floors of a big down town skyscraper. There is no name on the door. It consists of a reception room,private offices for some of his assistants. and his own private office,separated by swinging doors from his board.room. This is an oblong room with a long silicate quotation board on one side and a row of windows opposite. On the board are exhibited quotations for thirty or forty of the leading active stocks, and a few each of the active futures in cotton, wheat, corn and oats. The quotation board is not arranged according to the ordinary custom prevailing in brokerage houses. The changes in quotations are not posted by means of printed tickets containing merely the opening, high, low and last figures; instead , each stock has its own column running the full length of the board. in which the various changes in quotations are written with chalk, with the numerous sales strung along down below the abbreviations. He prefers this kind of board because it gives him a line on the swings of a stock, the extent of its rallies and reactions, as well as its relative activity. The volume of trading does not appear on the board; he gets this from the tape.

(Also in the the book - there is a concise chapter on Tape Reading)
Chapter 4. How Livermore Reads The Tape
                 How He Judges The Turning Points
                 How He Plays The Intermediate Swings

//---------------------------------------------------------------------------------------------------//


In Short, the Jesse Livermore Secret Market Key is NOT COMPLETE without integration of the trading volume from Tape Reading.




----------------- Additional Information Added on 25 Sep 2014 ----------------------------
From Investopedia:

"Dark PoolsDark pools are an ominous-sounding term for private exchanges or forums for trading securities; "

"The current controversy surrounding dark pools may lead one to think that they are a recent innovation, but they have actually been around since the late 1980s. Non-exchange trading in the U.S. has surged in recent years, accounting for about 40% of all U.S. stock trades in 2014 compared with 16% six years ago. Dark pools have been at the forefront of this trend towards off-exchange trading, accounting for 15% of U.S. volume as of 2014, according to figures given by industry insiders."