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Lessons from Investagrams InspirePH 2018 (Part 1)(8-min read)

(17May2018 Update: See part 2 here.)

Investagrams’ Inspire PH 2018 was held in SMX MOA last April 28, 2018. Compared to last year’s event entitled Traders’ Summit, this year’s event was held on a much bigger venue, still well attended and the topics covered did not only focus on stocks trading, but on other worthwhile pursuits and industry trends that may inspire and help Juan in his own journey towards financial freedom.

Sharing my notes from the event (as well as my 2 cents in italics) for the benefit of those who were not able to attend, and for those who want a recorded reference of what transpired. This first part will cover the morning talks (about stocks trading) while a different article will cover the afternoon sessions on start-ups, impact investing and small business incubation.

As always, caveat emptor.

TRADING TIPS

  • JM Lapina, CMO and co-founder of Investagrams
  • Be mindful of Price and Volume
    • ↑ Price + ↑ Volume: Bullish (more participants are coming in)
    • ↑ Price + ↓ Volume: Bearish (or conso, less participants pushing price up, weakening momentum)
    • ↓ Price + ↓ Volume: Bearish (less participants as prices go down, weak momentum)
    • ↓ Price + ↑ Volume: Bullish (possible capitulation, renewed interest, strengthening momentum)
  • Market is driven by supply and demand
  • Everything involves risk. Quoting Enrique Razon of ITCSI and BLOOM, “If you are afraid to lose, you will lose.” (Risk will not be eliminated, life in itself is a risk. What we have to do is manage such risk.)
  • Volatility is your friend if you know how to use it (e.g. consolidation and break-outs from such consolidation)
  • Know the brokers, who their big clients are, but don’t depend on them. Understand their buying and selling patterns.
  • Don’t expect blue chips to move like basura stocks (you should know this by now)
  • Losing money from a stock or trade is normal. (What you should be after is net positive gains on a portfolio level, not on a per trade basis. Lose small, win big.)
  • How to have a winning portfolio?
    • Manage risk, select stocks from different sectors (diversify!)
    • Buy 2 to 3 stocks at a time (don’t have too many stocks on your portfolio, focus on a few names at a time)
    • Compute your Risk-Reward Ratio, where Risk = Buying Price – Cut Loss; Reward = Target Price – Buying Price. Reward should at least be 2x of risk. (There is a module on RRR in our #3M Manage Your Money Better)
    • Create a system that fits your investment OHA, create a system that works for you (don’t keep on changing your trading style. Find something you can master.)
    • Mentors are not superheroes. They also make mistakes.
  • What makes a good trading system?
    • Simple
    • Adaptive on market cycle (e.g. hard to do momentum trading when all stocks are falling)
    • Rules-based, using price and volume
    • Use of filters and screeners to help you focus on select names
  • Trading psychology
    • Every battle is won and lost before it’s ever fought
    • Be disciplined, be patient
    • Expect to lose and trade to win. (Don’t trade to be right, the market doesn’t care about you and whether you’re right or wrong. If you’re wrong, accept it, do something about it)
    • Stay in the game (don’t lose it all!)
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CONQUERING THE STOCK MARKET WHILE IN SCHOOL (OR WORK)

  • Rafael Roces, 4th placer in 2017 Investagrams Trading Cup
  • Filter the noise, always go back to your objectives
  • Market is driven by supply and demand. Look for stocks with demand (high volume).
  • Focus on support, resistance and volume.
  • Checkout Darvas box trading strategy
  • Keep it simple. Losing gets tiring, accept the fact and find ways to turn it around
  • Is your process, your effort half-baked and half-a$$ed? (You want millions but your effort is for hundreds only?)
  • Dedicate time to it. 10,000 hours concept from Outliers.
  • Trading mindset
    • Delay of gratification
    • Do your best every day, put yourself in the best position to succeed
    • Keep chugging with your process, refine it but don’t give up on it (Minervini was losing for 3 years until he perfected his system, and recovered all his losses in just 1 year).
  • Realities you have to accept
    • The market does not care about you (again), instead react to what the market tells you, listen to it
    • Proper trading is logical, no room for emotions.
    • Preparation is key, plan for every scenario that can happen, up, down, gap up, gap down, flat, etc. (before market opening, preferably the night before. As they say, plan your trade, trade your plan.)
    • Emotional decisions are inconsistent. The trading plan is meant to keep you from making emotional on the spot decisions.
    • Your goal is consistent profitability.

LOSING TRADER TO TRADER CHAMPION

  • Javi Medina aka Taylor, consistent trading champion in various trading cups, including Investagrams Traders Cup 2017
  • One of only 5 CMT in the Philippines
  • Per Wilson Sy: “Out of 100 traders, only 10-15 will make money after 2 years.”
  • Juan has to be mentally prepared, what does it take to be part of the top 10-15%?
  • Commit to mastery
    • Winning trade <> Winning trader
    • Hedgehog concept from Good to Great, finding your own hedgehog concept
    • Need to reach a level where you can decide independently (filter out noise from the market, just you and the charts, no funda, just TA)
    • Focus and sacrifice are needed. Are you up to it?
  • Follow price above everything else, and above every one else. Price action is king.
    • “Price moves first, fundamentals second.” – Paul Tudor Jones
    • Price is a leading indicator
    • Prices moves 6 to 18 months in advance, act on price, don’t ask questions, answers in funda will follow
    • If you don’t stand for anything, you will fall for anything that comes your way (ouch!)
  • Understand where you are in the big picture.
    • Taylor uses Elliot waves
  • Risk management comes first, profits second.
    • It takes more energy to make money in the market than to lose money
    • Remember the % Loss Matrix
    • Cutting losses puts you in a position to win (I like this!)
    • Being wrong is not a choice. Staying wrong is. (Aside from cutting loses, they do not average down. As they say, do not throw good or neutral money after bad money).
  • Invest time in analyzing your trades.
    • If you can’t measure it, you cannot manage and improve it.
  • Trading psychology is ultimately what matters.
    • Mental skills are key to trading, trading is 80% psychological
    • Be mindful of emotions, of FOMO, of greed, impatience, doubt, revenge trading. Or would you rather trade with courage, faith, optimism, patience?
    • Most losses come from trades done during a negative state. Track your emotional states during your trades.
  • Learn how to give. Those who have strong trading psychology are also strong traders and givers.
  • Find the right mentor, community. Accelerate the 10,000 hours. Iron sharpens iron.
  • Measure and track your:
    • Hit Ratio / batting average = positive trades / total trades
    • Edge Ratio = Ave Amount of Gains / Ave Amount of Losses
    • Churn Rate = value turnover
  • How not to get shaken out of a trade?
    • Give each trade enough breathing room
    • Position sizing, use 1% capital-at-risk (CAR) to determine your cut-loss threshold (learn these in our #3M)
    • Should I cut within the day or wait until closing of market?
      • If downtrend is market-wide, consider cutting intraday.
      • If market is good but your stock is losing, try waiting until end of day
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FROM ZERO TO 7-DIGITS

  • Akio from Money Growers PH
  • Jeepney driver dad and vendor mom, tried many small businesses
  • Should we quit or keep going?
  • We tend to fall in love with our trades even if it starts to hurt us, because we have already invested in it (sunk costs).
  • Lacked process before, became student of Zee Freaks
  • SCAN – PLAN – EXECUTE – RECORD
    • Our brains are wired to look for patterns
    • Resistance and support
  • Scan
    • If you’re looking for trending stocks: above 200MA
    • If bottom-fishing: oversold RSI
  • Plan
    • Entry
      • During breakout
      • When support holds
      • MACD cross
      • Fibonacci ratios
    • Stop-loss
      • Upon breakdown
      • Set % cutloss is hit
      • Don’t adjust this downward! Move this upwards when gaining, now as a trail stop.
    • Exit
      • Fibonacci ratios
      • Nearing resistance
    • Risk-Reward-Ratio
      • Ideally 2x reward
  • Why can’t we execute?
    • Our brains are wired two ways:
      • Fast and reactive (emotional, impulse) –> we use this when we don’t have a plan
      • Slow and analytic (rational, used for planning) –> we should be using this for trades
      • Suggested reading: Think Fast and Slow
    • Your emotional state affects your trades
    • Expose yourself to possibilities
  • Lean the process
    • Don’t look at the results but look at the process to achieve such result (Ramen example)
    • Decide to pursue. All in effort!
  • When do you purge?
    • During a losing streak
    • When you lose, you tend to risk more (revenge trading)
    • Avoid trading during these times, trade when ready

HOW TO SURVIVE BEAR MARKETS

  • Trade the B-wave in Elliot wave
  • Strong names move first before PSEi bottoms out, usually 3 to 6 months ahead
  • Be majority cash, look for set-ups but lower position size
  • Focus on not losing money
  • If no market follow through, respect it.
  • Take this time to study, have extra patience, be reactive.
  • Being still <> Doing nothing. Being still requires discipline and patience to wait for opportunities
  • Pareto Principle: 80% of your gains will come from 20% of your trades
  • Considering Private Fund Management?
    • Fixed interest, guaranteed gains for the investor, beyond that for the fund manager
    • Profit sharing, fixed share for both, higher upside for investor but if losing, fund manager need not pay
    • Sign notarized agreement form. Be CSR-accredited if you want to do it publicly.

Watch out for part 2 in the coming days (17May2018 update: See part 2 here). In the meantime, subscribe to our free email newsletter:

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