Psychology Analysis: How the operators play with the retailers

On penny stocks there is a time where in these pennies are so quiet and no one even notices them. The operators will begin buying up since they can see that no one want's to sell already. Of course we all know that these operators pry on volume before they can buy the stocks more up. They know the psychology of the Newbies. Newbies love something that is going up. Newbies will begin riding. As they can see their earnings going up they are also falling in love with their stocks. After that the operators will sell down the stock to make install fear to the retailers. I know lots of retailers who cut this when the stock is already near their buying price. After having all the shares the weak hands have thrown they will pump the price more making the weak hands have another emotion, this time it's about regret. Then emotions will mix up making the retailers with weaker mindset than the operator make more mistakes than before.

The stock market is a battle of wits. The minds of all the people participating the market. The stronger minds and the one who has the money preys on the weaker minds with less money. If you want to earn on this market you need to read the moves of your enemy. If you are weak on a subject matter, look for a friend in the market who has the edge on that certain subject. I have lots of friends in the market. Some are really great fundamentalists. I learned from them. How they read the moves of the enemy by just knowing the business owners and how those business owners move they can already develop a move before it happens. They are good with researches. Always looking for something that can make a stock move. Sometimes they also don't know anything about technical that's why they also need a technical analyst friend. Once the two coincide then that is where a bagger was found.

Cutting Losses

Cutting losses is an important element in trading. Losses are part of the game. Human as from their nature are not perfect and are prone on committing mistakes. These mistakes can help us in developing our system, strategies, discipline, and mindset. Before buying a stock you need to make a plan. You need to check your supports, resistance and check the trends. You need to write them beside a stock you are currently spotting. Cutting losses fast is important so that we will not become the queen of losses later on. We can use the cash for another opportunity. Here are the rules where cutting is a must:

1. When you are currently bottom fishing a stock that is on a downtrend and the support that you think didn't hold, CUT. There might be another continuation of that downtrend. When you are bottom fishing just put a minimum amount for testing the waters so if you cut it will not hurt.

2. When you are holding several positions and one of your position is the fastest horse. Switch the slow positions and put it to the one showing momentum. This is important so that you can maximize the gain on the one that is in demand.

3. When you bought just by impulse or by hype. If you do not know how to trade it and you were just caught up by your emotions then you just better cut it. Study first how to control yourself. Study how to filter the information found in the internet.

4. When you realized a mistake and the move is against you. Sometimes there are biases on peoples mind based on fundamentals, management, being a loyal customer of the company and other things that can make you really go for the company. But if the price is telling you otherwise then always remember that it is not you that is right but the market is always right. Drop the ego and listen to Miss Market so you can prevent a big loss on sitting on a losing stock and wasting your precious time waiting. The market is all about timing and cycles. If it isn't time for that stock then it isn't time. Leave it and look for another opportunity. After all there are more that 200 stocks in the market to choose on.

5. When you are on a leverage and you made a wrong entry better cut fast! Timing is needed on leveraging. You need to buy a stock and sell it within 3 days or 5 days. So make sure when you are leveraging you are already pro at your timing or else this will make you get burned faster than the usual cash position.

6. When you can't sleep at night. Peace of mind is more important than seeing all your losses everyday. It is even unhealthy to a person who is currently experiencing a losing streak to have the right mindset in trading. You better stop first! Meditate. Breathe. If you are already okay then you can study and check where your mistakes are coming from. How can you prevent yourself from doing the same mistakes. What are your strengths and weaknesses? You need to identify everything before coming back! Practice first on paper if you are already getting it. If you already have been more disciplined than before. If you already have a good batting average then come back. Use real money and make use of your learning to gain already in the market.

7. Never cut on an uptrend stock because of wrong entry and wrong execution. You can either average down or just wait for the stock to come back at your cost. After all an uptrend stock will still be uptrend until the trend bends.

Picking an Indicator

Choosing an indicator is like choosing your own stock. This should be easy to understand, easy to process, and you can always relate it in the price action. This should be also relatable to your mistakes and is the closest one where price action and the basics of your indicators meet.

How did I come up with my indicators?
I came up by using different indicators I used RSI, Ichi Moku, Moving Averages, Bollinger, MACD, Aroon and Price exhaust. When I see a laggard one with price action I throw it out. RSI is somewhat the same in Price exhaust but Price exhaust is more of a pictorial innovation of RSI. I can see the momentum, the trends and the chance where I can buy on pullback and where I can lock in profits while RSI only tells the overbought and oversold levels of the stock. It made me get whipsaw a lot of times the reason I eliminated it in my system.

The next indicator I saw is Aroon. Most people say that this is the most laggard indicator but when you look at it on the monthly time-frame this is the fastest to recognize that the stock has already made it's bottom and an uptrend is coming. Aroon is also connected on the mistakes I did on the past where I always chase the price and in the end the stock will consolidate and that is where my discipline in only buying the pullbacks where established. Buying the pullbacks for me is the most valuable lesson I have learned in the market. It gives you more confidence in your trading, it let's go of all those nervous emotions you have inside of you, and it gives you a higher percentage profit than buying the breakouts.

The main indicator I use is moving averages or the Guppy Multiple Moving Averages plus bollinger. I can easily distinguish the trends, the Golden and Death Cross, the Alignment of the Stars, and the phases of where the stock is already. The phases includes of reversals/start of a new trend, if price action is trying to break out or break down. If the bollinger is on a squeeze for a long time. I also use the GMMA as my main supports when I am buying a pullback of an uptrend stocks. In buying you need to be more disciplined, you need to wait for the right time to enter, you need to enter while the stock is quiet and not on an outrage. When an uptrend stock is causing fear then that is the right time to enter. Buy when others are fearful as what Warren Buffet always say. The market is more of a battle of the mind! You need to have a strong mind to win this market!

You should know the uses of your indicators their strengths and weaknesses if you want to build your own system. I cannot share you the secrets of these indicators since it is my holy grail and once a system spreads the system will lose it's value. So I encourage everyone to look for your own combination of indicators that will help you in building your discipline in entries and exit, a way to eliminate all the emotions in trading, and be more confident with your trading career.

How to spot a bagger?

A bagger is a low risk high return investment. You can gain a minimum of about 300% on it. We will study how a bagger is spotted earlier and how the waves of a bagger was made. In PSE a stock with volume doesn't go up without a reason. There will always be a reason for it. Someone already knows it before the retails do. And those are the operators. Why a sleeping stock rises it is because someone is accumulating earlier. Once you spot that join them in the accumulation. Always by the pullbacks. You can range trade or you can sit on it, it's up to you.

Here are the examples how we spot a bagger!

1.) Using the Aroon indicator. At .087 Aroon Up Already crosses up that is the signal that this will be a bagger in the long run.

2. ) Using the bollinger. The bollinger is squeezed and prices have ranged in a long time.

3. Volume: An unusual increase in volume especially if an illiquid stock is trading at P10 million and up is no joke. There is really something happening on this stock. A shake is imminent to make the weak hands jump and they can get the shares in a lower price once more. The selling with low volume is an example of that. The operators need to sell down the stock to have money for buying up the stock again and so the cycle continues.

In this set-up you can see that There are still 5 months consolidations that happened in the stock. There can be two option either hold or lock first the profits before coming back while putting your money in a faster horse during the time of consolidations. In this consolidations the operators are accumulating slowly they are waiting for traders to be impatient to shake them out so they can gain the traders shares in a lowest price possible

When to sell:

We get ready to sell when the monthly is already exhausted. That is the time we need to be super careful. After selling you can accumulate again at the lows. The lowest it gets by this time is at .1220 you can collect and wait for 5 mos cosolidations or you can either time and get in when the stock is moving already. It will be upon you if you are a sitter or a timing trader.

Common Mistakes you are doing but you can't notice it

In Trading mistakes are common to traders. As human we are prone to errors and mistakes. Here are some common mistakes traders mostly commit:

1. Excitement: Yeeeeyyy! I just learned that if you invest you will get rich. I need to buy my favorite stocks. You used all your money to buy all those famous company without thinking of the trend, the time, the cycle, the business. All you know is that they are blue chips, or they have good management, or you are using the product, or you know the owner. After some time you noticed that the stock market is a cycle just like gardening there is a time for planting, a time for waiting and a time for harvesting. If you got it all mixed up then you're doomed but if you are lucky and you got it right then good for you but you might also be doomed if you committed the next mistake.

2. Overconfidence: Wow! I always win! You think of yourself as a genius. You think you will never go wrong. You jump over a stock thinking that whatever you do you will win the trade because you are a genius. Sometimes fate will really pull your feet down and show you that you are just lucky. Without having the proper discipline you might win some but you will lose more. Treat a winning trade like it was nothing and a losing trade like it was just a part of the game. Always remember that tomorrow is another battle, another trade and we do not know what will happen. Will the odds be with us or not? After all with overconfidence lots of mistakes will come because you are not in a proper mindset.

3. Addiction: An overconfident trader not on the proper mindset will fall in this. They will never notice that they are addicted already. They sell earlier because they want the hang of trading and not maximizing the profit at all. They thought they are winning but not considering proper position size, risk management, and not having a system. They just trade because they want excitement. Trading is really a boring one if you are not bored then maybe it is addiction that is causing you to lose more money than earn more.

4. Over-leveraging: This can also come with overconfidence and addiction. You think you are great that you can trade money you don't own. You think your funds are unlimited because you can just order and order whatever you want without planning how to enter, where to enter, when to enter and when to cut your losses. When you are on the process of addiction you will tend to just borrow and borrow until someone will stop you and ask you to pay all your losses and that is the only time you will realize that you are one fucked up trader.

5. Revenge trading: Once you are at a loss you want to have your revenge. Everybody wants that right but the question is Is your mind in the proper mindset. Do you have a plan to do that. Did you learn from your past mistake or you are still in denial that it was not your fault? If you still don't get it then what you have to do is to stop trading. Stop thinking of having your revenge! Your revenge should be sweeter and comes with a proper mindset. You should already be disciplined to do that. Cause if you will force yourself on getting even then all you will commit are more mistakes. For example you will average down on your chosen stock when it shows that it is a complete downtrend when what you should do is to cutloss. You will cutloss an uptrend stock because your entry is wrong instead of buying more. You see stocks is more of a strategic battle. It has no right formula so you need to be adaptable and can formulate any strategies that can help you win the battle.

6. Laziness: One of the sins of traders is laziness. They are so industrious on the wrong things. Industrious with facebook analysis, industrious with becoming close with the gurus, they thought they are privileged that these gurus are whispering them to buy a stock that they are actually selling. I've got a friend which was personal messaged by a well known guru to buy this stock. Wow! A famous guru pm'ing me I'm so blessed is what newbie might tell to themselves. Then boom it went down 50%. It's good that he just bought a little of that or else he might have lost his hard earned money. Don't put your stock tips on a certain person or guru you need to have due diligence as well. Even if you are paying a subscription you also need to check what you are going into. Learn to check the charts first. Learn about moving averages to know where the trend is going. Use short MA, medium, and long to develop your trend.

7. Not handling emotions properly: Emotions are innate to us we are only humans so how do we mitigate this fear of losing, fear of entering, greed, euphoria and the likes? We need indicators. We need to understand the meaning behind those indicators. You need to have confidence on your indicators. You only follow what your heart and instinct is telling you. Only YOU not your friend or other traders in the stock world. If someone sells you need to check your system if it really is a sell or not. You don't have to follow them because you don't know the reason why they sell. They might have seen another opportunity and you don't even know how to trade that other opportunity. Just stick to what you already studied you don't have to do what other's are doing. Just be yourself whatever system you are comfortable with!

You are the only one who knows yourself well. You need to accept the reality that the fault lies withinYOU. Stop pointing fingers and make excuses. The only time you will become a matured and disciplined trader is when you opened your eyes and identify all of your mistakes. The moment I have realized all my mistake is the moment I gained back what I loss and I have more winning trades than my losing trades. Polish your trading style. Learn some indicators that can improve your discipline. Always trade with the right mindset. Stop being impulsive. Have a set of rules that can help you with your buying and selling and coming back whenever you have realized a mistake. Then you're all set.

Position Sizing

Position Sizing is one of the important factors in your trading and investing. How many positions should you hold? How much cash should you just leave as your position? How do I allocate my funds on my positions. Do I buy one time big time or do I buy on tranches?

First of all let's look on how many positions is applicable for a starting trader. For a starting trader with P100,000 fund. I would ask you to focus on one position first. Why? Newbie traders coming in the market has still excitement on them. They want to put all their money and buy all the stocks they know and make their portfolio looks like a fund manager portfolio. They believe that they need to spend all their cash in just one go so that they can leave it overnight and tomorrow they might see their positions gain already. Of course when they woke up the other day it is the opposite of what they thought. Then they go to forums or groups show their port and ask the big question WHY?

Why? Well as a newbie first of all mistake you did is buy without a plan. You entered because you see the hype on a group where in those posters are full of euphoria and happiness that their stock has risen. Avoid those emotions. The market has no need for emotions and those celebrators are just mere noise. They will post chart that will tell you that the RSI is still pointing up even when it's already at 100 and at the overbought levels. Of course it was intended for you the Newbie who doesn't know what you are doing in the market.

So how do you avoid it? As a newbie position sizing comes from your confidence in buying the stock. If you do not know the stock you can either just wait for another opportunity and just leave your cash hanging. After all cash is a position too. What if you really want to risk? Then buy some boardlot of that stock and risk on. Buying the boardlot will cost you some commission costs but will also save you when it comes to danger. Always put in mind how new you are in the market and that you don't know anything yet. Be practical. Better safe than sorry.

Next for newbies are if they want position or long term stocks. I advice that you buy on tranches. If you want to buy now of a certain stock test it first. Newbies most of the time has no idea on support and resistance so it's better to test first your chosen stock so when it goes down you can still buy more. For example you want to go to DD and you have a P100000. At the current price of 54.10 you are not sure if it is a good buy. Then buy for 10000 first. After that the price fell at 53.35 and it looks strong then buy another P20000. Leave the P70000 for future use. The next day DD went up to 55 you can see that your stock is really strong. You can either buy your P20,000 to put in DD at those range especially if it just went up on that day. It means that the price reverses and the movement is good. What will you do with the other half? You can use the P10000 of it for trying to swing on some shorter term stocks. The P40000 is just a reserve to save you on whatever might happen in the long run. After all cash is a position too.

What if I am not a newbie. I have an experience already and I know some technicals? How will I do my position?

For those with experience and system you can put 50% position, 30% swings, and 20% cash. You can use the cash on day trading or scalping if you found a momentum stock. But make sure if things go wrong cut! That is meant to be your saving grace when a trade goes wrong. Like how newbies bought in tranches it is advisable for experienced traders to buy on tranches too cause the market is not predictable. You might think that it is already the bottom or the support but then it isn't. Unless you are the one who goes all in on a trade and has a cut loss plan then it is also still upon you. Different strategies for different people.

Although there is a saying that Wise men say only fools rush in yes there is really truth on that. If you are lucky then you will be happy with your gains but if you are unlucky then it might really hurt especially if you don't know how to cut.

For larger capital you can have 2-3 positions. Why few position? We need focus on our stocks. The higher your focus the more you can take care of your stocks. You can also do some exit strategies the best. Also you will have conviction on your chosen positions. Also have cash that you can hold so when your stocks dip you can still add on your positions and if you have seen a momentum opportunity you can easily play it without looking for loosening some cash on your positions.

How to choose your stock and how to play it

Choosing a stock is just like choosing the one who will be with you until you grow old. Choose wisely choose the best. Choose the one that will make your heart race the fastest. In stocks choose the fastest horse.

There are several strategies we can choose from in choosing a stock.

1. Ticker. This is where I check which stocks are in demand and which stocks are active on that day. I use col check for the first 15-30 minutes trade. List the stocks that are unusual and isn't heard of. After that I look for the charts on my list. You can check where the stock is coming from. If this is an illiquid stock and is on a squeeze in a bollinger then you will say that someone is accumulating it. You can either accumulate at the lows or buy the support.

The rectangle part is an example of a squeezed bollinger. And the one with the arrow points out that the price is already outside the middle band. When it's outside then that means it is a start of an uptrend. Accumulate on the lows and on the dips to gain a good return on investment. This stock is more of a longer hold and needs patience is a virtue.

You can also ride on the momentum of this stock if you are a scalper or daytrader. How? You can check how fast these stocks is on the ticker how fast they are being bought, how many shares are being bought, how fast the price moves then it means this stock is on demand and is currently on momentum. Check if its near the low or if you are using heikin ashi for 1 minute then you can ride and throw fast once the heiken ashi for 1 minute turned red. Move faster cause after that the selling will become fast. Whatever type of trader you are you can profit from this kind of move if you know how to enter and exit.

Another type of play for this once are slow moving. Like MJC once you see it that someone is accumulating at the lows don't wait buy the ask cause no one will sell it to you at a discounted price especially for a huge gap play on the prices between bid and ask.

How will you know if it's for the long term or quickie? First you need to check the fundamentals. Is the stock undervalued? Yes. Long term. How about LMG that one is super overvalued what makes the price go up? The other one is there an existing gossip? If the answer is yes then it is also for long term until the stock hasn't release the news yet.

Based on my experiences these are the stocks which has gossip on it and went up in a great way.

APL a gossip that has been spread that this is a possible backdoor. Been halted then after that the news spread that JVDC confirmed that it will be their backdoor. What happened it opened at the highs and the usual sell the news happened. Now this stock is now at the lows too bad for those who bought the news though they are now stuck with a paper on their hands.

DAVIN the backdoor of Wendy's. Although the news of this one hasn't been confirmed yet then does that mean that DAVIN will still have a long way to go? Let's check where the pullback will lead us.

Why does other well-known companies buy these small companies? What is the reason for their buy back? The companies do this to avoid the hassle of IPO's. Buying a cheaper price company will save them lots of cost and effort for a cheaper price and voila they are now a PSE listed company on just a matter of some few bucks!