Today, I got an email asking about how the website came to be, which is the reason why I decided to write this post.
Back in 1999, I read an article in a computing magazine about online investing and how to trade (was that a sign of a market top or what!). Up until then, I had little interest in the stock market, but by the time I finished the article I knew that I had found a new passion. I was fascinated by the fact that price movements were the result of the collective effect of factors, such as economic conditions, relevant information, mass psychology and individual needs. This made me think what better way to study these seemingly price-affecting factors than to study the price action itself, which led me to study technical analysis.
I found the interactions between the price and indicators such as the moving average and relative strength index (RSI) deeply interesting, especially the latter. My first ever trade in late 1999 was buying an oversold stock and selling it two weeks later for a 20% profit. That trade was a blessing and a curse at the same time. It was a blessing because it solidified my interest further, and a curse because it made me think that trading was easy. Inexperience and complacency is not a good combination to have.
I was trying to replicate my first success by buying oversold stocks, with an RSI below 30, and holding them until the RSI was 50 or above, but the strategy wasn’t working at all. Did I get something wrong? Was my first profitable trade a fluke? No and no. The reason why the strategy stopped working was because market conditions by then had changed. The roaring bull of the nineties had turned into a vicious bear and, of course, back then I had never seen a bear market before and I never knew that I could sell short overbought stocks, with RSI above 70. Unfortunately, I didn’t realise this until I ran out of trading money, which forced me to take a step back and reflect on the experience.
The experience also made me realise that there’s much more to investing than looking at a single price/indicator chart and making a decision to invest. I was still convinced that indicators were indispensable, but something was missing – I needed to look at the market as whole and then decide whether to buy oversold stocks or sell overbought stocks, because a significant portion of stock price movements, as it turns out, were influenced by market conditions.
However, I was a full time engineering student at the time, so I had to wait a few years until I finished that degree and began studying the markets in more detail. The more I learnt, the more I wanted to learn, so much so that I abandoned a potential career as a mechanical engineer and began to re-train in finance and information technology.
During the ensuing years, I continued to observe the stock market and the financial media, which led me to develop 3 market beliefs:
- Mean reversion is frequent, especially in the short-term (simple indicators)
- Market breadth reveals market displacements that create opportunity (breadth indicators)
- Market sentiment is great at picking buying points (put/call ratio and volatility indicators)
The launch of this website comes at a time when I have become sufficiently comfortable with my market beliefs and had the time to do it. I needed a single resource that I could get my technical market intelligence from, but more importantly, it is a way to express and share my passion for financial markets.