Book Review – The Perfect Speculator

(This post will be duplicated on the Reading Room page)

The perfect Speculator, by Brad Koteshwar

I can’t for the life of me remember where I came across this book suggestion, so forgive me if I don’t give you a shout-out for the recommendation. I had actually forgotten I had even ordered it until it showed up in my mailbox a week ago.

The Perfect Speculator isn’t some weighty tome that you will be laboring through – it’s 140 small pages, including illustrations. I will offer one warning, and that is this: it’s badly written. No really, it is. To be fair, the writer acknowledges this early on. The word construction is dreadful, the book has numerous typos that somehow made it through to the final printing, and the decision to write this around a fictional conversation between two traders doesn’t really work as a result (I’m not Hemingway, but I’m also not selling a printed book, either).

That’s the bad news.

The good news is that beyond all that stuff, it contains invaluable and worthwhile advice that would serve most traders well to read. What I think the book conveys extremely well is that trading doesn’t need to be, nor should it be, complicated. It stresses simplicity….but simplicity with discipline.

Buy this book if you struggle with areas such as:

  • where to place an initial stop loss
  • how, when, and where to raise a stop
  • how to add to a trade
  • how to narrow down a watch-list
  • how to develop useable trading rules

I have read dozens of books on trading, and while each successful trader has their own personal methodology, and many will not agree on some of the mechanics of what gets them into a trade, those same traders do share commonalities. Those are the points I look for, and focus on. One of those commonalities is risk management. Almost to a fault, professional traders religiously practice it. They do so because they understand Risk of Ruin. They understand that if you lose 10% of your account, you only need to make 11% to get back to square one. If you lose 70% of your account, you need to make 233% to get back to even.

One final note – the author makes a point of relying heavily on weekly charts. As he succinctly puts it:

I make it a point to keep everything as simple as possible. In reading charts, I get confused when I look at daily charts. Daily charts are noisy. They show way too much volatility and add to the mixed messages. I rely solely on weekly charts. There is much more smoothness to weekly charts.

Despite the writing style, this is one of the best self-help books on trading I’ve come across to date.

Five out of five for content.

THe perfect speculator

$TWTR’s moving average

 

A while ago I wrote a piece called “Do you know your stock’s moving average?”

We can look at $TWTR and see something similar occurring. The specific moving average that a stock may respect doesn’t have to be a nice even number, and it seldom is. However, in this case, the 50 day SMA seems to be an important area for $TWTR.

Also, as I’ve mentioned before, I don’t subscribe to the belief that using a moving average as a line in the sand is the way to go, but rather as an area or region. Trading is rarely that black and white.

Granted, there isn’t a lot of charting data yet available for this one, but I still think it’s worth consideration.

A clean close below the 50 SMA will be my cue to close my long position.

TWTR Oct

 

Chewing Glass vs Home Ownership

For the last five years or so, I’ve rented.

Initially, it wasn’t entirely by choice; a divorce forced the sale of the Ken and Barbie Dream Home, and my ex and I both went our separate ways to lick our wounds and regroup. I briefly considered buying a smaller place, but figured my life at the time had enough moving parts that adding the commitment of a home purchase to the mix didn’t seem wise…particularly since I wasn’t sure where I even wanted to live.

It had been many years since I last rented, and it was an odd feeling to be at that point again – one can’t help but feel a little…less than successful, returning to the land of damage deposits and post dated cheques (that’s a “check” to you yanks). North American society has conditioned us that home ownership is the hallmark of the successful. If you don’t own a home, your worth as a person is somehow diminished.

I’ve also owned several rental properties. Anyone that tells you that rental properties are “easy money”, hasn’t owned a rental property (FYI, there’s No. Such. Thing. As “easy money”, in real estate or otherwise). Just kick back, and collect those rent cheques! Easy Street! Yeah, not so much. They ruined two vacations, and probably took three years off my life. But that’s another story.

But here’s the thing. Buying a home isn’t necessarily the right move for everyone. And at this point, I’d rather chew on glass shards than go down that road again anytime soon. Here’s why.

It’s Expensive

Actually, it’s beyond expensive – “expensive” was 3 exits back. And not just because I live in Vancouver. People rush into buying a home because they want to be “in the market” and not be left behind. What many fail to consider is the crushing collateral fall-out that comes with that home. To name but a few:

  • Strata fees
  • Special assessments
  • Property Taxes
  • Local/municipal/utility taxes
  • Bank and Legal Fees
  • Repairs, which include, but certainly aren’t limited to:
    • Roof
    • Hot water tank
    • Furnace/Boiler
    • Pool/hot tub
    • Deck/fencing/driveway
    • Windows
    • Water piping repairs
    • Irrigation lines
    • Washer/Dryer
    • Dishwasher
    • Fridge
    • The updates you or your spouse will inevitably want to do:
      • The kitchen
        • New countertops
        • New sink/faucet
        • New Dishwasher
        • New Fridge (to replace the one you just had repaired last year)
        • New cabinets
        • New stove
      • The powder room
      • The master bath
        • New tiling
        • Heated floors
        • New toilet
        • New pedestal sink
        • New tub (“Oh! Let’s get a soaker tub!”)
        • New Shower (“Get the one with 6 heads! Tiled floor, not fiberglass. And change the lighting in there too.”)
      • New carpet/hardwood/bamboo flooring throughout!

Here in Vancouver we went through what was aptly called a “Leaky Condo” phase. Countless poor souls that had purchased condos were being hit with astronomical special assessment levies to pay for the extensive repairs needed as a result of rainwater infiltration into the buildings. It was devastating, and wiped out the equity many had built up, and still many more simply declared bankruptcy and walked away.

Oh, and mortgages aren’t free. Consider this: A $500,000 mortgage at just 4%, at 25 years, will actually cost you $791,755.26

Hate Thy Neighbor

My ex and I lived in a townhouse for a number of years. It was a small complex, only 12 units. Everyone got along splendidly, and practiced being a courteous neighbor – people took turns shoveling snow, making small repairs as required, that sort of thing. And then the wonderful neighbors we shared an entrance-way with, moved out. And Crazy New People, moved in. I won’t bore you with the details, let’s just say we weren’t exchanging Christmas fruit cakes with our NNFH (new neighbors from hell). But here’s the thing: we were effectively married to them, and they to us. It was a forced marriage, and neither party was happy about it. Fun!

We couldn’t just say, “Fuck it, we’re moving.”

It was several years of Hell, and we thought about moving, all the time. But selling and moving is a lot more complicated than giving 30 days notice and moving.

Hope You Love Your Job…

…Because now you’re chained to it. Well, that’s a bit of an exaggeration. But the fact is, now you have a mortgage commitment, and all the other house bills that go along with that. And while renters still have to write a cheque on the 1st, it’s typically not as large as a mortgage payment. And the property taxes, and the…well, you get the idea. The point is any career decision you make from this point forward now has to consider your home. Your home, effectively, gets a say.

Week-ends Are For Home Depot’ing

After a long week toiling at your j-o-b to pay for your fancy new house, there’s nothing like relaxing on your porch and having a cold one. Unfortunately, that’ll have to wait. You’ve got grass to aerate, fertilize and cut. Hedges need to be trimmed, trim needs to be painted. Fences need repairing, that nasty bush thingy needs to be pulled out before it takes over the entire back garden, there’s a hole in the driveway to patch, and the eaves are falling down…so go get the ladder (followed by a trip to the hospital to cast that leg).

Now, I like working on things, and tinkering. I miss my big double garage, and I didn’t particularly mind mowing the lawn. But it’s not for everyone. And somehow, $HD seemed to suck a hundred dollar bill out of me nearly every week-end, as did $SHLD. That wears a little thin after a while.

D1609BB1

I rather like renting. It’s stress-free living. Oh sure, the landlord could serve us an eviction notice, or decide to sell the place, and we’d have to deal with that. But when the washing machine broke and instantly flooded the hallway recently, it didn’t cost me a dime. I called him, and people with a shiny new washer magically appeared. The realtor that lives directly below us on ground level throws parties mid-week until 1am (well, she did until Lisa stared her down…now it’s only til 10pm), and while it’s irritating, I know we could move on reasonably effortlessly, if we chose to.

Is renting the same thing as throwing away money? I don’t believe it is. I think it’s saving money. As investments go, It’s certainly not the only option, and too often I think it leaves people house rich and cash poor.

One man’s opinion.

It’s also somewhat telling that our landlord has asked us if we’d be interested in buying the place from him. Why on earth would we do that?

 

 

 

The ‘C’ Word

 

Dad

My dad was the very definition of a hard working, family man. He ran several small businesses and bent over backwards to provide for my mother and me. He also smoked. It was 1979, and I was 10. We were play fighting, which basically meant that he sat in his big comfy chair and fended off my sneak attacks with one hand. Somehow I landed a blow near his ribs which was the first time I saw so much as a chink in the armor of this giant of a man. In truth he had a fairly slim build, but through my young eyes, he was an impenetrable giant. As it turns out, the damage from my blow was serious enough to warrant an X-ray.

That’s when the first spot on his lung was detected. He was 52.

My mother had an innate distrust of the medical profession. She loved my dad with all her heart, and truly felt the best course of action was not the traditional lung cancer treatment of the day, but alternative medicine. This quest to find the cure for cancer took us to some pretty strange places, including a clinic in Mexico, where treatment for serious illnesses seemed to consist of ingesting fruit smoothies. I watched one of the clinic’s physicians take blood from both his arm and leg. I “learned” this was because blood from the top half of the body had a slightly different composition than that in the lower half. Even at ten I was skeptical, but I wasn’t going to argue with an adult in a white coat. Months later, however, when I returned to school, I did put the question to my science teacher and was met with a look similar to the one you’re likely making right now.

What followed was months of traveling to crazy places in search of the holy grail, weeks at home where he was under the care of my mom and relatives, and finally, a move to the hospital as the care and pain management he so desperately required simply overwhelmed my family. Out of sheer habit,  I still close a screen door in the same fashion I learned to do as a child; mom was militant about quietness and ensuring he had a peaceful environment in which to fight his battle. We had a zero tolerance policy when it came to noise, enforced swiftly with a wooden spoon.

Late one Autumn evening in a stark hospital room, I watched as this seemingly undefeatable man gasped desperately for the shallowest of breaths; the Cancer had completely consumed him. He couldn’t hear me, or anyone else at that point. We left him, and went home, where I crawled into a spare single bed in the rumpus room – out of town relatives had overrun our house for the past several weeks, and an aunt from Seattle was now in my room. At some point later that night, we got a phone call and my mother woke me.

“Your father is gone,” she said quietly.

There wasn’t much more to say, and she left me to digest this expected news, and come to grips with it for herself. For as alone and lost as I remember feeling in the moment that night, I cannot imagine her own personal hellish pain.

I question the decision to allow a child to see his father in that sort of condition, mere hours before his horrific and violent death, but I don’t judge it. While it isn’t the final image of him I would like to be carrying in my mind’s eye, I can assure you, I have never, ever held a cigarette to my lips.

That said, I did pick up his fondness for cigars and a good drink.

Dad1

Dad, on the right. Cigars and drinks…we’d get along just fine…

Dad2

Cigarette in hand, well before I entered the picture

Mom

My mother never remarried nor dated, and I think in many ways, she silently blamed herself for somehow failing to save him, and as a catholic, she did the the self-flogging, constant guilt thing very well. I’d be lying if I didn’t admit that I did secretly (or perhaps not so secretly) blame his death on her for a number of years. But then I grew up. We make decisions in life, and we live with them. Her choices were based on what she felt was truly best for him, and in the end, there is no guarantee that following traditional treatments would have netted a different result.

She was a rigidly private woman, and I was raised that we didn’t talk about our feelings – even within the family, but kept them to ourselves. Because that’s super healthy! So it was sadly of no real surprise to me when in late 2001, she finally did tell me she had colon cancer. True to her methods over 20 years earlier, she once again shunned the medical profession, and instead sought out nutritionists, herbalists, Chinese medicine practitioners, and so forth. I suspect it was to punish herself for taking my father down that path, but that’s merely conjecture on my part.

She finally agreed to hospital admittance in October 2002, but by then, there were no more options for treatment. She had waited too long. With the enormous help of the integrated medical community in Victoria, we were able to bring her back to her home for her final days; the at-home support nurses were no less than true angels in my eyes. Without them, I honestly don’t know what we would have done.

Ironically and most disheartening for her, not a soul from her blessed church called upon her, thus reaffirming my bitterness and enduring hypocrisy towards organized religion. I reached out to the Salvation Army on her behalf and their support and frequent daily visits to her provided the spiritual comfort she needed. I will be forever grateful for them.

There was denial, or stubbornness, right to the end. The doctors told me that at this point, whatever she wanted to eat, she should have. It wasn’t going to make a difference, and her comfort in her final days was all that really mattered. But she firmly stood by her self-construed anti-cancer diet, and would take only plain rice and warm water. An offer of Roger’s Chocolates, a local favorite of hers, was not well received.

Chocolate? I can’t get better on that! Don’t you want me to get better?”, she said.

‘Denial’ isn’t just a river in Egypt, it also runs under our family tree.

She quickly deteriorated in the days following her return to home, and begun to drift out of consciousness for longer and longer periods.  All I could do was administer morphine using the needle-less syringes the nurses had provided, which I injected into her IV. I was told to use them “as generously as I felt was needed”. There came a point after about a week where she was unable to move. The nurses had taken to gently adjusting the position of her frail body every three or four hours. Anything to give her added comfort. One evening she looked to be in particular discomfort, and while the nurse on duty thought we should shift her, I was hesitant. After a short discussion, I agreed, and helped her. Instantly I knew it was a mistake. My mother’s eyes half opened, and her overrun body must have screamed inside her as her expression changed to horror. I broke down and kept apologizing to her again and again for causing her this brutality. The head nurse was called and she was miraculously at the house within mere minutes, and I left the room as they worked on my mom. Half an hour later, they called me back into the room which had been transformed into a softly lit, tranquil environment; something that was reflected on my mother’s face as she lay comfortably and peacefully sleeping once again.

I should never have moved her, and I’ll carry that forever.

Six hours later on that crisp December evening in 2002, I was at her side as she took her final gasps of life, and Cancer took another out of my world.

 

George

George entered my life as a clumsy mess of a kitten, an out of the blue gift in 1995 from a well-meaning girlfriend. He was fearless, gregarious, and every ounce a true Ladies Man. In short, everything I was not. He was also my best friend. He was there with me through less than spectacular times in my life, including the death of my mom. When it comes to bonding with our pets, we tend to think more in terms of dogs, not cats. George and I did bond, though, and we were inseparable. He was both an indoor/outdoor cat, but for whatever reason, I never really worried about his safety outside. He always came home when evening fell, and was just as happy to lounge on a bed, chair or lap, as venture out. Really, I think he just liked to have the option, not necessarily act on it.

The girlfriend that presented him to me didn’t last, and when I began dating my now ex-wife about a year later that break-up, it took a while for George to accept her. He *may* have peed on us when she slept over the first time (well, she was in his spot), and he *may* have beaten up her cat relentlessly when we moved in together (one of the cats had to find a new home, and since George wasn’t going anywhere…). But he did have a huge heart, and a love of humans; he had a habit of winning over the hearts of everyone he came into contact with, regardless if they were ‘cat people’, or not. He possessed the perfect balance of personal independence and warm, unconditional affection.

The first signs of trouble came in September 2009. Vet #1 identified a mouth infection but missed the cancer. Vet #2 caught it a month later, but by then we were up against the clock. We tried everything we could to save him, and in fact had optimistic hopes after what looked to be a successful surgery. But in the end, even the strength and steely determination that was George proved to be no match for such an insidious disease that had spread rapidly and pervasively. I held him in my arms as the vet administered a final dose to give him comfort, and with that a primary piece of my world drifted away forever.

George1

My best friend, and the original Ladies Man, George. 1995-2009

 

Dad’s smoking, combined with his less that stellar diet, likely played a starring role in his demise. However, where my mom and George got their cancers from is far more difficult to narrow down. Cancer doesn’t always have an obvious source, but sometimes it does.

When I get the joy of second hand smoke over half a city block from the source, I get irritated.

When I run by someone on Vancouver’s majestic seawall as they’re ignorantly partaking in a refreshing menthol, I get irritated.

When I’m walking through the park near our home and the walkway, the playground, the grass and the flowerbeds are littered with the discarded remnants from a relaxing smoke break, I get fucking irritated.

It’s a disgusting habit that harms and kills not only the user, but the innocent bystander, and our environment – somewhere along the way, being a smoker made it socially acceptable to litter - oh, I’m not littering, I’m smoking. It’s getting harder and harder for smokers to find a place to light up these days, and it’s still not enough, in my opinion. To be clear, I could care less if someone wants to smoke and decimate their body; hey, it’s your body, do with it what you will. What I do resent is that those of us that have no interest in partaking are forced to do so by proximity. And unlike someone blasting bad music from a convertible, no one ever developed black spots on their lungs from an audible assault of gangsta rap.

Sadly, my story isn’t unique. Cancer has touched almost everyone at least once, it seems. I have no answers. Just a desire that one day, Cancer won’t be such a scary word.

 

Cancer1

 

 

 

 

 

 

What’s your account REALLY worth?

 

Sometimes I can be a pretty optimistic and positive person. Other times I can be a bit of a glass-half-empty sort.

And still other times, I like to think I’m a realist. Especially when it comes to my accounts. The thing is, whatever the value of your account at the end of the day, that’s not an entirely accurate number, is it?

Here’s what I mean. Let’s say you have $100,000 cash in your account. Well then, interest aside, that really is the value of your account at the end of each day. Pretty simple. Now let’s say you start allocating some of that money to some shares. As an example, suppose it looks something like this:

Real account valueTrading is all about managing emotions first, money second. I find it’s easier to do both by understanding the true value of an account; that is, if all my stops were hit tomorrow, how much would my account be worth?

It’s an important consideration. eventually, all trades come to an end. Some may go on for months, even years, but eventually, a properly managed trade will be exited by the most recent trailing stop. And if several trades are exited within close proximity to one another, or even multiple same day exits, it’s far easier to deal with that emotionally if you’re prepared for it. The way to prepare for it is to understand what your account would look like if all of your current stops were hit tomorrow. How are you going to feel, if your account drops 5% this month. What if it drops 5% this week. Or tomorrow. Whatever your risk, that’s something that each of us has to determine for ourselves. Maybe you’re fine with larger losses, but maybe you’re not. I find it gives me strength to not focus on what I can potentially gain on a trade, but what I could potentially lose.

This might seem like accounting semantics and nothing more than hair-splitting, but it’s important to understand the actual risk an account has on at any given time. It’s the only way to fully appreciate the potential downside, and with knowledge comes confidence and from confidence comes success.

 

 

 

 

 

 

 

When technical and systems based trading collide

 

I have absolutely no idea whether or not the new trades I just entered will be profitable trades, any more than any other trade I enter. Losses are an unavoidable part of trading; the key is to of course limit the losses and let the profitable trades make up for them…and then some.

What I do know is why I entered to the trades. I trade two methods: a technical based, mostly weekly-based charting method, and a systems-based, weekly based method.

Trading is not about proving how brilliant you are, but about making money. That’s it. Which is not to say that people don’t trade for a myriad of other reasons, because they do. Surprisingly, it’s been my experience that only a minority trade purely for the sole purpose of increasing wealth. But that’s a different topic.

And because I’m not mathematically or scientifically gifted, I realized that there was zero chance I was ever going to become a master of All Things Technical. For those that are uber interested, this book is about as thorough as I’ve come across…and at over six hundred pages, it’s a mighty tome indeed.

tech analysis

But for the rest of us, this probably isn’t the manual we’re looking for. For my technical based trading, I therefore keep it rilly, rilly simple for my pea-noggin to grasp. For the most part, I have just a handful of trade set-up patterns that I look for, and trade. I’ve studied those patterns and decided it’s better to become comfortable and familiar with three or four, as opposed to trying to identify all the technical patterns out there.There’s some clever proverb about he who tries to catch two rabbits at once catches none…or something like that. Anyway.

So I tend to look for:

  • break-outs from basing patterns,
  • flagging patterns,
  • gap ups,
  • hammer formations, and
  • support/resistance patterns

That’s pretty much it. I don’t find there’s a need for me to look for any more than that. These five provide enough fodder for trading, and as I’m comfortable with these patterns, I choose those that exhibit the strongest patterns, and pass on any that aren’t A+.

I get even more interested when a stock has triggered on my systems-based criteria, and also on one of these technical patterns, and it’s surprising how many times this happens.

So here is a closer look at $NOK and what I saw:

(click to enlarge)

NOK capture

 

And here is $HCBK:

(click to enlarge)

HCBK capture

Once again, I cannot stress enough that these trades may very well get torpedoed and fail. And I’m perfectly OK with that, because I’ve sized my trades according to what I’m willing to risk per trade (typically 0.5% to 1% of my account). If the trade does work, I’m happy to add to it, and raise my stop.

 

 

5 reasons why I’ll never be a Vegan…or even a Vegetarian

 

(with apologies to my beautiful, smart, talented, yoga-doing Lisa. She’s not 100% hard-core Vegan…kinda more of a flexetarian, but still)

Reason #1 Too much social responsibility

I feel enough pressure in my daily life as it is. Between keeping up with technology, reality television shows (you have your vices, I have MasterChef. Leave me alone.), keeping track of an ever-growing number of website logins and passwords, and remembering important dates and anniversaries, I can’t take any more responsibility. I’m full. There is no more room here to be a moral culinary compass. I know where bacon comes from, and I’m good with that. Wherever possible, I do try and procure meat products from organic/free-range sources; you know, where the pigs get to roam free and play with soccer balls, that sort of thing. Yes, there is the dark underbelly of the industry, and I’ve seen the films and videos. But I’m not giving up meat. It’s delicious.

cartoon_vegan1

Reason #2 I’d lose all my friends

And I don’t have a lot of them to lose. I’m a Capricorn, after all. Anyway, those around me love the meat products every bit as much as I. The phone would stop ringing, and dinner invites would slow to a trickle.

“Should we invite Brian and Lisa?”

“No. Do you not remember last time? They lectured us on the horrors of slaughterhouses, and left that PETA literature on our bedside nightstand. That wasn’t creepy at all. Besides, they’d probably just bring that sawdust and gravel chocolate cake again. Think I chipped a tooth.”

Sure, we’d make new friends, vegan friends. But that’s exhausting, and at this point in my life, I’m not sure I’m willing to go through the interviewing, and the interviewed, process again. Plus, I’ll be super cranky from pork and Coke withdrawals, so that will take the shine off my appeal.

images

Reason #3 I don’t like Birkenstocks

And as a vegan, I’d be compelled to at least admire the obligatory footwear choice on other vegans, if not purchase numerous pairs of Birkenstocks for myself – you know, dress, casual, dress-casual, week-end, around the house, and sleepwear. Yes, I’m quite sure they’re super comfy. That shouldn’t be the sole measuring stick for everything in life, though. No one says, “Gosh, this is a super comfy condom!”, but they still get worn. Although, one could argue that if one were wearing Birkenstocks, one would have no need of further birth control.

Reason #4 I find body hair repulsive

Well, excessive body hair anyway. Male or female. And then there’s the natural deodorant issue. I’m reasonably certain my sweat glands would laugh at my puny attempts to mask odor without aluminum and butylated hydroxytoluene (I got curious, I had to look it up). A clever concoction of dandelion weed, cinnamon and fennel wouldn’t even get me to noon. I’d have to reapply hourly. Doesn’t seem practical. Also, as mentioned previously, I’m reasonably certain that Lisa, even as a lover of all things vegan, would dump my ass if I grew a ponytail. Which I would have to, of course.

Reason #5 Limited meal options

I have enough trouble figuring out what I’m going to have for lunch day after day, after day…without removing tuna, roast beef and chicken salad from the menu. I’ve been a long-time fan of Safeway’s ambrosia salad, which, I have been informed is not technically a salad, but nonetheless delicious. And then there’s snack time; mid morning, pre-lunch, post-lunch, pre-dinner, post-dinner, pre-bedtime…that’s a lot of planning, and while I do enjoy baby carrots, I don’t think I can enjoy them that much. Axing Coke, pepperoni sticks, cookies, and potato chips from my life would leave a void that could not be filled with leafy greens and walnuts.

imagesWhatever your dietary leanings, I wish you well, and to each their own. Namaste, mutha fuckas (couldn’t help it. Just finished Californication on Netflix)