A reply to Sam's comments:
http://samgang.blogspot.com/2009/01/vdear-maxforce-thanks-4-yr-compliment.html
Dear Sam,
Thank you for posting my comments and your followup writeups on my comments on Seng's blog.FYI, I scored distinction in 1119 English but not really proud of it. No big deal. English is not everything. Good in English does not mean anything at all. As a matter of fact, my sifu is not good in English but I hold him in the highest regard. There are times when ppl insult his level of English and I ll come very hard on them, VERY HARD...
I am also a big fan of Sun Tzu. Everytime I am free, I ll read it, over and over again... it never fail to teach me new things. Sad to say, that also mean that I have not fully understand the scripture yet. Hopefully someday I will. Hopefully.
I am actually not supposed to blog. I m actually in seclusion. My sifu will be upset seeing me posting here but anyway, hopefully he ll understand that I only mean to share not to brag or anything. I ll always remember his teachings... to be humble or be humbled by the market. Both of us will not gain anything from this discussion in monetary terms, at least not directly. Whether at the end of the day, you are actually using TA or not, it does not really matter also. You ll still continue your methods that work and discard any that does not. Same here as me. At the end of the day, we ll both look at our own bank balance and be happy or upset about it. Does not matter to anyone else.
I read your blog silently for some time. I ve never commented previously because you are such anti-TA person. Same as your fans. For whatever reasons it may be that you hate TA so much, it does not really matter. If you give me a chance to talk about TA as like right now, perhaps your perception of TA will change.
Back in 2006 or 2007, I cannot recall, I started a blog called Fusion Trader. One week later, Seng started his blog naming himself Fusion Investor. Later we visited each other's blog and intense discussion ensued. He was a pure FA guy back then. I was a convert - I started off with FA then fully TA.
FYI, I am an accountant by profession, I know the numbers. At the same time, I m not a book keeper, I look at businesses at the larger picture, unlike many accountants who are just interested in the numbers. Hence, FA is not a strange thing to me. However, later I switched to TA due to its superior result.
Enough for the introductions... now to the actual discussion at hand.
1) Your reasoning of the price usage in FA terms is acceptable to me. Very true. A pure FA guy cannot disregard price - there is a need to compare the intrinsic value vs the share price to come to a conclusion as to whether it is overpriced or not.
2) For volume indeed it is common sense. But then again, TA is supposed to be common sense. TA is not about the fancy indicators, not about fancy patterns, or fancy waves. At the end of the day, TA should be as simple as this - Price, Volume and Time. I ll explain more on this Price Volume and Time shortly.
3) GreenPacket recommendation at 4.50 - at that time, I still remember when I read that, I was shaking my head... remember I am a pure TA guy already. Thus if you say TA suggested a buy, I disagree. As a matter of fact, I remember posting that GPacket was a SELL at Boon's chatbox. (Among others which I posted a SELL at Boon's was Tenaga)
4) May 19 was when the recommendation was made. I say, have the chart. Just price and volume would suffice. No need fancy indicators. No need moving averages even. Just the basic price and volume. What do you see?
My observations:
a)Price went up previously.
b)Notable lows - 5.22, 5.33 and then 4.90.
c)Rebounded from the 4.90 low but the price movements and the volume spike suggested that downtrend is imminent or at least that the distribution is taking place.
d)Common sense and also TA suggested that when Downtrend imminent, its a SELL. When distribution, get ready to SELL. Hence why I disagree that TA suggest to buy.
5)At 0.60 in Nov, TA did not suggest to buy. Neither did it suggest to sell. However, it did suggest that accumulation is taking place. Volume spike after a downtrend while prices remain stable - ie the down range is not that big anymore, suggests that selling momentum is decreasing. Accumulation will start to take place. Short term buy is possible, but not a strong buy suggestion from TA. As a matter of fact, till today, it is still in accumulation stage.
6)Indeed your understanding of volume significance is good. Volume NEVER say its going up or going down. It should NEVER be looked at alone. However with Price, it may suggest something.
7)Many people claim to use TA, but they do not understand TA. TA is one of the most misunderstood tool. TA is NOT about indicators. Indicators are in the end a manipulation of formulas - circling around Price, Volume and Time. Eg. Moving Averages are basically derived from Price and Time. RSI - is derived from Price and Time too. Dont believe me? Go to investopedia and check it out. I shall not go into other indicators. They re all the same. Hence, if all indicators came from Price, VOlume and TIme, WHY USE THEM??? They may make it easier to read, but they ll HIDE some things... it ll be like reading a summary of Sun Tzu instead of reading it in its original text!!!
8)For me, a 100% TA guy, I say, TA is 100% common sense. It is and should be the simplest form as possible - Price Volume and Time. It should not be complicated. It should follow the concept of KISS - Keep It Simple, Stupid. So why now TA become so complicated? Because of vanity and pride. Initially people appreciate the simplicity of the TA methods. Then people began to feel bored. They want to complicate things. They feel that they re more superior because they use more complicated tool.
But they forgot the law of nature - Ren Fa Ti, Ti Fa Tian, Tian Fa Tao, Tao Fa Zi Ran. Everything goes back to Nature. Its a cycle. We live then we die, then we live then we die. Everything goes back to Nature. Stock rises, then falls then rises then falls. The more detailed process goes as simple as this -
1) Stock is accumulated. Price does not move much. Volume begin to pick up. Accumulation Stage
2) Stock already accumulated sufficiently. Supply dried out. Demand came. Stock is pushed up. UPtrend begins.
3) Stock rises to target of the operators. Now operators started to sell. Public absorbing the volume sold. Price does not move much anymore. Volume remains high. Distribution is at place.
4) Operator keeps selling. Public cannot absorb anymore. Demand dried up. Supply overflowed. Price goes down. Downtrend begins.
5) Later it will hit bottom and then goes through the accumulation process once again. A wonderful cycle isnt it? Doesnt it reflect how our lives are? Doesnt it reflect how Nature works?
Is it TA? I say it is. Is it FA? No, I dont look at PE. I dont look at accounts. I dont assess the business at all. Just looking at this cycle.
So I still say, Sam, your usage of price, I accept is NOT TA. But your usage of Volume is TA. And YES... its common sense. But TA is SUPPOSED TO BE COMMON SENSE!!! Its only humans due to their pride and vanity make it complicated. And I still say I am a pure TA guy, though I dont use the fancy indicators and stuff.
How, Mr Sam, accept?
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