For Richer or For Poorer, ‘Til One Month Do Us Part

You are swordsmen, he said, and you have to hunt for the three elusive musketeers. It was our first directive. A month has gone since. We watched as our stock picks bled and later, turned to the color of the pastures. Some flew to the skies, a few ran out of blood and died.

Here’s the thing: As with most adventures, our quest for the three musketeers would not make for a great story without a couple of mishaps. Our original choices were narrowed down to DD, ACR and IS.  A month ago, they had what we were looking for. Each of them had at least one of the following: AOTS, ZS, PUA. These were the criteria. 

ACR

DD

IS

They showed us healthy uptrends, who are we to ignore that? But, as always, it was anyone’s game. You get in on your own, you get out on your own.

Day 1 of 31 (Friday, Original Game Day)

The Skype thread was abuzz with excitement. It was our first practical after all.

“Got in at DD,” one said.

“Waiting for ACR to hit my bid,” the other answered. I’m waiting for the same thing, I thought to myself. I didn’t type it in. I sat there staring at the ticker like my life depended on it.

“I bought IS. I’m one out of three,” one of the messages read. I can feel everybody’s adrenaline bouncing off my computer screen. I almost forgot how the rush felt like. 

“Hindi ko na mahabol si DD.” It was one of the days DD was on a rampage. Some of us were left in the dust. Still, there was pride in knowing that we were right about its tracks.

On market recess, as if sensing the disappointment of those that did not get to ride DD early on, Zee sent a message telling us that we could nominate more potential musketeers on the roster. Instead of limiting our choices to just three stocks, we could come up with our top five picks, and from there, we buy the triumvirate we think would send us to the metaphorical cloud nine.

By that point, all of us had already bought IS.

Day 5 of 31 (Trading Hours)

IS hit the -8% cut rule. We sold.

Here is the part where I say it was an emotionless cut. And then here is the part where I admit it wasn’t. Maybe because it was our first loss since getting in the tribe, or that we thought the trend is our friend. Whatever it was, being proven wrong hurt. But that's how the market works. She's the queen. Whatever the queen says, we react accordingly. Maybe in the coming months, years, we turn into the trading robots that our mentors have become. But until then, we try and then we try some more.

Day 5 of 31 (After-trading Hours)

We rolled our sleeves and went back to the drawing board.

It was hours of deliberation. This is how our final six looked like: ACR, DD, PXP, PX, MA and EW. Every samurai has to choose three stocks from the list, which three will be based on the samurai’s own prerogative. Those that will make it to our ports are to be our final musketeers, stocks that we are bound to for a month. But this time, no more resets.

Day 1 of 31 (Friday, Real Game Day)

The Skype thread was abuzz with excitement, again. 

Today is the new deadline. Once the market closes, all of us should have bagged three stocks each. “I’m two out of three,” one informed. I was drumming my fingers on my desk, watching the ticker like a hawk. I didn’t know why. I was already three out of three by then. Maybe the thrill was getting in on my nerves.

Day 10 of 31

One thing that you should overcome, the master of the house said, and learn is how to tame your emotions.

Today we bury MA. It closed at 0.013. Those who bought at 0.015 sold. It would have been painful, to once again cut losses. But slowly, we’re learning. That discipline is king and emotions have no place in trading. A trade does not need to yield you profit for it to be a good one. It could cost you, but as long as your trading rules and principles are followed, it is a good trade. And isn’t that what we’re all after at the end of the day, a good trade? So when the tides go against your bias, you let go and you let go fast.

Day 19 of 31

Hurt my mom and I will end you.

“DD just broke 60.” Whoa.

We watched as the dragon turned into the beast that it was, day by day it reached a new high. We were participants yet we were also just spectators. Trading ought to be boring. Once it excites you, once it saddens you, then you are governed by emotions.

Day 25 of 31

PXP is on steroids. Whoa.

Sweet darling DD just breached the 20MA. It came from a high of as much as 80, today it tumbled and closed at 50. Normally, this would be one of the trail stops for trend followers. But a vow is a vow.  It was a one-month hold or a -8% cut. No in-between. My old self would have panicked if I had shares. Even if I got it at a comfortable AEP, I still would have panicked. But not today. Not anymore. There are rules that we have to follow. It's amazing how our trading mindsets have evolved. 

Day 26 of 31

April Tan’s photo popped up on the Bushido Skype thread.

“Sabi na si April Tan 'yung nakasalubong ko.”

“Na-starstruck ka ba?”

Meanwhile, I was enjoying my bag of Piattos while watching a re-run of Friends. Oh and ACR is trying to breach the 20MA support.

Day 31 of 31

A month ago, when the challenge was presented, there were hesitations, trepidation, self-doubts. Today, all our inner Doubting Thomases have been crucified. Any lingering skepticisms about trading being easy and trading being fun are gone. We chose the stocks that we bought solely based on moving averages (MAs). No RSI, Fibo, Darvas, or what-have-yous. Just plain, old moving averages.

Here's another thing: MAs are king, our mentors said. Dare I say, our portfolios agree.

May 20, 2016 to June 20, 2016

Hanzo

Hideyoshi

Honda

Ieyasu

Kenshin

Kuroko

Masamune

Meiji

Miho

Musashi

Samurai Jack

And there, my friends, is how a one-month hold looks like. No stress, no hassle. No rumors, no tips. Just pure, unadulterated technical analysis. 

Trading is easy. Trading is fun.

The Trouble With Growing A Moustache

We all get into something with certain expectations in mind. Some men shave their heads expecting to look like Derek Ramsay but end up looking like Mike Myers as Dr. Evil instead. When I got into the market, akala ko 'yung piso ko magiging pamaypay.  

EXPECTATION

Say my name.

“Wow nagsa-stocks ka? Yamanin!” Coupled with slight bulging of the eyes, or head nodding in approval or shoulder shrugging imperceptibly. I guess most people who go into trading have had this statement (or anything similar to it) thrown at them at least once one way or the other. The reaction is to be expected in a country where less than 1% of the population invests in the stock market—only 640,665 Filipinos in 2014 to be exact. It’s no wonder why the stock market created an illusion that it’s only for the elite few. I was under that illusion for quite some time as well, until I’m not.

REALITY

Obligatory Starbucks selfie

Anyone who has the ability to put a small percentage of their wages in the bank also has the ability to invest in the market. Gone are the days when traditional brokers would only accept clients investing at least 7 digits in their portfolios. Now, thanks to the advent of online brokers, for the price of three skinny Uniqlo jeans plus about three venti-sized Starbucks Frappuccinos, you can be a part of the 1%. But before anything else, a little caveat: invest only the money that you could afford to lose. Hindi ‘yung pang-matrikula ng anak mo, pambayad mo ng kuryente o pang-hulog sa bago mong sasakyan.  

EXPECTATION

On becoming filthy rich, you're halfway there. You're already filthy.

There is a certain mindset that the once you dive into the stock market, your money will work for you and you will get rich quickly. We’ve all heard of the “lucky” investor who became a millionaire overnight. And at one point in every trader’s journey, s/he dreamed to be one. So day in and day out, they look for the elusive “jackpot trade”.

REALITY

There are no shortcuts, only scams. And trust me, you wouldn't want to be involved in one. Let’s face it; it’s easier to lose money in the market than it is to gain. One of the most important lessons that I’ve learned in the ZFT course so far is that consistency is key. What you do every single day matters more than what you do once in a while. Hindi uubra ‘yung tsamba sa trading. Katulad nga ng sinabi ni Kap, yung may systematic approach ang totoong hokage.

EXPECTATION

I’ve always thought that getting into stocks was synonymous with burying yourself into companies’ financial records, or always being on the lookout for the latest disclosures, or giving a damn about what’s happening in the world market. For someone who barely knew anything about economics and financial thingamajig, everything seemed daunting and very much intimidating. And then I found out that that was just the tip of the iceberg. I was introduced to technical analysis. I was shown charts with candles and intersecting multi-colored lines and I swear I felt my brain melting into puddles. Na-lost ako! Para akong naligaw sa Kew Gardens ng Hacienda Binay.

REALITY

At the close of Season 5, Arya Stark lost her eyesight as a punishment for stealing a face from The House of Black and White. On Season 6, Jaqen H’ghar (or whoever wears his face) decided that it was time for Arya to get her vision back. He gave her water from a poisoned pool and faster than you could say Valar Morghulis, a girl could see again. Being taught under The House of Z has been an entire Arya Stark moment. The experience has been a complete eye-opener. You do not need to stay tuned for market news and announcements or listen to pretend gurus to know which stocks to buy and which ones to get rid of. Everything that you need is in the charts. Suddenly, the figures, candles and intersecting multi-colored lines made perfect sense. Trading was not the rocket science that we all thought it was. You just have to know where to look. As Z would always say: Trading is easy. Trading is fun.

via GIPHY

Of Swing Dances and Boxes

Five, six, seven, eight. I was doing the steps I knew like the back of my hand. With my lips stretched into a smile, lungs heaving for air, I looked at my partner, Julia. It was her time to captivate. I let go of her hand as she did her final pirouette. The audience filled the room with a thunderous applause. The spotlight beamed even brighter. Hand-in-hand we approached the end of the stage as we bowed in gratitude. I looked out into the crowd of the hotel ballroom. People were clapping, others were lifting their champagne glasses in approval. My heart is still racing with adrenaline, neurons firing up. Feelings I’ve always reveled in. We were in Calcutta, thousands of miles away from home. Yet, I’ve never felt lighter. I was touring the world while doing something I’m very passionate about—dancing. It was a fairytale. But the happily-ever-after did not end there. The year is 1958. My name is Nicolas Darvas and I had just made over $300,000 dollars.

I was 3 when I started dancing. I was 32 when I started trading the stock market. In 1952, I received an offer to perform in Toronto. But instead of paying me money, the two club owners offered to pay me stocks instead. It was unusual, intriguing. I did not know anything about the market. They gave me 6000 shares of a mining company I did not even know existed. The shares were valued at $3000. The name of the company is Brilund. I went on in my career thinking nothing of it. Two months later, after a dancing engagement in New York’s Copacabana, I nonchalantly glanced at the daily paper. It was then that I learned I had just made a profit of $8000. My jaw fell on its own. I sold all my Brilund shares faster than a lightning. I did not win the lottery, but I might as well have. My eyes have been opened. What is this thing that I had been missing all my life?

It was with the same ball of excitement that I committed one of trading’s gravest mistakes. After my first accidental win on the stock market, I was constantly on my toes looking for the next big hit. Do you know a good stock, I was asking people left and right.  And I was also getting answers left and right. It seemed like everybody knew something. I was in pursuit of the next “hot tip”. I realized that in order to know which stock to buy, I must have the needed information. I must know a secret. I listened eagerly to people dressed to the nines but were almost as clueless as I was. Stock ABC will skyrocket to 50% in 5 weeks, said a guy in a velvety blue fedora hat. He looked like he owned a yacht, or maybe a 50-acre farmland in Texas. He was drinking scotch. I met him after one of my performances. As I have all of my other stock “advisers”. I buy when they say buy, I jump when they say jump. Even if it was over a cliff. I followed all their tips religiously. I would get another Brilund if I only ask the right people, I kept repeating on my head as I saw my profits plunge. I owned 25-30 stocks at a time. I have developed an emotional attachment to most of them. I triumphed over my small gains. I turned a blind eye on my huge losses. I was losing and losing but I didn’t care. It took me time and a couple thousand dollars to realize I was doing everything wrong. But I guess I was still lucky. Some people never realize they are blindly following false prophets.

I studied like a madman. I decided that I am the captain of my own ship. I read hundreds of books about the stock market. I followed the quotations closely. I ignored company disclosures, market rumors and advices from Wall Street brokers. I developed a tunnel vision, I only see the price pattern of a stock and everything else fades in the background. I developed a system and followed it meticulously. In 1958, while on a dancing tour in India, I learned that I had made over $300,000. A few months later, my profits rose to half-a-million dollars. It was more money than I ever imagined. I was just 39. I have been all-over the world. There was nothing else I could ask for.

I was 40 when I had a rude awakening. I was trading in New York amongst all the Wall Street plutocrats. My previous gains floated my ego up in the air. I thought I had it all mastered. Little by little, my carefully-thought out system was surrendering in helpless abandon. I regressed to my amateur trading days. I listened to rumors, I followed advices blindly. I had a plan, a system. But they seemed like distant memories. I bought at the highs and sold at the lows. In months, I have lost almost $100,000. I was depressed, I was frustrated. I could not understand what had happened. Or maybe, maybe I did. My ears were my enemy.

People like me who lost a lot of money in a very short span of time almost always want to get back in the game immediately in the hopes of recuperating losses. Every trade becomes a means to breakeven, not to gain. Senses are forsaken, in its place are emotions and greed. I realized that the importance of trade vacation is often underrated. Thankfully, I still had some sliver of sense left in me. I paused. I took a time off. I reflected on all my bad trades and I realized, yet again, what I have known years ago: I am the captain of my own ship.

In May of 1959, I made two million dollars.

The House of Many Faces

There was a wail, a muffled scream, and then nothing. His name is Mark and he just turned 30. He was sitting on an office chair that squeaks when he moves. It was half-hour past 8 in the evening. His shift ended at 6. He stared at the growing pile of unfinished paperwork on his desk. His stomach growled and his back hurt. But he kept his feet planted on the ground. The e-mail on his screen taunting him. Finish the deliverables tonight, it read. He straightened his back, he went on typing. All he could do was wail and scream in his head.

Rachel is a single mother. She named her 18-month-old son Nathan, a gift of God. Nathan was turning the pages of one of his Baby Einstein books, seemingly absorbed with its colorful pictures, until he lifted the book to his mouth and bit its edges. Rachel watched it unfold. Her lips curved into a smile, her head shook imperceptibly. She sees this happen every day but she still finds it amusing. Rachel crossed the room, removed the book from her baby’s mouth, and picked him up from the floor. She laid Nathan on the bed, beside the clothes she has yet to pack. It’s for his future, she steeled herself. A future she would provide, a future she would not be there to witness. Her flight is in seven hours.

It was a standstill. Horns were blaring, people were cursing. John awoke from his mild stupor. Outside, cars were piled on the road like a parking lot. Beside him, a lady is feverishly typing on her phone. I will be late, she pressed Send. She looked out of the window and let out an exasperated sigh. The van was full of commuters, employees around the city’s business district. It was 4 in the morning when John turned off the alarm on his phone. He took a quick bath. He picked his favorite denim button down. He did not shave today, maybe he would tomorrow. At 5 in the morning, John was seated in the van. His shift is not until 9. But the metro traffic is unforgiving.

This is Sheila from customer relations, she answers, how may I help you? It was a spiel she utters, forty, maybe fifty times per day. The keyboard rattles, the mouse clicks. A few more spiels here and there. Have a great day, she ends the call after 15 minutes. The clock reads 1:27 AM. Sheila was an art major. She was in primary school when she handed her mother her first painting. It was of a flower, a rose maybe. There were splashes of color in places there shouldn’t be. It was good. It was not amazing, but it was good. It was the day Sheila decided to be an artist. This is Sheila from customer relations, comes another call, how may I help you? The room temperature is fixed at 22 degrees. The walls are white and green. Sheila can't remember the feel of a canvas.

On March 30, 1973, Ricky graduated with a degree in engineering. The following Monday, he was employed in his first job. The pay was measly, but he would get anything he could. Ricky worked hard throughout the years. At 28, he married his longtime girlfriend. At 29, they had their first born. At 32, their last. Ricky was a good husband and a better father.  He made sure his children were provided good education and a roof over their heads. He worked, and he worked, and he worked some more. At 60, Ricky would soon retire. He has saved enough to live comfortably when the paychecks stop coming in. It would be difficult, explains the doctor, to do much walking with the arthritis this severe. Ricky had always wanted to travel. Now he could, but he also couldn’t. He is 64.

Few of the faces of our everyday lives. Why do you trade, they would ask. Do you know, I would answer, the stories of Mark, Rachel, John, Sheila and Ricky?

It's Just Emotion Taking Me Over

To gauge what the students have learned so far, teachers create exams at the culmination of every major lesson. In the House of ZFT, our first exam is handed to us through a Buy button. (see The Three Musketeers)

The cut point was at -8%. The area of maximum tolerance. When that point is reached, you sell all your positions without ifs and buts. It was higher than the standard -4 to -5% of the ZFT system as we have exposed only a tenth of our portfolio value. It was a trial run, a knowledge check of sorts. We bought our musketeers (stock picks) on a Friday. And we do only one of two things: hold the positions for a month or sell when the cut point is hit. No in-between. 

On a Thursday, merely six days later, we sold. Two of our stock picks did not even last a week. They crashed and they burned. It was our first exam, and I couldn’t help but feel we’re failing it.

“First mission is a disaster”, I lamented.

“Mission failed tayo, dalawa agad”, echoes another.

The conversations within the group carried the same defeated tone. The excitement that bubbled a week ago seemed like a memory of distant past. In reality, it is not so much about money lost as it is about newly-found confidence slipping away.

“Ako ata pinaka-unang nag-cutloss kahapon, ‘di ko lang sinabi kasi nakakahiya.”

Our portfolios did not take much of a beating, but our egos did. I imagine that a class of thirteen very eager minds working in concert to pass a group exam would fare better. I didn’t think we’d get a perfect score, but I certainly wasn’t expecting we’d get stopped out as early as we did. I guess that’s the stock market for you, serving the humility pie when you least expect it.

I looked forward to our next class after we inevitably had to cut our losses. I was wondering how Zee would react, what he would say. Come Friday night, I didn't think the lesson would be... juicy.

It was juicy like Jessy. Appropriately, our latest topic was about money management and how to avoid being emotional when trading.

Zee posed a question to kick off our class.

This is how I saw it. Emotions come out to play when something of significance is at stake. If you don’t involve real money in it, how else would you take the test seriously? 

"If you don't put money in your trades, 'di kayo matututo," Zee added. 

And that is our goal ultimately, that is the reason why we are here in the first place—to learn. It may mean we’ll have to take a few hits, endure several sleepless nights, get our egos bruised again and again. But if in every wound, there is a lesson, I’ll take it any day.

Emotions. They said that there are only two fundamental emotions in this world: love and fear. All other feelings that we experience—happiness, sadness, contentment, greed—stem from just either of the two. Every positive emotion comes in a place where there is love and every negative emotion where there is fear. To learn how to control love and fear is not only difficult, it is herculean. 

Emotion is the very definition of human beings. This is why out of all the lessons we have to fully grasp in this course, taming our emotions would prove to be the most challenging. Neither advanced technical weaponry nor a well-thought out trading plan would allow you to execute a trade flawlessly once emotions come trickling in. This is something that every trader has to continuously learn. 

And that’s when pieces will fall into place, the moment we take responsibility for the choices we make. The moment we stop blaming others for the misery we are in. 

Jon Snow and The Three Musketeers

**GAME OF THRONES SPOILER ALERT**

The Battle Beyond the Wall

Because Jon Snow is officially alive and kicking and looking every bit of the Targaryen bastard that he is supposed to be, I decided to finally lay my sword at his feet and pledge my allegiance to the Lord Commander of the Night's Watch—or ex-Lord Commander? And by sword, I mean this little blog.

Let us do a Bran Stark and take a journey down memory lane—specifically to season 5 episode 8. Do you remember the most breathtaking and powerful fifteen minutes Game of Thrones has ever produced? Yup, the jaw-dropping epic face-off between the undead and Jon Snow’s insufficient army of wildlings. It’s unlike anything we’ve seen on TV. 

Come at me bruh!

Here's a run-through for the benefit of everyone who does not watch GoT (seriously though, is there someone else who doesn’t?):

These are the Wights. The dead raised by the White Walkers. In the game of chess, they are the pawns. In the Game of Thrones, they are the creepy pawns.

This weird-skinned creature with wispy white hair is what we call a White Walker. In videogame jargon, he is a Boss. Or an exceptional kind of villain encountered by a player at the end of a level. 

Now, white walkers can only be killed using dragonglass which is not readily available, unfortunately. And any other weapon used against them breaks into tiny little pieces. Parang ‘yung puso mo nung nagkaron ng bago ‘yung ex mo.

#basag

But in a thrilling turn of events, Jon Snow literally shattered a White Walker using his sword that is made of Valyrian steel.  

This is how we are made aware that Valyrian steel is as lethal as dragonglass against these scary-ass non-beings.

The Three Musketeers

Meanwhile, we pause for a moment and go back to the real world. This week, we were given our first live trade assignment: Find the Three Musketeers. We took a trading sabbatical a couple of weeks ago and this is the first time that we’ll be exposed to the market again. It’s no surprise that all of us are jittery and excited all at the same time. The task is simple: look for three stocks (Three Musketeers) which would satisfy the requirements based on the previous lessons about moving averages (MAs). (Here’s a very helpful link for you: Trading 101: ZS and AOTS). We allot only 10% of our portfolio for each stock. Once we find them, we buy them. Simple.

…And we hold them for a month. Or we cut them once it reaches our cut-point percentage, whichever comes first. This is the tricky part. We not only have to look for the most qualified stocks based on MAs, we also have to look for the most sustainable ones. Those which could last us a month at the very least. In the jungle that is the stock market, too many things could happen in a minute. Too many. I can only imagine what could transpire in a month.

The headmaster gave us a 50:50 lifeline ala Who Wants to be a Millionaire? and narrowed our choices to a little over 60 stocks out of the 200++ listed in the PSE. Still a lot, but it's a start. After hours and hours of charting, hunting, analyzing and debating, we came up with a list of suspects. 

You know nothin' Jon Snow

Today is game day. I woke up bright and early to finalize my trading plan. Understand that every student is left to his or her own devices when it comes to trade execution. Zee has been very crystal from the beginning; we do not trade as a group. The tribe has often been misconstrued as market movers, jockey players. They’re far from it. In fact, they detest those who are. 

The logic is simple: Highway A will bring you to Destination A and Highway B will bring you to Destination B. The tribe members travel daily and they always take Highway A (ZFT system), a road which has already been tested and proven. So they always find themselves in the same destination (stock) at the end of the daily commute. But what one person does once he reaches the destination, whether he decides to buy a coffee or stroll around a park, is entirely up to him. It’s just common sense really.They follow the same system, so they see the same results.

Now, allow me take you back to the battle beyond the Wall when Lord Commander Snow killed a White Walker.

Imagine the stock market as what’s beyond the Wall. It’s a slaughterhouse. The wights are the market noise. You can take out maybe one or two. But too much would surely kill you. 

The White Walkers or the Four Horsemen?

The White Walkers are the real deal. They are the stuff nightmares are made of. But once you know their kryptonite, there's nothing to be afraid of. I imagine it must be rewarding to identify a stock as a boss and make a killing. But every stock has a potential to be a boss, you just have to know where to look and when to look.

And we are all Jon Snow. Our dragonglass and Valyrian steel are our technical indicators, our weapons.

Jon Snow know nothin’.  Except that dragonglass can kill a White Walker. But now, Jon Snow also learned that Valyrian steel can be as deadly. If there are more tools against the Others, we are yet to find out.

Jon Snow know nothin’. Only the two weapons that could spell the difference between death and survival when winter finally comes.  

For Bushido, in a month (or less) we’ll find out if we used our weapons accordingly and bagged a White Walker... or just his pawn.