Wednesday, June 14, 2017

The 4 Seasons

There is a time and season to do certain things, and most things go about in their own cycles. It's the same for investing or trading. There's a time to sow the seeds, a time to wait, a time to harvest and a time to just lie in bed and do nothing. Today, we're going to talk about the seasons in my trading.

There are 4 seasons: Spring, Summer, Autumn and Winter. Each defines a certain mood that characterizes both the change in climate as well as the activities that follows it.

Spring: A new hope, a new beginning. This signals a change from the cold harsh winter months. The first shoots breaks out from the soil to welcome the warmer climate.

Summer: Hot hot hot. Every one is coming out to play while the sun shines the brightest and longest. Full bloom of the flowers.

Autumn: Weather starts to turn a little cooler. The colourful bloom of flowers is all but over while the leaves shed to prepare for the winter months ahead.

Winter: Cold, dry and lifeless. Animals hibernate, humans hide in warmth together.

We can tell which season by looking at an oscillator like the MACD histogram. Just look at the slope and the direction of the histogram (is it above the x-axis or below?).

Spring: MACD slope is positive, histogram below x-axis
Summer: MACD slope is positive, histogram above x-axis
Autumn: MACD slope is negative, histogram above x-axis
Winter: MACD slope is negative, histogram below x-axis

So, do you buy during winter, spring, summer or autumn? It depends on your school of thought. I'm a counter-trend person, so I'm much more active during the coldest part of winter towards spring. I think most trend followers will be much more active during summer. No wrong or right, just preference and temperament. I'm long only, so I try to buy during winter and sell during summer, but I can imagine a short only person doing completely opposite of what I do i.e. sell during summer and buy back during winter.

Let's take a look at STI with regards to the 4 seasons. Below is the daily chart of STI.

First of all, it can be a complicated year with more than 4 seasons. Blame it on climate change lol! We see winter-spring-summer-autumn then followed by a complex winter-spring-winter-spring and finally summer season.

But let's zoom out and see the weekly chart. The weekly chart allows us to view the bigger picture, which is about 5 times more than the daily chart. Why 5 times? There are typically 5 trading days in a week, so each bar on the weekly chart represents 5 trading days worth of information. Hence, looking at the weekly chart allow us to see the macro view in a way that the daily chart can't allow us to see. It's like looking at the hour to hour weather vs day to day weather and month to month weather. As the time frame gets longer, you see the bigger picture at work.

What do you see? I see a summer and an autumn that is long gone since April. Not sure which season we're in right now, because it looks like a protracted autumn or an incoming winter. Or maybe the weather will change and we're back in summer? Who knows such things? (Those who are interested might look at the monthly STI to see another perspective of the situation we're in.)

I know since it's not the deepest winter yet, hence my watchlist is almost empty, I should make hay while the sun still shines. When the cold wind nearly dies down, and just before the robins and the first shoots are out, and while the bear is hibernating, I'll be there. In the meantime, Bully the bear will prepare for winter by eating more to put on enough body fats to make it through the winter LOL


Sillyinvestor said...

Hi LP, Tough to work in harmony with the seasons. We have our seasons internally that might be in conflict with the seasons outside. Climate change is scary, but right now,it's all sunny. Like trump says, where got global
Warming? Lol

Unintelligent Nerd said...

Wah LP, nice perspective to view and interpret the data. I like! Thanks for sharing :D

I digress, but when I saw the "4 seasons" title, I thought of the 4 seasons ramen that my colleagues are raving about. lol!

la papillion said...

Hi SI,

Haha, that's why it's impt to know your temperament! Some people like to work during winter, some during summer - can't ask everyone to do the same thing during the same season, because there's conflict in their internal seasons :) I never thought of internal seasons, seriously, so thanks for adding into this wonderful concept haha!

la papillion said...

Hi UN,

Thanks for reading, and glad that you liked it :)

Never eaten 4 season ramen before :) So far, my favourite one is at millenia walk, uma uma, and their uma uma ramen ($16). I usually share it with my wife...haven't been their for nearly 6 months!


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